This is the text extract for Annual Review 2009 - Part 2, browse documents here.

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17

Review of expenditure, 2008/09

Key figures

> $653 million – yearly pharmaceutical expenditure (on budget) > $17.6 million – increase in spending compared to previous year (2.8% increase) > 35.3 million – number of funded prescriptions written (3.9% increase) > 3.1 million – number of New Zealanders receiving funded medicines > $32.6 million – amount of savings achieved

PHARMAC hit the target with its budget management this year. Expenditure came in at $653 million – exactly on budget. This is a $17.6 million increase in pharmaceutical spending compared to the previous year, an increase of 2.8%. At the same time, there was a 3.9% increase in the number of prescriptions written, up to 36.3 million prescriptions. The rate of prescription volume increase has slowed from the highs of recent years, indicating that the full impact of the Primary Healthcare Strategy has now been felt. Because the number of prescriptions being written continues to outstrip growth in spending, PHARMAC continues to focus on savings transactions to help meet the budget. In the past year, PHARMAC implemented three large-scale savings decisions that affected a total of 550,000 New Zealanders. These were for: > Paracetamol – used for pain relief > Omeprazole – used for gastrointestinal disorders like stomach ulcers, heartburn and gastric reflux > Simvastatin – used to treat raised cholesterol as part of overall cardiovascular risk reduction. Brand change can be upsetting for patients and we were well aware that, with such large-scale changes all happening at once, these changes needed to be implemented carefully. We supported the changes with information for health professionals and consumers and kept a watching eye on the patient responses. While savings transactions were an important feature of the year, we also managed to increase New Zealanders’ access to medicines with eight new chemicals funded, and access widened to a further 55. Many of these access widening decisions were a result of our ongoing project to `fix niggles’ for health professionals, and included moves such as removing specialist prescriber restrictions and, where appropriate, relaxing or removing Special Authority restrictions on medicines.

2004 $54.97 $45.19 $63.98 $11.53 $28.44 $19.22 $14.29 $20.72 $10.86 $27.57 $16.54 $19.81 $13.08 $13.06 $8.30 $16.37 $3.01 $7.33 $18.68 $5.33 2005 $60.82 $48.59 $68.64 $17.58 $29.12 $20.60 $18.65 $21.40 $11.32 $27.33 $14.52 $19.51 $13.37 $13.94 $9.83 $13.02 $3.94 $8.88 $17.50 $6.47 2006 $68.19 $53.45 $73.78 $21.27 $26.08 $22.51 $21.65 $24.80 $13.65 $29.71 $15.69 $16.28 $13.94 $13.88 $11.84 $13.68 $5.39 $10.37 $16.87 $8.83 2007 $68.86 $57.13 $75.58 $24.52 $29.10 $26.34 $19.34 $27.85 $16.62 $30.65 $17.23 $17.12 $14.50 $14.80 $13.56 $14.47 $9.14 $11.73 $16.20 $10.55 2008 $66.06 $60.58 $69.91 $29.29 $29.94 $29.36 $23.25 $24.62 $21.12 $20.81 $18.86 $19.03 $15.95 $15.47 $15.36 $16.02 $11.23 $13.82 $15.17 $12.21 2009 $63.47 $61.58 $43.42 $32.01 $31.19 $31.06 $27.84 $25.89 $23.35 $22.26 $21.18 $19.79 $17.26 $16.37 $16.35 $16.31 $15.93 $15.71 $14.45 $12.81

The Top 20 Expenditure Groups

Year ending 30 June

$ millions, cost ex manufacturer, excludes rebates and GST

Drug Type

Lipid Modifying Agents Antipsychotics Antiulcerants Beta Adrenoceptor Blockers Agents Affecting the Renin-Angiotensin System Diabetes Inhaled Long-acting Beta-adrenoceptor Agonists Antiepilepsy Drugs Chemotherapeutic Agents Antidepressants Analgesics Diabetes Management Immunosuppressants Antibacterials Calcium Homeostasis Calcium Channel Blockers Antirheumatoid Agents Antiretrovirals Inhaled Corticosteroids Endocrine Therapy

Main Use

Raised cholesterol (cardiovascular risk) Mental health (psychoses) Heartburn, stomach ulcers Heart disease Raised blood pressure (cardiovascular risk) Diabetes Asthma Epilepsy Cancer Mental health (depression) Pain relief Blood glucose monitoring Organ transplants, arthritis Bacterial infections Osteoporosis Heart disease Arthritis HIV/AIDS, viral infections Asthma Breast cancer

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Therapeutic group summary

Infections

PHARMAC’s longest-running optimal use of medicines campaign, Wise Use of Antibiotics, took a different approach this year. With the campaign’s key messages about using antibiotics only to treat bacterial infections appearing to have taken root with health professionals, we decided not to `re-launch’ the campaign for the winter cold and flu season. Instead, we developed a new resource for parents and caregivers to give them advice on giving medicine to children. The result, a collaboration with Plunket and the Paediatric Society is a leaflet titled Tips for Giving Medicine to Kids, and has proven popular. Among medicine funding decisions, the immune modulator drug pegylated interferon alpha was funded for hepatitis B, and given wider access to treat hepatitis C, for which it was already funded. Pegylated interferon was funded for other types (genotypes) of hepatitis C not previously funded, and it also meant the treatment could be used as earlier therapy without the requirement for substantial disease progression. Pegylated interferon can be used on its own, or in combination with another drug, ribavirin. PHARMAC’s estimate is that about 35 people per year would use the treatment for hepatitis B, and a further 40 for hepatitis C. It is available in addition to already-funded treatments such as standard interferon, lamivudine and adefovir.

Major decisions

> Pegylated interferon – now funded for all Hepatitis C genotypes, and for Hepatitis B.

