This is the text extract for Annual Review 2009 - Part 1, browse documents here.

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Pharmaceutical Management Agency

Annual Review 2009

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Highlights of 2008/09

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During 2008/9 we: > Hit the budget target of $653 million > Added eight new medicines to the Pharmaceutical Schedule, and widened access to 55. New medicines include treatments for mental illness, prostate cancer, migraines and skin cancers > Successfully implemented brand changes for medicines used by approximately 550,000 New Zealanders > Completed the review of the Pharmacology and Therapeutics Advisory Committee Terms of Reference > Began reviewing the Terms of Reference of the Consumer Advisory Committee > Launched the pilot of a new asthma campaign in Taranaki – Space to Breathe He Tapu te Ha > Sponsored and awarded the first Hiwinui Heke scholarships for Māori pharmacy students > Continued to support evidence-based prescribing through the PHARMAC Seminar Series and funding BPACNZ.

In this Review

‘Year’ means year ending June 30. ‘This year’ means the year ended June 30 2009; ‘last year’ means the year ended June 30 2008; ‘next year’ means the year ending June 30 2010. Unless otherwise stated, all values are in New Zealand dollars Unless otherwise stated, all references to expenditure are unadjusted for any rebates that may be due or paid by suppliers under risk-sharing agreements

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Taking up the challenge

PHARMAC is well placed to help the Government meet future challenges in health, writes PHARMAC chairman Richard Waddel

We hear a lot about value for money in the health sector these days, and obtaining the most benefits for patients from our spending. These are messages that resonate strongly at PHARMAC, which has always had a strong focus on getting value for money and the best health outcomes. PHARMAC has a strong track record in this area, something reflected in the Ministerial Review Group report, which advised the Minister on future changes to the health system. We support any work to improve the way health funding is used, which is the overall thrust of the MRG report. We are willing to assist in any way possible.

PHARMAC’s record

For 16 years PHARMAC has brought a disciplined approach to purchasing pharmaceuticals, to ensure newly-funded medicines provide measurable health gains and represent good value for money. Since it was created, PHARMAC has added nearly 200 new medicines to the funded list – including a further eight in the past year. In the 1980s, spending growth topped 20% per annum; this is now managed in a more controlled fashion – averaging around 3% per annum since 1993. PHARMAC has achieved this without exceeding its budget, agreed with DHBs and approved by the Minister of Health – including in the past year when the budget was managed at $653 million.

Speedbumps ahead

While we have a proud record, we remain open to improving the way we operate and we are focused on the challenges ahead. To protect and extend our record, we will need to maintain and strengthen the policies and structures that have served PHARMAC and New Zealand well. At our second PHARMAC Forum in October 2009, we received general support for many things PHARMAC had achieved, but it was clear some of our big-ticket policy issues need further discussion. In this Annual Review, we take the opportunity to explain some of our key policies and approaches, including: > The issues around greater transparency > The importance of Decision Criteria, and flexibility in their application > The shortcomings of using a funding threshold, as some suggest, and > Why PHARMAC uses sole supply and the cost of changing that approach.

“The cost of providing public health and disability services is increasing year-by-year, at a rate far greater than growth in our GDP, and will continue to take an even larger share of our national income unless we change the way these services are provided.”

- Ministerial Review Group report

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Continued successes

2009 has been a successful year during which, once again, we managed pharmaceutical spending right on budget. As well as adding eight new medicines to the funded list, we widened access to 55. Many of these access widening decisions were a result of our ongoing review of specialist prescriber restrictions; this has been a long term frustration in the system that we are continuing to address. We continued our important work in promoting the optimal use of medicines. Our campaigns grew with the addition of the Space to Breathe asthma pilot in Taranaki while our established One Heart Many Lives cardiovascular campaign continues to be well supported. And we also committed funding to improve workforce development through the development of the Hiwinui Heke scholarship for Māori pharmacy students (as outlined on P27 of this Annual Review). The Government also commenced work on a subject in which PHARMAC is very interested – High Cost Medicines. A threeperson panel was appointed by the Minister to review and make recommendations on this important subject. We look forward to the panel completing its work. 2009/10 looks to be equally challenging – but exciting too. PHARMAC is well placed to help the sector achieve its goals and to help in any way it can to deliver better health services, including pharmaceuticals, to patients.

