PHARMAC and hospital medical devices
Why is PHARMAC taking on management of hospital medical devices?
In the 2010/11 financial year, District Health Boards (DHBs) spent approximately $880 million on hospital devices, a cost which has been rising faster than the rate of economic growth over the last five years.
In 2012, the Government agreed to a phased plan for PHARMAC to progressively take on managing hospital medical devices, on the basis that there are likely to be significant benefits from application of the PHARMAC model.
The aims of PHARMAC’s role in managing hospital medical devices are to create national consistency in access to treatment, improve transparency of decision-making and improve the cost-effectiveness of public spending to generate savings.
Appropriate clinical advice is critical and underpins our approach to this work.
PHARMAC is committed to developing and enhancing its relationships with the large and varied group of people who interact with hospital medical devices in DHBs.
PHARMAC’s works towards full management of hospital medical devices will build on a base of devices procurement activity that Cabinet has asked us to undertake.
This work aims to get national contracts, for items already used in New Zealand. The contracts are optional for DHBs, but will offer savings benefits, should they switch or increase their mix of better value brands.
As of 1 May 2015, PHARMAC has around 14,000 medical devices under contract (and listed on the Pharmaceutical Schedule), covering estimated national expenditure of about $44 million per annum and delivering savings to DHBs of approximately $11.9m per annum.
PHARMAC’s hospital medical devices activity so far involves providing opportunities to DHBs through nationally consistent pricing of items already in use in New Zealand.
To this end, PHARMAC has so far negotiated national agreements with suppliers of ranges wound care products, sutures, laparoscopic equipment, orthopaedic implants (spine and trauma) and interventional cardiology products.
Following consultation with the sector, the items covered by national contracts have been listed on the Pharmaceutical Schedule (Section H, Part III ‘Optional Pharmaceuticals’).
The national agreements are optional for DHBs to use, but offer significant benefits if DHBs choose to increase their use of these better value products.
PHARMAC has not yet undertaken clinical assessment or prioritised the use of particular products over other similar products on the market. Clinical assessments of products continue to be made in DHBs and it is up to the discretion of clinicians as to whether or not a product is clinically appropriate to use.
Activity in some categories of products has only just begun and therefore PHARMAC anticipates that further ranges of products within devices categories will be added to the Schedule as agreements are reached with other suppliers.
DHBs may continue to purchase and use the products they consider to be the most appropriate and there are no restrictions on the use of other products that are not yet listed on the Schedule.
We will be listing more products on the Schedule and will apply more aspects of our management approach over time to deliver greater benefits.
PHARMAC has held consultations and is continuing discussions with the sector and other interested groups about considerations for managing hospital medical devices on a national basis.
One of the key things we learned is that 20 DHBs do things at least 20 different ways, and that there is no one size-fits-all approach that can be used to manage devices.
We will continue to build on our relationships with the sector and consult with you as appropriate, as change occurs incrementally, over time.
We plan to take a flexible, category-by-category approach, applying the various tools available to us to make informed, robust decisions.
PHARMAC will undertake elements of active management, over time, as we are able.
Tendering for products is the beginning of a process that is about creating substitutable categories of products. This requires significant clinical input and engagement, good progress, and quality implementation.
We expect to begin shifting towards market share procurement as soon as possible for some categories of hospital medical devices.
At any point in time over the next decade, various categories of hospital medical devices will migrate into higher levels of management, and full budget management may occur for some categories before others.
Over the coming months, we will increase procurement activity, to help us build a base on which to move categories of devices towards more active management.
We will increase our activity as more of the wider system (particularly the National Product Catalogue and Financial, Management and Information System (FMIS)) becomes available and where we see opportunities that will bring the most benefit for DHBs from applying our approach.
Eventually PHARMAC will move to full budget management of hospital medical devices. The fixed national budget for devices will be agreed by DHBs and the Minister of Health.
We will gain knowledge and expertise as we increase our activity, and will be using a framework which allows us the flexibility to make changes based on what we learn.
We will consult with the sector if or when any changes are proposed.
PHARMAC’s devices work sees us working with Health Benefits Limited (HBL) which is implementing the roll out of the Financial Management Information System and National Product Catalogue in DHBs.
The Shared Service (healthAlliance) will manage requests for the addition of new products to the catalogue and undertake procurement activity for the categories of medical devices that PHARMAC hasn’t yet got to. They will also manage DHBs’ purchasing of items.
PHARMAC is constantly updating its website with information about its current activity and plans for its wider activity in medical devices. We encourage you to check this regularly here.
Last updated: 5 February 2016