A mark of trust
As reforms of the health sector continued into the new millennium, a change was also on the cards for PHARMAC, one that would highlight its importance to the delivery of health care to New Zealanders.
In June 2000 Health Minister Annette King released a Cabinet paper outlining the future shape of PHARMAC. The agency would become a Crown entity under the Public Health and Disability Act 2000.
“Most medicines are too expensive for the average New Zealander to afford without Government subsidies and it is the level of these subsidies that PHARMAC negotiates,” said King at the time.
She added that PHARMAC’s exemption from the Commerce Act would remain unchanged, allowing it to continue to work with health agencies and the newly created district health boards (DHBs) to lower costs.
If previous legal attempts to have PHARMAC’s funding practices ruled illegal under the Commerce Act had failed, the move to a Crown entity shored up the case for the agency’s exemption even further.
As the Health Minister noted:
“Three of the eight legal cases PHARMAC has faced in the past five years have been related to the exemption. Maintaining the status quo should limit any further testing of legal waters, avoiding costly litigation.”
From 1 January 2001 PHARMAC ceased to be a wholly-owned subsidiary of the Health Funding Authority and a limited liability company.
It was now a stand-alone Crown entity accountable directly to the Minister of Health, managing a budget with DHB funding. It was a proud moment for PHARMAC, an “endorsement of its ability”, wrote chair Richard Waddel in October 2001.
For those who had worked through the agency’s tumultuous early years, when the threat of PHARMAC being shut down due to outside pressure or legal action seemed very real, it was like a safe harbour in a storm.
“After seven-and-a-half years of consistently excellent performance, PHARMAC has earned this independence,” Waddel continued.
It was still business as usual and, as ever, the health budget was tight. But PHARMAC’s successful track record was seeing the Government gearing up to task it with more responsibilities.
In 2001 Annette King directed PHARMAC to begin managing the purchase of hospital pharmaceuticals in addition to the medicines used in the community, and to start doing assessment of new hospital cancer treatments.
This decision would lead to PHARMAC being responsible for or making decisions about a larger proportion of the country’s health spend – $2 billion of $16.7 billion by the end of 2017.
The new status gave PHARMAC even more input into government decision making and tighter integration into health sector stakeholders, including the 21 fledgling DHBs.
But it also exposed PHARMAC and its decision making to even more scrutiny, which would become apparent in the years ahead as it tackled some of its most contentious funding decisions.
Last updated: 13 September 2018