Antibiotics

Cost (ex GST) $12.00 M $10.00 M $8.00 M $6.00 M $4.00 M $2.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Prescriptions 1,200k 1,000k 800k 600k 400k 200k 0k

Cost (ex GST) Amoxycillin Cost (ex GST) Amoxycillin Clavulanate

Prescriptions Amoxycillin Prescriptions Amoxycillin Clavulanate

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Asthma/ respiratory

Major decisions

> Development of a new Access and Optimal Use campaign – Space To Breathe - He Tapu Te Ha.

PHARMAC launched a new programme aimed at childhood asthma in April 2009 called Space to Breathe. The programme is focussed on Māori and Pacific children with asthma and their carers. Developed by PHARMAC, the Space to Breathe programme aims to promote better awareness of asthma and how to manage it. The programme targets health professionals, carers of asthmatic children and children with asthma. By better understanding asthma and how to manage it, families can avoid the need for hospitals, and even death that can result from asthma. The Space to Breathe (He Tapu te Hā) childhood asthma educated programme was piloted in Taranaki this year. It is aimed at Māori and Pacific children because they are disproportionately affected by asthma compared to other New Zealand children. Each year, around four out of every 1000 children under the age of 19 are hospitalised for asthma. But for Māori, this statistic is higher (6 out of every 1000) compared to NZ European (2 out of every 1000). Māori children are four times more likely to die from asthma than NZ European children. PHARMAC’s data shows that many Māori and Pacific people are being prescribed and using their reliever medicine to treat asthma when they should be using a preventer medicine to prevent asthma symptoms. Rather than using long-acting preventers, people are relying on short-acting relievers (like salbutamol) after symptoms appear. Space to Breathe was developed by PHARMAC in conjunction with regional health providers (Tui Ora, Tihi and Piki Te Ora) in New Plymouth, and the Best Practice Advocacy Centre BPACNZ. The Paediatric Society and the Asthma and Respiratory Foundation were also strongly involved in the development of the programme. Its aims are to > increase awareness and knowledge of asthma;

Asthma

Cost (ex GST) $45.00 M $40.00 M $35.00 M $30.00 M $25.00 M $20.00 M $15.00 M $10.00 M $5.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04

> increase knowledge and understanding about asthma medicines; > increase confidence of children with asthma and their families in managing asthma; and

Prescriptions > provide support and resources for carers to support wellness through management of asthma. 1,000k

The programme targets pre-school children and their families through kohanga reo and 900k early childhood education centres. It also featured a new decision support tool developed by 800k BPACNZ for doctors to use when diagnosing and treating asthma.

700k 600k 500k 400k

Asthma

Cost (ex GST) $45.00 M Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 $40.00 M $35.00 M $30.00 M $25.00 M $20.00 M $15.00 M $10.00 M $5.00 M $0.00 M Jun 98 Jun 99

300k 200k 100k 0k Prescriptions 1,000k 900k 800k 700k 600k 500k 400k 300k 200k 100k 0k Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09

Cost (ex GST) inhaled corticosteroids Cost (ex GST) long-acting beta agonists Cost (ex GST) Other Asthma Cost (ex GST) short-acting beta agonists Prescriptions inhaled corticosteroids Prescriptions long-acting beta agonists Prescriptions Other Asthma Prescriptions short-acting beta agonists

Cost (ex GST) inhaled corticosteroids Cost (ex GST) long-acting beta agonists

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Heart disease

Simvastatin continues to be one of the most commonly-prescribed medicines in the country, now accounting for more than a million prescriptions per year. During the year PHARMAC completed a move to sole supply of simvastatin, with generic supplier Arrow winning with its Arrow-Simva. The transition to the generic – involving more than quarter of a million people, went very smoothly. Though the use of statins continues to increase (indicated by the graph), there are still indications that some groups with high needs are not getting statins at the same rate as other New Zealanders. So there is a continuing need for campaigns like PHARMAC’s One Heart Many Lives, which targets Māori and Pacific men. The messages from the campaign are simple – Māori and Pacific men die up to 14 years earlier than other New Zealand men, often from heart disease. So get your heart checked, take action, and take medicine prescribed for you, including statins. One Heart Many Lives continues to operate in three DHB regions – Hawke’s Bay, Northland and Lakes. In addition, PHARMAC has also taken the campaign to the people at community days such as Te Ra o Te Raukura in Lower Hutt in early 2009.

Major decisions

> Statins – simvastatin sole supply awarded to Arrow-Simva

Cholesterol-lowering treatments

Cost (ex GST) $70.00 M $60.00 M $50.00 M $40.00 M $30.00 M $20.00 M $10.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 Prescriptions 1,600k 1,400k 1,200k 1,000k 800k 600k 400k 200k 0k

Cost (ex GST) Combination treatments Cost (ex GST) Fibrates Cost (ex GST) Inhibitors Cost (ex GST) Statins Cost (ex GST)

Prescriptions Combo Prescriptions Fibrates Prescriptions Inhibitors Prescriptions Statins

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Anti-ulcerants

Major decisions

> Omeprazole – Dr Reddys brand goes sole supply

One of the major changes put in place during the year was the shift from the Losec brand of the gastrointestinal drug omeprazole, to the Dr Reddy’s brand. The move, estimated to involve net savings of $16 million over five years, began in January 2009 and was completed by May. In that time, about 250,000 people changed to the generic brand. In terms of patient numbers, this was one of the largest-scale brand changes PHARMAC has implemented. It was supported by information for patients and health professionals, and was closely watched by both PHARMAC and the medicine adverse assessment centre, CARM. CARM received a number of reports to its database, but the nature and number of these did not lead Medsafe to recommend any action be taken. Medsafe commented that most of the reports were for side effects and responses that were common for all brands of omeprazole. With the move to a generic came the end of sizeable rebate payments to PHARMAC that had been linked with the supply of Losec. This also led to a considerable loss of revenue (through reduced markups) in the pharmacy and pharmacy wholesaler supply chains. Taking into account the impact on pharmacy, PHARMAC and DHBs agreed to reinvest part of the savings into the pharmaceutical supply chain, to maintain the viability of wholesalers and pharmacy.

