Annual Review 1996 (text extract)

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PHARMAC 611

Pharmaceutical Management Agency Ltd

The balloon' why it lIt

The co a Wl

PH A R M AC

(pharmaceutical Management

Agency Limited) was established in mid-1993 to manage the national Pharmaceutical Schedule on behalf of the four RHAs (Regional Health Authorities). It is a not-for-profit company owned equally bytheRHAs. The Schedule is a list, updated monthly and reprinted three times a year, of almost 3,000 subsidised prescription drugs and related products available in New Zealand. The Schedule also records the price of each pharmaceutical, the subsidy it receives from public funds and the guidelines or conditions under which the pharmaceutical may be prescribed. Decisions on subsidy levels, and prescribing guidelines and conditions, are taken by the PHARMAC Board with input from independent, medical experts on the Pharmacology and Therapeutics Advisory Committee (PTAC), and PHARMAC's managers and analysts. In taking its decisions, PHARMAC seeks to balance the needs of patients for equitable access to health care with the needs of tax payers for responsible management of the costs they ultimately bear.

Inside

Why we must address the ballooning cost

Denis Tait, PHARMAC 's chairman, says we continue to use more drugs though the added health benefit from the extra vol ume is questionable. He urges more rigorous debate on how to get the greatest value from a finite resource.

It's time we doctors took a fresh look at our ethics

John Hedley, Chairman of the independent Pharmacology and Therapeutics Advisory Committee (PTAC), says that in the post-reform environment, traditional approaches to medical ethics need to be re-examined.

The drug problem is a world wide one

PHARMAC General Manager David Moore reviews actions around the world to curtail drug budgets by squeezing prices and reducing waste.

PHARMAC's year reviewed - by therapeutic group

The year's work of PHARMAC is reviewed, including the results of its therapeutic group reviews - more accessible treatment for more patients, better targeting of drugs, and less waste.

PHARMAC's operations

A review of the operat ions of PHARMAC and an outline of the efforts it is making to further improve the quality and efficiency of its operations.

Who's who in PHARMAC and PTAC

III tltis publicatioll:

• " Year" means years ending 30 Jun e. For example: "this y ear" mealls the year ended 30 Jun e 1996.; "last year " mealls th e year ended 30 June 1995, "next year" means th e year ended 30 June

Sources of material: The commentaries on pages 2 to 13 were wrillen in July 1996 and are derived f rom numerous sources including: • th e international pharmaceutical industry newsleller Scrip and its companion magazine - Jun e 1995 to May 1996, • clippillgs and transcripts from daily and periodical. consumer and S1Jecialis[. New Zealand media on pharmaceutical topics over roughly th e same period. • the output of a library search of international data bases, • and the seven most recent issues of th e Journal of Medical Ethics. Fully -referenced and footllot ed versions of each of these commentaries is available on word processor file from PHARMAC On request.

1997.

• The word "drug" is generally used instead of th e more cumbersome "pharmaceutical" or "medicine;" "doctor" is generally used instead of "physician," or "medical practitioner;" and "health prof ssional" is used to describe all people engaged e in health and patient care. • Specific drugs are described by chemical entity with brand Iwmes in brackets where relevant; fo r example "Iallsoprazole (Zo [on)." • V nless o[hen !'ise stated all values are in New Zealand dollars. Th e exchange rate at 30 Jun e 1996 was approximately NZ$l.OO

= V S$0.68

There's 110 mllle ill squeezing cost, if it blows out elsewhere.

PHARMACEUTICAL MANAGEMENT AG ENCY LTD

Denis Tait, PHARMAC's chairman, says we continue to use more drugs though the added health benefit fro 111 this extra volume is questionable. He urges more rigorous debate on how to get the greatest vaLue from a finite resource.

•

to have doubts th at the extra cost each year is delivering an equivalent ex tra benefit in treatment outcomes.

Volume keeps growing

Analys is of trends in the price of subsidised drugs, prescription vo lume, prescription mi x, and total subsid y cost over five years (see graph two, page 4) reveals a disturbing trend: th e subsidy index is moving down, almost entirely as a result of PHARMAC's efforts, but the total cost is rising steadil y. Thi s data hi ghli ghts th e problem we face - th at the volume of drugs co nsum ed is rising faster than the price is falling. Two of the more spectacu lar examples are ill ustrati ve: • In 1992 we consumed 6.4 tonn es of amoxycillin with clavu lanic acid tablets, an antibiotic. Thi s yea r consumption was 9.8 tonnes - an increase of over 50 per cent. The dai ly cost of amox yc illin with clavulanic acid is about $2.20. Many conditions, in our view, can be treated as effectively with amoxycillin alone at a daily cost of about $ 1.80 - or 18 per cent less. hen PHARMAC was set up in 1993, New Zea land 's drug subsidy bi ll was growing at around 10 per cent a yea r or doubling about every seven yea rs. This growth rate was • similar to many other countries. Yet only a brave observer would say that th e health benefit was doubling at th e same rate. Our brief was to manage this ballooning cost and dimini shing marginal benefi t to the point where we are getting value for money. • In 1992 we co nsumed 190 kilograms of 5mg, IOmg, and 20mg enalapril tablets, for the treatment of cardiovasc ular co nditions. This year consumption was 270 kilograms - an increase of 42 per cent. Enalapril costs about $47 1 a year. Many conditions, in our view, can be treated as effecti vely with bendroAuazide for about $2 1 a year. Volume growth is also refl ected in the number of prescriptions presently about 21.5 million a year. Between 1992 and 1995 , annual growth averaged just under fi ve per cent on a trend line that was rising to about seven per cent. As we acquire more and better data we may better understand the reasons for vo lume and cost growth. Given that there does not appear to be any strong correlation between volume and average patient age, as is often assumed, we might consider two oth er poss ibi lities: th at doctors are being influenced by drug company promotions of new (and usually more expensive) drugs, and that demand is also being pulled up by a growing volume of marketin g through television and print direct to the co nsum er, such as with Proscar for prostate conditions, Caverj ec t for impotence, th e H2 antagonist Pepcid, and Cataflam and Nurofen for pa in re li ef.

Significant gains

In three yea rs, we have made significa nt gains including: • Improved access and wider choice through subsidies and derestrictions on more th an 200 drugs. These include antivirals for the treatment of ge nital herpes and AIDS/HIY, drugs for the treatment of stom ach ailmen ts, and new anticonvulsants. • Cost savings of about $48 million with at least that amo unt to come in each of th e next two years, thus freeing funds for reinvestment in better access and wider choice of health interventions (see graph one, page 4). • Substantial reductions in th e ri sk of growth from , for examp le, caps on vo lume growth (acyclovir); limits on dosage crecp (the proton pump inhibitor, lansoprazo le); and the manage ment of technological change (cfc-free salbutamol inhalers). • More robust assessment systems, improved consultat ion on strategies for greater cost-efficiency, and the settin g of exp licit priorities. Eac h dollar of th e $4.6 million we spe nt this year managing a budget of $694 million yielded about $10 in sav ings. By 1998 we forecast this to increase to abo ut $16. In addition, we have hauled back the growth so th at th e subsidy bill would double about every 10 to 12 years. Even this growth rate, however, may be unsustainable long-term, and we conti nue

The decision pipeline

If all the applications now in the pipeline, or ex pected, are approved, th e RHAs wou ld eve ntuall y need to find an ext ra $ 100 to $200 mi ll ion a yea r - beyond our forecast cost increases, and after taking into account th e effects of substitution and savings from refe rence pricing. The effect co uld be to blowout th e annual growth rate in costs.

How we make choices

Our assessments tell us that the therapeutic benefit from some newer more ex pensive drugs is often little different from that of the drugs they replace, or that they are effecti ve on ly for certain conditions. In these situations, our approach includes restricting access to those co nditions where the new drug will clea rly deliver th erapeutic benefit. On the other

Graph one

EFFECT OF PHARMAC INTERVENTIONS

Total subsidised, non-CHEjunded, drug cost in $ millions for 30 June years.

hand, some new drugs offer superior therapeutic benefit to the drug they seek to replace. In these situations, our approach is to approve a subsidy using funds released from savings elsewhere, or if the benefits justify it, to seek a diversion of funding from another area of the health budget.

New and better systems

Meanwhile, we continue to look for better ways to review the cost and therapeutic value of existing drugs, improve the rigour and quality of our assessments, improve our productivity and speed of delivery, and produce more transparent decisions. Th is year, we also looked at how we might reinforce PTAC's independence and streamline its assessment procedures. Some changes are already in place.

650 $674

Our work is not popular

600 +-- -------- -----, - - ------ ------ - , ------ ---------, 96 97 95 98

For our efforts: • We face several court actions from pharmaceutical companies using every means available in pursuit of their commercial interests. • We have been criticised by doctors on the grounds that we do not have the competence to limit their choice of prescription, or that our decisions are not ethical. For example, some said we should not have accepted a 40 per cent price reduction for the H2 antagonist cimetidine (Tagamet) in exchange for listing another drug. Our view is that we wo uld have been improvident if we had not. Such criticism also tends to ignore that our decisions are based on assessments by practising specialists of all available literature, and ri goro us analysis of the therapeutic benefit and cost of a range of drug options. • We have to respond to a growing number of requests from pharmaceutical companies for information under the Official Information Act. • We face regular, detailed questioning in Parliament.

- -- -- - - - - - - - - - - - - - -

Estimated expenditure without PHARMAC interventions. Actual and forecast expenditure with PHARMAC interventions only. Actual and forecast expenditure with PHARMAC interventions and montMy dispensing.

Graph two

SUBSIDY, VOLUME, MIX AND COST INDICES

Four-quarterly moving averages: years end 30 June. Base: June - Sept quarter 1992 = },OOO.

1,400 1,300 1,200 1, 100

Forecast

1,000 900

t--=...-~;...----------_~

1993 1994 1995 1996 1997

• We are lobbied by patient advocacy groups seeking more resources for their cause with little concern for the needs of other groups. • And occasionally we are portrayed in news media stories as lacking concern for patient welfare because of a decision to restrict access to a particular drug. An unfortunate consequence of these actions is that we are havi ng to divert increasing resources to the defence of our position. Our legal bill this year was $680,000 on top of normal legal fees. That is money, and unquantifiable time, that could be better spent on drugs.

