When was pharmac created

Naturally, controversy and cost containment has brought the agency to the attention of policy makers around the world. However, Pharmac has also raised the ire of the pharmaceutical industry, various clinicians, researchers and patient groups. Some would like to see the agency gone, or at least its powers curtailed.

Others see Pharmac as ahead of its time and to be emulated by policy makers elsewhere. This article reflects on the history and role of Pharmac today. First, it looks at the original context within which it was developed, its aims and how it has approached its task. Third, the article describes the challenges Pharmac has faced over time, including those presented by the Trans-Pacific Partnership Agreement TPPA negotiations, and of new personalised medicines.

Finally, it looks at potential lessons for other health systems. The circumstances surrounding Pharmac when it was founded are not to be overlooked. As noted, the overriding objective of policy makers at the time was to create a public health system infused with values of private business and competition. Pharmac was established by four independent government purchasing agencies, themselves just created in The four new purchasers saw benefit in creating a single independent company able to use monopsony power to manage the Pharmaceutical Schedule.

While the relationship between Pharmac and the pharmaceutical industry has improved over time and is today one of mutual, albeit at times uneasy, acceptance, at the outset Pharmac sought to attack pharmaceutical prices, and some might suggest the pharmaceutical industry, head on.

Active negotiation of pharmaceutical costs and active management of the Pharmaceutical Schedule was seen as core to meeting this objective. Pharmac, of course, also was founded in a country with a restricted medicines industry mostly focused on generics. Unlike other countries where the pharmaceutical industry is a significant economic contributor, there was limited economic gain for New Zealand through government support for industry-set prices and no political risk in the negotiating tactics Pharmac developed.

Unforseen at the time of creation, Pharmac has grown to provide an important balance in a context of direct-to-consumer advertising of pharmaceuticals, which is permitted in only New Zealand and the USA. Pharmac manages the costs of items already on the Pharmaceutical Schedule and also makes decisions around new inclusions. Most of the tactics used for the former had been deployed in a limited way when the Department of Health managed the Pharmaceutical Schedule [ 4 ]. The first of these is reference pricing in which Pharmac pays only the price of the cheapest pharmaceutical in a particular class, such as ACE inhibitors.

The costs over the reference price for pharmaceuticals whose suppliers fail to meet this will be worn by patients, meaning they have a higher co-payment. This drives prescribers toward selecting the pharmaceutical with the reference price, while driving down costs of competing products. Second, Pharmac pursues cross-company deals in which it agrees, for example, to list a new medicine at an agreed price in exchange for the manufacturer lowering the cost of other listed medicines—sometimes having a spin-off effect of creating new reference prices.

Third, the agency has a policy of promoting generics through tendering out the right to exclusive supply of a medicine for a fixed period once its patent has expired. Fourth, subsidies for various pharmaceuticals are restricted to patients most likely to benefit from them. In other scenarios, an expenditure cap on a pharmaceutical for a particular condition may be agreed on between Pharmac and the supplier.

If more than the capped level of a product is prescribed the supplier funds the cost difference through refunding subsidies paid. For new inclusions on the schedule, Pharmac underpins its decisions with criteria listed in Box 1 in , Pharmac engaged in a community consultation in view of producing an updated set of criteria, which remains under consideration at the time of writing [ 6 ].

Very importantly, Pharmac prides itself in focusing on the use of evidence and economic analyses to inform decisions [ 7 , 8 ]. In this regard, Pharmac has been a leader on the international stage in demanding transparency from a pharmaceutical industry that has been censured for selectivity when it comes to providing data [ 9 ]. The decision whether to list a new medicine on the schedule follows a series of steps that involve a pharmaceutical company supplying results of clinical trials, the treatment benefits of their product and its costs.

It uses cost-utility analysis techniques to inform its decisions and make trade-offs between different medicine investments [ 6 ]. Thus, the agency may need to balance whether a new and more expensive medicine, which perhaps benefits a small number of patients, provides a better investment than another already listed medicine that benefits a wider population.

As in any country, there are periodic community demands for high-cost pharmaceuticals for specific conditions that affect only a very small number of patients. Sometimes, applications were for new medicines around which information on efficacy was limited. There was an element of mystery surrounding the decision-making process. Success rates were not high and allegedly tended to hinge on how well the application was prepared [ 12 ].

