The Government received costings for its flagship Budget policy of abolishing the $5 prescription charge less than a fortnight before the Budget went to Cabinet.
Officials warned that as much as 10 per cent of the $706.8 million four-year cost of the policy would simply line the pockets of big businesses thanks to many pharmacies like the Australian-owned Chemist Warehouse and Countdown chains which currently pay the $5 charge, offering free prescriptions to get people through the door (a third chain, the NZ-owned Bargain Chemist, also pays the charges, but was not mentioned in the report).
Treasury warned this 10 per cent figure was an informal number. The Herald confirmed no formal number was ever calculated.
When asked when the idea for removing the prescription charge appeared on the radar, a spokesperson for Health Minister Ayesha Verrall said it was introduced after Verrall became Health Minister on February 1 this year.
“[Y]ou may recall she has spoken at length about how it was important to her after her time as a doctor, seeing first hand the struggle some patients faced given the cost to collect their medicine,” the spokesperson said.
Act leader David Seymour said the quantum of money heading to the big box chemists made him “so angry”.
“It makes me so angry that they get the honour of governing New Zealand, but they are so reckless with taxpayers’ money and with citizens’ health,” Seymour said.
“We’ve pointed out a number of better alternatives,” he said.
Seymour said he thought the $700m would be better spent on GPs capitation payments, incentivising more people to enter the profession, which he believed were the real barrier to people getting prescriptions filled out, not the $5 prescription charge.
He also said the money could also go to lifting Pharmac’s purchasing budget, funding more medicines.
Health Minister Ayesha Verrall. Photo / Mark Mitchell
The documents show how late in the piece the pharmaceutical policy was conceived.
The Budget process typically begins in the middle of the year prior to it being delivered, with early bids going in before Christmas.
This policy appears to have been costed far later than that, with the only documentation relating to it dated March 31 2023, a fortnight before the Budget was signed off by Cabinet on April 11.
It also dates the costing of the prescription policy to the fortnight in which the Government decided to kill its tax plan, which would have given a tax cut of about $1000 to most of New Zealand’s four million taxpayers.
The costing email said:
“A number of large commercial providers have already removed co-payments for prescriptions (e.g. Countdown, Chemist Warehouse).
“We do not have a good understanding of what percentage of this funding would go to businesses already absorbing the cost of co-payments. We’ve heard informally that 10% of this funding could be passed on to relieve cost for business, not New Zealanders (although further work from the Ministry of Health would be required to confirm this),” officials said.
They said the Government may want to “consider targeting funding to reflect this [the fact some companies already offered free prescriptions]”.
A spokesperson for the “Ministry of Health does not know how many businesses were already absorbing the cost so no updated figure.
“The Ministry advised 3 million people would be helped by the prescription co-payment removal, including 770,000 over the age of 65, and that 135,000 people did not collect their prescriptions due to cost last year,” they said.
The email went on to say the Ministry of Health had not been able to work out how much money it would save from the Disability Allowance and high-use healthcare card programmes by making prescriptions free. Those two programmes already subsidise prescriptions. Removing the charge for all $5 prescriptions would mean some funding for those two schemes was no longer needed and could be used to fund the cost of removing prescription charges.
