Sole-supplier Contracts Help New Zealand Save Money For Innovative Drugs

PERTH, Australia - Using sole-supply providers, New Zealand generic drug prices were considerably cheaper than corresponding drugs in Australia, Britain and Canada, according to the Pharmaceutical Management Agency's annual review for 2009.

In New Zealand the government is the primary funder of pharmaceuticals with 21 District Health Boards holding the budget for both the community Pharmaceutical Schedule and hospital purchases. Formed in 1993, PHARMAC determines which drugs will be subsidized and at what price. The agency encourages competition by tendering for sole supply of one brand of medicine once patents expire.

The agency claims that savings can be as large as 90 percent, and the funding that is released can then help to fund newer, more innovative drugs.

In the 1980s spending was roughly 20 percent per year for drugs, but that number has been reduced to 3 percent per year since 1993.

"Sole supply promotes competition although largely invisible to the patients, PHARMAC runs a competitive process, with companies bidding against each other, from which we choose the best bid (taking into account a range of factors)," writes Therapeutic Group Manager Greg Williams. "Under our sole supply system, it's the purchasers (the District Health Boards and taxpayers) that reap the benefits of competition."

In a comparison among New Zealand, Australia, Britain and Canada, New Zealand had the lowest prices of all four countries for commonly prescribed drugs paracetamol, simvastatin, omeprazole, amoxicillin and citalopram.

In 2009, eight new drugs were added to the PS and access was widened for another 55, while staying within a budget of NZ$653 million. As a result of decisions made in 2009, roughly 19,800 new patients were treated with subsidized medicines, with a total expenditure over 12 months of NZ$11.9 million.

Working Toward Transparency, Improved Communication

While PHARMAC has worked at increasing transparency, it maintains that it could "jeopardize health of New Zealanders" if its prioritization list - the list of medicines it most wants to purchase - were made available to the public.

The prioritization list ranks funding options and "if we disclose our preferences we shift some advantage to the companies," the report says. "It's a bit like telling a car salesman you've got $5,000 to spend."

The agency also said it is sometimes restricted by commercially sensitive information.

Given these limits in transparency, the agency says it is working on building trust by publishing information about its processes so that these are well understood by the public PHARMAC spokesman Simon England told PharmAsia News.

To that end, the agency is publishing more of its minutes from its advisory committee meetings and is reaching out to doctors more to communicate decisions, he said.

England said it was a tough balancing act between providing ample information to physicians to keep them informed and overloading them with too much information.

To that end, the agency announces its proposals to fund medicines and asks for input from the clinical community.

"As a matter of course, we seek clinical views on our funding proposals through consultations; these can be voluminous and not always of widespread interest but we try to target consultation documents to interested clinicians, so that we are confident we have the right advice," Medical Director Peter Moodie said.

New drugs added to the PS in 2009 included aripiprazole for second-line psychosis, imiquimod for skin cancer and genital warts, levetiracetam for epilepsy, finasteride for prostate disorders, bicalutamide for prostrate cancer, insulin lispro with protamine, psychotic agent amisulpride and atomexetine for ADHD (Also see "New Zealand's PHARMAC Picks Up Douglas To Dump Novartis; Funds Dr. Reddy's Risperidone, Schering-Plough's Avanza" - Scrip, 23 Oct, 2009.).

- Tamra Sami ([email protected])

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