Anti-ulcerants

Cost (ex GST) $80.00 M $70.00 M $60.00 M $50.00 M $40.00 M $30.00 M $20.00 M $10.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 600k 400k 200k 0k Prescriptions 1,400k 1,200k 1,000k 800k

Cost (ex GST) H2 Antagonists Cost (ex GST) Proton Pump Inhibitors

Prescriptions H2 Antagonists Prescriptions Proton Pump Inhibitors

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Cancers and transplant medicines

Two new treatments were funded for prostate disorders in men. Finasteride (Fintral) was funded for benign prostatic hyperplasia, while bicalutamide (Bicalox) was funded for advanced prostate cancer. Both of the drugs are off-patent and funded at very competitive prices compared with other countries. Both prostate cancer and BPH are relatively common, particularly in men aged over 50. Prostate cancer is the most commonly diagnosed cancer in New Zealand men and the third most common cause of male cancer deaths. Prostate cancer accounts for 3.8% of all male deaths in New Zealand. Bicalutamide is funded under Special Authority for advanced prostate cancer. PHARMAC estimates that it could be used by about 160 people in the first year, rising to more than 300 by 2011. Finasteride is funded under Special Authority for men who are unable to be successfully treated with another group of drugs called alpha blockers. Up to 3000 men could be treated with finasteride each year. Meanwhile, a new treatment was funded for people with a generally non-malignant form of skin cancer. Imiquimod (Aldara) is a cream that people can apply themselves to treat basal-cell carcinoma. While surgery remains the most effective treatment for skin cancers, imiquimod is useful in treating people for whom surgery might be inappropriate. Imiquimod (Aldara) is also funded to treat genital warts. PHARMAC estimates that up to 4500 people with skin cancer will be treated annually with imiquimod by 2013. Together with its other uses, PHARMAC estimates nearly 12,000 people will be treated with imiquimod annually by 2013.

Major decisions

> Imiquimod for some forms of skin cancer, and genital warts > Finasteride for benign prostatic hyperplasia > Bicalutamide for prostate cancer

Cancer treatments

Cost (ex GST) $35.00 M $30.00 M $25.00 M $20.00 M 60k $15.00 M $10.00 M $5.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Jun 09 40k 20k 0k Prescriptions 120k 100k 80k

Cost (ex GST) Chemotherapeutic Agents Cost (ex GST) Endocrine Therapy Cost (ex GST) Immunosuppressants

Prescriptions Chemotherapeutic Agents Prescriptions Endocrine Therapy Prescriptions Immunosuppressants

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Mental Health and Neurology

ADHD

Major decisions

> Extended release methylphenidate (Concerta) for ADHD > Atomoxetine (Strattera) for ADHD > Amisulpride for schizophrenia > Aripiprazole for schizophrenia > Topiramate for migraines (and first line for epilepsy) > Levetiracetam for epilepsy

Two new treatments were funded to provide long-acting therapies for the behavioural disorder attention deficit hyperactivity disorder (ADHD). In September 2008, PHARMAC began funding for extended-release methylphenidate (Concerta). This added to the already-funded immediate release and sustained release formulations of methylphenidate. Having an extended-release formulation on the schedule meant that for the first time a once-a-day treatment was funded. Then in April 2009, we added a different type of ADHD treatment, atomoxetine (Strattera). Like Concerta, atomoxetine is a once-a-day treatment, but has a different therapeutic action to methylphenidate, and is not a stimulant nor a controlled drug. This means it has benefits for health professionals and patients. It is funded for those people who haven’t responded to, or can’t take, the stimulant medicines such as methylphenidate or dexamphetamine. Overall, PHARMAC expects only a small increase in the number of people receiving funded treatment for ADHD to increase, as most patients would already be taking the other funded preparations. About 11,000 people, many of them children, receive funded ADHD medicines.

Attention De cit Disorder

Cost (ex GST) $2.50 M Attention Cost (ex GST) $2.00 M $2.50 M $1.50 M $2.00 M Prescriptions

De cit Disorder

70k 60k Prescriptions 70k 50k 60k 40k 50k 30k Prescriptions 40k 20k 70k 30k 10k 60k 20k 0k 50k 10k 40k 0k 30k Jun 09 Jun 09 Jun 09 20k 10k 0k Jun 08

Attention De cit Disorder

$1.00 M $1.50(ex GST) Cost M $2.50 M $0.50 M $1.00 M $2.00 M $0.00 M $0.50 M $1.50 M

Jun 98

Jun 99

Jun 00

Jun 01

Jun 02

Jun 03

Jun 04

Jun 05

Jun 06

Jun 07 Jun 07 Jun 07

Jun 98

Jun 99

Jun 00

Jun 01

Jun 02

Jun 03

Jun 04

Jun 05

Jun 06

Cost (ex GST) Methylphenidate - Extended Release

Immediate Release Cost $0.50 M (ex GST) Methylphenidate - Total (adj Sustained Release) Cost (ex GST) Methylphenidate Immediate Release Prescriptions Methylphenidate -- Sustained Release Cost (ex GST) Methylphenidate Sustained Release Prescriptions Methylphenidate -- Extended Release $0.00 M Cost (ex GST) Methylphenidate Extended Release Prescriptions Methylphenidate -- Total (adj Sustained Release) Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Prescriptions Methylphenidate - Sustained Release Prescriptions Methylphenidate -- ImmediateRelease Cost (ex GST) Methylphenidate Extended Release Prescriptions Methylphenidate -- Sustained Sustained Release) Cost (ex GST) Methylphenidate Total (adj Release Cost (ex GST) Methylphenidate - Extended Release Cost (ex GST) Methylphenidate - Total (adj Sustained Release) Prescriptions Methylphenidate - Immediate Release Prescriptions Methylphenidate - Sustained Release Prescriptions Methylphenidate - Extended Release Jun 06

Immediate Release Prescriptions Methylphenidate - Total (adj Sustained Release)

Jun 08

$0.00 M Cost (ex GST) Methylphenidate - Immediate Release $1.00 M (ex GST) Methylphenidate - Sustained Release Cost

