This is the text extract for Inpharmation: February 2009, browse documents here.

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MARCH 2009

Generics changes

Generics are an established part of the New Zealand medicines landscape and have been in use for many years. Generic (off-patent) medicines become available when the patent on a branded medicine expires. This means other manufacturers can make the same chemical (generic medicine) in competition.

In New Zealand more than 50% of all medicines dispensed are generics. This is a similar pattern to other countries. For example, in the United States 56% of medicines are dispensed as generics. Despite their prevalence, some people continue to be suspicious about generics, in New Zealand and internationally. An article published in the Journal of the American Medical Association in December 2008 (Kesselheim, Misono, Lee et al), looked at studies comparing generic and brand name medicines used to treat cardiovascular disease. The study authors found that branded and generic drugs were clinically equivalent – including those with a narrow therapeutic index. However, the study noted that many editorials continued to advise against changing from branded to generic. The authors commented: “Evidence does not support the notion that brand-name drugs used in cardiovascular disease are superior to generic drugs”.

In Australia, its consumer watchdog organisation Choice has advised people that generics hold no cause for alarm. Choice assures that the generic drugs contain the same active ingredients, and must meet the same standards for safety and efficacy as branded drugs. The same applies in New Zealand. The Government’s medicines regulator Medsafe decides if a medicine is safe and effective for use in New Zealand. To make this decision, Medsafe examines data to ensure the medicine contains the same level of active ingredient, and that it is used in the body the same way as the branded product (the technical term is `bioequivalence’). PHARMAC also thinks carefully about which generic medicines to fund, and takes advice from a committee that includes doctors and pharmacists. When it does decide to change a medicine brand, PHARMAC can provide support for health professionals and information for patients to help them adjust. There is also an established medicines surveillance programme to keep track of any adverse reactions people might experience. This programme, managed by Medsafe using the Centre for Adverse Reactions Monitoring, can identify areas of concern so that action can be taken if required.

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PHARMAC - March 2009 Newsletter

Wholesaler Uplift Fee

A number of very widely used medicines are currently undergoing brand changes, to generic versions. Some of these have been subject to rebate payments, which means the price published in the Pharmaceutical Schedule is higher than the actual price. However, because pharmacists and pharmacy wholesalers’ mark-ups are based on the Schedule price, the price reduction of the generics means there will be a loss of income in the pharmacy supply chain, which may be passed on to patients. To address this in the immediate term, PHARMAC has worked with the Pharmacy Guild and District Health Boards to develop a mechanism to reinvest the reductions in mark-ups incurred throughout 2009 back into community pharmacy. The payments will be made until August 2009. From September onwards payment will continue by cheque or through a `Wholesaler Uplift Fee’ which is an additional subsidy on certain products. The payments are not from the pharmaceutical budget. The payments are being made by DHBs from the funding they use for distribution fees. PHARMAC is assisting DHBs to make payments.

Setting the Pharmaceutical Budget

We have begun working with District Health Boards to set the pharmaceutical budget for 2009-10 and beyond. The new Government has signaled a desire to inject $40 million of new spending into pharmaceuticals, and this will form part of the budget-setting process. The first step is for us to discuss our forecasts of expenditure growth with DHBs, who hold the funds, so they can balance these forecasts with other competing demands. Once decided, PHARMAC and DHBs take a recommendation to the Minister, who sets the budget. Demand for pharmaceuticals continues to rise, and this drives up the cost of funded medicines each year, even before we can consider new investments. This eats into budget increases and reduces the amount available for new investments. To help counter this, PHARMAC also runs savings programmes like the annual tender.

Information for consumers

Before Christmas we published two documents that provide better information for people about PHARMAC. Information Sheets – these summarise various aspects of PHARMAC’s business and are designed to be user-friendly guides to PHARMAC for a wide audience. Topics covered include how the pharmaceutical budget is set and managed, how PHARMAC decides which medicines to fund, how PHARMAC helps ensure continued supply of medicines, and a guide to the Pharmaceutical Schedule. Getting involved in PHARMAC decisions – this document outlines how people can engage with PHARMAC around its funding decisions, from making funding applications to making consultation submissions.

Pharmaceutical Management Agency Level 9, Cigna House, 40 Mercer Street, PO Box 10-254, Wellington 6143, New Zealand Phone: 64 4 460 4990 - Fax: 64 4 460 4995 - www.pharmac.govt.nz Freephone Information line (9am-5pm weekdays) 0800 66 00 50

PHARMAC Information sheet

Introduction to PHARMAC

What is PHARMAC?

