In brief
- Pharmac is the Crown entity that decides which medicines and “related products” are funded by the NZ government.
- Medsafe is the NZ agency which approves access to new drugs.
- NZ is at the bottom of a list of 20 OECD countries for new drug approval.
- Pharmac’s “cost containment model” has been criticised as causing unnecessary suffering for patients needing life-saving drugs.
What is Pharmac?
Pharmac is shorthand for the Pharmaceutical Management Agency. It was set up in 1993 and decides which medicines and pharmaceutical products receive government funding in New Zealand.
Pharmac’s 2023 budget is $1.31b, but will drop to $1.13b in 2024 because of one-time top ups over the past few years.
Slow and a lack of transparency
Many reports and reviews over the past few years say Pharmac is slow to authorise drugs for funding and lacks transparency in its decision-making.
Approval can take several years. Funding confirmation took 25 years in the case of one medication to treat a rare spinal disease and people at risk of anaphylaxis.
New Zealand is the only country in the world with such a waiting list of medicines to be funded. We’re twice as slow as other countries in the OECD, says Medicine New Zealand’s Graeme Jarvis.
The list of treatments being considered isn’t available to the public. There is no way to tell when, if ever, a drug will be funded in New Zealand. Pharmac says if drug companies found out their drugs were on the list, they may drive up prices.
Ability to change Pharmac lies with NZ government
The decision to fund is often linked to budget, as opposed to need, unless it’s an extreme situation. The public has complained about what they say is Pharmac’s “excessive focus on containing costs”.
Lobby group Medicines New Zealand had the following suggestions for Pharmac:
- Optimise and demonstrate more rapid turnaround in receiving further information during the medicines funding process
- Make more information publicly available about its decision-making process
How Pharmac ranks globally
Pharmac has never breached its spending cap, which, by international standards, is low. It uses a range of tactics to drive down prices.
New Zealand ranks last of 20 OECD countries in accessing new medicines. It is important to note this is in the approval of the medicines for use in NZ, which is by Medsafe, and which is distinct from Pharmac then approving funding. Pharmac only funded 13 percent of new medicines approved by Medsafe, according to the report, but more could be added later. Australia funds 39 percent of new medicines approved by their Therapeutic Goods Administration.
Pharmac also ranks second to last for access to innovative medicines. These are drugs which have been expedited, are considered breakthrough medications or have been given priority assessments.
Many of the medicines still awaiting approval by Medsafe or funding by Pharmac are ‘global standard of care’ treatments for diseases or disorders elsewhere in the world.
It is important to note that, even though NZ does not rank well on this comparative list, there are affluent countries in the world where the government health program generally does not pay for prescription drugs. This includes the USA and Canada.
Suspected untimely death and suffering
Pharmac’s cost-driven decision-making and reliance on single source manufacturers for each medication has been suspected of causing untimely death and suffering. For example, three deaths were reported following an enforced brand switch of an epilepsy drug in 2019. In that case, the switch was done strictly to save money and was against the advice of MedSafe.