Jun 08

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Schizophrenia and related illness

Meanwhile, for patients with schizophrenia and related illnesses PHARMAC funded two new antipsychotic treatments that are associated with less weight gain than some of the existing funded treatments. Amisulpride (Solian) and aripiprazole (Abilify) were both funded during the year and add to a broad range of anti-psychotic medicines that are funded. Amisulpride is funded without restrictions, so is available as a first-line treatment option for all patients, while aripiprazole is funded under Special Authority as a second-line treatment. In PHARMAC’s view it’s important to maintain a range of anti-psychotic treatments, given the Antipsychotics difficulties of treating the condition, and the listings this year restore some of the range that has been lost with some older anti-psychotics being withdrawnCostsuppliers in recent years. by (ex GST) Overall, antipsychotics continue to be one of the highest expenditure groups with total $60.00 M spending of over $60 million annually.

Antipsychotics

Cost (ex GST) $60.00 M $50.00 M $40.00 M $30.00 M $20.00 M $10.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02

Prescriptions 300k 250k 200k 150k 100k Jun 03 Jun 04 Jun 04 50k 0k Jun 05 Jun 05

Antipsychotics

Cost (ex GST) $60.00 M $50.00 M $40.00 M $30.00 M $20.00 M $10.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07

$50.00 M $40.00 M Prescriptions $30.00 M $20.00 M $10.00 M $0.00 M 300k 250k 200k 150k Jun 98 Jun 99 Jun 00 Jun 01 Jun 02

Cost (ex GST) Depot Injections Jun 03 Jun 04 Jun 05 Jun 06 Jun 07 Jun 08 Cost (ex GST) Old antipsychotics Prescriptions Depot Injections Jun 09 Cost (ex GST) New antipsychotics

Prescriptions Prescriptions Prescriptions

100k

Cost (ex GST) Depot Injections 50k Cost (ex GST) New antipsychotics Cost (ex GST) Old antipsychotics 0k Jun 08 Jun 09

Antidepressants Prescriptions New antipsychotics

Prescriptions Old antipsychotics Cost (ex GST) $35.00 M $30.00 M $25.00 M $20.00 M Prescriptions 800k 700k 600k 500k 400k 300k 200k Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 100k 0k Jun 03

Antidepressants

Cost (ex GST) Depot Injections Cost (ex GST) New antipsychotics Cost (ex GST) Old antipsychotics

Cost (ex Prescriptions Depot Injections GST) $35.00 M Prescriptions New antipsychotics Prescriptions Old antipsychotics $30.00 M Prescriptions $25.00 M 800k $20.00 M 700k $15.00 M 600k 500k 400k 300k Jun 98 Jun 99 Jun 00 Jun 01 Jun 02

Antidepressants

Cost (ex GST) $35.00 M $30.00 M $25.00 M

$15.00 M $10.00 M $5.00 M $0.00 M

$10.00 M $20.00 M $5.00 M $15.00 M $0.00 M $10.00 M $5.00 M $0.00 M Jun 98 Jun 99 Jun 00 Jun 01 Jun 02 Jun 03 Jun 04 Jun 05 Jun 06 Jun 07

Jun 03

Jun 04

Jun 05

Jun 06

Jun 07

Jun 08

200k

Cost (ex GST) New Antidepressants Prescriptions Old Antidepressants Prescriptions New Antidepressants

Jun 09

Cost (ex GST) Old Antidepressants

Prescription

Prescription

100k Cost (ex GST) Old Antidepressants Cost (ex GST) New Antidepressants 0k Jun 08 Jun 09

Cost (ex GST) Old Antidepressants Cost (ex GST) New Antidepressants

Prescriptions Old Antidepressants Prescriptions New Antidepressants

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Migraines and epilepsy

People suffering from migraines received access to a further treatment during the year, with a decision to widen access to the epilepsy treatment topiramate (Topamax). Topiramate is a further addition to the range of migraine treatments that also grew in the previous financial year with the listing of rizatriptan wafers. The widening of access to topiramate also means it is now funded as a first-line treatment for epilepsy. Another epilepsy decision during the year was the funding for leviteracetam (Keppra), a lastline treatment for the neurological condition. Access to leviteracitam, which is provided to patients who have tried and failed all other available treatments, is provided through a panel of doctors.

Dermatology

Vocationally-registered general practitioners can now provide funded access to the severe acne treatment isotretinoin and psoriasis treatment acetretin. Previously, the treatments were only available from specialist dermatologists The move should help resolve differences in access for patient groups. An analysis of PHARMAC’s data showed that people from wealthier areas were more likely to have funded isotretinoin than those from less well-off areas. This suggests that the cost of seeing a specialist – and access to a specialist – was a barrier to treatment. Isotretinoin is a potentially dangerous medicine, 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. PHARMAC acknowledged safety issues that were raised during consultation, and responded to them. GPs were always able to prescribe the drug, although the prescriptions would not have been subsidised. In PHARMAC’s view, vocationally-registered GPs are well placed to make clinical judgements about the appropriateness of prescribing medicines like isotretinoin. PHARMAC worked closely with the College of GPs around the decision and its implementation. To support the decision, information was provided to doctors through the Otago University-based Best Practice Advocacy Centre (bpacnz), and through PHARMAC’s Seminar Series. PHARMAC estimates that the access widening will lead to a 5-10% increase in the use of isotretinoin, translating to an increase in spending of $55,000 to $100,000 per year.