800 +--r-,--r-,--r-,~--,_,__,~--,_,__,~--,_,__,-,

1992

Cost index is the drug cost to RHAs ex manufacturer before esT. Volume index is the number of prescriptions multiplied by a standardised measure of the amount prescribed per prescription. Mix index is the residual fro m cost index divided by (volume index X subsidy index). Subsidy index is like the consumers price index but for subsidised pharmaceuticals only. Forecast is based on extrapolating previous years' changes and incorporating the estimated impact of monthly dispensing on fwure volume growth.

Resources are not unlimited

Underlying the criticisms of PHARMAC is usually an assumption that unlimited resources are avai lable for drugs. The reality is that resources never have been, nor are, unlimited. The drug subsidy bi ll must compete with a host of other claims for that most scarce of resources - tax payers ' funds. One way or another, we have no choice but to take cost into account in our decisions. Also, drugs are but a fraction of a much broader issue. There is no value in curtailing cost in one area if this leads to a blow-out in another, unrelated area, and the needs of individuals for health and well-ness will always have to be balanced against the social and economic aspirations of the community. Inevitably there wi ll be challenges to firml y-held tenets such as equality of access and so-called inalienable rights to resources.

The sharp decline in the cost and volume indices in the fourth quarter of 1996 is due to the introduction by the RHAs of monthly disp ensingJram I May 1996. This lowered the annual cash cost by an estimated $2 7 million. Howevel; the oneoff effect oJ this change is Jorecastto disappear in the Jourth quarter of next yeO/:

PHARM ACEUTICAL MA NAGEMENT AGENCY LTD

The ethical debate

Mindful of these issues, the PHARMAC Board concludes that there can be no enduring solution to the problem of competing claims fo r reso urces until there is widespread recogni tion and acceptance that the re is a problem and there is a cooperative wi ll and effort to resolve it. For this reason, we jointly sponsored with the Nationa l Health Committee, a lecture and workshop tour in May by a leading medica l ethicist, Professor Raa nan Gillon. We hope that thi s has stimulated the begi nning of a rigorous debate in whi ch doctors, consumer groups, drug companies, politicians and the media all seek to ag ree on how we might set our priorities for health care. In Professor Gi llon 's words, the answer is li ke ly to be "more aesthetic than scientific ."

THIS YEAR

we made pleasing progress in . ..

• Improving patient access. For example. the listing of Famciclovir. a new treatment for Herpes; approval to subsidise a new combination therapy for treating AIDS/HIV; and the listing of inhaled corticosteroid products with spacers for asthma. • Reducing the subsidy cost of several drugs. Reference pricing. price negotiations. for example 40 per cent on the H2 antagonist cimetidine (Tagamet). and other strategies. released $48 million this year for reinvestment. • Completing therapeutic group reviews on ACE inhibitors. asthma. antidepressants, CCBs. NSAIDs. and Vitamin D derivatives. • Stimulating debate on the need for more cost-effective treatments through co-sponsorship of lectures and workshops by leading medical ethicist. Professor Raanan Gillon.

A changing environment

Since 1993, there has been growin g recognition by RHAs that PHARMAC alone can not control the growth of drug subsidies; that th e responsibil ity has to be shared with others, particu larly prescribers. In future, we expect that more of the effic iency gains we beli eve to be possible wi ll come from RHA ini tiatives. One of these was th e introd uction of monthl y dispensing which was, in part, a response to a North Hea lth campaign in 1994 to co llect unused, unwa nted and expired drugs from Auckland homes. One outcome was data which, when extrapolated nation-wide, indicated th at about $80 mi lli on worth of red unda nt dru gs co uld be in the medicine cabinets of New Zealand homes. Other initiatives include budge t holding co ntracts with doctors (for exam ple, through independent practitioner assoc iations) containing improved contractual incentives, contracts with orga ni sations invo lved in managed care, and various innova ti ve regional measures.

but fa ced pressure f rom . . .

• An underlying trend based on April years of rapid growth in the volume and cost of nervous system drugs (up 14 per cent). drugs for treating infections (up 12 per cent). and drugs for alimentary tract and gastrointestinal disorders (up I I per cent). • Low levels of doctor acceptance of our view that prescribing should take into account cost as well as therapeutic benefit. • Legal challenges. and some refusals to cooperate with our decisions, by pharmaceutical companies.

Thanks

I record sincere th anks to my fellow directors for their support and to David Moore's fine team of managers and analysts; to the practi sing doctors at PTAC and its sub-committees who continue to provide invaluable, independent and practical advice to the PHARMAC Board, and to th e many doctors, companies, professional medical assoc iations and user gro ups who have taken the time to respond to requests for co mment and feedback. The quality of our decisions is immeasurably improved by thi s wide ran ge of inputs. I also pay tribute to two of our fou nding directors who retired durin g the year - Murray Burns, Chief Exec uti ve Central RHA, and Grae me Edm ond, Chief Executive Mid land RHA. We will continue to do the job we are ass igned. Increasingly, we hope our ro le wi ll be as a cata lyst to a more harmon ious performance by th e health "team."

and suffered disappointment because . . .

• Having decided to subsidise salmeterol for treating asthma. risperidone for treating schizophrenia. and dorzalamide for treating glaucoma. at a total cost of $7.5 million. we were unable to find the funds because of rapid growth in other areas.

Deni s Tait Chairman 22 August 1996

It's

•

The ethical answer . may be more aesth~tlC .. thall sClellt~fic.

PI IARM A('EUTI CA L M ANA GEME NT AGENCY L TD

John HedLey, Chairman of the independent PharmacoLogy and Therapeutics Advisory COlllmittee (PTAC), says that in the post-reform environment, traditionaL approaches to medical ethics need to be re-examined.

at our

ew Zealand doctors are feeling the squeeze between admini sterin g and admini stratin g medi cal treatment. It is a world-wide phenomenon arising from gove rnm ent effort s to ensure that public Illoney spent on health care is effi cientl y employed. The causes of the phenomenon are unsustainable yea r on year increases in the volume and cost of dru gs, and a growing debate about wheth er or not the added dol lars are justified by th e improve ment , if any, in hea lth status. Reasons for th e increases in th e volume and cost of drugs include:

Drug company influence

Consider the pervasive influence th e pharmaceuti ca l industry has in :

Published trial results. Much of the trial research for new drugs is fin anced by the manufacturer. If the res ults are not favourable to the dru g, chances are the trial results do not see the light of day. The coro ll ary is that often only favourable results get publi shed. We need to be much more aware of the resulting bias in research literature especially th at with which pharma ce utical companies are assoc iated. An Ameri can stud y of published res ults of trials on nonsteroida l anti-inflammatory dru gs (NS AIDs) in th e treatment of arthriti s concluded: "The manufacturer-associated NSAID is almost always reported as being equal or superi or in efficacy and tox icity to th e comparison drug. These claims of superi ority, espec ially in regard to side effect profiles are often not supported by tri al data. These data raise concerns about selective publi cati on or bi ased interp retati on of results in manufacturer-associated trials." In reviewing th e published data on particular drugs, PTAC members oft en reach conclusions simi lar to that study:

• A lac k of stati sti call y significant support in manu fac turers' claims of less tox icity. • A dose rate for th e manufacturer's dru g hi gher th an th at of th e comparati ve drug. • Littl e or no di sclosure of th e nature and level of fi nancial and materi al support given to the researcher by th e manu fac turer.

Advertisillg amI sales promotiollS. How can we be obj ecti ve when

• Replace ment of older drugs with newer and usuall y more ex pensive drugs. • " Medicalisation" of social probl ems such as isolation, drug addi cti on, and alcoho lislll. • Increased publi c awa reness of treatment options, often driven by heavy consumer adve rti sing. • The deve lopment of drugs for treating new and emerging areas of awareness, such as depression and anxiety. • Hi gh dependency di seases such as AIDS, di seases associated with age ing, and dru g dependency.

we, sometimes unknowingly, allow ourse lves to be influenced by drug company adve rti sing and sales promotions? Two studi es hi ghlight th e problem: • An Auckl and stud y that medi cal practi ces have on th eir store room shelves and in their wa iting and consulting rooms a mea n of more than 1,000 promoti onal items from drug companies, including 373 drug samples and 35 pe ns, pads and trinkets bearing drug brand names. • An Ameri can study that found a stron g correlation between the level of interacti on doctors had with drug compan ies and the number of requests th ey made for specific drugs to be added to a hospital formul ary.

Edll catioll. It is al so important that medi cal educati on be unbi ased, up to date, and free of any suggestion of commercial influence. It is surprising th erefore that post-gradu ate education is heavily dependent on drug company support. With improve ments in CHE contrac ts, doctors are much better placed to fund th eir own post-gradu ate ed ucati on. If medi ca l conferences can not be run without co mpany sponsorship, th en the registration fees should be increased to allow financial independence. Spollsored travel all d research. Acceptance by doctors of full y or

Should doctors fight change

I do not suggest th at doctors shou ld greet ti ght budgets in the public hea lth service cheerfully, but there comes a time when the allocation of fund s has been undertaken by an elected gove rnm ent, and th en it is up to us to get on with things. I believe too much energy from some doctor groups has gone to trying to enlarge their own slice of the pie without recognition that ultimately the pie is finit e. Thi s energy mi ght better be deployed looking for ways to help us make appropri ate choices within the sli ce we each have. Only when our medi cal house is in order, will we reasonably be able to demand a larger slice.

parti all y-paid air travel and accommodati on to sy mposia around th e world and of research grants is so common th at it is almost embedded in our pysc he as an entitlement.

PHARMAC's DECISION CRITERIA

Seeking best health value for the pharmaceutical dollar

Professiollal associatiolls. The declaration by one drug company that the Arteriosclerosis Society could not exist without its sponsorship, must surcly introduce ethical difficulties.