“Pharmac is well regarded and has developed widely accepted processes for assessing the relative cost-effectiveness of new pharmaceuticals and making well-informed judgments about priorities for public funding of new and existing pharmaceuticals.”

- Ministerial Review Group report

Subsidy, volume, mix and cost indices Four-quarterly moving averages Base: four quarters ending June 2000 = 1,000. Getting more for less: The subsidy volume and mix indices are like the consumer price index, but for pharmaceuticals. The graph shows that while the amount of pharmaceuticals used, and their cost has been rising, the subsidy index is decreasing.

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Mix Index Susidy Index Volume IndexIndex number of prescriptions multiplied by a Volume is the standardised measure of the amount prescribed per prescription Subsidy Index is like the Consumer Price Index but for subsidised pharmaceuticals only Mix Index is the residual from cost index divided by (volume index X subsidy index) Cost before Cost Index is the drug cost to DHBs ex-manufacturer Index GST

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Keeping some information confidential could save your life

PHARMAC is always interested in increasing transparency where it helps get the best health outcomes from available funding – our job, as specified in the relevant statutes. PHARMAC has increased its transparency recently but, in some areas, more transparency could jeopardise the health of New Zealanders, writes Rico Schoeler, manager of analysis & assessment

There are often calls for PHARMAC to be more transparent about its work and decisions; it’s important for us to meet these expectations when possible and better explain why when we cannot. Most of us prefer more information to less, particularly if the information is well-structured and presented, as it gives us the option of finding out something we may find useful. Of course, we now live in a world characterised by more and more information, where ‘open government’ is an understandable expectation. Most people also accept there are limits. The police don’t openly share sensitive investigation details. The Reserve Bank tightly controls the release of monetary policy information. There are many controls around release of private information. These and other limits exist to avoid jeopardising the results society ultimately wants. PHARMAC understands that saying something is “commercially sensitive” or “a risk to our negotiations” can be seen as an excuse. These considerations are, however, important, and we need to get better at explaining why we use them. If you knew that publishing PHARMAC’s prioritisation list would cost the lives of New Zealanders, would you still want to see it? The question is deliberatively provocative. It does, however, represent the dilemma PHARMAC faces when deciding what information to publish. PHARMAC’s prioritisation list is the list of medicines we would most like to purchase. It ranks funding options from best to worst, as judged against our Decision Criteria. And, given that our funding system is built on the principle of willing-buyer (PHARMAC) and willing-seller (pharmaceutical companies), if we disclose our

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preferences we shift some advantage to the companies. It’s a bit like telling a car salesman you’ve got $5,000 to spend. Could you actually have bought the car you wanted for $4,000? Every time PHARMAC negotiates lower prices for a medicine (while still getting the health outcomes), it frees up money to buy other pharmaceuticals. In other words, we get more for less by promoting competition between pharmaceutical companies.

Reasons

Some people have asked that we reveal the underlying reasons for our decisions. We have improved the content and quality of the ‘notification letters’ we send after decisions are made. From our next Annual Report, we will include more extensive information on what we did, and didn’t fund, in any year. Decisions cannot be processed as a formula or tick-box exercise, as the article on P9 explains. The only standard thing between decisions is that the underlying circumstances are always different – such as a different number or type of existing medicines for the same medical issue; a different level of available funding; and/or a different expectation about the medicine’s effectiveness in order for it to be funded. The judgments are made carefully, using the same, consistent Decision Criteria and with lots of analysis and clinical advice – but they remain judgments. There are other considerations. We know pharmaceutical companies would like more certainty about what is required to get a medicine funded. This is an understandable commercial position. But if there were definitive thresholds, our ability to negotiate lower prices would be reduced and, as a result, fewer medicines could be purchased. If more and more detail is explained by PHARMAC, we risk defining thresholds over time – whether actual or perceived – ultimately to the detriment of New Zealand’s health outcomes. Detailed decision write-ups also take more time – time better spent progressing other funding proposals. We’re sometimes restricted in what we can say in order to protect companies’ commercially sensitive information; a responsibility we take very seriously, and we know this is valued by the companies. Any inappropriate release of information risks our reputation, and our ability to get the right type of information next time.

