This is the text extract for PHARMAC Annual Report year ended 30 June 2006, browse documents here.
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E.59
___________________________________________________________________________
Annual Report of
Pharmaceutical Management Agency (PHARMAC)
for the year ended 30 June 2006
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Presented to the House of Representatives pursuant to Section 44A of the Public Finance Act 1989
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CONTENTS
PHARMAC DIRECTORY INTRODUCTION CHAIRMAN’S REPORT CHIEF EXECUTIVE’S REPORT PHARMAC’S ROLES AND RESPONSIBILITIES STATEMENT OF RESPONSIBILITY AUDIT REPORT STATEMENT OF SERVICE PERFORMANCE PART A – PURCHASE OBJECTIVES PART B – OWNERSHIP PERFORMANCE OBJECTIVES STATEMENT OF ACCOUNTING POLICIES STATEMENT OF FINANCIAL PERFORMANCE STATEMENT OF MOVEMENTS IN EQUITY STATEMENT OF FINANCIAL POSITION STATEMENT OF CASH FLOWS STATEMENT OF COMMITMENTS STATEMENT OF CONTINGENT LIABILITIES NOTES TO THE FINANCIAL STATEMENTS 3 4 5 7 9 10 11 14 16 28 29 32 33 34 35 36 37 38
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PHARMAC DIRECTORY
Head Office Level 14, Cigna House 34-42 Mercer Street Wellington
Postal Address PO Box 10-254 Wellington Telephone: (04) 460 4990 Facsimile: (04) 460 4995 Website: www.pharmac.govt.nz
Board Members Richard Waddel – Chair Gregor Coster Kura Denness (from 1 July 2006) Karen Guilliland Helmut Modlik (to 30 June 2006) David Moore Adrienne von Tunzelmann Chief Executive Wayne McNee (to 30 June 2006) Matthew Brougham (Acting, from 1 July 2006)
Pharmacology and Therapeutic Advisory Committee Carl Burgess, Chair
Consumer Advisory Committee Sandra Coney, Chair
Auditors Audit New Zealand Wellington
Bankers ASB Bank Limited
Solicitors Bell Gully Buddle Weir
Insurers Circle (underwritten by IAG NZ Limited) Lumley General Insurance (NZ) Limited American Home Assurance Company
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INTRODUCTION
PHARMAC is responsible for ensuring that all New Zealanders have access to a wide range of affordable medicines. PHARMAC’s main objective under the New Zealand Public Health and Disability Act 2000 is: “to secure for eligible people in need of pharmaceuticals, the best health outcomes that are reasonably achievable from pharmaceutical treatment and from within the amount of funding provided.” PHARMAC has four main functions: • managing the Pharmaceutical Schedule, which lists the medicines that are subsidised for patients. PHARMAC assists District Health Boards (DHBs) in their management of pharmaceutical expenditure; promoting the responsible use of medicines, including through PHARMAC’s continued implementation of its Maori Responsiveness Strategy; assisting DHBs with national procurement initiatives to facilitate more consistency in the costs of hospital medicines (and some other procurement initiatives); and managing the Exceptional Circumstances (EC) scheme, which allows for medicines not normally subsidised to be funded for rare and unusual conditions. PHARMAC also administers a range of extremely high cost medicines.
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PHARMAC may also engage in research to meet its statutory objectives, as well as perform any other functions it is given or authorised to perform by the Minister. PHARMAC is internationally recognised as a leader in effective pharmaceutical management.
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CHAIRMAN’S REPORT
I have been delighted with the highly professional way in which PHARMAC’s staff have gone about their work in a year characterised by difficult and emotive issues. PHARMAC faced a number of highly public decisions, some resulting in PHARMAC funding medicines and others not. While media attention tended to focus on those medicines not funded, such as Herceptin, there was a large amount of good PHARMAC news. PHARMAC made 41 new investments in pharmaceuticals during 2006, an increase on previous years underscoring our commitment to investing in the health of New Zealanders. Pharmaceutical expenditure was $563 million, including one-off effects that can, in effect, distort the overall outcome. During the year, PHARMAC received payments from suppliers to resolve disputes that amounted to around $16 million. In practice, therefore, expenditure was approximately $579 million. These investments – both continuation of funding existing medicines on the Pharmaceutical Schedule and investment in new medicines – will deliver substantial health benefits to New Zealanders, now and in the future. Subsidised prescriptions grew 4.5% in the year, meaning a total of around 2.5 million New Zealanders benefited from PHARMAC’s activity this year alone. In addition to successful management of pharmaceutical expenditure, there were a number of other stand-out achievements, including:
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continued provision of extra value to District Health Boards from PHARMAC’s hospital pharmaceutical assessments, and purchasing on behalf of DHBs. PHARMAC’s involvement is adding considerable value to DHBs (in the form of savings) in this area; as part of national procurement on behalf of DHBs, PHARMAC initiated processes to secure national contracts for bulk intravenous fluids and radiological contrast media. PHARMAC welcomes the enthusiasm from DHBs for utilising PHARMAC’s skills and processes in this way, underscoring the benefits to the whole health sector from effective cooperation; the One Heart Many Lives cardiovascular campaign was extended into Hawke’s Bay, in conjunction with the Hawke’s Bay District Health Board. This campaign is proving highly successful at motivating local communities to take ownership of addressing cardiovascular disease: New Zealand’s number one killer; the electronic Special Authority project was launched, replacing a manual process that could take up to 2 weeks with a near real time electronic clearance while patients are still with the doctor. More efficient prescribing can only be better, significantly so, for health outcomes; close co-operation between PHARMAC and the Ministry of Health around the influenza vaccination campaign. A record 761,150 doses of influenza vaccine were distributed during the four-month subsidised campaign period.
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While these results stem from a collective PHARMAC effort, I acknowledge the contribution of Wayne McNee who has recently been seconded to the Department of Prime Minister and Cabinet. The results this year are further testimony to the significant contribution that Wayne has made to PHARMAC over a number of years.
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The Acting Chief Executive during Wayne’s secondment is Matthew Brougham. This role builds on Matthew’s long history with PHARMAC in a number of roles, most recently as manager of PHARMAC’s analysis and assessment team. I also acknowledge the valuable contribution of Helmut Modlik to the Board, including bringing an important perspective in the area of Maori and Pacific Island health. Kura Denness has now joined the Board. Another significant change during the year was a new Minister of Health. PHARMAC valued its working relationship with Hon Annette King, and looks forward to furthering its working relationship with the new Minister, Hon Pete Hodgson. In closing, I thank all PHARMAC staff, as well as Board and PHARMAC committee members, for their commitment and work during the year. PHARMAC is well positioned to look to the future with confidence and continue its work in improving the health of New Zealanders from access to and responsible use of subsidised medicines.
