top of page
Search
  • Brendan Shaw

Land of the Long Wait Crowd: problems in New Zealand's medicine funding system

Updated: Sep 7, 2023

Brendan Shaw




"It is so important that New Zealanders are able to access new, emerging and effective cancer treatments that are the standard of care in other parts of the world.”

- Sir Sam Neill, actor, New Zealander, and stage 3 blood cancer patient, June 2023



"Kiwis are one diagnosis away from having to move to Australia to access medicines that are publicly funded elsewhere in the OECD. We are in a crisis and our politicians need to act."

- Michael Mulholland, Chair, Patient Voice Aotearoa, August 2023.



For a high-income, developed country, New Zealand has a particularly poor system of evaluating and funding medicines. This system often leaves New Zealanders without access to new medicines and vaccines that are often the standard of care in other developed countries.



What's the problem?


For decades, New Zealand has been among the last countries in the OECD to obtain access to medicines and vaccines. Various studies over the years have demonstrated this.


As someone who has been watching New Zealand's medicines system for a long time, it has been depressing for me to see New Zealand regularly falling behind other developed countries in providing new medicines to its people.


Just as an example, data produced by analytical firm IQVIA, and commissioned by Australian pharmaceutical group, Medicines Australia, has consistently shown that among a sample of 20 OECD countries, New Zealand tends to have among the lowest number of new medicines funded. Compared to most other OECD countries, New Zealand performs poorly.


Shawview Consulting chart. Data source: Medicines Australia. 2022. Medicines Matter: Australia’s Access to Medicines 2015-2020, p. 6, https://www.medicinesaustralia.com.au/wp-content/uploads/sites/65/2022/11/Medicines-Matter-Australias-access-to-medicines-2015-2020.pdf, accessed 20/8/2023.



And the problem is only getting worse. IQVIA's access to medicines report for industry group, Medicines New Zealand, shows that the median number of days between when a medicine is first registered in New Zealand compared to when it is finally funded has blown out from 402 days in 2013 to 1,014 days by 2020. This compares particularly poorly to its near neighbour, Australia, just across the Tasman Sea.


Shawview Consulting chart. Data source: IQVIA, Medicines New Zealand – Access to Medicines (AtoM 3) Report (November 2021), Pg 5, available at https://www.medicinesnz.co.nz/resources/publications, accessed 20/8/2023.



In another example, according to a recent study published in Lancet Oncology, New Zealand reported the lowest number of new cancer medicines funded by their health system compared to a suite of other countries. The study, published in June 2023, found that:


"We reported the reimbursement recommendation status (or final reimbursement status for Germany and Japan) across the eight countries for the 15 US top-selling cancer medicines in 2022. Of the 34 indications, Australia, Canada, England, and France recommended 27 (79%) for reimbursement. Germany reimbursed all 34 indications, Italy recommended 32 (94%) for reimbursement, and Japan reimbursed 28 (82%). New Zealand recommended the fewest medicines for reimbursement (12 [35%])." (emphasis added).



Shawview Consulting chart. Data source: Jenei, K. et al. 2023. "Health technology assessment for cancer medicines across the G7 countries and Oceania: an international, cross-sectional study", The Lancet Oncology, v.24 (6), p.631, https://doi.org/10.1016/S1470-2045(23)00175-4, accessed 20/8/2023.


Another international comparison by US pharmaceutical industry group, PhRMA, provides further evidence. In a sample of 34 OECD countries, this study shows where in the 'queue' a country sits while its people wait to get access to medicines.


The results are pretty startling. Out of 34 OECD countries, New Zealand has to wait 33 months on average - almost 3 years - from when a medicine is first launched globally to when it is first launched locally in New Zealand. On this measure, New Zealand comes second last in how long its citizens have to wait for a new medicine after it has been first launched somewhere in the world. New Zealand is second-last out of 34 countries, only just beating Colombia.


Source: PhRMA. 2023. Global Access to New Medicines Report, Slide 23, Analysis of IQVIA MIDAS database, https://www.medicinesnz.co.nz/fileadmin/assets/2023-04-18_Global_Publicly-funded_Access_to_New_Modern_Medicines_Report_FINAL.pdf, accessed 20/8/2023.



It's also worth remembering that these figures show just when a medicine is launched in a country, not when it is funded. In New Zealand, of course, that step takes a long time as well.


