Pauline Norris (University of Otago, New Zealand): Insight in the New Zealand health care system, with a focus on medicines – current status and developments. Kelan tutkimuksen "Lääke-euro talouden puristuksessa" -seminaari 3.6.2015, Helsinki.

1. Insight into the New Zealand health
care system, with a focus on
medicines
Pauline Norris
Professor of Social Pharmacy
University of Otago

2. • Land area similar to Finland
• NZ: 268,000km2
• Finland: 338,000km2
• Population similar to Finland
• NZ: 4,570,000
• Finland: 5,477,000

3. Economy and Health
New Zealand Finland
GDP/person $36,152 $40,838
Gini index 36.2 25.9
Life Expectancy 83.2 (f) 79.5 (m) 83.3 (f) 76.24 (m)
Infant Mortality 4.65 3.38

4. Health System
New Zealand Finland
Expenditure (US$, PPP) 3182 3374
Expenditure as % of GDP 10.3 9.0
Out of pocket spending as
proportion of total
household consumption
1.8 2.9

5. New Zealand Health System
• Tax funded: government allocates funding from income tax, sales tax
and other taxes to Health
• Ministry of Health: central agency, policy, regulatory functions
(including licensing of medicines, pharmacovigilance, classification of
medicines)
• Funding allocated by government to 20 District Health Boards (DHBs)
(according to a formula based on population and other factors)

6. District Health Boards
• Responsible for health services in their region
• Provide services (mainly hospitals) and contract with private
providers: community pharmacies, primary care doctors (general
practitioners), home care providers etc.

7. Patient charges
• Public Hospital care free (including medicines taken while in hospital)
• Primary care: doctors’ visits (about NZ$40 -$60: 39 Euros) and
prescriptions ($5, 3.26 Euro per item)
• Patients register with a regular GP, but can go to any pharmacy

8. Private hospitals and insurance
• Private hospitals provide only small range of surgery, specialists
consultations
• Life-threatening problems always dealt with in public sector
• Private health insurance (30.8% of population, but small contribution
to healthcare funding)

9. Medicines

10. Medicines reimbursement
• Since 1941, government has been the major funder of medicines
• 1941 – late 1980s: government administered the reimbursement but
did not actively manage expenditure
• 1980s: fiscal problems, expenditure growing rapidly, patient charges
introduced and increased
• 1993: PHARMAC established to take advantage of monopsony
position of government

11. PHARMAC
• Goal: “Secure for eligible people in need of pharmaceuticals, the best
health outcomes that can reasonably be achieved, and from within
the amount of funding provided.”
• Must work within an annual budget
• Politically independent
• Advised by Pharmacology and Therapeutics Advisory Committee (but
this advice is not binding)
• About 105 staff

12. PHARMAC’s role
• Referred to as government’s “Drug buying agency” but really more
like “government’s personal shopper”
• Evaluating, bargaining, decision-making
• Budget holding

13. Strategies
• Being an active buyer: controlling access to reimbursement
• Positive list: Pharmaceutical Schedule of medicines that will be
reimbursed, and prices (approx. 2000 products)
• Reimbursed only if prescribed (although many also available OTC)
• Extensive use of cost-utility analysis

14. Decision Criteria
• The health needs of all eligible people;
• The particular health needs of Māori and Pacific peoples;
• The availability and suitability of existing medicines, therapeutic medical devices
and related products and related things;
• The clinical benefits and risks of pharmaceuticals;
• The cost-effectiveness of meeting health needs by funding pharmaceuticals
rather than using other publicly funded health & disability support services;
• The budgetary impact (in terms of the pharmaceutical budget and the
Government’s overall health budget) of any changes to the Schedule;
• The direct cost to health service users;
• The Government’s priorities for health funding
• Such other criteria as PHARMAC thinks fit

15. • Increasing price competition:
• Reference pricing (of groups of medicines, such as ACE inhibitors)
• Paying the same amount for drugs with similar outcomes (whether patent
or generic)
• Patients pay any cost above the reference price
• Targetting
• Bundling of contracts
• Sole supplier and Preferred supplier agreements (for one year)
• Cost-sharing with companies

16. Impact on
expenditure

18. Responses to PHARMAC
• 1990s: turbulent period
• Legal challenges, lobbying, media campaigns, opposition from doctors
and patients

19. Current situation
• Survived many different governments, many health reforms
• Overruled only twice in 22 years (Interferon B and Herceptin)
• Occasional controversies, but mostly “business as usual”
• Good working relationships between PHARMAC and pharmaceutical
industry:
“both groups are aware of each others’ positions, and willing to work together
in a pragmatic manner within the political reality that exists in New Zealand”
• Started with community medicines, then hospital medicines, medical
devices in the future

20. Why has it worked?
• Is PHARMAC, like the Kiwi, unique to New Zealand? (Davis, 2004)
• Statutory independence
• Capped budget
• Very little pharmaceutical industry in New Zealand

21. Do people get the medicines
they need?

22. Range of medicines reimbursed
• More medicines reimbursed with small increases in expenditure
• Comparison of NZ, Australia, UK and VA system in the US (Ragupathy
et al. 2012) showed that PHARMAC subsidized the fewest entities, the
oldest entities and the fewest innovative entities
• Aaltonen et al (2010) found the share of licensed and launched
innovative medicines was significantly smaller in New Zealand than in
Finland, but clinically relevant differences were rarely found

23. Can people afford reimbursed medicines?
• Ethnic and socioeconomic inequalities in health
• Reducing these is key priority for health system

24. • PHARMAC does not set prescription charges for patients: these are
decided by government
• Much lower in New Zealand than Finland (3.26 Euros per item)
• Flat rate irrespective of condition, medicine, age (except children),
income
• Recent research shows much lower than expected use of medicines
by Maori
• Prescription charges are likely to be one reason for this

25. Future Challenges to access to medicines in
New Zealand
• Expensive new medicines
• Aging population?
• Trans-Pacific Partnership Agreement (TPPA)
• How to target funding to reduce the impact of inequality

26. References
• http://www.pharmac.health.nz/assets/factsheet-01-introduction-to-pharmac.pdf
• Davis, P., "Tough but fair"? The active management of the New Zealand drug benefits scheme by an
independent Crown agency. Australian Health Review, 2004. 28(2): p. 171-181.
• Gauld, R., Ahead of Its Time? Reflecting on New Zealand’s Pharmac Following Its 20th Anniversary.
PharmacoEconomics, 2014. 32: p. 937-942.
• Aaltonen, K., et al., The impact of pharmaceutical cost containment policies on the range of medicines
available and subsidised in Finland and New Zealand. Value in Health, in press. 13(1): p. 148-156.
• Ragupathy, R., et al., Key Informants’ Perceptions Of How PHARMAC Operates In New Zealand. International
Journal of Health Technology Assessment, 2012. 28(4): p. 367-373.
• Ragupathy, R., et al., A 3-dimensional view of access to licensed and subsidized medicines under single-payer
systems in the US, the UK, Australia and New Zealand. PharmacoEconomics, 2012. 30(11): p. 1051-1065.
• Cumming, J., N. Mays, and J. Daube, How New Zealand has contained expenditure on drugs. BMJ, 2010.
340(may18_1): p. c2441-.
• Health at a Glance 2013 OECD INDICATORS