Pharmac has been under scrutiny recently for not funding certain life-saving medicines in New Zealand, while these medicines are funded in other countries, particularly Australia.
The key point missing from this discussion is an understanding of Pharmac’s role. It's crucial to understand Pharmac's role as mandated by the government. In essence, Pharmac's responsibility is to procure the medicines needed in New Zealand within a specified annual budget. Importantly, Pharmac is not able to overspend, and to my knowledge never has. This is Pharmac's budget challenge.
Comparing New Zealand's medicines budget with Australia's is eye-opening (table below). Australia in 2022 spent 12 billion NZD, which is ten times more than Pharmac's budget of 1.2 billion NZD. A good rule of thumb to apply is NZ is 1/5 the size of Australia. On this basis, Australia spends 2.4 billion NZD (12 billion/5 population size), equating to double Pharmac’s annual budget per capita. This comparison reveals the challenging task Pharmac faces, i.e., trying to provide life-saving medicines with only half the budget of Australia. Nevertheless, Pharmac has managed well, New Zealand isn't lacking half the necessary life-saving medications.
This is the conversation NZ is not having, what should Pharmac’s budget be? If you want more medicines, provide Pharmac with a bigger budget and they can fund more, it’s that simple…
Now let's also understand the tight spot Pharmac is in when it comes to scrutiny of products that have not been funded…
The Pharmac Board is appointed by the minister of health, and they appoint a CEO to run the organisation. All the power leads back to the Minister of Health.
Understanding this power dynamic, it is not possible for Pharmac to come out and say they don’t have enough money. That would be throwing their bosses under the bus.
I am impressed that recently they have been commenting that they do have a list of products they would love to fund when funding becomes available. In other words, they would like to fund it but don’t have the money.
NZ governments have loved having Pharmac as they take the heat rather than the Minister of Health and in the past, Pharmac has acted as a buffer for the government. Ironically, in the last 5 years, Health Ministers have consistently complained about Pharmac, which is crazy considering they are responsible and Pharmac is it's under their control. This demonstrates how Pharmac is “buffering” the government from bad publicity around medicine funding.
The discussion needs to come back to the allocated budget. National and Labour have both come out and pledged to provide additional medicine funding. While this sounds like a lot, it’s rounding in comparison to the current gap Vs Australia. Labour speaks of a billion-dollar boost, but that is over several years. National is offering an additional $280m, and again that is over 4 years. A spending budget accumulating over years makes no sense. Tell me how much more per year forever…
I have worked and met with many people at Pharmac who are all good people and who are motivated to go to work every day to get the best medicines they can for New Zealanders for the budget they are allocated. Give them more money and more medicines will be funded. It’s as simple as that…
Comments