Building trust

Given the limits on transparency, we recognise the importance of building trust in other ways. Trust can be difficult to define, but some core elements are likely to be: > acceptance of the general approach (making difficult choices between funding options no matter how big the budget); > understanding important details, such as how advisory committees work, their advice, and how analysis is undertaken; > being able to have a say, whether on individual decisions, general approaches or policy settings; and > understanding the decisions that are made, whether at the time, in summary reporting, or through general confidence in the process. We try to meet these core needs, and keep improving. We have recently put significant effort into improving our communication and relationships – and we continue to put that effort in. We’re publishing more minutes from our clinical advisors and, we think, greatly improving the clarity and accessibility of many publications (such as our Information Sheets and Guide to Cost Utility Analysis). Other improvements are also planned, such as an on-line funding application tracker and potential improvements resulting from consumer participation work on which we’re currently consulting. All changes are carefully considered. It is all too easy to commit government resources to publications or initiatives that cost money yet don’t really add value – or even destroy value, if information gives rise to unintended consequences. As increased transparency in some areas can risk reducing health outcomes, it is prudent to err on the side of caution. We believe this care, with New Zealand’s health outcomes top-of-mind, is one of our organisational strengths. We take the issue of transparency very seriously. We understand stakeholder expectations for more and better information, but we are also clear about making better use of existing resources and, above all, getting the best health outcomes from our spending. We want to improve the quality of the information we provide, but only when we’re confident it adds to the greater goal of the health of New Zealanders.

If you knew that publishing PHARMAC’s prioritisation list would cost the lives of New Zealanders, would you still want to see it?

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Creating a competitive environment

Promoting competition among offpatent medicine suppliers is one of the most effective ways PHARMAC gets good value from pharmaceutical spending, writes Greg Williams, Therapeutic Group Manager

Competition – we’ve all experienced it. In fact, most of us benefit from it in one way or another, whether from everyday activities like supermarket shopping, or choosing which airline to fly on. Competition is a powerful force and is used by PHARMAC to manage the pharmaceutical budget, through tendering for sole supply of one brand of medicine – a strategy that provides the maximum incentive to companies to offer low prices. Pharmaceutical companies have their own version of sole supply: patents, which generally last 20 years during which period no other company can compete. Once patents expire, generic versions of the medicine become available and PHARMAC generates competition either through tendering or some other kind of competitive process. Once unlocked, savings can be as large as 90%, and the funding that is released can be used to fund newer pharmaceuticals., or growth of medicines prescribing.

PHARMAC promotes competition

Sole supply promotes competition, although largely invisibly to the patient. PHARMAC runs a competitive process, with companies bidding against each other, from which we choose the best bid (taking into account a range of factors). Under our sole supply system, it’s the purchasers (the District Health Boards and taxpayers) that reap the benefits of competition: competition between suppliers provides savings that allow reinvestment in medicine. This achieves long-term benefits for New Zealand – more than $400 million of savings since 1997 that have been reinvested in new medicines. In our experience, sole supply is more effective than multiple supply arrangements in providing incentives to lower prices. In one recent competitive process, the average across all bids was 17% higher for dual supply than for sole supply. If this was the case across all tendered medicines, it would represent $17 million of extra spending, money we then wouldn’t have available to invest in new medicines. In tight economic times, such savings are vital. This is one tangible example. There are also interesting differences when we compare our experience with other countries. The table (opposite) illustrates the prices of five commonly-prescribed sole supply medicines with prices in Australia, Britain and Canada, which don’t use sole supply. We estimate our prices are less than half paid in the UK for the same products. The price differentials with Australia and Canada are even greater. This underlines the strength of the competitive processes we harness to achieve low prices compared with other countries. Companies tend not to market their generic products when there’s sole supply; it’s very different with dual supply, however. In countries where multiple supply is used, such as Canada, companies build in the price of marketing, then promote their products through

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special deals or bonusing to pharmacies. Great for the retailers, but it means higher prices for the funder (the Government). We’ve seen this practice in New Zealand, when we had multiple suppliers of the gastric ulcer drug omeprazole.

