Debate on Crown Entities, Public Organisations, and State Enterprises — Pharmaceutical Management Agency

On behalf of New Zealand First I rise to take a call on the Pharmaceutical Management Agency. This Crown entity has a hugely important task ahead in managing the optimal purchase and use of medicine for all New Zealanders.

This organisation has a huge challenge ahead, and I do not think that any one of us can underestimate that challenge. It needs to balance its budget yet ensure that New Zealanders have the best possible access to the best medicines to manage the various conditions they have. It also has to manage the funding of expensive developing pharmaceuticals for various conditions that small groups of people have, against the funding that will provide the greatest health gains for many people. It is not an easy balance.

There are many challenges ahead. How can Pharmac ensure there is timely and affordable access to high-cost, specialised medicines that is comparable with access in other countries? We often compare ourselves with Australia in this respect.

We have seen one of these conflicts recently with the drug Herceptin, where the High Court firmly put the ball back into Pharmac’s court with the advice that it had to consult over its decision not to fund patients for a longer time. How many other conflicts like this will we see? This type of court case is extremely stressful for everybody involved, and we cannot afford to drag out the recommended review any longer than is absolutely necessary.

When we look at Pharmac, we see that consultation with stakeholders must be one of the priorities that is carried through. We acknowledge the recent Pharmac forum and the positive feedback that Pharmac received from the forum. This type of forum needs to be held on a very regular basis so that explanations, decisions, and feedback can all be communicated. The Pharmac updates that we receive as MPs always make interesting reading; they focus on recent decisions and information. We will continue to be interested in the Pharmac decision-making process, particularly in response to the Medicines New Zealand strategy. We in New Zealand First believe that this should result in some review of the pharmaceutical budget. The funding framework has to allow for appropriate growth, because new, innovative medicines become available all the time. This, of course, raises the age-old issue, which we have heard about many, many times, of the need for greater transparency in the processes associated with funding decisions.

When people travel to Australia for holidays—as many do—one of the many queries that we all tend to get when they return is why their family member there has access to a particular drug that is not accessible to people here in New Zealand. They find it very difficult to understand. We believe that we need to be assured that the process followed by Pharmac is fair and just, and the recommended consultation process will be very valuable in this respect.

In New Zealand First we often hear too from frustrated companies that the registration of new medicines is an extremely slow process. We need to evaluate alternatives to a stand-alone Medsafe. One option that could be considered is a system based on recognition of the decisions of other respected international regulatory bodies, yet at the same time allowing us to maintain the ability to carry out the evaluations where it is considered to be necessary. Why we do not already recognise these decisions remains a mystery, and, hopefully, it can be explained by Pharmac in some future communications. Why should we duplicate the efforts of the US Food and Drug Administration or the trans-Tasman agency over in Australia? It makes one wonder what the value of particular registrations overseas is when we do not recognise them here in New Zealand. It seems to me that it is a real mystery. Recognising them would enable new medicines to go through the registration process a lot more quickly than they do now. We in New Zealand First believe that there is a very interesting year ahead for Pharmac.

I thank the member who has just resumed her seat, Barbara Stewart, for a very helpful contribution. I will take a short call to make several points.

The first is that I think most members of this Committee would agree that the Pharmac single purchasing model is fundamentally sound and that it delivers considerable benefits to New Zealanders by stretching our health dollar much further than it would otherwise stretch, to the tune of probably $1 billion to $1.5 billion a year. We should reflect upon the fact that, according to almost all of the conventional measures that have been shown in this Health Committee report, Pharmac is a well-managed and well-run organisation that is doing its job. Pharmac’s 2007 annual review showed that during 2006-07, close to 32 million prescriptions were subsidised—a rise of nearly 12 percent on the previous year. That means an extra 3.3 million were subsidised during the past year and at least 2.7 million people had their medicines subsidised. The scale of this and the scale of the savings that it renders to New Zealanders are such that in any discussion of Pharmac—although any organisation, no doubt, is capable of improvement—we must be very, very careful not to throw the baby out with the proverbial bathwater.

The second point is that there is always a debate at the margin around the fundamentally utilitarian model of funding allocation in Pharmac’s drug provision, which boils down to the greatest medicinal benefit for the greatest number, given a relatively fixed level of resource. At the margin, there are discussions of how we fund new and innovative drugs that are hellishly expensive but may at the margin deliver extra benefits to a small number of people. That is a very, very difficult debate at any level—economics, or ethics, for example; the philosophy of the utilitarian model versus the innovation model is difficult to get one’s head around. However, the system we have, which is based on clinical decision-making through the advisory committee, the Pharmacology and Therapeutics Advisory Committee process, and the use—although, no doubt, no measure is perfect—of an objective framework through the quality adjusted life years measure, is a sound approach because it is a heck of a lot better than the squeaky wheel getting the grease.

One thing is certain. It is that in the pharmaceutical industry there is an enormous premium attached to lobbying, an enormous amount of money washing around in defence of not only intellectual property rights but also monopoly rents by producers, and fairly good evidence that in many cases the price of medicines bears no relationship to the cost of production or research but bears every relationship to what it is perceived that the market will stand. In that regard, if we did not have something like Pharmac, then, frankly, we would have to invent one, because the public of New Zealand needs a defence against those deeply vested and powerful interests, nearly all of which are overseas-owned. That is why we have Pharmac.

Is a model like Pharmac capable of improvement? The Government’s view is that it is fundamentally sound and that, once again, it has turned in a very good performance—managing its funding to within 0.1 percent of budget, adding 11 new medicines, and widening access to 28 others. That is a pretty good record of achievement, but I note that the Medicines New Zealand strategy and Actioning Medicines New Zealand—the second document, for which my colleague Peter Dunne has the primary responsibility for overseeing—suggest several forms of improvement. The first is around the consultation processes. It is not sufficient for any organisation to use the fundamental validity of its business model as a reason not to have good stakeholder relationships. I am confident that Pharmac understands that there is much value to it in improving the transparency and communication levels in those stakeholder relationships. I am comfortable that it is well on that pathway and that that should continue.

Finally, let me say in respect of the point about Medsafe raised by the member speaking previously that I expect that Medsafe’s actions, particularly in the area of complementary medicines, will be proportionate, appropriate, and well understood by the sector and that there is more dialogue to be had in that regard. Thank you, Mr Chairman.

Report noted.

Police Complaints Authority

Sitting suspended from 6 p.m. to 7.30 p.m.