From medicines to devices
There are consequences to being good at your job, which PHARMAC discovered in 2013, when the Government called on the agency to take on a major new piece of work.
Pharmaceuticals were a big area of health expenditure where PHARMAC had been successful in getting better value outcomes for New Zealanders, saving the taxpayer billions in the process.
But what about all the tangible things, from bandages and IV drips to dialysis machines and ward equipment, that hospitals use to treat patients and which the sector spends the best part of a billion dollars a year procuring? Could PHARMAC achieve similar results there?
The agency was up for the challenge. Former chief executive Steffan Crausaz describes the move into management of medical devices for the district health boards as among the biggest developments during his tenure leading PHARMAC.
New Zealand hospitals already had access to world-class medical equipment, but assessment and procurement of it was done on an ad hoc basis.
Effort across the hospital sector was duplicated and there was often limited research about the long-term functionality and reliability of devices.
While PHARMAC had laid a great foundation with the sector after taking on hospital medicines, it knew that assuming responsibility for medical devices would be a major undertaking requiring close consultation with clinicians and the sector and new staff with appropriate expertise.
PHARMAC took the same approach to devices that it initially took to medicines – start small, test the waters to see what worked, and then expand into other areas.
By the middle of 2014 it had 2800 medical devices listed on the Pharmaceutical Schedule and for the year had delivered savings of $1.12 million for DHBs as a result of negotiating national contracts for the supply of selected categories of medical devices.
The savings spanned device categories such as wound care, disposable laparoscopic trocars, sutures and interventional cardiology, and, though modest at that stage, it provided important test cases for the agency’s ambitious plans to expand the categories of devices and the size of the spend it was negotiating.
In 2017 Crausaz announced a bold goal – to achieve $1 billion of savings from medical device management by 2025 to reinvest in health outcomes for New Zealanders.
“There’s still a long way to go, but we are committed to completing national contracting across all device categories over the next two years,” wrote Andrew Davies, the manager of PHARMAC’s hospital medical devices team, in the 2017 Year in Review. .
“Because these savings are in the form of price reductions on existing products, they release funding for DHBs to reinvest in other healthcare. In other words, we help DHBs achieve more with their hospital funding.”
PHARMAC has been steadily expanding medical device categories since 2013. As of April 2017 PHARMAC had national contracts covering approximately $110 million of annual expenditure, giving DHBs $40 million in savings over five years.
Those who know the health sector, and PHARMAC’s role in it, know the potential to reach that 2025 target and to go further.
“I spent 14 months working with St John, who were always under pressure to deliver a really important service for New Zealand, and had to buy their defibrillators, their cots, their ambulances,” explains former PTAC member Sharon Kletchko.
“Could PHARMAC end up purchasing devices on behalf of New Zealand Health Inc in future? Absolutely.”
As Crausaz came to the end of his tenure as chief executive in December 2017, the medical devices side of the agency’s work had bedded in well.
“It is starting to feel like ordinary business for PHARMAC,” he said.
“It is delivering really good gains.”
Last updated: 13 September 2018