RMI

Medicines’ budget squeezed

Why is the inflation-adjusted funding allocated to buy medicines for New Zealanders less today than when PHARMAC was established in 1993?
“I can’t think of another single area within the health sector that has not received huge increases in spending over the years,” said Dr Pippa MacKay, the chair of the Researched Medicines Industry Association.

The number of prescriptions nearly doubles while funding for medicines declines in real terms

RMI

PHARMAC’s annual report shows that the number of prescriptions filled since it was established have virtually doubled. But, when PHARMAC’s expenditure on the community pharmaceutical schedule since 1993 is adjusted for inflation using the Reserve Bank’s CPI inflation calculator we see that funding for medicines has reduced in real terms, paticularly since 1997/98.
This shows, very clearly, that funding for medicines is not keeping pace with demand, and reinforces the call by patient groups, clinicians and the industry alike for Government to increase funding for medicines. In real terms, funding for medicines is steadily going backwards.

The cost of similar access to that
enjoyed in Australia?

The additional annual cost of providing the same level of access to medicines as seen in Australia would range between $63-$95 per capita, ($258-$389 million) – depending on a variety of criteria. This finding was presented in the pharmaceutical industry’s submission to the Government's consultation document Towards a New Zealand Medicines Strategy. This is in context of a current budget of $636m.
The submission argued that while the increase in spending is significant, the size of the jump simply reflects the catch up required after many years of insufficient funding.
The pharmaceutical industry believes that if such an increase were phased in over a period of, say, five years, the overall fiscal effect would not be huge.
The submission also argued that improvements in health outcomes associated with greater access may well reduce other health and social expenditures by at least a corresponding amount.
The analysis is complex because of the variety of institutional arrangements in both countries. The detailed analysis is on pages 68 to 74 of our submission, click here.
Dr Pippa MacKay says society will benefit with fewer:
• Hospitalisations
• Invasive treatments
• Working days lost
• Numbers of carers required
• Dollars spent on sickness benefits
Even more importantly, she says, the level of needless suffering will be reduced as modern innovative medicines are introduced.

Biotech first

The New Zealand biotech sector has moved into a new stage of development with the recruitment of New Zealand patients into a phase 3 trial of a locally developed drug by Neuren Pharmaceuticals Ltd.
This is the first locally developed molecule where the company has retained ownership of the technology and will run the global phase 3 clinical trial.
“This is highly significant both in terms of demonstrating the potential for the biotech sector, as well as for those patients who could benefit from the early access to a promising medicine,” Ken Shirley, the CEO of the RMI said.
“The pharmaceutical industry is discouraged from conducting R&D in New Zealand by the hostile commercial environment fostered by PHARMAC, the Government’s procurement agency.
“These short-sighted policies result in New Zealand failing to capture its expected share of the $US60 billion invested annually by pharmaceutical companies worldwide.”
Other countries, like the UK and Australia actively promote and encourage clinical trials both as providing early access to innovative medicines for patients, and also to retain and nurture their scientific, clinical and manufacturing sectors.

Money’s not the whole answer to more and better medicines

“While a realistic budget for medicines would help to ensure that New Zealanders had access to the medicines they need, in the same way as citizens in Australia do, it’s not the whole answer,” says Dr Pippa MacKay.
The pharmaceutical budget should be determined by need and access benchmarks, rather than the evaluation of products after a capped budget has been set. Horizon scanning should be used to establish budget estimates on an annual basis.
The current system simply results in a priority list of new products competing for the limited funding available. There are currently around 30 medicines waiting for funding which have been recommended by PHARMAC’s clinical advisory group (PTAC).
Few of these are likely to become available unless other medicines on the Schedule are replaced by generics or where individual companies ‘do a deal’ to reduce the price of another, often un-associated medicine, in order to get a new one listed.
The recent joint announcement by the DHBs and PHARMAC regarding the amount allocated for the Community Schedule makes it clear that the current budget is set pretty much on a “what’s left over after everything else is catered for” basis.
PHARMAC has also been careful to dampen any expectations of funding for new ‘investments’ because the increase will be soaked up by the ballooning number of scripts being written as the Primary Health Strategy is extended.
“If the pending New Zealand Medicines Strategy doesn’t introduce real reforms, and ensure that there is an adequate budget to cover them, we can fully expect continued suffering and an ongoing tragic parade of patients seeking medicines that they know are available over the Tasman,” Pippa MacKay commented.
“And, as new and exciting medicines come onto the world market as a result of biotechnology, we can only presume their prices will be commensurate with the costs of research and development. Thus managing the costs of these newer medicines will also be an escalating issue.”

This newsletter is published on behalf of the
Researched Medicines Industry Association of New Zealand
The views and opinions expressed in this publication
are not necessarily those of the RMI.

For further information:

The Researched Medicines Industry Association Inc
PO Box 10447 Wellington
Phone 04 499 4277

http://www.rmianz.co.nz/

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