These are not isolated results. The recent Shawview Consulting report, The future of Aotearoa’s medicines access – fixing the funding model, commissioned by Johnson & Johnson New Zealand, reviews more studies and comparisons of New Zealand's performance. Such trends have been demonstrated in earlier studies which have shown that New Zealanders' access to medicines has for a long time been more limited and substantially delayed compared to other countries. For years, decades even.


This is not a new problem for New Zealand, and it is getting worse.



Why is this happening?


There are several reasons that New Zealanders are consistently behind the rest of the developed world in getting access to funded new medicines.


Shawview Consulting's recent report reviews the major issues with the New Zealand's medicine funding system and proposes some policy solutions.


For a long time, a key policy priority for New Zealand has been to manage costs. To be fair, managing costs is not a problem unique to New Zealand. Every health system in the world is having to achieve that delicate balance between access to medicines for a country's citizens and managing finances in a sustainable way.


The problem for Kiwis is how their country has approached this challenge. A capped pharmaceutical budget has long been a feature of New Zealand's medicines policy. New Zealand has maintained a capped level of pharmaceutical spending that has not grown or has only grown through discrete decisions to increase that cap by small amounts. The result is that as the country's population grows, and as the number and type of new medicines and vaccines potentially available has grown due to technological innovation, New Zealand's health system has not kept pace.


The available data suggests that New Zealand's level of medicines funding is well below what other OECD countries spend. Our estimate is that OECD countries on average spend about 1.4% of their national income on medicines, while New Zealand spends around 0.4 to 0.5% of national income on medicines. The OECD figures include both over-the-counter and prescription medicines, while the New Zealand figures on medicines also include vaccines, medical devices and other medical technologies. International comparisons have been difficult to make over the years due to the lack of transparency in New Zealand's medicines expenditure trends and because it appears New Zealand has not supplied comparative data on pharmaceutical spending to the OECD since about 2005.


Another reason why Kiwis have missed out is how the agency responsible for managing the medicines budget had gone about its task. New Zealand's Pharmaceutical Management Agency, better known as Pharmac, has had the job of trying to manage a capped budget while providing an increasing range of medicines to a growing population.


It is a thankless task. Given the capped budget the agency has been given to manage, it is perhaps not surprising that Pharmac has taken the approach it has over many years. However, independent reviews have criticised the agency for being secretive, non-transparent, and putting cost management ahead of health outcomes for New Zealanders. Reviews have also found that Pharmac's processes were flawed, characterised by poor decision-making and poor prioritisation processes.


I've witnessed this approach myself firsthand over the years, where Pharmac officials have stood out at international health economics conferences by starting their presentations on the New Zealand system with slides highlighting a flat budget line - prioritising their success in achieving what they saw as their primary policy objective of a capped budget.

Pharmac has also at times played off pharmaceutical companies, stakeholders and patient groups against each other. It has made clinical and funding decisions among just a handful of officials without proper external scrutiny and has not been transparent about what New Zealand really spends on medicines.


Ultimately, there have been consequences of this that have been tragic to watch. Whether it's New Zealanders with diseases having to move to Australia to access subsidised treatments they can't access at home, or questions asked about Pharmac's practice of switching brands of medicines against the advice of the country's safety regulator, there are many examples over the years where Pharmac has apparently proritised budgetary savings over New Zealanders' health.


A direct result of this tension between achieving better health outcomes versus budget savings is Pharmac's Options for Investment list. This list contains the medicines that Pharmac has recommended for funding but that are not funded due to a lack of money. As of April 2023, there were 109 medicines on this list, including influenza vaccines, and medicines for many diseases such as various cancers, Fabry disease, arthritis, asthma, opioid dependence, osteoporosis, and high blood pressure. One recent study found that 72%, almost three-quarters, of these medicines are medicines that Pharmac itself classifies as treating a severe, very severe or extreme health need in the country.


It's worth remembering that this Options for Investment list contains the medicines that Pharmac recommends for funding. There are other lists Pharmac has where it does not recommend medicines funding, despite these medicines often being the standard of care in many other developed countries. That speaks to Pharmac's quite conservative approach to assessing medicines. Around 83 medicine applications across Pharmac's lists of unfunded medicine were the standard of care in other countries, with many of these - 59 applications - on its Options for Investment list.



What needs to change?


The Shawview Consulting report goes into some detail about the policy options New Zealand should consider in starting the process of reform. We examine policies that other countries which are similar to New Zealand, but perform better, use in providing early access to new medicines for their people.