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PHARMAC in the wider health sector

As well as its work in securing subsidies for medicines used in the community, PHARMAC negotiates national agreements for some medicines used in District Health Board hospitals, and conducts other procurement work on behalf of DHBs or the Ministry of Health. In this way, PHARMAC uses its expertise in combining medical advice with commercial skills to get greater efficiencies in hospital purchasing. Work in previous years that has continued during 2008/09 includes:

>Negotiating national agreements for some medicines used in DHB hospitals (as published in Section H of the Pharmaceutical Schedule) >Procurement of the influenza vaccine on behalf of the Ministry of Health >Procurement of bulk intravenous fluids >Procurement of radiological contrast media >Procurement of recombinant factor VIII for haemophilia

DHB Procurement

PHARMAC continued to manage national agreements for hospital pharmaceuticals and some related products . There were 278 changes to the Hospital Schedule (Section H of the Pharmaceutical Schedule) in 2008/09, made up of: >181 new listings >61 price decreases, and >36 price increases. As in previous years much of the activity was via the annual multiproduct tender, which provided an estimated $3.9 million of savings in the 2008/09 financial year. There were additional savings with price reductions for oxaliplatin and omeprazole, however this was to some extent offset by price increases for recombinant factor VIII. Overall, we estimate changes in 2008/09 achieved additional savings of approximately $5 million per annum for DHBs. PHARMAC also ran commercial processes in 2008/09 for volatile anaesthetics, bulk intravenous fluids, and radiological contrast media. We estimate savings in excess of $1 million per year can be expected from the anaesthetics process. The other procurement work is ongoing. In line with the recommendations of the Horn report, we are keen to assist DHBs with procurement in areas where they see that PHARMAC can gain greater efficiencies or add value to DHB work. We continue to talk with DHB CEOs about where PHARMAC may be able to assist.

Influenza vaccine

A world-wide alert over the H1N1 influenza virus (“Swine Flu”), prompted much higher demand for influenza vaccines this year. The Ministry of Health lengthened the subsidised flu season as part of its raised pandemic alert provisions, and this combined with public concern led to nearly a million doses (961,000) of the vaccine being supplied – most of it Government-funded. This was more than 20% higher than 2008, and signficantly more than our stock projections for the year. With the increased demand PHARMAC sought additional supplies from vaccine companies. We were grateful for the efforts of Sanofi and GlaxoSmithKline to source additional supplies so that the needs of New Zealanders could be met.

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Workforce development

PHARMAC and Nga Kaitiaki o te Puna Rongoa o Aotearoa (Māori Pharmacists Association or MPA) have combined to sponsor scholarships for young Māori pharmacy students. The Hiwinui Heke Scholarships are named after Hiwinui Heke (Te Arawa), who was one of the first Māori to graduate from a New Zealand pharmacy school in 1955. Now semi-retired, Mr Heke continues to work in a Rotorua pharmacy part-time. At a ceremony at the Otago University Pharmacy School, the first awards were presented to Kevin Pewhairangi (Ngati Porou, Ngati Whakaue), Tess James of the School of Pharmacy University of Otago (Ngati Porou) and Caroline Blucher, School of Pharmacy, University of Auckland (Te Aupouri). Kevin Pewhairangi, 24, was awarded a $5000 scholarship while Tess James, 22, received a $2,500 scholarship – both students are in their last year of study. Caroline Blucher, a 19-year-old first year student, also received a $2500 scholarship.

(left to right) Kevin Pewhairangi, Hiwinui Heke, Leanne Te Karu (Māori Pharmacists Association) Caroline Blucher and Tess James at the scholarship presentations, Otago University

The awards are aimed at encouraging Māori in the pharmacy profession. A $2,500 scholarship is available at each School of Pharmacy for a third or fourth year Māori student, while a further $5,000 scholarship is awarded for a pharmacy student who has a history working as a Pharmacy Technician/Dispensary Technician or a Dispensary Assistant. PHARMAC sees the scholarships as a positive initiative to help Māori who have chosen to pursue a career in pharmacy. They align with PHARMAC’s Māori Responsiveness Strategy, which aims to improve knowledge about and use of medicines by Māori. Awards will be presented each year, with a total value of $10,000.

Fixing niggles in the system

We’re aware that some of the systems we set up create work for health professionals and this can be frustrating for them. We’re committed to reducing paperwork and bureaucracy for health professionals where possible and removing `niggles’ from the medicine funding system. We’ve addressed this in a number of ways in the past year.

Electronic Special Authority

Special Authority is the targeting mechanism PHARMAC uses to ensure medicines go to the patients who most need them. In 2006 PHARMAC worked with the Ministry of Health and software providers to set up an electronic application system, and this has grown in popularity. Under the manual application system, patients sometimes had to wait up to two weeks to receive Special Authority approvals. Now the electronic system means applications can be processed while the patient is still consulting with their doctor. The speed and convenience of the electronic system has made it popular with doctors and patients. By the end of 2008/09, more than 3000 doctors were using an electronic system, including many hospital doctors. Electronic applications now out-stripping manual ones, where doctors fill out a form and fax it to the Ministry. The speed and convenience of the electronic system has made it popular with doctors and patients. By the end of 2008/09, about 3200 doctors were using an electronic system, including many hospital doctors. Numbers of electronic applications now out-strip manual ones, where doctors fill out a form and fax it to the Ministry.

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Additional payments to pharmacy

During 2008/09 PHARMAC put in place brand changes for a number of medicines, including two that had previously been subject to substantial rebates. Under the rebates mechanism, the pharmaceutical company charged a higher price for their product which was fully subsidised, and a portion of that was then rebated back to PHARMAC (and then passed on to District Health Boards). With the change to generic forms of omeprazole and simvastatin, the headline price dropped significantly. This had an impact on the pharmacy supply chain, because part of pharmacy reimbursement is based on a percentage margin on the headline price of the medicine. To help compensate pharmacy for the loss of revenue, DHBs agreed to reimburse pharmacy part of the savings that occurred as a result of the brand changes. The payments, were paid twice by PHARMAC during 2008/09 and totalled $2 million. The net effect of the additional payments was that pharmacy did not lose the income it would have, while DHBs still obtained savings from the reduction in medicine cost.