The generic brand doesn’t work…

Even when medicines have been assessed as bioequivalent, or essentially the same, not everyone responds the same way. This is taken into consideration when we’re deciding which medicines to include in a tender. We contemplated a mechanism called Alternative Brand Allowance (ABA) to enable a small number of people – around 1% for each medicine – to stay on their existing brand if they couldn’t take the new brand. Feedback during consultation on the proposal, primarily from pharmaceutical suppliers, indicated such a mechanism would be unworkable: expenditure on generic medicines is sometimes worth less than $50,000 per annum, so giving one supplier 1% of such a market would expose them to significant financial risk for little gain, and the industry told us this would be unworkable. We’ve also seen – with a similar system we set up for the ADHD drug Ritalin - how such a system could be used inappropriately – with monitoring and auditing challenges and costs. As we believe an ABA would be unworkable, we haven’t implemented the proposal. But we’ve certainly considered it, along with many other suggestions. Overall, we’re committed to taking an even more careful approach to choosing which products to tender. This includes thinking about the range of other medicines that are available to treat the same condition, alongside other relevant issues such as size, shape, colour or taste of the new products. When a brand is switched, we support the change with information for doctors, pharmacists and patients.

Careful choices

Generics are often deemed to be `bioequivalent’, having the same chemical composition and therapeutic effect as the competing brand. Savings are only useful if the product lives up to our expectations so before awarding sole supply status to a generic brand, we take several careful steps. Most importantly, the generic must be registered as safe and effective by Medsafe, the government’s regulatory body. Objective advice is then taken from the Tender Medical Evaluation subcommittee of PTAC (made up of clinicians and pharmacists) on issues such as the taste, shape or colour of the product, pack sizes, packaging, or any other relevant issues. Then we consult with the community about potential changes, and review the supporting information required to help make transition to the new product easier for health professionals and patients. We’re careful about the incentives used to ensure ongoing supply, an important part of the supply equation and one where we’ve improved dramatically in recent years. Contracts with suppliers include clauses requiring they notify us about any stock level issues. If stocks fall below an acceptable level or problems are anticipated, we can work with the companies to arrange alternative supplies.

Comparative prices of five medicines in Australia, New Zealand, UK and Canada. New Zealand has lower prices for all medicines than all four countries – sometimes up to 90% lower.

NZ Price (subsidised brands) $0.29 (1) $1.00 (1) $3.05 (1) $1.64 (1) $1.35 (1) Australia Price (subsidised brands) $3.10 (4) $40.78 (16) $37.68 (13) $19.62 (11) $30.20 (13) UK Price (subsidised brands) $1.09 $2.21 $4.02 $4.79 $2.96 Canada Price (subsidised brands) $1.07 (7) $52.24 (9) $41.45 (5) $12.88 (5) $32.98 (12)

Medicine Paracetamol Simvastatin Omeprazole Amoxycillin Citalopram

Price per 30 tablets 500 mg 20 mg 20 mg 500 mg 20 mg

Notes: 1. All prices are public list prices obtained from the following sources: Australia - Online searchable version of the Schedule of Pharmaceutical Benefits www.pbs.gov.au (accessed 27/10/2009) UK - BNF 58 (September 2009) Canada - Alberta Interactive Drug Benefit List https://www.ab.bluecross.ca/dbl/publications.html (accessed 28/10/2009) 2. Differences in population size and clinical practice have not been considered in this analysis 3. All prices are expressed in New Zealand dollars using the following exchange rates: Australia = 0.814143 UK = 0.456225 Canada = 0.796052

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Computer says no?

PHARMAC’s Decision Criteria provide guidance and flexibility for making difficult judgements, writes PHARMAC’s Chief Executive Matthew Brougham

If you’re anything like me you hate being told what to do. Even worse if a machine was doing the telling – and you had no room to manoeuvre. Comedy series Little Britain has a running gag with a worker tapping away at her computer, then telling the customer: “Computer says no”. The joke plays on people’s frustration at computerised decisions and worker inflexibility, to great comedic effect. I’m pleased to say PHARMAC could never be accused of having a `computer says no’ mentality. We have a set of Decision Criteria that guide us in our decisions, but ultimately how they are applied is a judgement about the specific circumstances before us. I think most people would prefer it that way – rather than having a mechanistic `tick box’ approach to decisions that didn’t allow any flexibility.