On behalf of the PHARMAC Board
……………………………………………….. Richard A Waddel Chairman
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CHIEF EXECUTIVE’S REPORT
Public campaigns this year promoting the funding of high cost drugs, such as Herceptin, are a sign of things to come. PHARMAC will continue to be tested by the question of whether to fund very expensive drugs that only benefit a small number of people. The drugs in question this year were predominantly for cancer, particularly temozolomide for brain tumours and trastuzumab (Herceptin) for early breast cancer. As always, PHARMAC needed to be as thorough as possible and focussed on evidence to ensure, for all New Zealanders, available funding was used in the best possible way. PHARMAC has always faced this tough challenge: a dollar spent on one medicine is a dollar not available for another (or another health use). While saying “no” to funding a medicine is never easy, the positive side of those judgements is that there is a better outcome that can be achieved from an alternative decision. This more positive side of the equation, however, is seldom discussed. This, of course, accepts there is a fixed amount of money available; a practical reality in PHARMAC’s view, a healthy discipline to make quality decisions and something people are only too familiar with in terms of their own personal or household budgets. There is only so much to go around and difficult choices need to be made. Most PHARMAC staff, through their personal connections, know the very real effects of illnesses on individuals and families. PHARMAC’s role, however, necessitates a strong focus on evidence and weighing up the benefits and risks of investing in medicines, including relative to other choices. A rigorous approach is critical to making the best health choices for all New Zealanders. The approach also means that, in some cases, a low-cost treatment for a large number of patients is the best decision. In other cases, it will mean funding a medicine at a high cost per patient but for only a small patient group. Both of these outcomes occurred at different times during 2006. PHARMAC provided new or enhanced access to 41 medicines during the year. New investments included relatively inexpensive medicines for a large group of patients (over 100,000 people now take subsidised low dose aspirin to prevent heart attacks and strokes) and high cost therapies for small numbers of people (such as temozolomide to improve life expectancy for people with brain tumours). Other key decisions included: Adalimumab – a new type of disease-modifying drug to treat rheumatoid arthritis; Adefovir (and widened access to lamivudine) – decisions to improve the availability of treatments for Hepatitis C; Alendronate – up to 100,000 people now able to access a treatment for osteoporosis; Entacapone and ropinirole – new treatments listed for the treatment of Parkinsons Disease; Oxycodone – a new type of opioid analgesic for the relief of severe pain; Glatiramir – an alternative to beta-interferon for the treatment of multiple sclerosis; Mycophenolate – wider access to this treatment for organ transplant rejection; and Serevent – wider access to a long-acting asthma preventer. Our focus on health outcomes has also seen PHARMAC strengthen involvement in public information campaigns promoting the appropriate use of medicines. Making the best use of the pharmaceutical budget depends on both price impacts (such as PHARMAC’s price
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negotiations with suppliers) and volume effects (the quantity of medicines use). PHARMAC’s “demand side” work seeks to influence volume, up or down depending on the circumstances. This includes the One Heart Many Lives campaign, a campaign focussed on reducing the impact of New Zealand’s number one killer, cardiovascular disease. One Heart Many Lives continues to take an innovative and successful approach to a key health area – including promoting strong community buy-in to addressing the problem – and continues to be one of PHARMAC’s flagship public health campaigns. Our work in this area sees us working with and alongside a wide range of groups, including consumer organisations, professional medical associations, health providers and District Health Boards. Wide collaboration is essential to campaign success, and to the health sector achieving health outcomes as efficiently and effectively as it can. Finally, I acknowledge Wayne McNee’s significant contribution to this year’s results. With Wayne’s secondment, I am delighted with the opportunity to lead PHARMAC for the coming months. It is a privilege to lead such a high quality team committed to promoting the health of New Zealanders. I also look forward to further strengthening PHARMAC’s relationships with a wide range of stakeholders.
……………………………. Matthew Brougham Chief Executive (Acting)
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PHARMAC’S ROLES AND RESPONSIBILITIES
Role of the Board The PHARMAC Board is accountable to the Minister of Health for PHARMAC’s performance. The Board consists of six members appointed by the Minister of Health. The Board:
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makes all decisions relating to the operation of PHARMAC, either directly or through delegating its authority to the Chief Executive; ensures PHARMAC meets performance measures outlined in its Crown Funding Agreement; is responsible for agreeing PHARMAC’s accountability documents with the Minister of Health; complies with duties and requirements placed on it by the New Zealand Public Health & Disability Act, Public Finance Act and the Crown Entities Act.
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Management of PHARMAC The Chief Executive is responsible for managing PHARMAC’s day-to-day operations. In addition to the Chief Executive, PHARMAC has a six-member management team responsible for each core area of PHARMAC’s operations (Medical, Funding & Procurement, Schedule and Contract Maintenance, Demand Side, Analysis & Assessment, Corporate).
Advisory Committees PHARMAC has a number of advisory committees that provide expert advice.
Committee Pharmacology and Therapeutic Advisory Committee (PTAC) PTAC Sub-committees Consumer Advisory Committee (CAC) Hospital Pharmaceuticals Advisory Committee (HPAC) Meets Quarterly As required Twice yearly and as required As required Primary role Provides clinical advice on pharmaceuticals being considered for funding Clinical advice on specialist areas (e.g. cancer, cardiovascular disease) Input from a consumer and patient perspective Advice on pharmaceuticals used in hospitals
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STATEMENT OF RESPONSIBILITY
The Board and management of PHARMAC accept responsibility for the preparation of the annual Financial Statements and for the judgments in them. The Board and management of PHARMAC accept responsibility for establishing and maintaining a system of internal control designed to provide reasonable assurance as to the integrity and reliability of financial and non financial reporting. In the opinion of the Board and management of PHARMAC, the Financial Statements for the year ended 30 June 2006 fairly reflect the financial position and operations of PHARMAC.
……………………………………………….. Richard A Waddel Chairman 25 October 2006
……………………………………………….. Matthew Brougham Chief Executive (Acting) 25 October 2006
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AUDIT REPORT
TO THE READERS OF THE PHARMACEUTICAL MANAGEMENT AGENCY’S FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
The Auditor-General is the auditor of the Pharmaceutical Management Agency (Pharmac). The Auditor-General has appointed me, Stephen Lucy, using the staff and resources of Audit New Zealand, to carry out the audit of the financial statements of Pharmac, on his behalf, for the year ended 30 June 2006.
Unqualified opinion In our opinion the financial statements of Pharmac on pages 14 to 43:
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comply with generally accepted accounting practice in New Zealand; and fairly reflect:
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Pharmac’s financial position as at 30 June 2006; the results of its operations and cash flows for the year ended on that date; and its service performance achievements measured against the performance targets adopted for the year ended on that date.
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The audit was completed on 25 October 2006, and is the date at which our opinion is expressed. The basis of our opinion is explained below. In addition, we outline the responsibilities of the Board and the Auditor, and explain our independence.
Basis of opinion We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which incorporate the New Zealand Auditing Standards.
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We planned and performed the audit to obtain all the information and explanations we considered necessary in order to obtain reasonable assurance that the financial statements did not have material misstatements, whether caused by fraud or error. Material misstatements are differences or omissions of amounts and disclosures that would affect a reader’s overall understanding of the financial statements. If we had found material misstatements that were not corrected, we would have referred to them in our opinion. The audit involved performing procedures to test the information presented in the financial statements. We assessed the results of those procedures in forming our opinion. Audit procedures generally include: determining whether significant financial and management controls are working and can be relied on to produce complete and accurate data; verifying samples of transactions and account balances; performing analyses to identify anomalies in the reported data; reviewing significant estimates and judgements made by the Board; confirming year-end balances; determining whether accounting policies are appropriate and consistently applied; and determining whether all financial statement disclosures are adequate. We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements. We evaluated the overall adequacy of the presentation of information in the financial statements. We obtained all the information and explanations we required to support our opinion above.