PHARMAC is the New Zealand Government agency that decides, on behalf of District Health Boards, which medicines are subsidised. PHARMAC, a Crown Entity, was created in 1993 to ensure that New Zealanders get the best possible health outcomes from money the Government spends on medicines. Trying to meet the public’s growing demand for new medicines within a defined budget is a challenging and important job. Since its establishment, PHARMAC has made a wider range of subsidised medicines available, while staying within an agreed budget each year.

Optimal use of medicines

As well as making medicines available, an important part of PHARMAC’s role is to ensure that medicines are used appropriately, and not overused, underused or misused. We do this by developing campaigns, such as Wise Use of Antibiotics (encouraging appropriate use of antibiotics) and One Heart Many Lives (encouraging men to improve their heart health).

Hospital medicines

PHARMAC Information sheet

What does PHARMAC do?

PHARMAC has four main roles: • managing the Pharmaceutical Schedule of over 2000 Government-subsidised community medicines (those medicines that your doctor prescribes) • promoting the best possible (or ‘optimal’) use of medicines • managing the subsidy of some medicines and products for public hospitals • managing Exceptional Circumstance schemes (medicines funding for people with rare conditions) and other special access programmes. We are guided by a number of laws and Government guidelines, and Medicines New Zealand – the strategy for the medicines system.

PHARMAC negotiates prices (and other supply terms) for some hospital medicines on behalf of District Health Boards. These are listed in Section H of the Pharmaceutical Schedule. District Health Boards may also use PHARMAC’s expertise to manage the purchasing of other products used in hospitals.

We also negotiate annual supply contracts for the influenza vaccine - on behalf of the Ministry of Health.

Setting and managing the Community Pharmaceutical Budget

Pharmaceutical Cancer Treatments (PCTs)

PHARMAC manages the cancer treatments `basket’, a list of pharmaceutical cancer treatments which all District Health Boards must fund. PHARMAC decides which medicines to add to the list. Funding is currently held by District Health Boards, and this may be transferred to PHARMAC in future.

Advisory committees

Having a budget

Monitoring Expenditure & Forecasting

To stay within budget, we constantly monitor our medicines spending, and must forecast future expenditure before deciding to subsidise new medicines. This involves making a range of assumptions, about factors such as demand trends for existing medicines and likely future use of newly funded medicines. When we’re thinking about subsidising a new medicine, we need to weigh up future cost implications against budget projections to ensure we can continue to subsidise that medicine in the future.

Managing the medicines budget

The budget for medicines that people take when they are not in hospital - the Community Pharmaceutical Budget - is set each year by the Minister of Health, on the advice of District Health Boards and PHARMAC. District Health Boards hold that money and PHARMAC works on their behalf to manage the spending. PHARMAC decides what medicines to fund, negotiates prices, sets subsidy levels and conditions, and ensures spending stays within budget. The list of subsidised medicines is called the Pharmaceutical Schedule. Legislation requires that PHARMAC does not spend more than the budgeted amount. PHARMAC tries to keep spending as close as possible to the target figure, while remaining under it.

Most people use a budget to manage their household spending. PTAC, the Pharmacology and Therapeutics Advisory take a similar approach to manage spending on medicines. We Committee, gives PHARMAC advice on whether new medicines should be Having a budget means you have to take a disciplined approach to subsidised and, if so, what priority they should be given. PTAC spending to make sure you get the most from your money. In our is made up of practising clinicians with expertise in general and choices to try to get the best health outcomes case, we’re making specialist medical practice, clinical pharmacology, and examination from the money available for pharmaceuticals. for New Zealanders of data from clinical trials. The committee generally meets four times a year.

Members are appointed by the Director General What’s special about medicines? of the Ministry of Health. PTAC has subcommittees for specialised advice, such as on Medicines are the only part of the NZ health sector where a cancer and diabetes treatments, when necessary. Together these separate government agency manages a defined budget on behalf committees provide PHARMAC with a resource of more than 50 of District Health Boards. The emphasis on ‘manages’ is important: clinicians helping us to make the right decisions. PHARMAC does not hold the money as it continues to be held and spent by DHBs. The Consumer Advisory Committee provides PHARMAC with an important patient or health consumer point of view. Its members are appointed by the PHARMAC Board. Members bring a wide range of consumer perspectives, such as gender,What is the Community Pharmaceutical age, ethnicity and geographical location. Budget for? This budget is purely for subsidies for community pharmaceuticals – those medicines that are dispensed by your pharmacist. It does not include: • Hospital medicines – funded by District Health Boards. • Cancer medicines – funded by District Health Boards. • PHARMAC’s operating budget – this is a non-medicine budget, used to meet the day-to-day costs of running PHARMAC and set by the Minister of Health. • Payments for distribution, such as the fees that your pharmacist receives.