Decision Criteria

The criteria are necessarily broad and take into account a wide range of factors relevant to making decisions about pharmaceutical funding. These include things like people’s health needs, alternative treatments, cost of the treatment, risks and benefits of the treatment, impact on other health resources (does it require more or fewer lab tests or other treatments?), and how it sits with other Government health priorities. In addition, we have discretion to take other factors into account if required. These are all reasonable things to take into account, and are tested from time to time, through reviews of our Operating Policies and Procedures. At the recent Wyeth Forum on high cost medicines, I asked the large audience what other factors were relevant for our decisions ... … and nothing was identified that cannot already be taken into account under our current criteria. This is comforting. The main point about the criteria is that they are a guide to help us make judgements about which medicines to fund. There are some very well-developed and scientifically rigorous parts of the process – but ultimately the decisions are made by people taking into account a broad range of factors. The criteria are used at several levels of our decision-making process. The Pharmacology and Therapeutics Advisory Committee (PTAC) uses the criteria to guide the recommendations it makes on pharmaceutical funding applications. PHARMAC uses them to help rank funding options in order of priority. And our Board uses them when it makes funding decisions. PHARMAC is sometimes said to be “all about the money” – but a look at our criteria quickly provides a response to that. Clearly funding is an important consideration and can’t be ignored, but the criteria make it clear it’s not the only thing that matters. Top of our list is patient need, and the health needs of Māori and Pacific People.

PHARMAC’s decision criteria. > The health needs of all eligible people; > The particular health needs of Māori and Pacific peoples; > The availability and suitability of existing medicines, therapeutic medical devices and related products and related things; > |The clinical benefits and risks of pharmaceuticals; > The cost-effectiveness of meeting health needs by funding pharmaceuticals rather than using other publicly funded health and disability support services; > The budgetary impact (in terms of the pharmaceutical budget and the Government’s overall health budget) of any changes to the Schedule; > The direct cost to health service users; > The Government’s priorities for health funding, as set out in any objectives notified by the Crown to PHARMAC, or in PHARMAC’s Funding Agreement, or elsewhere; and > Such other criteria as PHARMAC thinks fit.

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Another comment we hear is that “the other criteria don’t really matter as the focus is always on Cost Utility Analysis.” This also isn’t true.

Flexibility

This emphasises another point about the Decision Criteria: allowing flexibility over time. The right decision at one point in time can appear in retrospect to be inconsistent with other decisions. This illustrates the judgements inherent in the criteria. Some people have suggested we should give a weighting to the Decision Criteria, making it explicit when some things outweigh others., It is, however, difficult to comprehend how a particular set of weights could be accurate or optimal for all possible situations and funding options that PHARMAC faces.

Cost Utility Analysis

CUA is certainly a well-developed tool for assessing both the costs and benefits of pharmaceuticals. But it is only that – a tool to help guide and inform our decision-making. Further, CUA allows us to consider better the importance of the other criteria. Because the results of CUA are expressed in a common currency (cost/Quality Adjusted Life Year – QALY), we can look at the gap between two There are other problems. Understandably, pharmaceutical suppliers options and ask whether there are any other factors that, when Impact of Pharmac in our Expenditure over time want more specificity and predictabilityon DrugDecision Criteria. If, added to the picture, make the gap either wider or narrower. In this however, they could better predict funding, our ability to secure the way, the importance of other considerations are brought to bear best Expenditure over time Impact of Pharmac on Drug possible price would be reduced (and fewer health outcomes upon, and significantly influence, our decisions. would ultimately be achieved). There are times when one criterion is clearly the defining factor. An There are also limits around how much information we can provide example is the brain tumour drug temozolomide, which was funded about our use of the Decision Criteria. Money and health aren’t in 2005 largely because there were few other treatment options Drug cost but the Actual always easy bedfellows,(Millions) reality is we operate in a commercial available, This meant patient need was highlighted even though, by $2,000 environment so must protect our commercial position. If we comparison with some other choices at the time, temozolomide was compromise it, we will pay too much and, in turn, risk losing Path Drug cost (Millions) Actual Budget/Funding health less cost-effective. $1,800 outcomes. $2,000

$1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $535 $601

$1,890 Our Decision Criteria are well established and well tested. They $1,600 $1,775 that impact enable us to take into account a wide range of factors $1, on medicine funding, and give scope for making comparative $1,611 $1,400 $1,296 judgements. This isn’t something machines do well – this is $1,438 something far better left to people’s informed judgment. Overall, the $1,174 $1,200 criteria have enabled PHARMAC to greatly improve health outcomes $1,061 $1,296 for New Zealanders while managing the pharmaceutical budget. $965 $1,000 $1,174 $1,061 $965$800 $600 $535 $880 $674 $763 $891 $826 $534 $565 $564 $728 $599 $589 $635