Responsibilities of the Board and the Auditor The Board is responsible for preparing financial statements in accordance with generally accepted accounting practice in New Zealand. Those financial statements must fairly reflect the financial position of Pharmac as at 30 June 2006. They must also fairly reflect the results of its operations and cash flows and service performance achievements for the year ended on that date. The Board’s responsibilities arise from the Public Finance Act 1989 and the New Zealand Health and Disability Act 2000. We are responsible for expressing an independent opinion on the financial statements and reporting that opinion to you. This responsibility arises from section 15 of the Public Audit Act 2001 and the Public Finance Act 1989.
Independence
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When carrying out the audit we followed the independence requirements of the Auditor-General, which incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand. Other than the audit, we have no relationship with or interests in Pharmac.
S B Lucy Audit New Zealand On behalf of the Auditor-General Wellington, New Zealand
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STATEMENT OF SERVICE PERFORMANCE
This Statement of Service Performance (SSP) records the performance of PHARMAC against the performance measures outlined in the 2005-06 Statement of Intent (SOI). PHARMAC has one output class “securing the best achievable health outcomes from pharmaceutical treatment, within the amount of funding provided”. The activities within that output are: • • • Management of Community Pharmaceutical Expenditure; Management of Hospital Pharmaceutical Procurement; and Promotion of the Responsible Use of Medicines.
In addition to these purchase objectives, PHARMAC has also been set ownership performance targets.
Modifications to purchase intentions during the financial year During 2005/06, PHARMAC made certain modifications to the purchase intentions set out in its published SOI. The changes were consistent with the general intent of the SOI, and largely aimed at improving communication with stakeholders as supported in principle by then Minister of Health, Hon Annette King. PHARMAC considered, in consultation with its Auditor and the Ministry of Health, whether the modified intentions were sufficiently material to warrant a revision to the SOI and decided they were not. Material changes necessitate a modified SOI to be tabled in Parliament, but this was not considered necessary. PHARMAC considered that a revised SOI would have very little, if any, effect on the public accountability around PHARMAC’s operations, particularly given the general alignment of the changes with initial intentions; and the modified intentions would be reported to the Ministry as part of PHARMAC’s ongoing reporting and described in PHARMAC’s Annual Report (this document). The changes (summarised below) resulted in additional operating expenditure to that set out in the SOI; expenditure funded from PHARMAC’s existing financial reserves. This amendment is detailed in Note 12 to the Financial Statements. The specific changes made during the year are detailed in the table on the following page (some of the commentary in the Statement of Service Performance is also relevant to these areas).
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Change
Amount allocated
Deliverable
Outcome This initiative has been delayed and is identified as a key task for the 2006-07 financial year.
GP Forum
$80K
Establish a forum for GPs to provide input to PHARMAC
PHARMAC Foundation
$500K
Establish an education Foundation for GPs, specialists, nurses education programme including annual conference and disease-specific training
Achieved. The PHARMAC Seminar Series Board was appointed to oversee operations and a number of seminars have been held.
Special Authority roll out
$500K
Implement an electronic Special Authority approval system. PHARMAC will assist DHBs to manage their expenditure on pharmaceutical related products used in hospitals. PHARMAC will assume management of pharmaceutical cancer treatments by 1 July 2007. PHARMAC will enhance its capacity to manage internal information by implementing a new Knowledge Management System. PHARMAC will maintain its staff capacity.
Achieved. Fully operational from June 2006. Project is progressing. Further scoping and development work and specific projects are being developed in the 2006-07 financial year.
Hospital new initiatives
$165K
Healthpac (cancer management)
$300K
Progressing. Project due for completion July 2007.
Knowledge management system
$214K
Project is in progress and due for completion 2006-07.
Consequential addition to salaries and related costs
$201K
Achieved.
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PART A – PURCHASE OBJECTIVES
Activity One:
Deliverable 1.1 Subject to deliverable 1.2 below, PHARMAC will maintain expenditure on subsidised community pharmaceuticals for the year ending 30 June 2006 within $582.86 million (excl GST), after deduction of rebates from pharmaceutical suppliers. Subject to deliverable 1.2 below, quarterly pharmaceutical expenditure targets on a cumulative basis, (excluding GST) before the deduction of rebates were: Quarter One Two Three Four Target (millions) $183 $370 $539 $717
Management of Community Pharmaceutical Expenditure
Result Expenditure on subsidised community pharmaceuticals for the year ending June 2006 is likely to be $563.45 million, $19.41 million within the budget of $582.86 million. The expenditure figure includes:
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$99.3 million in rebates already paid; a potential further $16.5 million of rebates; one off rebates and other receipts of $16.0 million; and $5.59 million in agreed spending on antibiotics for use in the event of an influenza pandemic
There were 28.5 million prescriptions written during the year ending June 2006 for medicines for at least 2.48 million individual New Zealanders, a 4.5% increase in the number of prescriptions compared with the previous financial year. The following table outlines the cumulative expenditure throughout the year, as compared to the pharmaceutical expenditure targets.
Cumulative expenditure ($ millions)
Quarter One Two Three Four Rebates Year End Total Cumulative Target Cumulative Actual Variance $183 $170.19 -$12.81 $370 $347.11 -$22.89 $539 $513.37 -$25.63 $717 $695.35 -$21.65 $134.14 $132.02 -$2.12 $582.86 $563.45 -$19.41
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Savings and Increases PHARMAC has continued to achieve savings on currently subsidised medicines. This is achieved through a variety of purchasing methods, including tendering for off-patent medicines and reference pricing. Subsidy reductions in the 2005/06 financial year resulted in savings of approximately $24.45 million. Subsidy increases in the 2005/06 financial year resulted in an additional cost of $2.65 million. Changes in subsidies can occur through either changes in pharmaceutical prices, or through an increase/decrease in the number of patients receiving medicines (volume). Primarily, changes in subsidy levels are the result of price changes, as prescribing volumes tend to increase each year (as outlined above).