Countries like Germany and Japan have schemes that prioritise early access to medicines for their citizens - funding them almost immediately once they are approved by the country's national regulator, and then entering negotiations with pharmaceutical companies on suitable prices, rather than the other way round. Countries like France, Italy and the United Kingdom have early access schemes for innovative medicines where they provide early funding for patients while working with pharmaceutical companies to collect better clinical and economic evidence on the effectiveness of medicines and pricing them accordingly. Countries like these have also used managed entry agreements with companies to deal with uncertainties in the clinical and cost-effectiveness of medicines.


In other countries, health systems place more priority on investing in health, investing in medicines and in working with pharmaceutical companies, patients, clinicians and other stakeholders to better manage the inevitable clinical and economic uncertainties. Countries around the world are dealing with these issues as more and more new, emerging therapies are coming into clinical practice as a result of scientific and technological development.


Other developed countries that have similar systems to New Zealand, namely publicly- or population-wide funded systems with health technology assessment, have found ways to expedite the process to get medicines to patients sooner while managing budgets and costs. New Zealand's budgetary cap and low spending level must also be fixed.



Policy recommendations


On the back of international experience, we make a number of recommendations that New Zealand should consider in reforming its medicines evaluation and funding systems to help make medicines more affordable and readily available to Kiwis:

  • First and foremost, there is an urgent need to fund the backlog of innovative medicines on the Options for Investment list. In the short-term, a quick fix is to fund the medicines that Pharmac, despite its own problems and biases, has already recommended for funding but that are just not funded.

In the longer-term, there are a number of policy options that New Zealand should consider implementing as part of a plan to better align New Zealand's priorities and values with those in other similar developed countries:

  • Develop a forecast and a plan to increase New Zealand's medicines budget year on year to get closer to the OECD average. Without a plan, nothing will change. Other countries are prioritising mechanisms to achieve this level of spending and New Zealand should do the same.

  • Look at innovative financing mechanisms in other comparable OECD countries to apply in New Zealand, such as managed entry agreements, funding of medicines on regulatory approval, and the use of innovative medicine funds.

  • Pharmac should adopt a societal perspective in its health technology assessment evaluations, meaning that consideration of the broader social and economic benefits of medicines should be used when valuing medicines, including things like productivity levels and workforce participation.

  • New Zealand should develop an updated medicines strategy that is appropriate for a high-income, developed country, perhaps through a process of developing a National Medicines Policy.

  • And, finally, Pharmac and the New Zealand government should reform the agency's evaluation, funding and decision-making processes, including:

    • placing greater emphasis on patient views in the agency's assessment and decision-making processes and involving patients earlier in review and coverage decisions

    • providing more predictability and transparency in Pharmac’s decision making to improve the accuracy and fairness of its decisions

    • establishing conditional approvals and funding as well as setting up disease registries to collect real world effectiveness data to better manage clinical uncertainty

    • considering the introduction of multi-year contracts with innovative funding and payment terms to ensure budget sustainability for medicines that have multiple indications in disease areas like oncology, where clinical, economic and funding uncertainties may exist

    • examining ways to harness the potential of data technology to track and evaluate medicine usage and health outcomes in clinical practice in real time using real world data

    • considering the use of time-bound deadlines for Pharmac's medicines reimbursement decisions once a medicine has received a recommendation from its PTAC clinical advisory committee, and

    • considering the separation of the evaluation function for a medicine from the funding decision, perhaps by giving Pharmac the responsibility for evaluation and recommendation, and te Whatu Ora/Health New Zealand or Government Cabinet the separate responsibility for the final funding decision. This would improve transparency and accountability in decision making in the system overall.


There's a lot to do, but reform needs to happen. For years, New Zealand's funding system has been letting Kiwis down, but the structural problems and pressures the system is now facing mean that it is becoming increasingly untenable.


As someone who has been in and around debates about New Zealand's medicine funding system for decades, it has been saddening to watch how New Zealand has not been able or willing to match the standards of care that are the norm in other high-income countries with similar health systems.


New Zealanders deserve better than this.





The Shawview Consulting report, The future of Aotearoa’s medicines access – fixing the funding model, can be found here. The report was commissioned by Johnson & Johnson New Zealand, while Shawview Consulting retained editorial control over the report.
















1,044 views0 comments

Comments


bottom of page