Impact of Pharmac on Drug Expenditure over time

$674 $763

$880

$601

Impact of PHARMAC on Drug Expenditure over time $517 $516 $400

Drug cost (Millions) $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 $535 $517 $601 $516 $273 $674 $763 $534 $504 $306 $510 $347 $400 $439 $565 $564 $482 $599 $534 $589 $635 $965 $880 $1,174 $1,061 Actual $200 $0 $243 2000 $273

$589 $653 $534 $517 $516 $504 $510 $599 $734 $482 $565 $564 $400 $534 $439 $694 $714 $400 $653 $347 $635 $200$482 $534 $504 $510 $273 $306 $243 $439 $400 Budget/Funding Path$0 $347 $306 2000 2001 2002 2003 2004 2005 2006 2007 Year Ending 30 June $1,890 $1,775 2003 2004 2005 2006 2007 Expenditure at 1999 subsidies 2012 Real 2008 2009 2010 2011 Year Ending 30 June Real Expenditure at 2009 subsidies Actual Expenditure and Budget/Funding Path

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Real Expenditure at 1999 subsidies $1,438 Real Expenditure at 2009 subsidies $1,296

$826 $728 $653 $653 $694 $714

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Actual Expenditure and Budget/Funding Path

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Why PHARMAC doesn’t use a funding threshold

Imagine this. You’ve just bought a new car. It’s a great car: fuel efficient, environmentally friendly, and with a 5-star safety rating. A few weeks later, you receive a letter from another car dealer. Another car has come on the market, also with a 5-star safety rating. And because of new government rules, if any car gets a 5-star safety rating you have to buy it. If you don’t, the car company can take you to court. That’s even though you already have a car just as safe, and you can’t afford another car just now. It would be crazy, right?

Yet, this is what some commentators suggest PHARMAC do with medicines. Using a funding threshold, they say, will provide consistent, predictable decisions and aid transparency. It’s certainly a requirement in some countries: once a product meets the funding threshold, national or regional governments are compelled to fund it. It means new money has to be found, or other products or services cut. Although it’s a legitimate policy choice, it’s not one that has gained traction with successive New Zealand governments and for good reason, in PHARMAC’s view. The threshold suggested is based on Quality Adjusted Life Years (QALYs), the measure used in PHARMAC’s economic analysis of medicines; medicines with a cost per QALY of a certain level (perhaps $50,000) would automatically be funded, while those above the threshold would not. While this might sound feasible, there are many reasons it wouldn’t work in our current environment. Most significantly, automatic funding thresholds don’t sit easily alongside managed budgets – irrespective of their size. If there was no funding to purchase the new medicine that had met the threshold test, then it couldn’t be bought or other things would have to be chopped. A threshold approach suggests medicine funding requires simple yes/no, on/off decisions. This would be the case if PHARMAC were a regulator, answering questions over the medicine’s clinical efficacy or safety. PHARMAC, though, is interested in relative effectiveness: how much better a medicine is than one already in use. This is clearly not a yes/no answer and is often a judgement, made using all of our Decision Criteria (as outlined in the previous article). Using the threshold approach would remove the ability to make informed judgements, or to take into account whether the medicine is any better than those already in use. Using a QALY threshold would be making the assumption that economic analysis is an entirely perfect model, always producing a perfect answer. It’s not. Cost-utility analysis is a very highly-developed assessment tool – it’s the best one we know and is widely used internationally. But it doesn’t take into account every consideration, and that’s why we use our nine Decision Criteria. Using CUA isn’t about finding the perfect answer; it is about assessing costs and benefits as a way to rank potential funding options. We call this ‘relative assessment‘ – doing enough work to feel confident that one funding option can be ranked ahead, or behind another. Trying to find a ‘perfect’ answer would mean endless debates and heavy impacts on our resources and, ultimately, slower decisions. There is no perfect answer – even high quality analyses often have wide ranges in their results. And as our article on transparency on P5 points out, a threshold would also mean no more negotiation. And negotiation is one of PHARMAC’s most powerful tools. If a company knew that all it had to do to obtain funding was meet the funding threshold, it would be reluctant to negotiate on price or supply terms once that threshold was reached. This would limit PHARMAC’s ability to get the best possible health outcomes from whatever it spends and that, in turn, would restrict New Zealanders’ access to the widest and best range of pharmaceuticals possible.