Subsidy reductions and increases by therapeutic group ($ million)
Alimentary Tract and Metabolism Blood and Blood Forming Organs Cardiovascular System Dermatologicals Hormone Preparations - Systemic Excluding Contraceptive Hormones Infections - Agents for Systemic Use Nervous System Oncology Agents and Immunosuppressants Respiratory System and Allergies Sensory Organs Musculo-skeletal System Special Foods Genito-Urinary System Tender Grand Total Increase Decrease $0.58 -$7.54 $0.05 -$0.51 $0.28 -$0.36 $0.19 -$0.22 $0.17 $0.18 $0.36 $0.42 $0.01 $0.04 $0.09 $0.27 $2.65 Net -$6.96 -$0.46 -$0.08 -$0.02
-$2.64 -$2.47 -$2.69 -$2.51 -$7.43 -$7.07 -$0.23 -$0.23 -$0.98 -$0.56 -$0.86 -$0.85 -$0.04 $0.00 -$0.09 -$0.09 -$0.06 $0.03 -$0.79 -$0.52 -$24.45 -$21.80
Decisions made
Decision type New Chemical entity listed New Presentation listed New Product listed Total new listings Derestriction or expanded access Changing access to improve outcomes Changes that restrict or limit access Delistings 1999/00 18 21 39 78 17 2000/01 20 13 28 61 19 2001/02 7 11 60 78 17 2002/03 3 15 45 63 7 2003/04 15 27 49 91 9 2004/05 9 14 51 74 16 2005/06 14 42 49 105 24 1 6 362 6 135 4 89 1 196 2 72 3 59 0 43
PHARMAC added 14 new products and 42 new presentations of existing products to the Pharmaceutical Schedule during 2005/06. These included treatments for schizophrenia (risperidone including long-acting injections), rheumatoid arthritis (adalimumab), strong opioid analgesic painkillers (oxycodone), Parkinson’s disease (entacapone and ropinirole), multiple sclerosis (glatiramer), cardiovascular risk (low-dose aspirin), and aggressive brain tumours (temozolomide). In addition to these new investment decisions, PHARMAC widened access to a further 24 medicines. These included extending treatments to more patients who had osteoporosis (alendronate), neuropathic pain (gabapentin), asthma (salmeterol), glaucoma (prostaglandin analogues), organ transplants (mycophenolate), bladder and bowel cancers (gemcitabine;
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oxaliplatin), hepatitis B and C (lamivudine; pegylated interferon alpha-2a/2b with/without ribavirin), and diabetes (pioglitazone). In addition to new listings and expanded access, PHARMAC amended the eligibility criteria for beta-interferon to achieve greater health gain for the same number of patients. Two of the new presentations listed this year also produced measurable health gains over previously funded treatments. In 2005/06 new investments and widening of access cost $12.0 million. The largest new investments in terms of cost were extending access to terbinafine, costing a further $2.7 million for the 10 months after the change, and extending access to gabapentin to include neuropathic pain (further $2.4 million). These new spending decisions in 2005/06 saw an estimated 180,000 new patients treated with these subsidised medicines. These numbers will increase significantly in coming years, as many of the new medicines listed had not yet been subsidised for a full year. The largest numbers of new patients were 137,000 using low-dose aspirin by June 2006 (four months following listing), followed by salmeterol (6,800 by June – eight months), and with 5,000 new patients using gabapentin for neuropathic pain. In the first full year of these decisions being implemented, PHARMAC estimates that there would be 236,000 new patients using these medicines - including 180,000 new patients using aspirin and 10,000 new users of salmeterol. PHARMAC also assesses the health gains obtained through its investments. PHARMAC uses cost-utility analysis and measures outcomes in quality adjusted life years (QALYs). This measure enables medicines that perform different functions (such as extending or improving quality of life) to be compared. Data are available for 19 new investments to show the impact on District Health Board (DHB) budgets, and on people’s health. The data are for: • risperidone depot microspheres (Risperdal Consta) • entacapone • glatiramer • ferrous fumarate • aspirin 100mg • adefovir • temozolomide • gabapentin for neuropathic pain • lopinavir with ritonavir • aromatase inhibitors (letrozole and anastrazole) • pioglitazone • atorvastatin • venlafaxine • alendronate (osteoporosis) • pegylated interferon alpha-2a and alpha-2b with or without ribavirin • salmeterol • lamivudine • gemcitabine • beta-interferon The data show investing in these 19 drugs or groups alone cost the Pharmaceutical Schedule $5.9 million for an estimated 159,000 new patients during 2005/06. These patients gained the equivalent of 1449 full years of extra life (i.e. QALYs). This included 785 QALYs for aspirin and 485 QALYs for gabapentin. After 12 months, these nineteen medicines should provide 1800 QALYs for 211,000 patients, costing $7.5 million.
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In addition, this spending was matched by potential nominal savings elsewhere in the Pharmaceutical Schedule or the rest of Vote:Health of $3.0 million. This equated to nominally saving $51 for every $100 spent on these drugs. This included $1.2 million nominal savings for Risperidone consta and $1.1 million for aspirin. After 12 months, nominal savings should reach $4.1 million. These figures do not include the health benefit and savings which would have been gained from the other investments.
Numbers of patients benefiting from specific PHARMAC investment decisions, 2005/06
Decision Month of implementation Estimated no. new patients by June 2006 Estimated no. new patients by 12 months' implementation 4,800 80 6,900 720 380 950 3 5,200 220 990 400 580 180,000 940 170 110 150 0 5,007 0 30 1,000 n/a 580 4,500 4,600 650 6,200 n/a n/a n/a 330 20 10,300 100 0 n/a n/a 0 500 0 236,410
new listings oxycodone risperidone Risperdal Quicklet risperidone tab 0.5 mg risperidone depot microspheres Risperdal Consta entacapone ropinirole glatiramer ferrous fumarate adalimumab brimonidine with timolol oral feed with fibre 1.5 kcal/ml ezetimibe with simvastatin (Vytorin) aspirin 100mg capsaicin temozolomide adefovir dapsone access widening antiretrovirals gabapentin for neuropathic pain lopinavir with ritonavir aromatase inhibitors (letrozole and anastrazole) pioglitazone pyridoxine atorvastatin glaucoma preparations - prostaglandin analogues - bimatoprost, latanoprost, travoprost terbinafine venlafaxine alendronate (osteoporosis) azithromycin ceftriaxone ciprofloxacin mycophenolate pegylated interferon alpha-2a and alpha-2b with or without ribavirin salmeterol oxaliplatin leuprorelin amiodarone amlodipine lamivudine gemcitabine changing access to improve outcomes beta-interferon Total
August 2005 October 2005 October 2005 October 2005 November 2005 November 2005 December 2005 December 2005 January 2006 January 2006 January 2006 February 2006 March 2006 March 2006 May 2006 May 2006 June 2006 July 2005 July 2005 July 2005 August 2005 August 2005 August 2005 September 2005 September 2005 September 2005 September 2005 October 2005 October 2005 October 2005 October 2005 October 2005 November 2005 November 2005 December 2005 January 2006 May 2006 May 2006 May 2006 June 2006 December 2005
4,061 49 6,456 529 245 684 3 2,332 160 399 280 97 136,977 773 82 44 38 0 5,007 0 26 957 n/a 480 3,703 3,812 538 4,622 n/a n/a n/a 249 12 6,830 71 0 n/a n/a 0 45 0 179,560
Notes: • Patient numbers have been estimated from HealthPAC data, based on maximum monthly use for the year ending June 2006 beyond expected levels had investments not been made. • Blank entries or “n/a” mean that patient numbers cannot be estimated. • Zeros (“0”) mean that patient numbers were lower than predicted had investments not been made, hence numbers are not estimated.
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Deliverable
1.2 PHARMAC will review the quarterly pharmaceutical expenditure targets phasing set out in deliverable 1.1 above and if appropriate propose amendments to those deliverables to DHBs and the Ministry. PHARMAC, in discussion with DHBs, will review the spend target mid way through the year, and recommend any adjustments to the Minister. 1.3 PHARMAC will provide the Ministry of Health with a 1-3 year forecast of pharmaceutical expenditure. Any potential deviation from the 2005-06 forecasts will be promptly notified to the Ministry.
