The PHARMAC model: New Zealand’s approach to

pharmaceutical reimbursement

Graham Beever, General Counsel

Overview

• 1. PHARMAC’s Role

• 2. A Brief History

• 3. Funding Process

• 4. Decision Making

New Zealand Public Health and Disability Act 2000

• S 47

• Objective: “to secure for eligible people in need of pharmaceuticals,

the best health outcomes that are reasonably achievable from

pharmaceutical treatment and from within the amount of funding

provided”

• S 48

• Function: “to maintain and manage a pharmaceutical schedule that

applies consistently throughout New Zealand, including determining

eligibility and criteria for the provision of subsidies”

PHARMAC’s place in the health sector

• The Government establishes the pool of money for spending on health –

around $15 billion

• The Minister of Health decides how much will be available for the Combined

Pharmaceutical Budget – 2016/17 combined budget $850 million

• PHARMAC manages the funding of community medicines (and many hospital

medicines) within that budget

• Decides what medicines can be given in DHB hospitals

• Emerging role in relation to hospital medical devices

19932001

PHARMAC establishes a national process for

assessing new hospital-administered cancer

treatments

2002

A selective history of PHARMAC’s role

19932001

A selective history of PHARMAC’s role

2002

community

hospital

hospital cancer

Cancer treatment funding changes –

hospitals are paid in same way as

community pharmacies

2008

19932001

A selective history of PHARMAC’s role

2002

community

hospital

2008 2010

Widened responsibility for hospital

medicines and new responsibility for

medical devices

community

hospital medicines

hospital cancer

medical devices

hospital cancer

A selective history of PHARMAC’s role

community

Widened responsibility to

include vaccines

2012

19932001

2002

community

hospital

2008 2010 2013

HML launched

vaccines

community

hospital medicines

hospital cancer

medical devices

hospital cancer

NZ Pharmaceutical Spending, 1978-2013

Average subsidy for Omeprazole 20mg Capsule

Average subsidy for Olanzapine 5mg Tablet

PHARMAC’s management model

Competition

e.g. Generics

New Medicines

Savings

re-investment in the sector

The Funding Process

Step 1: Receipt of Proposals

Step 2: Medical Advice – PTAC

Step 3: Economic Assessment

Step 4: Prioritisation for funding

Step 5: Negotiation

Step 6: Consultation

Step 7: Decision

Step 8: Implementation

Consider evidence

Assess relative value

Outcome

Ranking of Proposals

Priority Proposal IndicationPTAC

priority

CUA

rank

QALYs per

$1m, likely

(possible)

Proposal

expenditure

(first year)

Cumulative

expenditure

1 Fantasticol Lupus High 140-80

(20-100)$80,000 $0.1m

2 ColomabColorectal

cancerMedium 2

25-50

(15-50)$5,000,000 $5.1m

3 RheumatolRheumatic

feverHigh 6

5-10

(3-10)$1,000,000 $6.1m

4Typhoid

vaccine

Typhoid

preventionHigh 5

5-12

(2-20)$530,000 $6.6m

5 Vinedronate Arthritis High 47-10

(6-12)$1,200,000 $7.8m

6 Metogrel ACS Medium 37-13

(4-16)$620,000 $8.4m

7 Tagagliptin Diabetes Low 74-8

(0-10)$500,000 $8.9m

An example of our Options For Investment list (with fictional proposals), with a

budget for investment of $7 million this year

Clearly shows the opportunity cost of every decision

Factors for Consideration

Factors for Consideration

Need

Health benefits

Costs and savings

Suitability

Key figures 2015 – Combined Pharmaceutical Budget