Why does PHARMAC always underspend its budget?

PHARMAC is required by law to remain within budget. Our spending decisions directly affect District Health Boards, who hold the funding for medicines. If PHARMAC overspent the Community Pharmaceutical Budget, District Health Boards would have to reduce their spending in other areas in order to meet this overspend, which could impact other important health areas. If PHARMAC underspends, District Health Boards retain the funding for use on other health interventions.

Gross expenditure and net expenditure – what is the difference?

There are two expenditure figures – gross and net. Gross expenditure is the total amount spent on medicines before taking into account any “rebates” we may receive from pharmaceutical suppliers. Net expenditure is the amount spent on medicines after rebates have been deducted. Rebates are amounts of money repaid to District Health Boards (via PHARMAC) by pharmaceutical suppliers based on supply agreements. They are used to reduce the cost of medicines where the pharmaceutical company is unable to notify a lower price (e.g. because of concern over price disclosure or re-export of low priced products). Rebates can also be used to manage risk of expenditure blow-outs by “capping” public expenditure at a certain level, with the company taking on the excess. This is known as a risk-sharing agreement.

3-year Funding Path

Budget. This allows make FrontCommunity Pharmaceuticalbe confident that weus tostill be able Cover medicine investments and will PHARMAC has an indicative 3-year `funding path’ for the

Pharmaceutical much more difficult to Agencyongoing medicine it would be Management guarantee

to afford those medicines in later years. Without this knowledge, subsidies for patients.

PHARMAC is the Government agency responsible for deciding which medicines are subsidised for New Zealanders. It manages spending on pharmaceuticals for the District Health Boards, and ensures that a comprehensive list of medicines (the Pharmaceutical Schedule) is subsidised for New Zealanders, and that the list of medicines continues to grow to meet the needs of patients.

Information sheets

Both these publications are available on the PHARMAC website www.pharmac.govt.nz; and the Information Sheets are available both as a booklet, or individually by subject.

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PHARMAC - March 2009 Newsletter

Improving heart health

PHARMAC’s campaign to improve men’s heart health continues to expand. It is currently running in conjunction with District Health Boards in Hawke’s Bay, Northland and Lakes DHB regions. In Northland, it has produced an award-winning programme called the Bro Files, developed by the Kaitaia-based Te Hauora O Te Hiku O Te Ika Trust. In early February PHARMAC teamed with the Heart Foundation, Quitline, Te Hotu Manawa Maori and others at the Te Ra o te Raukura festival in Lower Hutt. The One Heart Many Lives programme offered free heart checks to men, and advice on how to manage heart risk. The stand was extremely popular with queues throughout the day for the 90-minute heart check process.

Isotretinoin access widening

People with severe acne will be able to get the drug isotretinoin subsidised through their GP from 1 March. The decision to widen access has been made with full awareness of patient safety issues. Isotretinoin is potentially dangerous, with a range of side effects including risks for pregnant women, and there is ongoing debate around the evidence of increased risk of suicidal ideation. Up until now, isotretinoin has only been available subsidised through a dermatologist. This had created equity of access issues, because not all potential patients could afford, or had access to, a specialist dermatologist. This was particularly the case for people in lower socio-economic areas. To support the access change, doctors will have information provided through the Best Practice Advocacy Centre (bpacnz), and through PHARMAC’s Seminar Series. We have also worked with the College of General Practitioners to provide information and training to GPs, including as part of their continuing medical education. PHARMAC expects the decision will probably lead to a 5-10% increase in the use of isotretinoin, possibly translating to an increase in spending of $55,000 to $100,000 per year.

PHARMAC is the Government agency responsible for deciding which medicines are subsidised for New Zealanders. It manages spending on pharmaceuticals for the District Health Boards, and ensures that a comprehensive list of medicines (the Pharmaceutical Schedule) is subsidised for New Zealanders, and that the list of medicines continues to grow to meet the needs of patients. Contact: PHARMAC, Level 14, Cigna House, 40 Mercer Street, PO Box 10-254, Wellington 6143, New Zealand Phone: +64 (0)4 460 4990 Fax: +64 (0)4 460 4995 www.pharmac.govt.nz