Result
No changes were made to expenditure targets during 2005-06. No recommendations for change were made.
PHARMAC provided the Ministry of Health with a 1-3 year forecast of pharmaceutical expenditure in December 2005. Deviations from the forecast were reported to the Ministry and Minister each month.
1.4
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Activity Two:
Promoting The Responsible Use Of Pharmaceuticals
PHARMAC has a legislative responsibility to promote the responsible use of pharmaceuticals which involves the development of relationships with key stakeholders and strategies to ensure appropriate prescribing behaviour and usage of pharmaceuticals.
Deliverable 2.1 PHARMAC will promote the responsible use of pharmaceuticals by aiming to influence the volume and mix of medicines prescribed.
Measure
Outcome This campaign was delayed and revised as changes to the supply of diabetes test strips removed the justification for a testing strips campaign. PHARMAC worked with Diabetes NZ to develop resources to help people with Type 2 diabetes manage their health. This involved advice on appropriate nutrition and medications. Resources were developed and distributed by June 2006; a national launch of the resources occurred on 3 July 2006. Feedback received form nurses and health workers about the diabetes resource has been very positive. A PHARMAC diabetes website has been developed www.diabetes.pharmac.govt.nz. Achieved. 128 psychiatrists, psychiatric registrars and mental health pharmacists attended the workshops. Evaluation indicated the workshops were positively received as a suitable forum to discuss and debate treatment issues and in particular local issues in relation to best practice.
An evaluation report on the diabetes test strip campaign to be provided to the Ministry of Health by 31 March 2006.
An evaluation report on the Atypical Antipsychotic campaign to be provided to the Ministry by 31 March 2006.
84 psychiatrists and psychiatric registrars participated in the CPD case studies. The case studies demonstrated a good medium to explore clinical decision making and compare practice with clinical opinion leaders. In general, responses to the case study were in line with evidence based practice; however, there was some hesitancy in the use of clozapine for treatment resistant schizophrenia. The project was received positively by participants and stakeholders, including specialists.
The evaluation of the 2005 campaign included a survey of primary care health professionals, media analysis and analysis of PharmHouse prescribing data. The key findings of the 2005 evaluation demonstrate that: • PHARMAC will undertake the “Wise Use of Antibiotics” campaign during winter 2006. An evaluation report will be provided to the Ministry. the campaign is well received by primary healthcare providers and is considered to beneficial in particular by providing materials to remind and promote discussion about the appropriate use of antibiotics. the campaign continues to receive a high level of media interest, which is effective in communicating key messages. PharmHouse data demonstrates that there has been a slight increase in the number of antibiotic prescriptions, and also in the associated pharmaceutical costs.
• •
The campaign was again run in winter of 2006.
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- 22 Deliverable Measure Report to the Board on Proton Pump Inhibitor campaign completed by April 2006. PHARMAC will conduct an evaluation report on the pilot training programme for Māori community nurses and community health workers by 30 June 2006. PHARMAC will undertake a national roll out of the train the trainer programme for community based nurses and health workers by 30 June 2006. PHARMAC will produce patient education resources in Māori health priority areas as appropriate. PHARMAC will contract with BPAC New Zealand to deliver services in 2005/06. Quarterly reports will be provided to th PHARMAC by the 20 of the month following each quarter, detailing whether it has met the output and outcome targets agreed to in the contract and service plan. Outcome A report was prepared for the Board outlining a proposed strategy to address prescribing of proton pump inhibitors. A campaign is likely to occur in the 2006-07 year. A training manual has been developed and two of six pilot training programmes were run by 30 June 2006. Evaluations were completed for each workshop and these have shown that the participants felt they benefited from the training materials and that the presenters were of a high standard. Achieved. Programme content, implementation, promotion and registration for the first block training session was completed by 30 June 2006. The first pilot training block occurred in Otautahi (Christchurch). Patient information on diabetes medications was developed in Te Reo Maori and Pacific Island languages by 30 June 2006.
BPAC has provided quarterly reports as agreed. BPAC has met the agreed performance targets.
2.2
PHARMAC will contract with external parties which promote the responsible use of pharmaceuticals.
PHARMAC will evaluate the current contract with BPAC NZ and inform the Ministry of its decision regarding future funding by 30 June 2006.
An evaluation of the BPAC NZ contract & services was reported to the PHARMAC Board in February 2006. The evaluation was very positive. PHARMAC requested expressions of interest in the contract to provide services to promote the responsible use of medicines in December 2005, and requested proposals in March 2006. As a result of this process, PHARMAC recommended that BPAC NZ continue to be contracted for future services. The Ministry of Health and District Health Boards were informed of the contracting process for BPAC NZ through members of the PHO Performance Management Programme group. A DHB representative was included on the evaluation committee. DHB & DHBNZ staff are providing input into future contract and services.
PHARMAC will work with DHBs to ensure that services provided by BPACNZ are aligned with the PHO performance framework. PHARMAC will contract for the delivery of the Green Prescription programme in 2005/06. Quarterly reports will be provided to PHARMAC by th SPARC by the 20 of the month following each
SPARC has met all targets specified in the funding contract with PHARMAC.
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- 23 Deliverable Measure quarter detailing whether the programme has met agreed targets in the contract. 2.3 PHARMAC will promote the responsible use of pharmaceuticals by making the Pharmaceutical Schedule readily available to GPs. Outcome
PHARMAC will work with the Ministry, DHBs and PHOs to determine options for providing electronic prescriber support by 30 June 2006.
Improvements to the interactive Pharmaceutical Schedule were launched and promoted by June 2006.
.
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Activity Three:
Management of Hospital Pharmaceutical Procurement
PHARMAC has been authorised to manage hospital drug purchases on behalf of DHBs.
Deliverable
Measure
Provide a report about DHB compliance with restricted brand contracts to DHBs and the supplier annually taken by 1 November 2005. Complete any actions required to be taken by 30 June 2006.
Outcome
Completed March 2006, delayed due to implementation of new data management systems.
3.1 PHARMAC will collect hospital pharmaceutical utilisation data to monitor national contracts.
Completed April 2006 Most payments received from suppliers are not contested and are paid in due course. However, due to difficulties in calculating and distributing hospital rebates the payment schedule is generally longer than 6 months. For payments that are received and are disputed the payment schedule can be significantly longer while the discrepancy is investigated. Four Cost Utility Analyses were completed and shared with DHBs by 30 June 2006. During the year PHARMAC had lower than optimal staffing for this work area. An increase in the community pharmaceutical budget and a higher demand for cost utility analyses for community medicines also saw resources diverted from hospital assessments. PHARMAC is seeking further resourcing to enable a greater number of technology assessments for hospital medicines to be carried out.
3.2
Rebates under hospital pharmaceutical contracts calculated and distributed to DHBs within 6 months of the end of each rebate period.
Rebates calculated and distributed to DHBs within 6 months of the end of each rebate period.
3.3
PHARMAC will promote and further develop processes for assessing new pharmaceutical technology in hospitals.
6-8 Cost Utility Analyses completed and shared with DHBs.
