Managing Pharmaceutical Expenditure while Increasing Access

Abstract

The role of the Pharmaceutical Management Agency (PHARMAC) is to manage pharmaceutical subsidy expenditure in New Zealand. PHARMAC has adopted a proactive approach. It selects the drugs that are to be subsidised and declines to subsidise others. It has established reference pricing across many drug groups, has entered into a range of innovative commercial contracts with pharmaceutical companies, and has encouraged greater price competition among pharmaceutical companies in order to lower prices and control expenditure risk.

These initiatives have all been part of an overarching strategy to improve the value of the government’s expenditure on pharmaceuticals. PHARMAC has also developed techniques of cost-utility analysis to assess the value of expenditure.

PHARMAC has slowed pharmaceutical expenditure growth, culminating in a fall in expenditure in the 1998/1999 year. At the same time, patient access has continued to expand, with more prescriptions being written and new drugs being subsidised. Therefore, PHARMAC has made dramatic strides to improve the value of the government’s expenditure on pharmaceutical subsidies and its actions have meant that more funds have been available for investment in other health services, than would have occurred if previous policies had remained unchanged.