The cost issue

PHARMAC seeks to operate in an open, transparent and accountable way. Its reviews and changes to the Pharmaceutical Schedule are governed by its Operating Policies and Procedures - a public document developed in consultation with the pharmaceutical industry.The document emphasises the importance of basing decisions on the latest research-based clinical information, and it sets out criteria to be taken into account in decisions about the Schedule. These criteria are: • the health needs of all New Zealanders, • the availability and suitability of existing medicines, therapeutic medical devices or related products to meet health needs, • the clinical benefits, risks and costs of new medicines, therapeutic devices or related products, • the cost-effectiveness of meeting health needs by purchasing pharmaceutical services rather than by purchasing other health care and disability services, • the overall budgetary impact of any changes to the Pharmaceutical Schedule, • the direct cost of pharmaceuticals to users, • any recommendations on core health and disability services made by the National Health Committee (previously known as the Core Services Committee), and any other matters that PHARMAC sees fit. In most other sectors of the economy such influence is part of normal commercial arrangements. In the health sector the relationship is not so transparent because neither the doctor nor the patient usua ll y bears the cost; it is diffused through taxes and subsidies. We also need to be more aware that the cost of every prescription inevitably has an impact on costs elsewhere. For example, an ACE inhibitor prescribed at an annual cost of $470, in preference to the diuretic, bendrofluazide, may deprive another patient of the opportunity to receive $450 of treatment a year. Expressed another way : that $450 could also pay for the treatment of one patient for about six months with salmeterol, a drug PHARMAC wants to make available but is presently unable to afford. There is no excuse for ignorance about the cost of competing prescriptions. The Pharmaceutical Schedule is rich in information on comparative costs and cost trends.

What exactly is being ethical

Questions about the re lative cost of competing treatment options, and of drug company influence, raise significant ethical issues. Of course, what is ethical and what is not is frequently less than clear when one tries to balance competing moral claims. Seizing of the moral high gro und by he or she who comes first with the pronouncement of unethical status is a superficial treatment of an ethical problem. The approach described by Professor Raanan Gillon (see lower pallel 011 page 9) offers a helpful framework for the resolution of ethical di lemmas.

Where to from here?

Here are some random thoughts on how we might put professional integrity ahead of the short-term gravy train:

THE MOTIVES BEHIND SALES PROMOTIONS

"Some of the industry's post-marketing studies seem designed to ensnare a physician champion for a particular agent and to sell the rolls of the company's speakers' bureau"

- Or Frank Riddick of the Akon Ochsner Medical Foundation.

More recognitioll ofp atiellt autoll omy. The granting to competent patients of sufficient information to enable them to make an informed judgement is a powerfu l ethical princip le. How can patients' choices be tru ly autonomous when information is presented to them by a medical adviser with undec lared - or unrecognised - conflicts of interest? If a patient is not aware that a relationship exists between a doctor and a third party, then the patient's autonomy of decision-making is likely to be impaired. By not declaring conflicts of interest to the patient, we are guilty of paternalism or downright deception. Recognition of patient autonomy means not prescribing through arrangements that give us a direct financial incentive, either from the RHAs or drug companies. It means using a less expensive drug where there wi ll be no difference in clinical outcome by making that choice, and not performing tests that have no influence on the treatment decision. It means not making prescribing decisions on the basis of subliminal advertising on our desks, or our last trip. It also means being aware that every business class air fare, trip to an overseas conference, or hotel tariff funded by a drug company can be regarded as being financed from the drug subsidy bill which, in turn, is met by tax payer patients.

PHA RM ACEUTICAL M ANAGEMENT AGENC Y LT!)

Disclosillg illterests. Many speciali sts feel no burden of responsibility to declare a confl ict of interest when one patently exists. For exa mple, it's not on to receive a company sponsored trip and then speak to a New Zealand medical audience abo ut that company's product without declaring that the conflict is present, and allowing the audience to make its own interpretati on of the presented data. If no conflict is declared, then the audi ence should reasonab ly expect to conclude that no conflict is, in fact, present. Neither should a doctor receive research grants from a company but not disclose this fac t when talking abo ut, or publishin g, the results of the research. Dustillg off our ethical rtlles. We should dust off th e ethical codes and guidelines of each of th e colleges, ensure their appropriate ness, and consistency, then adhere to them. The guidelines should be revisited in the light of the new structures and relati onships that have been created as part of the health reform s. The test here is that if th e relationship between the doctor and another party could be construed by an outside observer as inapprop riate if it became known, then probably it is inappropriate. We might consider the va lue of an ethical rul e of th e type adopted by hospital pharmacists in the UK - accept onl y the hospita li ty yo u are prepared to rec iprocate. We might read th e booklet publi shed by the Royal Australasian College of Phys icians in Sydney ent itled Relationships beh1leen Physicians and the Pharmacellticallnduslry, and the recommendati ons of each college on drug sampling, entertainment by companies, and overseas trave l by specialists when sponsored by companies.

WE SHOULD NOT WASTE RESOURCES

"Cost and its team mate, opportunity cost, are moral issues and central to distributive justice.We should not waste the resources at our disposal. If a cheaper drug is li kely to produce as much benefit as a more expensive one, we should prescribe the cheaper one."

Raanan Gillon, visiting professor of medical ethics, Imperial College of Science, Technology ond Medicine, London; from British Medical journal, volume 309. 16 july 1994.

THE "FOUR PRINCIPLES PLUS SCOPE" APPROACH TO ETHICS

"The 'fo ur principles pl us scope' app roach provides a si mple, accessibl e, and culturally neutral approach to thinking about ethical issues in health care.The approach, developed in the United States, is based on four common, basic prima facie moral commitments respect for autonomy, benefi cence, non-malifecence, and justice plus concern for their scope of appli cation. It offers a common, basic moral analytical framework and a common, bas ic moral language. Although they do not provide ordered ru les, these princi ples can hel p doctors and other health care workers to make decisions when reflecting on moral issues that arise at work."

Professor Raanan Gillon.

Colleges should take the initiative

In each of the above areas, it is import ant that the colleges take the initiati ve rather th an leave it to a small group to deal with . A recent Canad ian ed itori al suggested that co lleges cou ld assume a leadersh ip ro le in the eq uitable allocati on of resources. It sa id they co uld become a cleari ng house for outcome measures, and co uld coordinate the deve lopment of "an acceptable common metric" for quantifying the benefits of different hea lth-care interventi ons. These roles, said the editorial, should have a hi gh priority on coll ege agenda.

If we don't others will

I have written this primari ly from my perspecti ve as chairman of PTAC, but also as a consultant phys ician in th e trenches of front line general medicine. I have no doubt that it will ruffle a few feathers , but it is hi gh time doctors had clear ethical guiding lights as we go into budget holding and a range of other ethical challenges. If we do not put our own professional house in order, I' m sure there will be plenty of non-medical people who will be wi lling to do it for us. We will onl y have ourselves to blame if that comes to pass.

John I-Iedley Chairman Pharmacology and Therape utic Advisory Committee (PTAC)

Taking the moral high .I Ild is a superficta . . grou treatment of all ethical Issue.

PII A RM AC EUT ICAL M AN MiEMENT AGI ', NCY I TO

PHARMAC General Manager David Moore reviews actions around the world to curtail drug budgets by squeezing prices and reducing waste.

What other countries are doing

Perusal of th e pharmace utical industry newsletter Scrip over the last year shows clearly that New Zea land is not alone in its concerns about unfettered growth. From Aust ralia to Zimbabwe, government, quas igovernm ent and private bod ies are using, or proposi ng, a wide va ri ety of mechanisms to wrestle with the rising bill. • Allstralia. Following a decade of eight per cent rea l growth in its Pharmace utical Benefits Scheme, the gove rnm ent increases co-payme nts and cuts tax rebates. • Belgilllll. Government and the drug industry agree on a package that includes a price freeze and an undertakin g that if target cost reductions are not ach ieved, a two per cent price cut will be made. • ChiJ/a. Government moves to rationalise and contain hea lth care costs in the face of hi gh growth in state spending on free med ical care and labour health insurance schemes. • Delllllark. A new system reduces reimbursement on antibiotics from 75 per cent to 50 per cent , and negotiated price ag reements with drug co mpani es are estimated to save $US38 million . • Frall ce. Following various attempts to curta il cost-esca lation, a 2.1 pe r cent ceiling is set on annual growth in health spending ge nerated by non-hospital doctors, and a new regime enables doctor prescribing to be curbed under threat of fin es. In protest, th e three main doctors' unions ca ll for a one-day strik e. • Greece considers reference pricing and controls on drug promotion ex penditure. • Holland. Senate approves legislat ion to cut drug prices to the average of Belgium, France, Ge rm any and the UK. • Italy estimates that $US280 million a yea r could be saved from its new reference pricing system. • Japan. The Central Social Insurance Medi cal Council (Chuikyo) issues a draft report on meas ures to rationalise drug expenditure, with an emphasis on pricing and to a lesser extent proper drug use. • Kellya in troduces a nati onal drug policy under which pharmac ists may dispense a generic eq ui valent unless the prescriber declares otherwise. • Polalld decides to reimburse only the cheapest drug in each category.

one

• • • here is a clash of viewpoints in New Zea land - and in many other countries - between those who want to spend more money each year on health and those who want health care costs brought under control. PH ARMAC is at th e front line of this clash of views in its rol e as the RH As prim ary adv isor on new drug technologies. On the other hand, th ere seems to be agreement th at our society's health care objectives should broadl y reflect principl es such as those on whi ch th e UK National Health Service is based: that all hea lth needs should be met, th at there should be a hi gh standard of service for all , an d th at everybody should have equal access.

Unfortunately when "needs" come face to face with th e resources ava il able to deliver th em, there is a conflict that takes us back full circle to the original cl as h of viewpoints.

The reality of finite resources

At present our drug subsidy bill is about $700 million a year - a small fraction of the $3 0 billion th e gove rnment redi stributes each year. The problem is that this fraction grows relentlessly des pite effo rts to contain it. Prior to PHARMAC th e fraction was doubling about every seven yea rs. PHARMAC has managed - not without controversy - to slow th at down to a growth rate that wou ld doubl e the cost about every 10- 12 yea rs. Eve n at this rate of growth , by the time a baby born today reaches the end of an ave rage life, the bill wil l ri se to about $25 billion. Even after adjusting for inflation, it is clear that th e conflict we now have between tax payers and health care consumers will, at some point in th e future, escalate. The problem is uni versa l. In the 1980s and early 1990s, th e annua l nominal growth rate of the wo rld pharmaceutical market was in doubl e fig ures but, largely as a resu lt of government and private efforts to hold costs, it seems to have stabilised in the mid-1990s in hi gh single figures. Nor is the problem unique to the drug budget. Professor William Baumol in th e 1995 OH E lecture, said that th e share of nati onal resources each co untry devotes to health wi ll continue to increase because health care is a "handicraft" industry that can not be full y automated. Thus productivity wi ll improve, but at a far slower rate than th e rate of producti vity improvement of the whole economy.

