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Savings from extended roles exceed $100m

Media release

December 2014

Savings from extended roles exceed $100m

District Health Boards are poised to save more than $100 million over five years as a result of PHARMAC’s expanded role, PHARMAC reports in its Annual Review, released today.

PHARMAC now manages all medicines used in the community and District Health Board hospitals, haemophilia treatments, vaccines, and has begun negotiating national contracts for hospital medical devices.

Savings from hospital medicines and medical devices work are now significant, says Chief Executive Steffan Crausaz.

“Savings from hospital medicines and medical devices since July 2013 now top $100 million over five years after investments. And that’s just the very beginning for PHARMAC’s work in medical devices,” Steffan Crausaz says.

“While we’ve achieved savings, we’ve also extended access to a wide range of products, achieved nationally consistent access, and managed costs for DHBs.”

PHARMAC also continues to manage the combined pharmaceutical budget, a fixed budget for funding community medicines, cancer medicines and vaccines. PHARMAC added 26 new medicines to this list, while funding was managed on budget at $795 million.

Savings within the fixed budget of $52.2 million added further to PHARMAC’s record, meaning that over 10 years, PHARMAC’s fixed budget savings for DHBs exceeded $5 billion.

“On top of our hospital savings activity, our ongoing work in making savings in the fixed community budget meant DHBs spent $1.2 billion less last year compared to the prices they would have paid 10 years ago for the same medicines.”

The Annual Review also highlights PHARMAC’s work in the emerging technology area of biosimilars. These are competitor products to biologic medicines – those made from or of living things. Examples include some vaccines, insulins, hormones, and complex and expensive monoclonal antibody medicines used to treat auto-immune conditions and cancer.

Biosimilars enable PHARMAC to promote competition for biologic medicines, and lower prices. The Annual Review highlights the example of filgrastim, a medicine used to treat low white blood cell counts in cancer patients. A biosimilar version was funded in 2012, at a lower cost which enabled PHARMAC to increase the number of people able to be funded and improve the health of existing patients.

As a result, clinicians from the MidCentral Regional Cancer Treatment Services report a drop in the incidence of neutropaenic fever experienced by their cancer patients from 30% to 7%.

“Introducing biosimilar competition has sent a signal to suppliers about PHARMAC’s future intentions to harness the benefits of competition where possible for biologic medicines,” says Steffan Crausaz. “The filgrastim story shows that this competition can spill over to similar products that remain on patent, creating even greater savings.”

“Biosimilars are likely to be increasingly important in New Zealand healthcare. In 2014, PHARMAC introduced another biosimilar – for the growth hormone somatropin – and many other biosimilars are in the pipeline.

“Of the competitive processes PHARMAC has run to date where there is biosimilar competition, half have been awarded to the originator brand and half to a biosimilar.”

Highlights for the 2013/14 year

Combined Pharmaceutical Budget
$795.0 million – yearly DHBs’ combined pharmaceutical expenditure (on budget)
3.4 million – number of New Zealanders receiving funded medicines
$52.2 million – amount of savings achieved
26 – number of new medicines funded
35 – number of medicines with access widened
42,885 – estimated number of additional patients benefitting from these
decisions in a full year
Hospital Medicines (1 July 2013 to 30 June 2014)
$3.65 million – full year savings to DHB hospitals from hospital medicines decisions
$0.6 million – cost of new investments in hospital medicines
$14.6 million* – savings to DHBs over five years after costs of new investments
Hospital Medical Devices (1 February 2014 to 30 June 2014)
2,800 – number of line items on the Pharmaceutical Schedule under national contracts (as at 1 December 2014 5,900 line items are listed)
$1.12 million – annual savings to DHBs from national contracts
$4.6 million* – savings to DHBs over five years from national contracts

* (as at 1 December 2014 these hospital savings total more than $100 million in net savings to DHBs over five years)
Other Pharmaceuticals
$28.0 million – savings to DHBs from listing haemophilia treatments


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