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Seeking clinical advice on our communications

PHARMAC is looking for ways to improve further how it communicates with health professionals, writes Medical Director Dr Peter Moodie.

Doctors are busy people and are already inundated with important information. It would be impractical for doctors to take an in-depth interest in all PHARMAC’s activities – but at the same time we want doctors to feel well informed and know that we have listened to clinical advice. At the same time, we don’t want to provide so much information that it is overloading clinicians. It’s a balancing act, and one we are keen to get right. There are many ways health professionals can provide information to PHARMAC, but three in particular:

> Making funding applications; > Via our clinical advisory committee PTAC and its advisory committees; and > Making submissions to our consultations.

Anyone can make a funding application, and clinicians often apply for a particular treatment to be funded on the Pharmaceutical Schedule. We treat all applications equally, taking advice from PTAC and being guided by its recommendations. PTAC and its sub-committees are the first step for all medicine funding applications. PTAC consists of 10 clinicians, all active practitioners (a list of PTAC and sub-committee members is listed at the back of the Annual Review). Minutes of PTAC meetings are available on our website once the deliberations are completed, although this process can take longer than people expect because PTAC often asks for further information from a subcommittee. PTAC may also seek specific input from particular clinical groups – such as rheumatologists or gastroenterologists, particularly when we are developing a Special Authority for a particular medicine. As a matter of course, we seek clinical views on our funding proposals through consultation; these can be voluminous and not always of widespread interest but we try to target consultation documents to interested clinicians, so that we are confident we have the right advice. We also notify people about funding changes and this is, of course, important to health professionals, particularly pharmacists. Our notification letters are sent to anyone who participated in the consultation, and posted on our website. We update the Pharmaceutical Schedule monthly: the front section outlines major changes and flags potential changes. We’ve also been piloting a newsletter format for PHOs in the Nelson region, and it will be interesting to gauge the response.

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Other interactions

PHARMAC maintains close relationships with the major clinical associations and colleges as they are important conduits to health professionals; we try to attend the major health conferences as face-to-face contact is important in developing and maintaining relationships. Behind the scenes we’re doing a lot to help doctors do their jobs better. We fund the Best Practice Advocacy Centre (BPACNZ), run by Professor Murray Tilyard at Otago University, which publishes a monthly magazine and runs services for doctors such as prescribing tools and clinical guidelines. We know from the feedback that these services are highly regarded by doctors. Professional development is also important for health professionals, so we fund the PHARMAC Seminar Series covering a range of topics such as managing respiratory infections, pharmacology for nurses, and risk factors in cardiovascular disease. The Seminars, usually held in Wellington, are often fully booked, so anyone planning to attend is advised to register early.

Ongoing improvement

In 2007 we began the PHARMAC Forum, providing an opportunity for health professionals and others in the sector to discuss their views with us. PHARMAC is committed to improving its communications, and we’re receptive to suggestions on how this can be achieved, without overloading health professionals with too much information. So if you have suggestions on how we can improve how we get information to health professionals, or receive information from them, let us know. It’s all about striking a balance; it’s not so much about having all the information put in front of you – it’s knowing it’s available if needed.

So if you have suggestions on how we can improve how we get information to health professionals, or receive information from them, let us know.

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Major funding decisions in 2008-09 – new patients, new spending, better health

Each year, PHARMAC invests millions of new dollars in pharmaceuticals and works to ensure these produce better health for New Zealanders. PHARMAC’s major funding decisions in 2008/09 (see table) included adding eight new products to the Pharmaceutical Schedule, and widening access to six pharmaceuticals. More people treated

As a result of the decisions in 2008/09 an estimated 19,800 new patients were treated with these subsidised medicines. In the first full year of these decisions being implemented, PHARMAC estimates that there would be 30,400 new patients using these medicines – including 9000 new patients using imiquimod and 2900 new users of topiramate. Total expenditure over 12 months for these decisions is estimated to be $11.9 million.