• SOllth Africa. A report says pharmaci sts can co ntribute towards the detection , prevention and resolution of drug- related problems when reviewing doctor 's prescriptions, contributing to improved patient outcomes and cost savings. The report estimates that if a single prescription intervention occurs daily in every South Afri can pharmacy, there are potential sav ings of R124 million a year. • USA. The Generic Pharmace uti ca l Industry Assoc iati on says $US I0 billion could be saved by usi ng ge neri cs and: " If a consumer wishes to buy a more ex pensive brand-name drug when an equ ally effecti ve gene ric is ava ilab le, he shouldn 't expect taxpayers to pay the difference."

----- ---

•

Zimbab we seeks to improve rational drug use through form ularies

and therapeutic guidelines.

• A study of GPs in New Brunswick fo und that high prescribers ordered on average 45 per cent more prescriptions than low prescribers. • An ex peri men tal study of30 GPs in Ire land fo und th at the li ke ly degree of generic prescribing was greatest in the areas where the potential savings were only moderate and the least generic prescrib ing was present in the group of drugs where the greatest potential savings might be made. • A British study found that the age and sex profi le of a medi cal practice did not explain inter-practice vari ation in prescribing patte rns.

-------------- --------

Dealing with waste

Clearly, a sign ifica nt sli ce of the money we spend on drugs is wasted, a good dea l of it in the way doctors prescribe. Why, fo r example, is the per capita cost of new-style antidepressants in Southern RH A more than two and a half times greater than in Northern RHA (see graph three, page 13); and why is the per capita cost of acne drugs in Northern RHA nearly do uble that of Midland RHA (see graphjoUl; page 13), with no ev idence of differen t health outcomes. And why do attempts to deve lop predi ctive models for prescribing behav iour in terms of morbidity and demographic factors de liver inconclusive results? An uncharitable explanati on is that prescriptions are influenced by fad and the elapsed time since the last visit of a dru g company salesperson. The fo llowing are illustrative:

- --

• In India, a consumer network studied 2000 prescriptions fro m six states, concl uded that there is "irrational prescribin g", and threatened to take acti on aga inst doctors for medical negligence. On the other hand there is evidence that when health professionals address the issue of waste and th ink about cost, wo rthwhile savings are available without comp rom ise to patient needs. • In Sweden, 125 GPs at 27 health centres sought to prescri be more rationally. They undertook surveys of their own behav iour, attended

- - - - - -- -

--------------

• An inqui ry in Ontario concluded that there was no demonstrable improvement in the health of patients over 65 as a res ul t of more prescriptions of more expensive drugs, and that costs would only be contro lled by improving the appropriateness of doctors' prescribin g.

THREE STRATEGIES FOR BALANCING HEALTH NEED AND COST

PHARMAC employs three strategies to balance patient needs and costs.

and the newsletters of the supplier company and the Foundation. With lamotrigine (Sabril) and vigabatrin (Lamictal) , new anti-epileptic drugs, patients get access but the financial risk is managed through a capped budget and clear guidelines. For patients who do not show benefit, the therapy is discontinued.

Price competition

Price competition is achieved mainly through reference pricing.This involves classifying pharmaceuticals into therapeutic groups and fu rther into subgroups. A therapeutic group is a set of pharmaceuticals used to treat the same or similar conditions.A sub-group is a set of pharmaceuticals that produce the same or similar therapeutic effect in treating the same or similar conditions. For example, ulcer healing agents form a therapeutic group, while Hl antagonists form a sub-group.This sub-group comprises cimetidine, ranitidine, famotidine and nizatidine.The subsidy for each is equivalent to the price of the least expensive brand of Hl antagonist available. Reference pricing is highly effective and is one of PHARMAC's most powerful tools. It reduces market segmentation based on brand marketing, which previously allowed suppliers to establish markets that were free from price competition.

Risk sharing

• Price/volume contracts between PHARMAC and the supplier recognise

that rising volume invariably results in lower marginal costS for the supplier.Typically, the contract will be at a fixed (or diminishing) price for a fixed (or increasing volume). Many generics are in this category.

• Average daily dose contracts shift the risk of increasing dosages of a drug

to the supplier.An example of such a contract was with paroxetine

hydrochloride (Aropax).A contract was negotiated with the supplier that tied the subsidy at an average daily cost that, in this instance, also corresponded to an agreed average daily dose of 20mg.The supplier gave a rebate when the average dai ly dose was exceeded.

Improved targeting

Some pharmaceuticals are more expensive than alternative treatments. Often they are slightly more effective than alternative treatments for many patients, perhaps because of better side effect profiles. Sometimes, they are much more effective for some patients than alternative treatments, for example the new anti-epileptic drugs. One approach to such drugs is to develop, and widely di sseminate, prescribing guidelines. These guidelines are drawn in cooperation with the relevant medical practitioners and their professional colleges, and user groups.With acyclovir, for example, the Herpes Foundation was consulted, and the final guidelines were published in the Pharmaceutical Schedule,

• Capped maximum annual contracts. Under these contracts, PHARMAC

pays a maximum annual fee for patient and prescriber access to a drug regardless of the volume prescribed or the number of patients requiring treatment. It provides a good balance between incentives for doctors who want to prescribe the best drug for th eir patients, and suppliers who want to market enough volume to reach the maximum annual fee at a given price, but no more.An example is acyclovir (Zovirax), where subSidy expenditu re is fixed for five years at a fi xed growth rate, restrictions on lower-strength doses have been removed to allow dispensing from pharmacies, and prescribing gUidelines introduced.

PIIARMACEUT1CAL MANAGEMENT AGENCY LTO

workshops on drug use in primary health care, referred to a university hospital drug formular y, and enl isted the help of local pharmacies. Compared with the national prescribing pattern, they saved 20 per cent on drug costs through smaller volumes and costs per prescription item . • And in Scotland the cost of drugs prescribed by an urban practice with five partners fell by 24 per cent in the first year of fund holding and the use of a generic formulary for all new and repeat scrips.

Graph three

Graph four

SSRI ANTIDEPRESSANTS Expenditure per capita by RHA for year ended 31 December 1995

$8.80

ACNE DRUGS Expenditure per capita by RHA for year ended 31 December 1995

$3.26

8 ~---I1

6 - - - ---1

$4.78

$5 . 11

Evidence-based medicine

About a decade ago the term evidence-based medicine emerged to em phas ise the need for better use of data in treatment decisions. The phrase has been derided on the grounds that there is no other type of medicine and that it is "a smokescreen for rationing." Nevertheless, several organ isations around the world clearly see a demand for improved tools to help doctors prescribe more cost-effectively. In the UK, the National Health Service is funding three research centres to produce evidence-based clinical protocols that reduce waste on ineffective treatments and decrease variations in treatment. The Department of Health has published a document " Promoting Clinical Effectiveness," and a Nationa l Prescribing Centre has been establi shed to enco urage "hi gh quality, cost-effective" prescribin g with goals that include training and edu cation of doctors, coordinating information, disseminating best practi ce in prescribing, and shaping future informat ion technology systems. The National Health Service is also trialling in 150 ge nera l practices a Dutch computer system, Prodigy (for Prescribin g Rationally with Deci sion-Support in General Practice) that offers three treatment options for each condition . In Germany an obligatory evidence-based approach is being considered, and Belgium , Germany and France are either considering or trialling bar code systems for prescription monitoring. In Northern Ire land, some fund holding GPs are using a computerised on-line system named Compass for ana lys ing prescription "science and stewardship" and are reported to find it va luable for planning improvement in cost-effectiveness and qua lity. There has, howeve r, bee n resistance to such systems. Briti sh drug companies objected to Prodigy because they were not consulted and it uses on ly generic names, and Belgium's bar code system "teetered," according to Scrip Magaz ine, beca use doctors refused to cooperate.

We can all contribute

Clearl y, th ere is growing recognition around th e world that there are limits to the avai lability of public funds for dru gs just as th ere are, coincidentally, on organs for transplant. Thus having accepted that there is a limit, we all have a role (especially doctors) to ensure that the choice of drugs and services provided is as just and fair as we can make it. The rigour of th e debate about where th e priorities lie will be improved by frank and open disclosure of interests. Voluntary action by doctors, as Dr John Hedley urges on pages 6 to 9, and by drug compan ies, to disc lose all mutual fin ancial arrangements in clinical trials or in assessments of th e relative effecti veness of alternative dru gs and treatment programmes could be a sensible first-step. Doctors can not stand as ide an d say, as have some, that th ey are "being embroiled in pricing issues" or that their only responsibility is to their patient. Chances are th at th e pati ent also is, has been, or will be. a tax payer.

Consumers can play a role by "thinking more about how they use family doctor services and by taking more responsibility for their health," to use the words of the UK 's Department of Health at the launch of a multi-million dol lar advertising campa ign. Consumer groups also have a rol e. In the US , for example, in response to a Federal Drugs Adm ini stratio n proposal for more informati on on drug package labels, a coalition of 330 health carere lated organisations, consumer groups, voluntary hea lth agenc ies and the drug industry, mounted a programme to "improve communication between consumers and healthcare providers about prescription drugs." Objectives include ensuring that patients receive useful information about new prescriptions, and are encouraged to ask questions and discuss treatment options. PHARMAC will continue with its strategies of price competition, improved targeting, and ri sk sharing (see panel page 12). At the centre of this work, we continue to build on and improve th e core technology assessment skill s that we have developed. These strategies are working for New Zealand and are being emulated in many countries; though in the fa ce of taunts about heavy-handedness, bureaucracy, lack of concern for indi viduals, and court action by a litigious drug industry. To paraphrase Dr David Seedhouse, Sen ior Lecturer in Medical Ethics at the University of Auckland, we mi ght also: • question the dominance of medicine in health care planning, • challenge our politicians to do the same, • compare medi ca l systems with other systems in our society, • qu estion whether technology and pharmacology ought to be soc iety'S major weapons against disease, • and acti vely debate the mea ning of key words such as health , we llbeing, medi cine and di sease.

Dav id Moore Gel/eral Manager

Reviewby

A review of the steps PHARMAC is taking to improve access to drugs, encourage more effective use, and Lower costs.

