Will Pharmac become a victim of its own success?

Moynihan’s article summarises well the issues surrounding New Zealand’s drug funding authority Pharmac and the Trans-Pacific Partnership trade agreement currently being negotiated with the US.1 Why are US drug companies lobbying against Pharmac when the New Zealand drug market is insignificant in global terms? Pharmac’s success has probably made it a target.

Pharmac operates within a set budget, which by law it cannot exceed, while striving to fund the most appropriate range of community drugs possible. Strategies include preferentially funding generic drugs, forcing drug companies to tender for the right to have their brand subsidised, and reference pricing. Importantly, Pharmac has to subsidise only (at least) one drug within each therapeutic subgroup, so it does not have to list higher priced drugs that have no significant benefit over others in the class. Patients still have access to drugs that are not listed, but at their own expense.

With a community drugs budget of around $NZ700m (£376m; €430m; $613m) a year, tough price negotiating and other strategies by Pharmac save the health system more than $NZ300m a year.2 It is clear why drug companies are keen to shackle Pharmac and obstruct the spread of this successful model to other countries. According to Organisation for Economic Cooperation and Development data,3 per capita spending on drugs in New Zealand is less than a third of that in the US, and half of that in Australia. This does not seem to have been at the cost of health outcomes (life expectancy is two years greater in New Zealand than in the US).

Ironically, the US health system could become more efficient by adopting the Pharmac model.