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PHARMAC’s “hardball” approach a money saver

6 March 2014

PHARMAC’s “hardball” approach a money saver

The tough bargaining stance of PHARMAC, New Zealand’s drug purchasing agency, has reduced costs to the taxpayer, but not without consequences, a recent Victoria University of Wellington study concludes.

Professor Kevin Dew from the School of Social and Cultural Studies and summer scholarship student Amy Davis set out to understand how PHARMAC came into being at the height of neoliberal reforms in the health sector in New Zealand.

“Like a lot of people, I assumed PHARMAC was the bad guy because it restricts people’s access to drugs,” says Professor Dew. “But it intrigued me that this agency got established in 1993 at a time when New Zealand was trying to push the barriers of free market principles in healthcare.”

PHARMAC manages the list of prescription pharmaceutical products that are subsidised by the state. By choosing just one drug per therapeutic group to fully subsidise it is able to negotiate with drug companies for the best deal.

Professor Dew says PHARMAC’s “hardball” approach has kept New Zealand’s pharmaceuticals budget in check and also regulated the population’s desire to have any available pill for any ill.

“Although New Zealand’s drug use has ballooned since the 1940s, when the government first subsidised pharmaceutical costs, and pharmaceutical costs are always rising, they’re not rising nearly as quickly as other countries,” he says.

“Nevertheless, there are certain costs that come with that one of them being that New Zealand tends not to get new drugs that are subsidised as quickly as other countries.”

However, he adds, this can sometimes be positive. “You get some new drugs that last a few years, then get withdrawn as a result of adverse reactions, whereas PHARMAC processes provide better insurance that the most reputable drugs are subsidised.”

Although Professor Dew believes PHARMAC is working well in general, he would like to see aspects of the agency undergo critical evaluation.

“There’s no perfect system—you’re dealing with a system of rationing and somebody’s going to miss out. But there are people out there who are struggling to get access to certain drugs, especially for rarer conditions. I’d like to see more public input into the formulas PHARMAC uses to make its decisions.”


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