•

he core activity of PHARMAC is the assessment of health technologies. This involves continual assessment of drug performance and cost, usually by reviewing trends within defined groups of drugs (therapeutic group reviews), and appraisal of applications from drug companies for subsidy for their products. Every drug is reviewed from a therapeutic and economic perspective so that the Board of PHARMAC can take its decisions based on both medical and cost-benefit criteria. Considerable emphasis is put on consultation , and the need for innovative solutions that either reduce the cost, the rate of growth in cost, or improve the health of New Zealand's populations. PHARMAC decides on which reviews will take place, and sets its review priorities by taking into account the reports of the National Health Committee (previously known as the Core Services Committee), known patient needs, the size of the therapeutic groups relative to total drug usage, and cost trends within therapeutic groups.

This highlighted the need for an assessment of absolute risk before patients receive either pharmacological or nonpharmacological treatment. The report also said that because there is randomised controlled trial evidence of reduction in cardiovascular morbidity and mortality with diurctics and beta blockers that these agents should be considered first. This evidence is lacking for ACE inhibitors and CCBs. The annual cost per patient with an ACE inhibitor at $471, is more than double that for a beta blocker and 22 times the cost of the diuretic, bendrofluazide. The lipid review is the largest ever investment appraisal for PHARMAC. The Board will have to consider whether the $40 million cost of lipid modifying agents represents the best use of the health care dollar.

Actions

Review ofACE inhibitors. These are treated as a single therapeutic sub-group, and from I February 1996 were reference priced at the same weighted average daily cost, with potential savings of$3 million a year. However, growth in the use of these agents virtually eliminated the savings. ACE inhibitors with diuretics are still being reviewed. On I July 1995 , a new ACE inhibitor, trandolapril (Odrik and Gopten) was listed on the Schedule. This will result in further savings due to a lower weighted average daily cost for the who le ACE inhibitor market. Review of CCBs. From I March 1996 the subsid ies were aligned to the level of the lowest priced product in each therapeutic sub-group. CCBs were placed in six different therapeutic subgroups as follows: three antihypertensive (Iow, medium and high) - nifedipine, amlodipine, isradipine and felodipine; anti-anginal - diltiazem; refractory angina - perhexiline; and antihypertensive/antianginal/anti-arrhythmic - ve rapamil. Annual savings from the CCB review, and the listing of low strength felodipine

Cardiovascular and blood

Cost trends (See graph eight. page 16)

Total cost was $153 million, down one per cent on last year. However, the underlying trend, based on April years, is for growth of eight per cent. The major areas of investment were ACE inhibitors with or without diuretics ($45 million), calcium channel blockers (CCBs) ($32 million), and lipid modifying agents ($19 million).

Issues

The major issue is the continued use of more expensive agents where lower cost alternatives would suffice, particularly in the management of hypertension. In June 1995 the National Health Committee released a further report on the management of mildly-raised blood pressure.

PI IARMACEUTICA L MANAGEMENT AGENCY LTD

Graph five

AN IMPORTANT NOTE ABOUT THE DATA IN THIS REVIEW

C AS H INVESTM ENT ON DRUGS 12-molllh moving annual total RHA cash expenditure including mark-lips and eST - in $ millions for years ended 30 June.

720 700

The data in this Review of total subsidised investment (graphs six and seven,

pages 15 and 16) and investment by therapeutic group (graphs eight to fourteen, pages 16 to 18) and the tables on pages 22 and 23 are not indicative

of real trends because of the introduction by RHAs from I May 1996 of monthly dispensing. The effect of this - which resulted in a sharp decline in total investment of $27 million this year - is clearly illustrated in graph five at right and in the price, volume, and mix indices graph (graph two) on page 4. As shown in graph two, PHARMAC forecasts the total investment to return

680 660 640 620

its trend line by June 1997. Monthly prescribing was an RHA initiative for

Jun

1994

Jun

1995

Jun

1996

which PHARMAC provided almost one person-year of consulting services prior to its introduction.

(Plendil ER) 2.5 mg arc estimated at $4 mi lli on. Unfortunately, while the reference pricing out comes of th e review have been implemented two supp li ers have in itiated legal ac ti on. Review o/"the crileria/or/ipid modifving agents. Since the start of th is rev iew med ica l opinion about th e manage ment of dyslipidaemia has shi fted. The result is a significant increase in the use of the statin, simvastatin (Zocor). PHARMAC has modell ed the econom ic impact of the new Nationa l Heart Foundation guideli nes, and a PTAC subcommittee has made recommendations whic h, togeth er, will be considered by the PHARM AC Board. Dip.l'ridamole. The Specia l Autho rity criteria for

dipyridamole were reviewed, res ulting in two small changes - ex tension from six months to two years for approva ls for patients with trans ien t ischaemic attacks despite aspirin therapy, and the addition of neurosurgeons to the list of spec ialists who can make applicati ons. PH ARMAC awa its the peer-reviewed, published clin ical res ul ts of th e ESPS- II study which had 6602 pa tients en rolled in four trial arms: dipy ridamole/as pirin, dipyridamo le, asp irin , and with placebo. Oth er cardiovascular drugs. Subsidy reduct ions were made on two beta blockers - nado lol and sotalol, an d the diuretic indapam ide, wh ich togeth er, will res ult in savings of around $500,000 a year.

Graph s i x

S UBSIDI SE D DRUG COST Years e/lded JO June $ millions

700 600 500 400 300 200 100 674 694 7 15

639 554 580 -

PTAC's PURPOSE AND STRUCTURE

Independent, expert evaluation and advice

92 93 94 95 96 97*

•

The primary purpose of the Pharmacology and Therapeutics Advisory Committee (PTAC) is to provide PHARMAC with independent advice on the pharmacological and therapeutic consequences of proposed amendments to the Pharmaceutical Schedule. PTAC is a committee of medical specialists and gene ral practitioners nominated by such professional bodies as the New Zealand Medical Association, th e Royal New Zealand College of General Practitioners, th e Royal Australasian College of Physicians, and the Australasian Society of Clinical and Experimental Pharmacologists and Toxicologists. PTAC's work includes considering and making recommendations on the medical implications of: • All significant appl ications by drug companies for PTAC's focus is on general medicine, but increaSingly it seeks advice from known specialists or experts. It also consults with the National Health Committee, sets up subcommittees for specific tasks, and sometimes undertakes its own literature searches. PTAC members and those co-opted to sub-committees are paid an hourly rate plus expenses for attendance at meetings and time spent preparing for meetings. Full meetings of PTAC are usually held in Wellington at least four times a year. inclusion on the Schedule, or amendment to it; • Requ ests by PHARMAC for de-listing; • The management of the Schedule; and • The need for reviews of specific drugs, or groups of drugs.

eST Estimated dislribllling margins and dispensingjees. COSI, nel of charges and tax. * Forecasl hased on net groll'lh ofdrllgs on the Schedllle al JO JUlle 1996. It does 11 01 include the effect ofdecisiolls

on Ileu' lislings. increases in

subsidies, 0 1' de-restrictions, Ihalmay he takell in 1997.

Graph seven

INVESTMENT BY THERAPEUTIC GROUP

Year ended 30 June 1996

Respiratory tract and allergies

Cost trends (See graph nine)

Total cost was $114 million, down 12 per cent on last year. However, the underlying trend, based on April years, is for a reduction of just four per cent a year. The major area of investment ($68 million) is in inhaled corticosteroids. The respiratory system is the second largest therapeutic group by ex penditure. Indications are that the annual cost has stabilised at around $125 million. Year to year fluctu ations around this figure appear to be due to seasonal changes in the severity of asthma .

Nervous system

Cost trends (See graph ten)

Total cost was $74 million, up seven per cent on last yea r. However, the underlying trend, based on April yea rs, is for growth of about 14 per cent a yea r. The largest area of investment ($ 17 million) is in selecti ve serotonin reuptake inhibitors (SS Rls). The cost of these was up by more than 21 per cent. Investment in ana lgesics was $16 million, an increase of eight per cent.

Cardiovascular and blood (26%) RespiratDlY tract and allergies (19%) • Alimentary tra ct alld metabolism (/5 %) Nerl'olls sl'stem (12 %) All orher eS(J i,)

Issues

Many new agents fo r psychiatric and neurologic disorders are being developed and we expect this to have an impact on expenditure. Some of this development is occurring in di sorders where no treatment was previously ava ilable, or for conditions where existing medications, whi le effective, have less tolerable side effects. There is also increasing public awareness of mental disorders, reinforced by the Maso n Inquiry into mental health. The government responded by promi sing to make more money avai lable for new drugs, in particular for schi zophreni a. The budget for these drugs, clozapine an d risperidone, is currentl y managed indi vidually by each RHA. Growth in ex penditure on the newer antidepressants continues to be a concern. An increase in antidepressant prescriptions appears to be due to increased awareness of depression and possibly because newer antidepressants are being used fo r other disorders.

Issues

The Montreal agreement, which wi ll see the phasing out of CFCs, has a significant impact on the asthma market as companies race to develop CFC-free propellants in inhalers with the expectation of higher prices. PHARMAC is looking at a number of new chemical entities in the asthma market. The Board resolved to fund one of th ese new agents - salmeterol (Serevent) when suffi cient funds become available. It is frus trat ing that dry powder devices remain ve ry expensive in comparison to metered dose inhalers. Another disappointment was that Ciba-Geigy withdrew from an agreement which would have seen a long-acting beta agonist (Fo radil) available in the market.

Grap h eight

CARDIOVASCULAR AND BLOOD

Years ended 30 June $ millions before GST

154 153 150 142 I-

t--

Actions

Asthma review. The asthma review was completed in August 1995 and was we ll received. The success of its implementation was helped by a close working relationship wi th the Asthma Foundation.

92 93 94 95 96

Actions

Antidepressants. The review was com pleted in January 1996 and led to a study of ways to widen access to the newer antidepressants. The Mental Health Sub-committee of PTAC is consideri ng another new antidepressant. Risperidone. Risperidone was assessed by PHARMAC for listing. Currently it is funded by the RHAs through drug inclusive contracts with CH Es or through specific budgets. New listings . Commercial methadone solutions were listed in the interests of safety and consistency as recommended by the draft national Methadone Protocol. Betaferon. Betaferon, a new adjunct in the treatment of multiple sclerosis is being considered for subsidy.

Tire un deriving trelld is for eiglrl per cell I anllual grolVlh.