As highlighted elsewhere, this contrasts with the assessment process for elective surgery in New Zealand [ 13 ]. To be fair, information about the impact on patients unable to access specific medicines is limited and more research into this is needed, along with research into the impact of delays in accessibility of some medicines. Urgent Assessment for individuals with conditions requiring urgent treatment who cannot await a decision for listing on the Schedule.

Hospital Pharmaceuticals in the Community for patients better treated with unlisted medicines in the community as an alternative to hospital treatment.

In , for example, it was handed responsibility for buying medicines on behalf of all New Zealand public hospitals, where previously each hospital district had purchased its own medicines, resulting in reasonable savings [ 14 ]. From , it took responsibility for the national immunisation schedule and, in , launched the Hospital Medicines List to provide consistency in medicines availability across hospitals.

Pharmac has also recently taken on responsibility for purchasing medical devices for the public hospital sector, meaning its budget and influence will continue to grow. On a range of indicators the agency has performed admirably. Against this background, Pharmac asserts that the range of subsidised medicines has continued to expand as cost savings through its negotiations have permitted. Pharmac reported that, in , 14 highly applied for NPPA medicines were moved into the Pharmaceutical Schedule, following a policy move to align the NPPA and schedule more closely [ 16 ].

There are numerous examples of individual New Zealand pharmaceutical prices and patient co-payment amounts that other countries and their citizens might only dream of [ 19 ]. Very importantly, Pharmac has been relatively free from political interference, receiving funding from but independent of government, and fiercely resistant to pharmaceutical industry influence over its decisions.

On only a small number of occasions have its decisions come under political fire. A high-profile recent case involving herceptin Trastuzumab saw Pharmac deciding to fund only a week course rather than the full year funded in other countries.

Detailed elsewhere, the end result of electioneering saw the incoming government bypassing Pharmac and directly funding herceptin for 52 weeks via the Ministry of Health [ 21 ]. Despite the apparent successes, Pharmac has been criticised. First, studies variously suggest that New Zealanders have access to a more limited range of medicines, which are older and less innovative, than comparator health systems meaning patients with specific diseases often wait longer for access knowing that medicines are publicly subsidised in other countries [ 1 , 22 ].

The implication is that Pharmac is to blame. The US pharmaceutical industry, in particular, has opposed this on various grounds [ 24 ].

Such arguments have surrounded decisions not to fund certain pharmaceuticals or to only make them available via a specialist rather than a general practitioner. They also are used by those declined funding under the NPPA and its predecessor. Concern has also periodically arisen when Pharmac has switched a brand of medicine, with impacts on quality of care.

Examples include the highly publicised case of statins, with considerable cost savings for Pharmac, but alleged implications for patients [ 25 — 27 ]. Pharmac obviously has to grapple with issues that confront every health agency, especially living within its budget in the face of potentially untethered and ever-changing demands.

While Pharmac presently funds a range of cancer products designed for specific populations, a patient demand for an individualised pharmaceutical is presently likely to require an NPPA. Thus, another present challenge for Pharmac is producing a new set of decision criteria which, as noted, is in progress. Following its 20th anniversary, a number of conclusions can be drawn about Pharmac. It is without doubt a resounding success in many ways as discussed above and to be celebrated for this.

Notably, Pharmac has managed to combine two functions that in most other health systems are separated: the assessment of medicines in both scientific and financial terms. Yet, it is this very combination residing in Pharmac that has engendered the most criticism and industry concern. The agency has also emerged as something of an international role model for evidence-informed decision making.

In the future, new thinking around how to fund high-cost individualised medicines is needed. One option could be for Pharmac to work on agreements with manufacturers to fund such medicines for individuals only if they are seen to produce results, requiring something of a trial period in each case in the form of shared industry-government risk.

As noted elsewhere [ 24 , 29 ], perhaps the key lesson from Pharmac over the years is that active management of a pharmaceutical schedule can produce savings while increasing public access to subsidised medicines, albeit with the caveat that access to some medicines can be delayed, restricted or denied. In this context, Pharmac has shown New Zealand and the international community that it is possible to prioritise using methods that can withstand scrutiny and time.