Exceptional Circumstances

Exceptional Circumstances is the mechanism that gives people access to medicines that aren’t otherwise funded through the Pharmaceutical Schedule. PHARMAC administers three Exceptional Circumstances schemes for community (CEC), hospital (HEC), and cancer (CaEC) medicines. The Community EC scheme provides access to medicines for people with unusual clinical circumstances. Access is subject to approval by a panel of clinicians. The budget for CEC for 2009 was $3 million, which is part of the overall Pharmaceutical budget. HEC has been running since July 2003. This mechanism enables DHB hospitals to fund medicines in the community where it is more cost-effective for the DHB to do so than continue to treat people in hospital. Cancer EC was set up in 2005. This mechanism allows DHB hospitals to fund, on application to PHARMAC, cancer medicines that are not funded through the Pharmaceutical Cancer Treatments “basket” – a list of cancer medicines that all DHB hospitals must fund. As part of Actioning Medicines New Zealand, PHARMAC set about a review of the Exceptional Circumstances Schemes to determine whether they were meeting the needs of patients and functioning well. Subsequent to the Medicines New Zealand work, in early 2009 the new Government announced it would set up a Panel to examine high cost highly specialised medicines, and as part of the review would look at the Exceptional Circumstances schemes. As a result PHARMAC’s own review was put `on hold’ pending the outcome of the high cost panel’s work. In the meantime, PHARMAC continued to operate the Exceptional Circumstances schemes. Overall, PHARMAC received 3192 Exceptional Circumstances applications during the year, of which 2460 were approved. This was an increase in both the number of applications and approvals compared to 2008. A breakdown of applications received and processed during the year is provided in the table below.

Special Authority removals/Specialist Restrictions

As outlined above, Special Authority is an important mechanism for ensuring medicines get to the people who most need them. Part of the success of the system is in ensuring it isn’t overused, so PHARMAC has an ongoing review in place to ensure the restrictions that are in place are appropriate. During 2009/10 PHARMAC removed Special Authority requirements, or specialist prescriber restrictions, from 29 medicines. This followed on from the previous financial year when 43 such restrictions were removed.

Summary of Exceptional Circumstances schemes

Received Community EC Community EC (automatic approvals)

Note: The number of approved plus declined may not equal the total number of applications for a variety of reasons. > the application may be withdrawn > the patient may have died > the application may be approved under other rules (eg as a Special Authority); or > the application may be transferred from HEC to CEC or vice versa.

Approved 86 156 351 604 804 401 1 1 187 10 2460

Declined 227 16

Initial Renewal Initial Renewal Initial Renewal Initial Renewal Initial Renewal

365 174 351 604 1059 414 1 1 213 10 3192

Hospital EC Hospital EC (automatic approvals) Cancer EC Totals

148 3

4 398

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External advice from our Advisory Committees

During the year we progressed work to ensure our external advisory committees perform as optimally as possible. We want to ensure we get the best possible advice from these committees and this includes the structures set up to govern the committees are as strong as possible.

Reviews of both our clinical advisory committee (PTAC, the Pharmacology and Therapeutics Advisory Committee) and Consumer Advisory Committee were actions identified for PHARMAC as part of Actioning Medicines New Zealand. From our point of view, it’s important these committees function well and give us robust advice, and that their advice has credibility in the eyes of their peers and the wider community.

PTAC Terms of Reference review

By the end of 2008 we had completed the review of the Terms of Reference PTAC, and its sub-committees. PTAC, which consists of nine practicing doctors, has 15 sub-committees with a range of specialist knowledge including cancer treatments, heart disease, endocrinology and mental health. Overall, PTAC and its subcommittees consist of more than 50 practicing doctors and are a major asset for PHARMAC. The work on reviewing PTAC’s Terms of Reference aimed to clarify the role and functions of the committee and its relationship with PHARMAC. We want to avoid the perception that the members of the various committees are `captured’ by PHARMAC, so they maintain their clinical independence and the integrity of their advice. Changes from the review include: >Publishing more minutes relating to pharmaceutical funding applications on PHARMAC’s website, including when PTAC has deferred making a recommendation. PHARMAC is also now publishing minutes from PTAC subcommittee meetings on its website. >The Committee’s operations – its membership, scope of activity and specific functions – have been clarified in a number of ways. For example: >membership can now include senior health professionals, such as public health physicians, pharmacists or nurses – not just medical practitioners as in the past. This change reflects that many types of health professionals, not just doctors, have an interest and expertise in prescription medicines; and >PTAC can now request that a subcommittee undertake a “rapid review”, in order to receive specialised advice from a subcommittee in a more timely way. >The relationship between PHARMAC and PTAC has also been clarified, like making clear that PTAC can provide PHARMAC with any and all information and views it considers desirable. These changes are intended to maintain and improve the relationship and continue PTAC’s tradition of providing objective advice to PHARMAC. Overall, the changes are aimed at increasing public confidence in the operations of PTAC and its sub-committees.

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Consumer participation work

When we thought through the issues around the Consumer Advisory Committee (CAC) , we realised that there was a broader question to ask - `how should PHARMAC ensure consumers are participating in its work?’ A review of CAC’s Terms of Reference, something PHARMAC had committed to through its Statement of Intent, formed a part of this wider work. We decided to start by seeking information about how consumers participate in Government health bodies and decision making in other countries. We also sought the views of the community on how the CAC should optimally work. While this was a bit of a `blue skies’ question, the intention was to ask people a very broad question to help identify what issues people had with CAC and how these could be addressed. The information we obtained through these processes was very valuable, and was able to inform a further step in our process. In early October 2009 we released a discussion document on PHARMAC’s consumer participation work. This put forward seven options which we sought people’s feedback on. We also asked for other suggestions from people as to how consumer participation in PHARMAC’s work could be improved. The seven options broke down into three distinct categories: >Increasing the amount of information provided to consumers >Formalising face-to-face meetings with consumer groups >Changes to PHARMAC’s decision-making processes to include consumer views or reviews. Views are being sought on these options, and any other ideas people want to put forward, by 4 December 2009. We’ll then do some further analysis before deciding on next steps and completing the review of the CAC Terms of Reference.