3.4
PHARMAC will consider the contracting options for the procurement of radiological contrast media for DHB Hospitals.
PHARMAC will seek nominations from DHBs for an advisory committee on radiological Contrast Media and the requirements of the DHBs by 31 December 2005. PHARMAC will collate data received from DHBs and advice received from the advisory committee to form the basis of a procurement strategy and process for radiological contrast media by December 2005. PHARMAC will consult with DHBs and suppliers of radiological contrast media by 1 October 2005 when considering possible national procurement strategies.
The advisory committee was established in September 2005.
The procurement strategy and process was approved by the Board by December 2005.
Consultation was completed in September 2005.
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Deliverable
Measure
PHARMAC will conduct a procurement strategy to establish national contracts for certain radiological contrast media by 31 December 2005.
Outcome
Completed April 2006. Board approval of the proposed process December 2005, procurement process issued April 2006. Additional time was required to seek clinical advice on the process. The contracting processes were not completed. The complexities of the proposals received meant that analysis took longer than expected. Investigation of options was completed by June 2006. This is ongoing and dependant on completed contracts. Options for procuring dialysis fluids and bulk intravenous fluids were examined by December 2005. The advisory committee was established in September 2005.
Subject to agreement to proceed by the PHARMAC Board, completion of certain radiological contrast media contracts by 30 June 2006. PHARMAC will investigate possible options to ensure continued monitoring of any national contracts for radiological contrast media by 30 June 2006. PHARMAC will examine options for procurement of dialysis fluids and Bulk Intravenous Fluids by December 2005. PHARMAC will seek nominations from DHBs for an advisory committee on bulk intravenous fluids by 31 December 2005. PHARMAC will consult with DHBs and suppliers of bulk intravenous fluids by 1 October 2005 when considering possible national procurement strategies. PHARMAC will conduct a procurement strategy to establish national contracts for certain bulk intravenous fluids by 31 December 2005. Subject to agreement to proceed by the PHARMAC Board, completion of certain bulk intravenous fluids by 30 June 2006. PHARMAC will investigate how to monitor national contracts for bulk intravenous fluids by 30 June 2006. 3.6 PHARMAC will continue to work with the New Zealand Blood Service and the DHB Haemophilia Working Group to implement a national arrangement for the supply of recombinant factor VIII. PHARMAC will work with the New Zealand Blood Service (NZBS), the Ministry of Health, DHBNZ and the DHB Haemophilia working group on the strategy and future contracting for supply and implementation and monitoring of contracts for recombinant factor VIII. Supply contracts implemented by 1 July 2005.
Consultation was completed in September 2005.
3.5
PHARMAC will consider the contracting options for the procurement of bulk intravenous fluids for DHB Hospitals.
Completed February 2006 Board approval of the proposed process December 2005, procurement process issued February 2006. Additional time used to seek clinical advice on the process. The contracting processes were completed by 30 June 2006.
Investigation of how to monitor contracts was completed by June 2006. National supply contracts for Recombinant Factor VIII were completed and implemented in May 2005.
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Deliverable
3.7 PHARMAC will consider in consultation with DHB CEOs and Chairpersons other areas of DHB Hospital Procurement where it could be of assistance to DHBs to have a centralised contracting process.
Measure
Outcome
PHARMAC will present information to DHB CEOs and Chairpersons and respond to requests made by these groups by 31 March 2006.
Information was presented to DHB CEOs and Chairs in February 2006.
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Activity Four: Procurement of the Influenza Vaccine and Process for the Management of Pharmaceutical Cancer Treatments Deliverable Measure
PHARMAC will monitor supply contracts for influenza vaccine and work with the Ministry of Health to co-ordinate the timing of supply with the annual influenza vaccine campaign, product to be supplied by 1 March 2006. PHARMAC to review the system for contracting for Influenza Vaccine for the Annual National Influenza Vaccine Campaign by 1 October 2005. PHARMAC will work with DHB Hospitals to enable DHBs to submit PCT claims to HealthPAC by 1 July 2005. PHARMAC will publish the first edition of the Pharmaceutical Schedule including PCTs and new Schedule rules by 31 August 2005. DHBs to submit PCT claims to HealthPAC by 1 January 2006. PHARMAC Board to assume responsibility for making decisions regarding access to PCTs (where budgetary impact is cost-neutral or cost-savings) without requirement for prior agreement of 21 DHBs by 1 July 2007.
Outcome
Product was secured and was supplied in time for the beginning of the subsidised influenza vaccination programme from 1 March 2006.
4.1
PHARMAC will assist DHBs by procuring the influenza vaccine.
A review was completed in June 2005. As a result of the review more than one supplier was contracted for 2006, and more than one supplier will be contracted in future years. Mechanisms were established with DHB Hospitals to enable them submit claims for PCTs to HealthPAC by 1 July 2005. The first edition of the Pharmaceutical Schedule including PCTs and new rules was published in July 2005. Some DHBs have begun submitting some PCT claims to HealthPAC. This remains dependant on the co-operation of DHB hospitals supplying the necessary data.
4.2
PHARMAC will assist DHBs by managing the expenditure of Pharmaceutical Cancer Treatments (PCT).
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PART B – OWNERSHIP PERFORMANCE OBJECTIVES
Deliverable Measure Outcome
PHARMAC considered the need for and feasibility of a Pacific Peoples Responsiveness Strategy. Preliminary scoping was undertaken. A number of existing PHARMAC initiatives already promote Pacific Island health, particularly the One Heart Many Lives campaign. Given the emphasis on other priority areas, as outlined in this Annual Report, this project was not further progressed. Additional work is likely to be undertaken in the 2006-07 financial year. Whakapono: Implementing Maori Responsiveness Report completed February 2006.
5.1 PHARMAC will ensure that all New Zealanders have similar access to subsidised pharmaceuticals. Quarterly reports on progress provided to the PHARMAC Board.
PHARMAC will investigate the need for and feasibility of a Pacific Peoples Responsiveness strategy by 30 April 2006.
5.2 PHARMAC will ensure that all New Zealanders have similar access to subsidised pharmaceuticals by implementing its Māori Responsiveness Strategy.
PHARMAC will produce a report on each of the Māori health priority areas that outlines pharmaceutical prescribing/ uptake and utilisation (Strategic priority 1) by 30 June 2006. PHARMAC will increase internal capacity by engaging a Māori health analyst by 30 November 2005. PHARMAC will develop, consult and agree with DHBs the ongoing funding of Demand Side initiatives by 31 March 2006.
A Maori health analyst was employed in September 2005.
5.3 PHARMAC will develop with DHBs an ongoing mechanism for funding Demand Side Activity.
The ongoing funding of Demand Side initiatives was agreed with DHBs by 31 March 2006.
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STATEMENT OF ACCOUNTING POLICIES
Reporting Entity
These are the financial statements of the Pharmaceutical Management Agency (PHARMAC), a Crown entity in terms of the Public Finance Act 1989 (PF Act). PHARMAC acts as an agent of the Crown for the purpose of meeting its obligations in relation to the operation and development of a national Pharmaceutical Schedule. These financial statements have been prepared in accordance with the requirements of section 41 of the PF Act, and the NZPHD Act.