While no approach is perfect, and as noted there are various areas that Pharmac could and has sought to improve upon in its tasks, the agency is arguably better than the alternatives. A three-dimensional view of access to licensed and subsidized medicines under single-payer systems in the US, the UK, Australia and New Zealand.

PubMed Article Google Scholar. Gauld R. Google Scholar. Health Policy. Clark H. In: Davis P, editor. For health or profit? Medicine, the pharmaceutical industry, and the state in New Zealand. Auckland: Oxford University Press; Wilson JQ. Bureaucracy: what government agencies do and why they do it. New York: Basic Books; Pharmaceutical Management Agency. Wellington: Pharmaceutical Management Agency; Grocott R. Applying programme budgeting marginal analysis in the health sector: 12 years of experience.

Expert Rev Pharmacoecon Outcomes Res. PubMed Google Scholar. Whilst Pfizer was providing the medicines needed for the Union war effort, a young cavalry commander named Colonel Eli Lilly was serving in their army. A trained pharmaceutical chemist, Lilly was an archetype of the dynamic and multi-talented 19th century American industrialist, who after his military career, and trying his hand at farming, set up a pharmaceutical business in Another military man in the drugs business was Edward Robinson Squibb, who as a naval doctor during the Mexican-American war of — threw the drugs he was supplied with overboard due to their low quality.

Switzerland also rapidly developed a home-grown pharmaceutical industry in the second half of the 19th century. Previously a centre of the trade in textiles and dyes, Swiss manufacturers gradually began to realise their dyestuffs had antiseptic and other properties and began to market them as pharmaceuticals, in contrast to the origin in pharmacies of other enterprises.

It later moved into medicines, commercialising aspirin around the turn of the 20th century, one of the most successful pharmaceuticals ever at that point. These companies focused as much on cod liver oil, toothpaste, citric acid for soft drinks, and hair gel as on prescription medicines, as well as selling products like heroin on the over-the-counter market. The national rivalries and conflicts that characterised this period also had their impact on the developing industry.

Bayer also had its Russian subsidiary seized during the Russian revolution. The beginnings of the globalisation of the industry were seen both before and after the war — in the UK, import duties incentivised many foreign companies such as Wyeth, Sandoz, CIBA, Eli Lilly and MSD to set up subsidiaries in Britain in the post-war years. The period between and was marked by two breakthroughs that presaged the arrival of the pharma industry as we know it today.

The first was insulin — Frederick Banting and colleagues managed to isolate insulin that could treat diabetes, up until that point a fatal condition. But it was only in collaboration with the scientists at Eli Lilly that they were able to sufficiently purify the extract and industrially produce and distribute it as an effective medicine.

The second was penicillin, a discovery of an impact possibly unparalleled by any other in medicine. The immense scale and sophistication of the penicillin development effort marked a new era for the way the pharmaceutical industry developed drugs.

The war had also encouraged research into everything from new analgesics to drugs against typhus, with a great deal of collaboration between the companies and government. In , the NHS brought in what was essentially a price fixing scheme to allow reasonable return on investment for drug manufacturers, solidifying the incentive to invest in new medicines.

This investment fuelled the development of drugs to come over the coming decades. Meanwhile, as the industry grew wealthy thanks to its growing portfolio of products, the potential ethical conflicts of making money from selling healthcare products became increasingly apparent. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear.

The better we remember it, the larger they have been. This public-spirited industry still required greater oversight, however, and government regulations on medicines increased on both sides of the Atlantic. The Thalidomide scandal of prompted an increase in the regulation and testing of drugs before licensing, with a new amendment to US Food and Drug Administration FDA rules demanding proof of efficacy and accurate disclosure of side-effects for new medications the Kefauver-Harris Amendment being implemented in Likewise, the Declaration of Helsinki put greater ethical structures on clinical research, clearly cementing the difference between production of scientific prescription medicines and other chemicals.

Fordian methods enabled more rational methods of mass production, and increasing understanding of biology and chemistry enabled drug candidates to be chosen systematically rather than discovered serendipitously. As the barriers to entry in drug production were raised, a great deal of consolidation occurred in the industry. Likewise, the processes of internationalisation begun before the war were continued — in alone Pfizer opened subsidiaries in nine new countries.