National, United want review of frugal Pharmac

Pharmac, which has underspent its drugs budget, faces an independent review of its money-saving techniques if Labour loses the election.

National and United Future - and the drugs industry - want a review of the agency that decides which medicines will be state-financed.

Pharmac underspent by $8 million on its $541 million budget for 2003-2004. United Future leader Peter Dunne highlighted that this week, linking it to the lack of state funding for drugs to treat Alzheimer's disease and other conditions.

But the Government stood by Pharmac and its rationing processes, based on prices and evidence of benefits, for deciding which medicines will be financed.

"Labour ... believes that Pharmac is doing an outstanding job," Associate Health Minister Damien O'Connor told Parliament.

Pharmac explains its underspending, which hit $24 million in 2001-2002, by saying that legislation requires it to keep within its budget and that it is difficult to predict patient demand exactly. The money is spent by district health boards on other healthcare.

United Future wants to restructure Pharmac, which it believes is obsessed with forcing down drug prices and is under-funded.

One of Pharmac's price-cutting techniques is negotiating a "sole-supply" contract. Only one drug out of a range of similar medicines is funded. But it has backtracked on one sole-supply deal, after problems with a new asthma inhaler, and will cease using the technique for flu vaccine, after this year's vaccine debacle.

Pharmac is constantly being pressed to fund new drugs or expand access to others. In the case of Alzheimer's drugs, which some people pay for themselves, it maintains that the evidence shows only "small benefits across the population". Alzheimers NZ says this is putting cost ahead of people's needs.

National's health spokesman, Paul Hutchison - whose party created Pharmac - said yesterday the agency had done a good job. But National would have it reviewed to ensure that by saving money on drugs, such as by sole-supply contracts, it was not causing avoidable health problems in future.

Dr Pippa MacKay, chairwoman of the Researched Medicines Industry Association, a drug company lobby group, said New Zealand's spending on subsidised drugs was falling behind that of Australia. Bigger Pharmac funding increases were needed.

She said an independent review was needed to address the lack of transparency and slowness of Pharmac's decision-making, and the difficulties of "engaging with them" and of appealing against its decisions.

Pharmac chief executive Wayne McNee said 3 to 4 per cent annual funding increases were a reasonable level of budget growth. Pharmac funded 20 new drugs in the past two years, he said.

The drugs bill

Pharmac view With Pharmac: budget $583 million

Without Pharmac: taxpayer spending on non-hospital drugs would have hit $1.5 billion.

The drug companies' view New Zealand drug subsidies last year: $131 per person

Australia: $265.