Measurement Base
The financial statements have been prepared on an historical cost basis.
Accounting Policies
The following particular accounting policies, which materially affect the measurement of financial performance and financial position, have been applied.
Comparative Figures
Some prior period figures have been reclassified due to changes made to the presentation of the current year’s Financial Statements.
Budget Figures
The budget figures are those approved by the Board at the beginning of the financial year. The budget figures have been prepared in accordance with generally accepted accounting practice and are consistent with the accounting policies adopted by the Board for the preparation of the financial statements.
Revenue
PHARMAC derives revenue through the provision of outputs to the Crown, for services to third parties and income from its investments. Such revenue is recognised when earned and is reported in the financial period to which it relates.
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Goods and Services Tax (GST)
All items in the financial statements are exclusive of GST, with the exception of accounts receivable and accounts payable which are stated with GST included. Where GST is irrecoverable as an input tax, then it is recognised as part of the related asset or expense.
Taxation
PHARMAC is a public authority in terms of the Income Tax Act 2004 and consequently is exempt from income tax.
Accounts Receivable
Accounts Receivable are stated at their expected realisable value after providing for doubtful and uncollectable debts.
Property, Plant and Equipment
All fixed assets, or groups of assets forming part of a network which are material in aggregate are capitalised and recorded at cost. Any write-down of an item to its recoverable amount is recognised in the statement of financial performance. Depreciation Depreciation is provided on a straight line basis on all property, plant and equipment, at a rate which will write off the cost (or valuation) of the assets to their estimated residual value over their useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows: Item Leasehold Improvements Office Equipment EDP Equipment Furniture and Fittings Estimated useful life 3 years 2.5 - 5 years 2.5 years 5 years Depreciation rate 331/3 % 20% - 40% 40% 20%
The cost of leasehold improvements is capitalised and depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is shorter. Capital work in progress is not depreciated. The total cost of a project is transferred to the asset class on its completion and then depreciated.
Employment Entitlements
Provision is made in respect of PHARMAC’s liability for employees’ annual leave. Annual leave is measured at nominal values on an actual entitlement basis at current rates of pay.
Leases
Operating leases
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Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Operating lease expenses are recognised on a systematic basis over the period of the lease.
Financial instruments
PHARMAC is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, short-term deposits, debtors and creditors. All financial instruments are recognised in the statement of financial position and all revenues and expenses in relation to financial instruments are recognised in the statement of financial performance. There are no financial instruments that expose PHARMAC to foreign exchange risk or off balance sheet risks, although PHARMAC has entered into contracts with pharmaceutical suppliers (as an agent of the District Health Boards) that provide for limited variations in price according to exchange rate fluctuations.
Statement of cash flows
Cash means cash balances on hand, held in bank accounts, demand deposits and other highly liquid investments in which PHARMAC invests as part of its day-to-day cash management. Operating activities include all activities other than investing and financing activities. The cash inflows include all receipts from the sale of goods and services and other sources of revenue that support PHARMAC's operating activities. Cash outflows include payments made to employees, suppliers and for taxes. Investing activities are those activities relating to the acquisition and disposal of current and non-current securities and any other non-current assets. Financing activities are those activities relating to changes in equity and debt capital structure of PHARMAC and those activities relating to the cost of servicing PHARMAC’s equity capital. Changes in accounting policies There have been no changes in accounting policies since the date of the last audited financial statements. All policies have been applied on a basis consistent with previous years.
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STATEMENT OF FINANCIAL PERFORMANCE For the year ended 30 June 2006
Note Revenue Crown: Operating Responsible use of pharmaceuticals DHB: Operating Responsible use of pharmaceuticals Other: Interest received Interest received – legal risk fund Proceeds of legal settlement-legal risk fund Other revenue Total revenue Expenditure Operating costs Salaries and related costs Audit fees Directors fees Depreciation Rentals and leases High cost medicines Responsible use of pharmaceuticals Total expenditure Net surplus/(deficit) for the period 1
Actual 2006 $000 8,060 2,895 600 1,000 579 298 20 88 13,540 4,201 4,342 27 124 211 216 270 3,843 13,234 306
Budget 2006 $000 8,060 2,895 600 1,000 300 12,855 6,168 4,263 27 121 210 194 253 4,335 15,571 (2,716)
Actual 2005 $000 8,060 2,928 470 286 125 500 12,369 4,265 3,502 25 124 203 191 301 3,070 11,681 688
7
The accompanying accounting policies and notes form an integral part of these financial statements. For information on major variances against budget, refer to note 13 (page 46)
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STATEMENT OF MOVEMENTS IN EQUITY for the year ended 30 June 2006
Actual 2006 $000 9,907 306 10,213 Budget 2006 $000 10,370 (2,716) 7,654 Actual 2005 $000 9,219 688 9,907
Note
Public equity at the beginning of the period Net surplus/(deficit) Public equity as at the end of the period
2
The accompanying accounting policies and notes form an integral part of these financial statements. For information on major variances against budget, refer to note 13 (page 46)
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STATEMENT OF FINANCIAL POSITION As at 30 June 2006
Note Actual 2006 $000 5,310 4,903 10,213 Budget 2006 $000 3,182 4,472 7,654 30 June 2005 $000 5,435 4,472 9,907
PUBLIC EQUITY Retained earnings & reserves Legal Risk Fund TOTAL PUBLIC EQUITY Represented by: Current assets Cash and bank Receivables and prepayments Total current assets Non-current assets Fixed assets Total non-current assets Total assets Current liabilities Payables, accruals and provisions Employee entitlements Total current liabilities NET ASSETS
2 2
3
11,066 75 11,141
9,889 750 10,639 300 300 10,939 3,115 170 3,285 7,654
11,492 1,712 13,204 365 365 13,569 3,495 167 3,662 9,907
4
737 737 11,878
5
1,493 172 1,665 10,213
Signed this 27th day of October 2006
Chairman
The accompanying accounting policies and notes form an integral part of these financial statements. For information on major variances against budget, refer to note 13 (page 46)
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STATEMENT OF CASH FLOWS for the year ended 30 June 2006
Note CASH FLOWS - OPERATING ACTIVITIES Cash was provided from: - Ministry of Health - DHBs - Interest - Other - Net GST Cash was disbursed to: - Payments to suppliers and employees - Net GST Net cash flow from operating activities CASH FLOWS - INVESTING ACTIVITIES Cash was disbursed to: - Purchase of fixed assets Net cash flow from investing activities 6 Actual 2006 $000 10,955 1,600 877 20 13,452 (12,210) (1,085) (13,295) 157 Budget 2006 $000 10,955 1,600 300 12,855 (15,361) (400) (15,761) (2,906) Actual 2005 $000 10,988 756 458 203 12,405 (13,157) (13,157) (752)
(583) (583)
(210) (210)
(187) (187)
Net increase/(decrease) in cash held Add opening cash brought forward Closing cash balance
(426) 11,492 11,066
(3,116) 13,005 9,889
(939) 12,431 11,492
The accompanying accounting policies and notes form an integral part of these financial statements. For information on major variances against budget, refer to note 13 (page 46)
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STATEMENT OF COMMITMENTS as at 30 June 2006
2006 $000 Capital commitments approved and contracted 2005 $000 -
Other non-cancellable contracts At balance date PHARMAC had entered into non-cancellable contracts for the provision of services including lease on premises. Commitments under these contracts are as follows: Not later than one year 248 191 Later than one year and not later than two years 248 191 Later than two years and not later than five years 21 191 Later than five years 517 573 Total commitments $517 $573
The accompanying accounting policies and notes form an integral part of these financial statements. For information on major variances against budget, refer to note 13 (page 46)
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STATEMENT OF CONTINGENT LIABILITIES as at 30 June 2006
PHARMAC had no contingent liabilities at 30 June 2006 (2005:NIL).