Funding Decision

Month of implementation

Condition treated

Estimated no. new patients by 30 June 2009

Estimated no. new patients by 12 months’ implementation

Estimated net extra costs by 12 months’ implementation

New listings aripiprazole imiquimod levetiracetam finasteride bicalutamide (2) insulin lispro with insulin lispro protamine amisulpride atomoxetine Widening access methylphenidate ER risperidone (1) topiramate isotretinoin (1) pegylated interferon alpha-2a, pegylated interferon alpha-2b with ribavirin Total September 2008 September 2008 September 2008 March 2009 April 2009 ADHD psychosis epilepsy, migraine severe acne hepatitis B and C 783 19,839 3,641 30,408 $5,580,154 $11,879,932 2,948 3,885 $599,476 2,392 3,221 $1,146,580 August 2008 September 2008 September 2008 October 2008 November 2008 November 2008 December 2008 April 2009 psychosis some skin cancers, genital warts epilepsy prostate disorders prostate cancer diabetes psychosis ADHD 969 9,073 151 1,244 418 1,366 272 223 1,098 10,963 175 2,532 755 2,545 670 922 $896,092 $1,894,998 $195,321 $192,740 $76,675 $724,230 $188,363 $385,304

Notes : (1) Insufficent or inconclusive data to provide a reliable estimate; (2) cancer medicines are funded from the Pharmaceutical Cancer Treatment budget, which is held by DHB hospitals (not PHARMAC)

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16

Top 20 most prescribed medicines

Year ending June 2009 Most commonly prescribed subsidised drugs. Note: This does not include non-subsidised prescriptions (i.e. those paid for by the patient or those where the cost falls under the patient co-payment).

Chemical Name paracetamol aspirin Simvastatin Omeprazole Amoxycillin Amoxycillin clavulanate Metoprolol succinate Salbutamol Diclofenac sodium Cilazapril Zopiclone Prednisone Ibuprofen Flucloxacillin sodium Bendrofluazide Quinapril Fluticasone Felodipine Frusemide Thyroxine Prescriptions 1,970,000 1,320,000 1,240,000 1,070,000 980,000 870,000 810,000 770,000 580,000 540,000 520,000 500,000 470,000 430,000 420,000 420,000 400,000 390,000 380,000 380,000 Main use

pain relief prevents heart attack and stroke (cardiovascular risk) impaired cholesterol (cardiovascular risk) heartburn, stomach ulcers bacterial infections bacterial infections raised blood pressure, heart disease asthma symptoms pain/arthritis raised blood pressure cardiovascular risk) insomnia steroid treatment for asthma attacks, arthritis etc pain relief bacterial infections raised blood pressure (cardiovascular risk) raised blood pressure, heart disease, diabetes prevents asthma raised blood pressure, heart disease heart failure underactive thyroid gland

Health gains from funding decisions

PHARMAC also assesses the health gains obtained through its investments, and measures outcomes in quality adjusted life years (QALYs). QALYs are a standard pharmacoeconomic measure to compare different medicines that do different things. The funding decisions for the ten pharmaceuticals (indication in brackets) below > aripiprazole (psychosis, second line) > atomoxetine (attention deficit & hyperactivity disorder (ADHD) > bicalutamide (prostate cancer) > finasteride (prostate disorders) > imiquimod (some skin cancers, genital warts) > levetiracetam (epilepsy) > methylphenidate ER (ADHD) > pegylated interferon alpha-2a, pegylated interferon alpha2b with ribavirin (hepatitis B and C) > topiramate (epilepsy, migraine) are likely to lead to 27,200 new patients being treated in the first 12 months after listing. These patients are estimated to gain the equivalent of 500 to 1,000 full years of extra life (i.e. QALYs) over their lifetime. Aripiprazole, bicalutamide, pegylated interferon alpha-2a, pegylated interferon alpha-2b with ribavirin, and topiramate additionally will cause net savings to the health sector through reduced use of other more expensive medicines or reducing the need for hospital use or other costs to the health sector. In addition, some savings to the health sector alongside health gains are expected for finasteride, imiquimod, levetiracetam, atomoxetine, and methylphenidate ER. Amisulpride (pyschosis, first line) will also cause net savings to the health sector through reduced use of other more expensive medicines.