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Directory

PHARMAC’s Advisory Committees

Pharmacology and Therapeutics Advisory Committee (PTAC)

Chair Professor Carl Burgess MBChB, MD, MRCP (UK), FRACP, FRCP, Physician & Clinical Pharmacologist Deputy Chair Dr Paul Tomlinson BSc, MBChB, MD, MRCP, FRACP, Paediatrician Committee Members Dr Ian Hosford MBChB, FRANZCP, Psychiatrist Dr Sisira Jayathissa MBBS, MD, MRCP (UK), FRCP (Edin), FRACP, FAFPHM, Dip Clin Epi, Dip OHP, Dip HSM, MBS, Physician Dr George Laking PhD, MB, B.Med.Sci, MD, FRACP, Oncologist Dr Jim Lello BHB, MBChB, DCH, FRNZCGP, General Practitioner Dr Graham Mills MBChB, MTropHlth, MD, FRACP, Infectious Diseases Physician

The PHARMAC Board

Chairman Richard Waddel BCom, FCA, AFInstD Deputy Chairman * Professor Gregor Coster CNZM, MSc (Hons), PhD, MBChB, FRNZCGP Directors Kura Denness (Te Atiawa) MBA CA Dr David W Kerr MBChB, FRNZCGP (Dist), FNZMA David Moore MCom, Dip Health Econ (Tromso), CA Adrienne von Tunzelmann MA (Hons), Master of Public Policy (Dist) * Did not seek reappointment from 1 August 2009. Replaced as deputy chair by Stuart McLauchlan BCom, FCA (PP) , AFInstD

Dr Peter Pillans MBBCh, MD, FCP, FRACP, Physician & Clinical Pharmacologist Dr Mark Weatherall BA, MBChB, MApplStats, FRACP, Physician Dr Howard Wilson BSc, PhD, MB, BS, Dip Obst, FRMZCGP, FRACGP, General Practitioner PTAC Subcommittees Analgesic - Dr Howard Wilson (Chair, PTAC, General Practitioner), Dr Ian Hosford (PTAC, Psychiatrist), Dr Rick Acland (Anaesthetist), Dr Jonathan Adler (Palliative Care Specialist), Dr Bruce Foggo (Palliative Care Specialist), Dr Lindsay Haas (Neurologist), Dr Geoff Robinson (Physician), Dr Jane Thomas (Paediatric Anaesthetist). Anti-infective - Dr Graham Mills (Chair, PTAC, Infectious Diseases Physican), Dr Steve Chambers (infectious disease specialist), Dr Iain Loan (General Practitioner), Dr Howard Wilson (PTAC, General Practitioner). Cancer Treatments (CaTSoP) - Prof Carl Burgess (Chair, PTAC Chair, Clinical Pharmacologist, Physician), Dr Bernie Fitzharris (Oncologist), Dr Peter Ganly (Haematologist), Dr Vernon Harvey (Oncologist), Dr Tim Hawkins (Haematologist), Dr Scott Babbington (Radiation Oncologist), Dr Anne O’Donnell (Oncologist), Dr Lochie Teague (Paediatric Haematologist & Oncologist), Dr George Laking (PTAC, Oncologist). Cardiovascular - Dr Sisira Jayathissa (Chair, PTAC, Physician), Dr Peter Pillans (PTAC, Physician/Clinical Pharmacologist), Dr Malcolm Abernathy (Cardiologist), Dr Lannes Johnson (General Practitioner), Dr Stewart Mann (Cardiologist), Dr Richard Medlicott (General Practitioner), Dr Mark Weatherall (PTAC, Geriatrician). Diabetes – Dr George Laking (Chair, PTAC, Oncologist), Prof. Carl Burgess (PTAC Chair, Clinical Pharmacologist, Physician), Andrea Rooderkerk, (Diabetes Nurse Specialist), Dr Nic Crook (Endocrinologist), Dr Peter Moore (Physician), Dr Bruce Small (General Practitioner), Dr David Hopcroft (General Practitioner), Dr Craig Jefferies (Paediatric Endocrinologist).

PHARMAC’s Management Team

Chief Executive Matthew Brougham MSc (Hons), Dip Health Econ (Tromso) Management Team Peter Alsop - Manager, Corporate and External Relations Steffan Crausaz BPharm, MSc, MRPharmS - Manager, Funding & Procurement Rachel Mackay BA, NZIMR - Manager, Schedule and Contracts Dr Peter Moodie BSc, MBChB, FRNZCGP - Medical Director Marama Parore (Ngati Whatua, Ngati Kahu, Nga Puhi) - Manager, Access and Optimal Use & Māori Health Manager Rico Schoeler - Manager, Analysis & Assessment

