Should wealthy New Zealanders have access to subsidised medicines when they could be investing in better health insurance?

That's the question economist Dr Bryce Wilkinson is calling on the Government to answer, in a new report published by the New Zealand Initiative (NZI) today.

Wilkinson's report "Pharmac: The right prescription?" examines the strengths and weaknesses of the country's drug buying agency, and has been sent to Health Minister Chris Hipkins and Pharmac's chief executive Sarah Fitt for consideration.

A new report by pro-free-market public-policy think tank New Zealand Initiative examines the strengths and weaknesses of New Zealand's drug buying agency Pharmac. Photo / 123rf
A new report by pro-free-market public-policy think tank New Zealand Initiative examines the strengths and weaknesses of New Zealand's drug buying agency Pharmac. Photo / 123rf

Key findings:

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• A drive to achieve lower prices has narrowed the range of subsidised medicines compared to other countries. It may also have led to delays in deciding if new medicines should be subsidised.

• No one can know if Pharmac is improving New Zealander's health and wellbeing because no one knows what mix of prescription medicines patients would be consuming if the agency didn't exist.

• Failing to subsidise a medicine does not deprive Kiwis of access to it. Why subsidise what medical professionals might advise people not in financial need to buy anyway?

• Less reliance on taxes to pay for medicines might reduce Pharmac's commercial
clout. A gradual shift away from the tax system would manage this risk.

• Pharmac should be required to benchmark its price negotiating performance globally against top procurers since its current 'before and after' assessments do not do this.

Wilkinson said the most concerning issue was the lack of clarity around what the Government intends to achieve by subsidising pharmaceutical medicines for people who could afford it.

"People like myself, who could fund the drugs themselves and be covered for major expenses with private health insurance, he said.

New Zealand Initiative (NZI) economist Dr Bryce Wilkinson is the author of a new report called
New Zealand Initiative (NZI) economist Dr Bryce Wilkinson is the author of a new report called "Pharmac: the right prescription?". Photo / Supplied

Wilkinson said if no clear reason could be given for taking people's money in taxes and using it to decide the prescriptions that should be subsidised then why do it.

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"Then Government would have more tax available for more pressing things like epidemic control, things that the country badly needs."

Wilkinson stressed he was not a health care expert and was only offering a economist's point of view.

One of the country's leading paediatricians and former Government welfare adviser, Dr Innes Asher, said the overall goal has been to have a system that reached all New Zealanders and reduced inequality - and enable those who have the least to have access to adequate resources which includes medicine.

"I don't think an isolated strategy like having insurance to cover your medicines if your well off is part of the way we work in New Zealand.

"How do you define those that can afford it or not? It tends to be against the way we generally operate in New Zealand and have been operating ever more so since Covid arrived."

Leading paediatrician and former government welfare adviser Dr Innes Asher says high income workers would be better to pay more tax rather than rely on private health insurance. Photo / File
Leading paediatrician and former government welfare adviser Dr Innes Asher says high income workers would be better to pay more tax rather than rely on private health insurance. Photo / File

Asher said there were better ways of distributing income that didn't involve insurance which had all sorts of hookers and difficulties in terms of equality of access and outcomes.

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"I think that there are better ways of dealing with the huge inequalities we have in New Zealand and achieving access to medicines for those who don't have much money which includes a wealth tax.

"When I was a young doctor working I was taxed 64 per cent in the highest tax rate, well now it's now 33 per cent ... I'd be very happy to pay more taxes to redistribute the wealth."

Pharmac's chief executive Sarah Fitt said the agency aimed to give people access to clinically effective and innovative medicines at a price that was fair and affordable, which was in line with what the country's taxpayers expect us to do.

"Pharmac works to get the best health outcomes for New Zealanders we can by funding medicines from within the available budget," Fitt said.

"Having a fixed budget means we need to make careful and considered funding choices in the interests of all New Zealanders."

She said Pharmac made more medicines and medical devices available to more New Zealanders every year.

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"Pharmac approved the funding of 14 new medicines and widened access for 32 medicines in the last financial year (from 1 July 2019) and will continue making the best choices we can, expanding available treatments for all New Zealanders based on a robust, evidence-based approach."

A spokesperson for the Hipkins said the report was emailed to the minister's office yesterday afternoon and he hadn't had the opportunity to consider it, and so it was not appropriate for him to offer comment on its conclusions at this point.

"The Labour-led Government's focus is on ensuring we have a quality public health system that provides comprehensive quality care for all those who need it.

"A tax rebate for private health insurance would be likely to cost the government quite a lot, and we would rather invest in improving healthcare for everyone, not just those who can afford to pay for health insurance."