Graph nin e

RESPIRATORY TRACT AND ALLERGIES

Years elided 30 JUlle $ millions before GST

124 124 127 129 120 1- 114 -

Inhalers and spacers. Listing of the first CFC-free inhaler Airomir, following lengthy negotiations with the supplier, was a significant milestone that established the principle of listing CFC-free inhalers at current levels of subsidy. The move to funding spacers continues and the RHAs invested $700,000 on spacers for an estimated 45,000 children in the past year. The expenditure greatly exceeded expectations but is expected to provide significant health benefit. Two new inhaled corticosteroid products with spacers were listed - Respocort S IOOmg and 250mg with spacers. Pulmozyme. PTAC modified its adv ice in light of new evidence - that there may be benefits fo r some patients. Gu idelines are being developed that will identify those patients expected to benefit from treatment. A deci sion as to whether subsidy is warranted is expected later this year. Combivent. A new combination bronchodilator for use by patients with chronic obstructive airways di sease (CDAD) was listed. This should res ult in lower patient costs as one inhaler wi ll rep lace two. In addition, the new inhaler is ex pected to improve compli ance as we ll as reduce RI-lA ex penditure.

Alimentary tract and metabolism

Cost trends (See graph eleven)

Total cost was $88 million, up four per cent on last year. However, the underlying trend, based on April years, is for growth of abo ut II per cent a year. The major areas of investment we re di abetes products ($25 mill ion), H2 antagonists ($24 million), and proton pump inhibitors ($11 million). The annual growth trend for proton pump inhibitors is between 50 and 70 per cent. Investment in ca lcitriol (Rocaltro l) increased by 16 per cent ($5 million). However, th e underl ying trend is for 33 per cent growth.

The aSlhma review has helped stabilise COSI.

PIIARM ACEUTICAL MA NAGE M ENT AG ENC Y LT D

Issues

More patients are being treated with ulcer healing drugs than ever before. This suggests greater public awareness of dyspepsia, possibly driven in part by televi sion adverti sing by pharmaceutical suppliers. Increasingly, patients are being treated with more potent and ex pensive dru gs as seen by the rapid growth in the use of proton pump inhibitors (PPls). The challenge is to manage the growth yet ensure that patients get access to the appropriate therapies. Available studies suggest that diabetes affects between 86,000 and 172,000 New Zealanders and that up to 50 per cent are not diagnosed. The landmark Diabetes Control and Complications Trial from 1993 found that more aggressive treatment for insulin-dependent diabetics improves health outcomes. Ex penditure on vitamin 0 derivat ives continues to rise. A review of calcitriol found th at the rate of use in ew Zealand is greater than other parts of the wo rld . PTAC considers that vitamin 0 deri vati ves have a place in a number of conditions, but notes that evidence of their effectiveness in osteoporosis - its main use - is less convincing, and that hormone replacement therapy is a more effective first line treatment.

Graph t e n

Infections

Cost trends (See graph twelve)

Total cost was $50 million, up six per cent on last year. However, the underlying trend, based on the last April year, is for growth of 12 per cent a year. The major area of investment was in antibacterials ($40 million). The cost of antivirals rose by 25 per cent to $7 million, largely due to herpes and AIDS treatments becoming more available.

NERVOUS SYSTEM

Y ears ended 30 June $ millions before eST

75 -----------6 9~~~ ~ 74

ff-

25 -

I- '-

Issues

Internationally there is growing concern about antibiotic resistance. The importance of using pathogen-specific antibiotics was reinforced by an expert panel of infectious diseases speciali sts in New Zealand . Landmark tri als on the use of combinations of drugs to treat patients with AIDS show significant benefits in terms of health outcomes for patients and ra di call y change the pharmacological treatment for patients with AIDS. New therapies for AIDS treatment are ex pected in the near future . Protease inhibitors are expected to be assessed for subsidy next year.

94 95

Cosls have risen by 6 I per cenl since 1992, and the underlying trend is for 14 per cellf annual groll'th.

Grap h e t e v en

ALIMENTARY TRACT AND METABOLISM

Y ears ended 30 June $ millions before eST

Actions

H) antagonists. A 40 per cent redu ction in the subsidy will save around $12 million a year. The savings wi ll be reinvested in other areas. Unfortunatel y, the decision is su bj ect to lega l challenge (see page 21). Protoll pump inhibitors. Following the li sting of lansoprazole (Zoton), a new proton pump inhibitor, new Special Authority criteria were implemented. The new criteria aim to ensure that PPl s are targeted to patients with demonstrated need. Within one month of Zoton being listed, the supplier of omeprazole reduced the price to its current subsidy level, thus eliminatin g the manufacturer surcharge. Diabetes. A review is under way which is look ing at access to age nts for the treatment and monitoring of diabetes: syrin ges; pen needl es; glucose and ketone test ing strips; oral agents for the treatment of diabetes and other products for the treatment and monitoring of diabetes. PHARMAC commi ssioned a review of blood glucose testing products because of the lack of quality research against whi ch to eva luate th em . Vitamin D derivatives. A review of the relative subsidi es on vitamin 0 derivatives was completed with the formation of therapeutic sub-groups and implementation of reference pricing. Expected savings from the rev iew have been lost in the rapid growth of these age nts. Further review of the appropriateness of vitamin 0 will be undertake n as part of a gene ral review of osteoporosis.

Actions

Expert panel of infectious disease specialists. This panel, established in November 1995 , highlighted many controversial issues in antibiotic prescribin g, such as antibiotic resistance and its effect on choice of agent and level of dosing. The panel stressed that it was important to avoid unnecessary use of broad spectrum antibiotics since this is a contributing factor in the development of bacterial resistance worldwide. Famciclovir. The listing of famciclovir (Famvir) sees more choice for patients with herpes and res ults in signi fi cant savings for the RHA s. Unfortunately, the decision is subject to lega l challenge (see page 21 . ) HIVIAIDS treatl1lent. The decision to fund combination therapy of AZT plus either ddl or ddC represents a major advance in the management of this di sease. The decision was taken after review of the preliminary results of the Delta and ACTG 175 trials wh ich demonstrated significant benefit for patients. Antibiotic review. This was completed in early 1996. The macrolide therape utic sub-group was formed in February 1996. One of the suppliers in this market, initiated legal action against PH ARMAC over this rev iew (see page 21 ). Coldsore creal1ls review. A review was completed at the end of the year and implemented on I Jul y 1996 of treatments for herpes labial is. Its focus was to look at the health benefit associated with the use of these agents aga inst the cost of $2.3 million a yea r. It res ulted in the delisting of acyclovir (Zovirax) cream and idoxuridine (S tox il) lotion .

90 __________~~ 88~ 82 84

94 9S

Costs have risen by 40 per cent since 1992, and Ihe underlying trend is for I I per cent annual growth.

G r aph twelve

I NFECTIONS

Years ended 30 June $ millions before eST

60 ---------------47 45 ------- 43 36

92 93 94 95 96 Costs have risen by 61 per cent since 1992, and the underlying trend is for 12 per cellf annual growth.

Graph thirt ee n

MUSCULO-SKELETAL

Yea rs ended 30 June $ millions before CST

27 26 26 26 23

20 1 -

Musculoskeletal

Cost trends (See graph thirteen)

Total cost was $23 million, down II per cent on last year. The decline was due mainly to monthl y prescribing. The underl ying trend is for costs in this therapeutic group to be relativel y stable partly due to lower prices from generic competition. The largest area of investment is in nonsteroidal anti-inflammatori es (NSA IDs) ($16 million), the use of which is declining.

Controversy still surrounds the use of GnRH analogues in combination with other an tiandrogens, and th ere is still debate about whether patients should be ab le to choose between orchidectomy or medical management of prostate cancer.

Actions

HR T review. A PTAC sub-committee, comprising specialist clinicians met twice to review th erapeutic sub-groups, consider th e recommendat ions of th e National Health Committee and all submissions. The review is ex pected to be complete by December 1996 . Transdermal oestrogen patches. Listing of a new brand of transdermal oestrogen patch (Femtran) at 30 per cent lower subsidy than the existin g brand reduced annual costs by about $5 00,000.

10 -

1 -

Issues

o92 93 94 95 96

The review o/NSAfDs has helped bring costs down.

The decline in the use of NSA IDs may in part reflect concerns raised about the safety of these agents. This year 38,000 fewer prescriptions were written than last year, although some of thi s decline was due to monthly dispensing. Few new products are expected in thi s area of medicine.

Other

Oral contraceptives. In May 1996 the Minister of Health announced a package of strategies to reduce the cost barriers to contraceptives. The package includes a direction to PHARMAC to use reasonable endeavours to ensure that at least one fully subsidised bran d of contrace ptive in each of the oral contraceptive therapeutic sub-gro ups is available. There is a manufacturer's surcharge on all oral contraceptives at present. PHARMAC will negotiate with suppliers to implement the Mini ster 's decision during 1996 and 1997. Acne treatment. A review of isotretinoin (Roacc utane) was started in consultati on with dermatologists and the supplier. Of parti cul ar concern is th e rapid growth of this agent (up $ 1.4 milli on to $6.9 million thi s year). The review will look at possi ble targeting mechanisms and negotiations with the supplier to manage th e risk to the RHAs.

Ollcology ami illllllllllosllppressallts. An on-going review removed funding for interferon in Kaposi 's sarcoma, as it was considered to have little patient benefit. On the oth er hand funding was approved for interferon in basal cell carcinoma where patients are unable to be treated surgically or by radiotherapy. A separate review considerin g the current guidelines for access to interferon in hepatiti s C and hepatiti s B is ex pected to end next yea r.

Actions

NSA ID review. The first stage of the review was completed wi th the form ation of several therapeutic sub-groups and subsequent referen ce pricing. A feature of the review was the initial reluctance of suppliers to reduce prices to the reference pri ce levels. However, five months after the review was implemented, the majority of products are fully fu nded. PHARMAC established an 0800 line to deal with pati ent, pharmacist and prescriber queries over the review, and with the help of the Arthritis Foundation sent a mail out to all members of the Arthritis Foundation advising them of th e review outcome.

G raph f o urt een

HORMONE PREPARATIONS

Y ears ended 30 JUll e $ millions be/ore CST

20 17

Hormone preparations

Cost trends (See graph Jourteen)

92 93 94 95 96

The underlying trend is/or eight per cellt al1l1ual growth.