The accompanying accounting policies and notes form an integral part of these financial statements. For information on major variances against budget, refer to note 13 (page 46)
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NOTES TO THE FINANCIAL STATEMENTS for the year ended 30 June 2006
Note 1: Net Surplus/(Deficit)
2006 $000 The net surplus (deficit) is after charging for: Fees paid to auditors - external audit - other services Board members’ fees Depreciation: Furniture and fittings Computer equipment Office equipment Leasehold improvements Total depreciation for the year Rental expense on operating leases 27 124 30 91 48 42 211 216 25 18 124 29 89 39 46 203 191 2005 $000
Note 2:
Public equity
2006 $000 2005 $000 4,918 688 (171) 5,435
General funds
Opening balance Net surplus/(deficit) Net transfer to legal risk fund Closing balance
5,435 306 (431) 5,310
Legal risk fund 2006 $000 Opening balance Transfer from Ministry of Health Add: Interest received transferred from General funds Plus: Litigation expenses transferred from General funds Plus: Proceeds of legal settlement Closing balance 4,472 298 113 20 4,903 2005 $000 4,301 286 (240) 125 4,472
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Note 3:
Receivables and prepayments
2006 $000 2005 $000 1,709 3 1,712
Receivables GST receivable Prepayments Total
26 3 46 75
Note 4:
Property, plant and equipment
Cost Accumulate d Depreciation $000 254 554 158 75 1,041 281 628 205 117 1,231 Net Book Value $000 68 136 93 61 7 365 81 138 46 76 396 737
$000 2005 Furniture and fittings Computer equipment Office equipment Leasehold improvements Fixed asset work in progress Total 2006 Furniture and fittings Computer equipment Office equipment Leasehold improvements Fixed asset work in progress Total 322 690 251 136 7 1,406 362 766 251 193 396 1,968
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Note 5:
Payables, accruals and provisions
2006 $000 2005 $000 1,095 480 1,785 135 3,495
Trade creditors Accrued expenses Project funding received in advance GST payable Total payables and accruals
1,008 485 0 0 1,493
Note 6:
Reconciliation of the net surplus from operations with the net cashflows from operating activities
2006 $000 2005 $000 688
Net surplus/(deficit) from operations Add non-cash items: Depreciation Total non-cash items Add (less) movements in working capital items: Decrease/(increase) in receivables Decrease/(increase) in prepayments (Decrease)/increase in payables (Decrease)/increase in project funding received in advance (Decrease)/increase in employee entitlements (Decrease)/increase in net GST Working capital movements – net
306
211 211
203 203
1,683 (43) (82) (1,785) 5 (138) (360) 157
(1,424) 29 38 (272) (15) 1 (1,643) (752)
Net cash flow from operating activities
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Note 7:
Related party information
PHARMAC is a wholly owned entity of the Crown. The Crown, through the Ministry of Health, significantly influences the role of PHARMAC and is its major source of revenue. PHARMAC also conducts business with other government entities on an “arms length” basis in the normal course of business. These transactions are not considered to be related party transactions.
Note 8:
Credit risk • • •
Financial instruments
Financial instruments which potentially expose PHARMAC to credit risk consist of bank balances and accounts receivable. Bank balances are held with New Zealand registered banks. The values disclosed in the Financial Statements represent the maximum exposures on these financial instruments. No collateral is held for any of these financial instruments.
Concentration of credit risk There is no significant concentration of credit risk. Credit facilities PHARMAC does not have a bank overdraft facility. Fair value The fair value of financial instruments approximate the carrying amount disclosed in the financial statements at 30 June 2006.
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Note 9:
Employee Remuneration
Number of Employees 2006 2005 5 1 1 1 1 1 2 2 1 1 1 1 1
Total Remuneration and Benefits $000 100 – 110 110 – 120 120 – 130 130 – 140 140 – 150 150 – 160 160 – 170 170 – 180 180 – 190 190 – 200 200 – 210 210 – 220 220 – 230 230 – 240 240 – 250 280 – 290
The chief executive’s remuneration and benefits is in the $280,000 - $290,000 band (2005: $240,000 - $250,000 band)
Note 10:
Board Fees
Board members earned the following fees during the year: Member Mr Richard Waddel (Chair) Prof Gregor Coster Ms Karen Guilliland Mr David Moore Mr Helmut Modlik Ms Adrienne von Tunzelmann Fees 2006 $000 36 18 18 18 17 17
2005 $000 36 18 18 18 17 17
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Note 11:
Cessations
This information is presented in accordance with section 152(d) of the Crown Entities Act 2004. Cessation payments include payments that the person is entitled to under contract on cessation such as retirement payment, redundancy and gratuities. During the year PHARMAC made no payments to former employees in respect of cessation of employment with PHARMAC. (2005: $NIL)
Note 12:
Reconciliation between SOI and adjusted budget
$ (756,000) $1,759,000 $ 201,000 $(2,716,000)
Original SOI deficit Additional Operating Costs Additional Salaries & related costs Adjusted budget deficit for the year
During 2005/06, the PHARMAC Board resolved to make changes to its operating budget to reflect modified activity and associated expenditure intentions. These changes, summarised below, are discussed elsewhere in the Annual Report. The specific changes embedded in the summary figures: GP Forum PHARMAC Foundation Special Authority roll out Hospital New Initiatives Healthpac(cancer management) KMS Total Operational Costs $ 80,000 $ 500,000 $ 500,000 $ 165,000 $ 300,000 $ 214,000 $1,759,000
Note 13:
Major Budget Variations
Statement of Financial Performance The net surplus for the year ended 30 June 2006 of $306,000 is $3,022,000 more than the budgeted deficit of $(2,716,000). The main reasons for the difference are: • • • Interest received was higher than budgeted by $577,000 due to higher cash reserves being held and higher interest rates. Operating costs were $1,978,000 less than budget mainly due to decrease in legal, information management, HealthPAC, PTAC, Foundation and Forum seminar costs and hospital new initiatives. Postponement or reduction of activity for some project initiatives in responsible use of pharmaceuticals resulted in this area being $492,000 less than budget. These initiatives have been rescheduled for the 2006/07 year.
Statement of Financial Position • Public equity has increased owing to the increase in the legal risk fund. Statement of Cash Flows • Cash disbursed is less than budget mainly owing to the decrease in operating costs.
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Metadata
Title
PHARMAC Annual Report year ended 30 June 2006
Abstract
Annual Report of Pharmaceutical Management Agency (PHARMAC) for the year ended 30 June 2006 Presented to the House of Representatives pursuant to Section 44A of the Public Finance Act 1989
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