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Growth Hormone - Prof Carl Burgess (Chair, PTAC Chair, Clinical Pharmacologist, Physician), Dr Paul Tomlinson (PTAC, Paediatrician), Prof. Wayne Cutfield (Paediatric Endocrinologist), Assoc. Prof. Paul Hofman (Paediatric Endocrinologist), Prof. Ian Holdaway (Endocrinologist), Dr Penny Hunt (Endocrinologist), Assoc. Prof. Patrick Manning (Endocrinologist), Dr Esko Wiltshire (Paediatric Endocrinologist). Hormone and Contraceptive - Dr Howard Wilson (Chair, PTAC, General Practitioner, Clinical Pharmacologist), Prof John Hutton (Gynaecologist), Dr Frances McClure (General Practitioner), Dr Christine Roke (Family Planning), Dr Bruce Small, (General Practitioner), Dr Stella Milsom (Endocrinologist). Mental Health - Dr Ian Hosford (Chair, PTAC, Psychiatrist), Dr Jim Lello (PTAC, General Practitioner) Dr Crawford Duncan (Psychiatrist), Dr Verity Humberstone (Psychiatrist), Professor Richard Porter (Psychiatrist), Dr Gavin Lobo (General Practitioner), Dr Matthew Eggleston (Paediatric Psychiatrist). Neurological - Dr Sisira Jayathissa (Chair, PTAC, Physician), Dr Alistair Dunn (General Practitioner), Dr Lindsay Haas (Neurologist), Dr William Wallis (Neurologist), Dr Peter Bergin (Neurologist), Dr Richard Hornabrook (General Practitioner), Dr Mark Weatherall (PTAC, Geriatrician). Ophthalmology - Prof Carl Burgess (Chair, PTAC Chair, Clinical Pharmacologist, Physician), Dr Neil Aburn (ophthalmologist), Dr Rose Dodd (General Practitioner), Dr Steve Guest (Vitreo Retinal Surgeon), Dr Allan Simpson (Ophthalmologist). Osteoporosis - Prof Carl Burgess (Chair, PTAC Chair, Clinical Pharmacologist, Physician), Dr Anna Fenton (Endocrinologist), Dr Bev Lawton (General Practitioner), Prof. Ian Reid (Endocrinologist), Dr Liz Spellacy (Geriatrician). Pulmonary Arterial Hypertension - Dr Howard Wilson (Chair, PTAC, General Practitioner, Clinical Pharmacologist), Dr Paul Tomlinson (PTAC, Paediatrician), Dr Andrew Aitken (Cardiologist), Dr Lutz Beckert (Respiratory Physician), Dr Clare O’Donnell (Paediatric Congenital Cardiologist), Dr Ken White (Respiratory Physician). Respiratory - Dr Jim Lello (Chair, PTAC, General Practitioner), Prof. Carl Burgess (PTAC Chair, Clinical Pharmacologist, Physician), Dr Ian Shaw (Paediatrician), Dr John McLachlan (Respiratory Physician), Dr Tim Christmas (Respiratory Physician), Dr Henry Doerr (General Practitioner), Dr John Wellingham (General Practitioner). Special Foods - Dr Jim Lello (Chair, PTAC, General Practitioner), Dr Simon Chin (Paediatric Gastroenterologist), Kerry McIlroy (Dietician), Jo Stewart (Dietician), Moira Styles (Dietician), Dr John Wyeth (Gastroenterologist). Tender Medical - Dr Jim Lello (Co-Chair, PTAC, General Practitioner), Dr Graham Mills (Co-Chair, PTAC, Infectious Disease Physican), Dr Paul Tomlinson (PTAC, Paediatrician), Ms Sarah Fitt (Pharmacist), Geoff Savell (Pharmacist), Clare Randall (Palliative Care Clinical Pharmacist), John Savory (Pharmacist), Dr David Simpson (Haematologist), Dr John McDougall (Anaesthetist). Transplant Immunosuppressant – Peter Pillans (Chair, PTAC, Physician/Clinical Pharmacologist), Dr Paul Tomlinson (PTAC, Paediatrician), Dr, Dr Peter Ganly (Haematologist), Dr Peter Ruygrok (Cardiologist), Dr Richard Robson (Nephrologist), Dr Kenneth Whyte (Respiratory Physician), Dr Stephen Munn (Transplant Surgeon).

Consumer Advisory Committee (CAC)

Sandra Coney (chair, women’s health advocate, Auckland), Vicki Burnett (mental health consultant, Auckland), Sharron Cole (Patron, Parents’ Centres, Wellington), Matiu Dickson (Te Runanga o Kirikiriroa chair, Hamilton), Anne Fitisemanu (Pacific health, Auckland), Dennis Paget (Grey Power, Blenheim), Paul Stanley (general manager, Waipareira Trust), Te Aniwa Tutara (Māori health manager, Waitemata DHB), Heather Thomson (health manager, Te Aroha, eastern Bay of Plenty).

Hospital Pharmaceuticals Advisory Committee (HPAC)

Sarah Fitt (Chief Pharmacist, Auckland DHB - Chair), Paul Barrett (Pharmacy Services Manager, Canterbury DHB), Simon Donlevy (Pharmacy Manager, Southland DHB), Jan Goddard (Manager, Pharmacy Services, Waikato DHB), Neil Aitcheson (Materials Manager, MidCentral DHB), David Ryan (Pharmacy Operations Manager, Waitemata DHB), Chris Morgan (Materials Management, Auckland DHB).

Panels

Exceptional Circumstances (also leviteracetam special access panel) Dr Howard Wilson (chair, general practitioner, pharmacologist), Dr Mel Brieseman (Medical Officer of Health - retired, Christchurch) Dr Paul Tomlinson (paediatrician, Southland DHB), Dr David Waite (physician, Capital & Coast DHB), Dr Sharon Kletchko (manager funding & planning, Nelson Marlborough DHB), Dr Andrew Herbert (consultant gastroenterologist, MidCentral DHB). Cystic Fibrosis Advisory Dr John Kolbe (respiratory physician), Dr Ian Shaw (paediatrician), Dr Richard Laing (respiratory physician), Dr Cass Byrnes (paediatrician). Gaucher Treatment Advisory Dr Callum Wilson (metabolic consultant), Dr Ruth Spearing (consultant haematologist), Dr Clinton Pinto (musculoskeletal radiologist). Multiple Sclerosis Treatment Advisory Dr Ernie Willoughby (neurologist), Dr David Abernethy (neurologist), Dr Alan Wright (neurologist), Dr Neil Anderson, (neurologist). Pulmonary Arterial Hypertension Dr Howard Wilson (Chair, PTAC, General Practitioner, Clinical Pharmacologist), Dr Paul Tomlinson (PTAC, Paediatrician), Dr Andrew Aitken (Cardiologist), Dr Lutz Beckert (Respiratory Physician), Dr Clare O’Donnell (Paediatric Congenital Cardiologist), Dr Ken White (Respiratory Physician). Growth Hormone Prof Wayne Cutfield (chair, paediatric endocrinologist), Assoc Prof Paul Hofman (paediatric endocrinologist), Prof Alistair Gunn (paediatrician).

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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. Pharmaceutical Management Agency Level 9, 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 ISSN 1179-3775 (Print) ISSN 1179-3783 (Online)