Total cost was $23 million - no change on last year. However, the underlying trend, based on April yea rs, is for growth of eight per cent. The major areas of cost were hormone replacement therapy (HRT) ($8 million), and cyproterone, an agent used mostl y for prostate cancer ($3 million ).

Issues

The significant volume growth in HRT is ex pected to continue. HRT is being advocated for th e prevention of osteoporosis and coron ary heart disease in addi tion to the management of menopause. H RT is ex pected to be in the top 20 most commonly prescribed drugs by the year 2000 . A National Health Committee report concluded that transdermal oestrogen patches are an expensive form of treatment for wo men compared with oral oestrogen. The number of patients being di agnosed with prostate cancer is on the increase. Thi s may follow an increased awareness of th e condition. There are contenti ous iss ues in the treatment of prostate cancer.

Benign pros/a tic hypelplasia. Strong growt h continued in th e use of alpha bl ockers, specificall y terazosi n for the manage ment of this condition .

PHARMACEUTICAL MANAGEMENT AGENCY LTD

The operations of

PHARMAC's IS-person team faced considerable pressure during the year from an unprecedented number of legal challenges, and numerous requests for illformation.

I I I

HARM AC com pleted six th erapeutic gro up reviews. started two more, and continued to hone its systems and structure during a year in whi ch its IS-person team faced considerable pressure from lega l challenges and req uests for information under the provisions of th e Official In formatio n Act. and furth er requests for information from Parliament and consumer groups.

Listing changes to the Pharmaceutical Schedule1

Y elided 30 JUlle ears

Number

New chemical entity listed New presentation li sted New product listed Total new listings De-restriction or expanded access 3 Changes that restrict or limit access De-listing by decis ion date

1996

1995 8 18 46

1994 11 23 40 74 16 0 0

Total

32 62 13 4

14 4

118 2 208 43 8 2

PHARMAC co nsidered more than 70 appli cati ons fro m drug companies for li stin g or li stin g chan ges. As a result, it added more than 60 new or en hanced products to th e Schedu le and wide ned access to more than a doze n. About 15 per cent of applications were dec lined. As a result of reviews, access was restricted on on ly four drugs, and one was de- listed.

III rhree years, more rhan 208 new or ellhanced producrs hal'e been lisred: access has been widelled ro a /i".,her 43: and ren hal'e been resrricred or de-lisred. }. Th e dara in rhe rabies above and ar leji do nor reconcile \I'irh lasr .vear:S PHARMAC annual review because rhe basis of disclosure has been changed fO make ir more comprehensive and meaning/id. Also, rhe dara is based on rhe rime or which decisions became ejjixril'e. Lasr .vears daw \I'as hased 0 11 rhe rime of decision. 2. Does nor represenr rhe roral /lumber ofproducrs added ro rhe Schedule. since rhe lisring of one lIell' chemical emiry can resulr in rhe lisring of more rh all one producr. The fOral /lUlllber of producrs added ro rhe Schedule, as ar 30 June 1996, is aClllallv 213.

Applications declined by PHARMAC Board

Y ears elided 30 JUll e

3. Br decision, /lor necessarily the number ofchen/ical enriries aJJecred.

Number

New chemical entities New presentations New products Totals

1996 1995 1994 Total

Pharmaceutical Schedule

The Schedul e was re-printed th ree times, an d 12 monthl y updates distributed. A number of refin ements to the conten t and readabil ity were made fo ll owing feedback from response cards and sur veys. From December 1995, average daily cost data was included. The Sched ule is distributed free to abo ut 10,000 doctors, pharmacists, medical libraries, professional bodies, an d user and support gro ups, and offered for sale to a sma ll subscription list, including drug suppliers. A floppy disk version became ava ilable in earl y 1996 on request.

3 4 4 11

3 9

4 19

19 12 17 48

0111 .. abollr 15 per cenr of rhe applicarialls hy drug companies were declilled.

Financial impact of PHARMAC decisions

PHARMAC decisions resulted in RH As spending nearly $48 million less in the year on pharmaceutical benefits than would have been spent if past trends continued. The reduction came mainly from price competition, and from Board decisions following therapeutic groups reviews. Details by type of product are:

PTAC and the proposed decision of PHARMAC. This process provides valuable feedbac k that improves the quality of PHARMAC's decisions.

Open communication

Initiatives taken durin g the yea r to furth er improve the fl ow of information from PHARMAC included an 0800 telephone number, a freepost fac ility, a home page on the Inte rnet, and publication of a periodic newsletter for Members of Parliament foll owing a request from the Social Services Committee. The practice of enclosing a newsletter with the mailing of updates to the Schedule continued, as did contributions to the specialist pu blications GP W eekly, the New Zealand Medical Journa l, Pharmacy Today, patient magazines, and releases to the daily media when the information is of widespread interest. Dialogue continued wi th other participants in the hea lth care industry, including the New Zeal and Hospital Pharmacists' Association, the New Zealand Medi cal Association, the Royal New Zea land College of General Practitioners, the New Zealand Genera l Practitioners' Association, the Paedi atri c Society, the New Zealand Society of Gastroenterology, the Rheumatol ogy Association, diabetes specialists, groups of nurse educators, specialist care-give rs, nurses and prescribers, patient support groups such as the Asthma, and Arth riti s fo undations, the Ga ucher Association , and the Mental Health Coalition.

Estimated cumulative annual savings by decision type1

Years ended 30 June, including GST 1996

New chemicals presentations New products -Reviews Other2 Total saving

~ew

1995

590,000 1,163,000 -21 ,236,000 6,050,000 0 $29,039,000

1994

(200,000L 100,000 1,200,000 -1,100,000 0 $2,200,000

1,052,00~

~391,0~

28,240,~0

11,149,000 4,755,000 $47,587,000

Most savings cameJro m the introduction oJprice competition resultingJrom the listing oJ new products. I. Prior year figures do not reconcile with last year :, PHARMAC annual review because the figures Jar each year are estimated then updated as new data becomes available. 2. Includes de-restrictions and p rice changes.

Streamlining the processes

In pursuit of a goal of continual improvement in its decision and review processes, PHARMAC adopted a num ber of new systems. These included the introduction of flexible working groups to manage specific projects and tasks, adoption of a formalised process for negotiations with drug companies, the setting of new priorities fo r therapeutic assessments, adoption in April 1995 of performance measurement, and review of the operations of PTAC. Outcomes include changes to the way PTAC and its sub-committees fun ction, with clearer guidelines as to the independence of PTAC as an adviser to the board of PHARMAC, and improved liaison with RH As . A goal in the year ahead is to establish a direct data link with Health Benefits Limited to improve the quality and speed of deli very of information about prescription drugs.

At 30 June 1996, PH ARMAC employed 15 people. They comprised a general manager, a medical director, an epidemiologist on a 60 per cent contract, four therapeutic group manage rs, a manager of research and analys is, an in fo rmati on manage r, four analysts, an office manager, and receptionist. Together, they possess three medi cal deg rees, three pharmacy degrees, three science degrees, and ten other tertiary qualifications. Three seminars were conducted by Professor Bruce Arroll for therapeutic gro up managers and analysts on the critical appraisal of medi cal literature (a core skill in the assessment of drugs), and most staff undertook furth er compute r and technical training.

Widespread consultation

In taking decisions on the Schedule, PH ARMAC seeks all ava il able medical and commercial data and views relevant to the drug or drug fa mily under rev iew. This includes release of the views of PTAC to doctor groups, drug companies and user gro ups, with invitations to comment; and a process through which the applicant is given an opportunity to comment both on the recommendation of

Litigation

In July 1995, the Researched Medicines Industry Association of NZ Inc (RMI ) and th ree drug manu fac turing and distributing companies, associated as the Independent Pharmaceutical Manufacturers Association, fil ed a claim with the High Court aga inst PH ARMAC and the four

PHARMACEUTICAL MANAGEMENT AGENCY L TD

RHAs. The claim seeks relief on a variety of grounds for alleged actions by PHARMAC in contravention of various statutes. PHARMAC believes the claim has no merit and intends to defend it vigorously. PHARMAC is pursuing claims aga inst the RMI and Health Consulting Group (HCG) for all eged publication of misleading information and contempt. The RMl and HCG have also made claims against PHARMAC in that proceeding. Earlier this year several drug companies issued four sets of proceedings variously seeking judicial review of PHARMAC's decisions and allegi ng that PHARMAC was acting in breach of the Commerce Act. They include: the listing of a herpes drug and a subs idy reduction for H2 antagonists, the subsidy on two calcium channel blockers, and an antibiotic. PHARMAC is challenging a patent extension application for enalapril. PHARMAC's challenge to the patent extension application for omeprazole (Lose c) for a ten year extension has been heard in the High Court and an extension of eight years granted by a decision dated 20 September 1996. PHARM AC's challenge to the Zantac patent extension app li cation has been determined by the Commissioner of Patents who granted a five year extension term (with almost three years having elapsed by the time of the Commissioner's decision). The Comm issioner has also made an order that no infringement of the patent will occur in respect of, amongst other things, the sale of ranitidine HCL made or imported into New Zealand prior to 17 May 1996 and sold in the ordinary course of business on or prior to 17 November 1996. On 26 Jan uary 1996, Roussel Uc\af Australia Pty Limited and Roussel (NZ) Limited issued proceedings in the High Court against PH ARMAC and PTAC seeki ng judicial review of PHARMAC 's decision to reduce the subsidy for the macrolide antibiotic, Rulide, man ufactured by Roussel (by reason of a change to the basis of reference pricing of Rulide). The reduction in the level of the subsidy was due to take effect on I February 1996. [n the first instance, Roussel sought and were granted interim orders preventing PHARMAC from implementing its decision pending a full substantive hearing. Thi s is expected early in 1997. On 23 February 1996, Bayer New Zealand Limited and Pfizer Pty Limited each issued separate proceedings in the High Court in respect of PHARMAC's decision to alter the subsidy level s payable for the ca lcium channel blockers Adalat Retard and Adalat Oros (Bayer) and Norvasc (Pfizer). The effect of PHARMAC's decision was to alter the therapeutic SUb-grouping of, and bas is of reference pricing for, the calcium channe l blocker group. The proceedings seek judicial review of the decision and allege breaches of the Commerce Act. These proceedings are effecti vely "on hold" pending the hearing of an application for the removal of Russe ll McVeagh McKenzie Bartleet & Co, soli citors for Bayer and Pfize r, on the basis of an apparent conflict of interest.

