New Zealand agency comes under pressure to pay more for drugsBMJ 2011; 342 doi: https://doi.org/10.1136/bmj.d3933 (Published 21 June 2011) Cite this as: BMJ 2011;342:d3933
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The recent BMJ news article "New Zealand agency comes under pressure
to pay more for drugs"  summarises well the issues surrounding the
country's drug funding authority PHARMAC and the Trans-Pacific Partnership
trade agreement currently being negotiated between New Zealand (NZ) and
the US. One has to question why US pharmaceutical companies would be
lobbying against PHARMAC when the size of the NZ pharmaceutical market is
insignificant in global terms. It is likely the success of PHARMAC that
has made it a target.
PHARMAC operates within a set budget, which by law it cannot exceed,
while still striving to fund the most appropriate range of community
pharmaceuticals possible. Strategies include preferentially funding of
generic drugs, forcing pharmaceutical companies to tender for the right to
have their brand subsidised, and reference pricing. Importantly, PHARMAC
is bound only to subsidise at least one community pharmaceutical within
each therapeutic subgroup, giving it the power to not list higher priced
drugs if they don't carry significant benefits compared to other drugs in
the class. Patients still have access to the drugs that are not listed,
but at their own expense.
Within the context of a community pharmaceutical budget of around
$700 million per year, tough price negotiating and other strategies by
PHARMAC save the health system in excess of $300 million per year . It
is clear why pharmaceutical companies would be keen to shackle PHARMAC,
and in particular to obstruct the spread of this successful model to other
countries. According to OECD data , per capita spending on
pharmaceuticals in NZ is less than a third of that in the US, and half of
that in Australia. This does not appear to have occurred at the cost of
health outcomes (eg, life expectancy is 2 years greater in NZ than in the
The irony is that the US health system could potentially become less
inefficient by adopting the PHARMAC model.
1. Moynihan R. New Zealand agency comes under pressure to pay more
for drugs. BMJ 2011; 342:d3933
2. PHARMAC Information Sheet: Purchasing Medicines.
3. OECD Health Data 2011 - Frequently Requested Data.
Competing interests: No competing interests