By Paula Lorgelly

Professor of Health Economics, University of Auckland

Never before has Pharmac – the government’s medicine procurement agency and decision maker – featured so prominently in an election.

Many parties are pledging more funding, but two are promising to overhaul the agency as we know it. One proposal would link funding for medicines with measures of their impact on overall productivity (such as keeping people working).

But linking funding with productivity could jeopardise efforts to ensure equitable access and health improvements for all. Equity is a focus of wider health reforms and also a key recommendation in a recent review of Pharmac.

With patients waiting and sometimes dying while waiting for new health technologies to be approved, there has been increasing media criticism of Pharmac’s various refusals and delays to medicines funding.

It is clear from the Pharmac review that the agency’s success at negotiating some of the lowest medicine prices in the world has come at the expense of delivering equitable and timely access to medicines for New Zealanders.

Nearly every political party has a proposed solution. Given there are more than a hundred medicines on Pharmac’s Options for Investment waiting list – deemed to deliver value and be funded if the budget allowed – promised funding increases will be welcome. But questions remain over whether this will stretch beyond merely “keeping the lights on”.

Labour is promising to increase Pharmac’s funding by NZ$1 billion over four years, with an extra $50 million for new treatments, rising to $100 million after two financial years.

National is promising an additional $724 million over four years, plus $280 million ring-fenced to fund 13 cancer treatments. The party plans to fund these cancer drugs by reinstating the $5 prescription charge which the current government recently scrapped.

The Greens say they would increase funding for Pharmac but have not provided any dollar values. Likewise, Te Pāti Māori has promised more funding, but has not said by how much.

The Opportunities Party (TOP) has no stated policy, although it promises to fully fund contraceptives. No dollar value is given.

NZ First is promising a new medicines-buying agency and an additional $1.3 billion a year for life-saving medicines.

ACT has provided no specific funding promise, but has a policy it claims would ensure consistent and fair access to medicines. Essentially, the party proposes to overhaul regulatory approval processes and decision making.

Of all the party promises and offerings, however, it is ACT and NZ First that are promising something beyond funding increases – more akin to rewiring the whole house.

Linking access to medicines with productivity

ACT’s medicines strategy is the most detailed of any party. It is also the most radical – likely a result of candidate Todd Stephenson, number four on the party list, having spent 15 years working in the pharmaceutical industry in Australia.

It requires the Ministry of Health to publish and regularly update a medicines strategy (a recommendation of the Pharmac review), and New Zealand’s medicines regulator MedSafe to approve within one week any drug or device that has been approved by two comparable international regulatory agencies.

ACT’s strategy calls for analysis to understand New Zealanders’ unmet needs, what new medicines offer, how other countries are managing cost, and what drives price changes. Given the Ministry of Health’s revised remit under the health reforms as the kaitiaki (or steward) of the health system, this would fit well.

ACT then suggests performance bench-marking. This would require the ministry to publish evidence of the productivity gains from pharmaceutical funding decisions, and the productivity losses of waiting for treatments to be subsidised. The party also wants price performance to be compared with other countries.

ACT has expressed an interest in including productivity in healthcare evaluations, and, Stephenson has suggested productivity should feature in the decision framework.

Other countries consider productivity losses by taking a societal perspective and including both direct healthcare costs and indirect productivity costs in evaluations. But this remains a much debated topic in the field of economic evaluation.

Productivity can either be valued using the “human capital” approach (the amount of time lost due to illness, valued at the market wage) or the “friction cost” approach which takes into account unemployment and labour market reserves so workers can be replaced.

Irrespective of the approach, if a patient group happens not to be economically productive, then health technologies that target them may be deemed less cost-effective as there is no measurable productivity benefit of improving their health.

This became an issue in Sweden where the country’s societal perspective clashed with the principle of equal human value. If Pharmac were to consider productivity, it would be important to ensure it does not discriminate against the young, old, those with chronic conditions, and those on benefits. That would risk exacerbating inequities.

Outsourcing and bench-marking

NZ First recently released a seven-point plan for better healthcare. It expands on the party’s “performance not puffery” idea by replacing Pharmac “with a new agency focused on patients’ health and recovery – not cost savings and lack of essential medicines”.

The party suggests bench-marking funding against the OECD average, funding a rapid access scheme for innovative medicines, and putting in timelines for the completion of reviews and decisions. NZ First also has a policy to “end MedSafe waste” by committing New Zealand to mutual recognition agreements with peer regulators.

The issue of outsourcing approvals was raised during the COVID pandemic. Then director-general of health Ashley Bloomfield’s response was that evidence of safety and efficacy should be assessed in light of population demographics and healthcare delivery systems specific to Aotearoa New Zealand.

NZ First’s health spokesperson has suggested the evaluation and recommendation functions should be separated from the funding decision.

If Pharmac were not both the decision maker and funder (as is the case in England where the National Institute for Health and Care Excellence makes decisions and the National Health Service funds them), this may undermine the agency’s credibility. The lack of a fixed budget would also undermine New Zealand’s strong negotiating stance.

ACT and NZ First are suggesting a new approach to decision making and procurement that, despite more funding, may increase inefficiencies and further embed inequities.

Professor Paula Lorgelly

* Originally published in The Conversation. Republished with permission.

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