In February 1996, Merck Sharpe & Dohme (New Zealand) Limited, Glaxo Wellcome New Zealand Limited, Eli Lilly & Co (NZ) Limited, Douglas Pharmaceuticals Limited and Pacific Pharmaceuticals Limited issued proceedings against PHARMAC (first defendant) and Smith Kline Beecham (NZ) Limited (second defendant). The plaintiffs seek judicial review of PH ARMAC 's decision to list Famvir, an antiviral , and to reduce the subsidy payable for H2 antagonists by 40 per cent. They also allege that the decision breaches the Commerce Act. PHARMAC is hopeful that a substantive fixture will be allocated in the first half of 1997.

Broadcasting decision upheld

The Broadcasting Standards Authority upheld a complaint by PHARMAC against a 20/20 programme broadcast by TV3 in July 1995 on the use of Pulmozyme to treat cystic fibrosis. The Authority concluded that the programme was unbalanced because it failed to address adequately the ethical issues.

Financial performance

PHARMAC's costs increased by nearly 68 per cent over last year. Thi s was due mainly to the recruitment of additional staff, and the costs of additional medical and pharmacologica l consulting services to cope with a greater number of therapeutic group reviews. Legal costs associated with litigation accounted for just over a quarter of the total cost increase.

The annual cost of PHARMAC

Derived from audited figures for years ended 30 June

Dollars

1996

1995 804,000 575,000 1,047,000 260,000 0 $2,686,000

1994 665,000 563,000 532,000 217,000 0 --$1,977,000

Staff costs (includes Directors' and professional fees) 1,170,000 Office costs (includes depreciation I, rent, phones, 925,000 library, purchase of data, ordinary legal costs) Consulting services (includes PTAC, PR, general 1,408,000 consulting, audit fees, HRM and accounting) Schedule production (printing and postage only) 338,000 Costs associated with litigation 680,000 Total cost $4,521,000

--~

I. At balance date, PHARMAC'sfixed assets comprised $180,000 of office and computer equipment, fumiture and fittings. Pharmac ended the year three per cent below its operating budget, apart fro m the extraordinary legal costs of current litigation. The major item of expenditure in 1996 was fees paid for advice on medical, pharmacological, and communications issues.

Top 50 drug groups by subsidy cost

Anatomical therapeutic classification Years ended 30 June before GST Proportion oftotal 1996 cost

11.74% 7.27% 5.99% 5.82% 5.24% 4.79% 4.21 % 3.05% 2.66% 2.63% 2.51% 2.57% 2. 13% 1.92% 1.61 % 1.62% 1.60% 1.41% 1.32% 1.31% 1.08% 1.13% 1.09% 1.08% 1.04% 1.04% 1.03% 0.96% 0.95% 0.93% 0.81 % 0.79% 0.67% 0.62% 0.58% 0.55% 0.48% 0.43% 0.44% 0.42% 0.39% 0.41% 0.39% 0.36% 0.36%

1996 cost

$72,440,000 $44,850,000 $36,940,000 $35,920,000 $32,3 I0,000 $29,530,000 $26,000,000 $18,840,000 $ 16,440,000 $16,200,000 $15,460,000 $15,840,000 $13, 150,000 $11 ,830,000 $9,950,000 $9,990,000 $9,900,000 $8,690,000 $8,160,000 $8,080,000 $6,690,000 $6,990,000 $6,750,000 $6,680,000 $6,390,000 $6,390,000 $6,380,000 $5,920,000 $5,840,000 $5,740,000 $4,980,000 $4,860,000 $4,140,000 $3,800,000 $3,570,000 $3,400,000 $2,940,000 $2,640,000 $2)40,000 $2,570,000 $2,430,000 $2,520,000 $2,410,000 $2,220,000 $2,210,000 $2,190,000 $2,160,000 $2,130,000 $2,110,000 $2,140,000 $54,490,000 $77,120,000 $694,100,000

1995 cost

$81 ,460,000 $45,330,000 $36,320,000 $34,820,000 $34,360,000 $32,350,000 $23,070,000 $19,870,000 $18,810,000 $12,850,000 $14,840,000 $14,690,000 $14,730,000 $1 1,690,000 $10,140,000 $9,490,000 $9,040,000 $8,310,000 $8,440,000 $6,800,000 $6,690,000 $5,600,000 $6,050,000 $6,630,000 $6,950,000 $6,980,000 $8,450,000 $6,030,000 $5,430,000 $5,940,000 $5,560,000 $4,310,000 $3,760,000 $3 ,790,000 $3,560,000 $2,630,000 $2)50,000 $2)40,000 $2,310,000 $3,040,000 $2,630,000 $1 ,910,000 $3,440,000 $2,340,000 $2,080,000 $3,490,000 $2,220,000 $2,270,000 $2,160,000 $2,150,000 $27,900,000 $74,900,000

Asthma preventative medicines Angiotension converting enzyme (ACE) inhibitors Antibacterials -Anti-ulcerants Calcium channel blockers

Bronchodilators Antidepressants Beta adrenoceptor blockers Anti-inflammatory non steroi~ugs (NSAIDs) Hypoli idaemics Diabetes

Analgesi~ ~ontraceptives

Sex hormones non contraceptive Nitrates

Diabet~management

Anticonvulsants

Immuno~uppres~ams

Corticosteroids topical Anti-acne preparations ACE Inhibitors with diuretics Antivirals Vitamins and minerals -Endocrine therapy Eye preparations Antiparkinson agents Nasal preparations Laxatives Antidiarrhoeals Antipsychotics Diuretics adrenoceptor blockers Alltimigraine preparations Trophic hormones Anti-arrythmics

~ha

Antifungals Fluids a~lectrolytes Muscle relaxants Antianaemics Antifungals topical agents Psoriasis and eczema preparations Antithromboti~ agents Hyperuricaemia and antigout Antihistamines Respiratory devices Sedatives and hypnotics Antacids and antiflatulants Corticosteroids and related agents for systemic Emollients and barrier creams Other drugs GST Total cost in year including GST

Oth~ndocrine

0.36% 0.35% 0.35% 0.34% 0.35% 8.83%

---

$674,100,000

PII ARMACbUTICAL

MANAG I~ MENT

AGENCY LT D

Top 15 drug groups by increase and top 15 by decrease in subsidy cost

Anatomical therapeutic classification Years ended 30 June Proportion oftotal cost

2.63% 4.21% 1.13% 1.31 % 2.57% 5.82% 1 .60% 0.55% 1.09% 2.51% 5.99% 0.41% 0.79% 0.29% 1 .62%

1996

$3,350,000 $2,940,000 $1,390,000 $1,280,000 $1 ,150,000 $1,100,000 $850,000 $760,000 $700,000 $630,000 $620,000 $610,000 $550,000 $500,000 $500,000 $16,940,000 ($290,000) ($470,000) ($480,000) ($560,000) ($590,000) ($590,000) ($1,030,000) ($1,030,000) ($1,300,000) ($1,570,000) ($2,040,000) ($2,070,000) ($2,370,000) ($2,8 10,000) ($9,020,000) ($26,210,000) $1,770,000 $25,290,000 $17,790,000 2 $2,220,000 $20,0 I0,000

Proportion of total cost increase

19.54% 17.11% 8.12% 7.46% 6.69% 6.39% 4.98% 4.45% 4.10% 3.65% 3.62% 3.56% 3.20% 2.93% 2.9 1 %

1995

$2,690,000 $5,020,000 $1,220,000 $890,000 $1,750,000 ($2,490,000) $1,260,000 $610,000 $1,050,000 $1,710,000 $2,380,000 $130,000 $1,220,000 $520,000 $910,000 $18,870,000

Hypolipidaemics Antidepressants Antivirals Anti-acne preparations Analgesics Anti-ulcerants Anticonvulsants Antifungals Vitamins and minerals Diabetes Antibacterials Psoriasis and eczema preparations Alpha adrenoceptor blockers Oral supplements/complete diet (nasogastric/gastro) Diabetes management Total top 15 increases Corticosteroids topical Antifungals topical Angiotension converting enzyme (ACE) inhibitors Eye Preparations Antiparkinson agents Diuretics Antithrombotic agents Beta adrenoceptor blockers Respiratory devices Contraceptives Calcium channel blockers Nasal preparations Anti-inflammatory non steroidal drugs (NSAIDs) Bronchodilators Asthma preventative medicines Total top 15 decreases Net increase - others therapeutic groups Adjustment to reconcile data with cash I Increase (net of GST) - cash figures GST Total increase (cash figures)

1.32% 0.42% 7.27% 1.04% 1.04% 0.81% 0.39% 3.05% 0.36% 2. 13% 5.24% 1.03% 2.66% 4.79% 11.74%

- 1.68% - 2.74% - 2.79% - 3.24% - 3.41% - 3.41% -5.99% - 6.01% - 7.56% - 9.17% - 11.90% - 12.06% - 13.80% - 16.39% - 52.55%

$960,000 $420,000 $4,620,000 ($10,000) $180,000 $130,000 ($2,620,000) $750,000 $1 ,200,000 $120,000 $3,560,000 ($1,910,000) ($560,000) $1 ,070,000 $1,010,000 $8,920,000 $10,600,000 ($8,670,000) $29,690,000 $3,710,000 $33 ,410,000

J. The abore data is based Oil illjormatiollfrom J/ealth Benefits Limited (HBL). the RHA agency which processes pharmacists claims jar reimbursement ojprescription costs. I JBL \ data is prepared on an accrual basis. Data used elsewhere in this rel'iell' is prepared on a cash basis. To reconcile the /Wo data sets this adjustment is made this year and last year. Th e 1996 data includes a pro mta pavment fro m JJBL in June to pharmacists because not 01/ prescripliollS I,-ere processed by HBL at year end. 2. Discrepancy is du e to rollnding.

Metadata

Title

Annual Review 1996

Abstract

PHARMAC 611 Pharmaceutical Management Agency Ltd The balloon' why it lIt The co a Wl PH A R M AC (pharmaceutical Management Agency Limited) was established in mid-1993 to manage the national Pharmaceutical Schedule on behalf of the four RHAs…

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