Pharmac Figures Don't Stack Up

September 6, 2004
News Release

PHARMAC FIGURES DON'T STACK UP

Figures released today by PHARMAC on its three-year funding path and budget just do not stack up, according to the chairman of the Researched Medicines Industry Association (RMI) Dr Pippa MacKay.

Dr MacKay commented: `Any increase in budget is welcome and the three-year funding path is certainly helpful, but last year's budget was $566 million so this year's ($565 million) is actually a reduction.

`PHARMAC's annual plan (2004 - 2005) states a normal annual growth of 11 per cent (mix and volume) offset by a nine per cent annual drop in prices. Therefore they need a minimum two per cent increase in budget per year just to fund what they've already got - with no allowance for new medicines. Next year's budget only gives a 0.5 per cent increase and the year after gives only 1.9 per cent increase.

`I fail to see how PHARMAC can deliver the medicines it is promising based on this formula. Where will they find funding for lower co-payments and new medicines? How will they be able to continue to insist on price cuts of medicines by more than nine per cent every year? Is this sustainable? Will they continue to cut costs through delays in listing and restrictive criteria? What does this mean for New Zealanders' access to medicines and our health?'

By comparison the Australian Pharmaceutical Benefits Scheme has had a nine per cent increase in expenditure and lists 30 new medicines a year.

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Further Information

Since 1993 PHARMAC has achieved significant savings and has contained growth in pharmaceutical expenditure to less than 3 per cent p.a. Before PHARMAC, New Zealand's per capita spend was 3-4 per cent higher than Australia's, it is now around 53 per cent of the Australian level. New Zealand and Australia's pharmaceutical expenditure represents a similar proportion of GDP, the difference is Australia has had faster and more sustained economic growth.

PHARMAC has applied Special Authority status to many medicines routinely funded in other countries. Between 1997 and 2002, New Zealand listed only 48 of the 160 new medicines listed in Australia; of those, 34 had access only through Special Authority.

PHARMAC also delays some subsidies, apparently due to its capped budget (although in the past financial year, PHARMAC under spent its budget by $25M).

New Zealand no longer has world-class access to medicines. Analysis of 85 new innovative medicines introduced into 25 major markets between 1994 and 1998 showed New Zealand had the third lowest rate with only 28 introduced. In 2003 only one new medicine was listed in New Zealand, compared to 30 in Australia.

New Zealand needs a more realistic budget for funding for medicines, with a reallocation of its health spending. Australia spends 10 per cent of its total health budget on pharmaceuticals; New Zealand spends 5 per cent. Pharmaceutical expenditure in OECD countries represents on average about 15 per cent of total health expenditure. In 2001/02 New Zealand's total health expenditure was $10,680M so, by OECD standards, New Zealand could have been expected to spend $1,602M on pharmaceuticals. Instead, PHARMAC spend for 2001/02 was less than one third of this - $504M. Australian expenditure is approximately $250 per person; in New Zealand it is $140.

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