GUEST BLOG: Ian Powell – Criticisms of Pharmac review lose sight of an opportunity

The Government’s announcement of an independent review of Pharmac, implementing an election promise, has attracted criticism from many for not including funding in the review’s terms of reference. The sentiment behind this criticism resonates with me. There is no doubt that inadequate funding has been a huge obstacle to Pharmac achieving its full effectiveness.

But the critics are missing something; the need to drill down beyond underfunding to purpose; that is, the value of investment in pharmaceuticals to improve both health outcomes and cost-effectiveness. If the value of investment is properly understood then improved funding should follow subject to political will.

What is Pharmac

Pharmac is the better known name for the Pharmaceutical Management Agency. It is a New Zealand Crown entity that decides, on behalf of the district health boards, which medicines and pharmaceutical products are subsidised for use in the community and public hospitals. As a state drug purchasing agency it has its own governing board appointed by the Minister of Health. Its current chair is former Labour Minister of Education and Vice-Chancellor of Massey University Steve Maharey.

Pharmac doesn’t approve pharmaceuticals for use in New Zealand. That responsibility rest with Medsafe based in the Ministry of Health. Pharmac can only purchase pharmaceuticals that have been approved by Medsafe. As such there is no inherent conflict between the two bodies. There is a current difference between them but this involves conflicting clinical assessments over switching from one approved epilepsy drug to another. This is currently being considered by the Coroner.

Established by statute in 1993 Pharmac in some respects was an anomaly of the ideological era of its foundation. This was in the decade that was the highpoint of neoliberalism in New Zealand to which the health system was not exempt. Our public hospitals were changed into state-owned companies covered by the Companies and Commerce Act and were idiotically expected to compete rather than collaborate with each other (and the private sector). Creating a state-owned purchasing entity didn’t fit in with this ideology but it did reflect the injection of some insightful pragmatism that has stood the test of time.

In performing its statutory role there is general recognition that Pharmac has done a good job in negotiating with a venal sea of sharks otherwise known as ‘Big Pharma’. It is a tribute to Pharmac that international drug companies have been determined to try to curb or otherwise obstruct its role including through free trade agreements.

The review

The review of Pharmac is required to focus on two areas:

1. How well Pharmac performs against its current objectives and whether and how its performance against these could be improved.
2. Whether Pharmac’s current objectives maximise its potential to improve health outcomes for all New Zealanders as part of the wider health system, and whether and how these objectives should be changed.

In undertaking this focus the review is to consider a range of factors, including:

• The timeliness of Pharmac’s decision making (in particular for new medicines).
• The transparency and accessibility of decision-making processes.
• Equity, including access to medicines and devices for Māori and Pacific peoples.

The final report of the review is expected by the end of this year with an interim report due in August.

An opportunity that should not be lost

The critics are right. There is no reference to the funding of Pharmac. But does funding need to be including in order to address it? Note the review’s second area of focus outlined above.

Consider the words “potential to improve health outcomes”, “part of the wider health system” and “whether and how these objectives should be changed.” It doesn’t require a quantum leap of thinking to recognise that if Pharmac is enabled to investment more in approved drugs it can be more cost-effective in improving the health outcomes of many more New Zealanders. This includes New Zealanders currently those denied access to improved health outcomes because of Pharmac’s funding constraints but who still cost the wider health system more in various ways because of necessary but less effective ongoing treatment.

If the review was to explain the benefits for the health of New Zealanders and cost-effectiveness of changing the objectives of Pharmac to include investing more in approved pharmaceuticals, then the argument for improved funding is able to be seen in a positive light – good for the sick and good for the economy.

The independent panel is chaired by experienced consumer advocate Sue Chetwin. She is known as someone with an acute mind, good values and spunk. These, along with the expertise of her other panel members, are excellent credentials for developing the argument about changing Pharmac’s objectives to include investment in health outcomes. If she and her panel do this then political will becomes the remaining challenge.

Ian Powell was Executive Director of the Association of Salaried Medical Specialists, the professional union representing senior doctors and dentists in New Zealand, for over 30 years, until December 2019. He is now a health systems, labour market, and political commentator living in the small river estuary community of Otaihanga (the place by the tide). First published at Otaihanga Second Opinion.