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RMI: Pharmac's Use Of Smoke And Mirrors

November 10, 2004

News Release


This year's annual review released today by PHARMAC is a masterly use of smoke and mirrors, according to the chairman of the Researched Medicines Industry Association (RMI) Dr Pippa MacKay.

Dr MacKay commented: `Once again PHARMAC attempts to bedazzle the people of New Zealand with a masterly use of smoke and mirrors. But of the eleven medicines newly subsidised since 1 January 2004 only one is not subject to special authority restrictions. Tens of thousands of New Zealanders still will not be able to access medicines for diabetes, HIV/AIDs, severe pain or cancer. While any subsidy from PHARMAC is welcome, New Zealanders have, on average, had to wait for over two years from first listing to subsidy for these medicines so they can hardly be called new. And the restrictions imposed mean that wider access is an illusion.'

Last month, Health Minister Annette King admitted to Parliament that with more than 100,000 special authority applications a year, New Zealanders were suffering inconvenience, frustration and hardship in getting the medicines they need.

Dr MacKay pointed out that PHARMAC's promises to improve access to medicines were unconvincing: `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. -ends-

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.

1.Medicines Australia 2.'Health Expenditure in New Zealand 1990-2002' Ministry of Health report April 2004

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