Drugs used to lower blood pressure and manage heart failure would feature in PHARMAC’s first major use of clinical data and reference pricing to extract significant savings.
So-called angiotensin converting enzyme (ACE) inhibitors were in growing use in the late 1990s and today are used by around 500,000 New Zealanders.
But clinical studies were revealing that there was little difference in efficacy of the various ACE inhibitors on the market, despite varying considerably in price.
In addition, PHARMAC’s Pharmacology and Therapeutics Advisory Committee was considering medical literature advising that for many patients, lower-priced diuretics, sometimes called ‘water pills’, were at least as effective in managing blood pressure as ACE inhibitors were.
It was a perfect opportunity to apply reference pricing to secure a subsidy decrease and PHARMAC issued a request for proposals on that basis. The results exceeded even the most optimistic expectations of PHARMAC’s negotiating team.
Reductions offered by two suppliers lowered the price of ACE inhibitors subsidised by PHARMAC to the tune of 60 percent.
“We reference priced the statin drugs and the ACE inhibitor drugs at the same time,” says former PHARMAC chief executive Wayne McNee.
“We saved around $60 million a year; it was the biggest transaction that PHARMAC had ever done.”
Indeed, the savings on ACE inhibitors alone were estimated at the time to amount to $150 million over the next six years.
It was to become a commercial model for other high-cost drug categories.
“In addition to an education campaign aimed at patients, pharmacists and prescribers, subsidies for doctors’ visits to consult about the changes were made available,” wrote PHARMAC Board chair the late Denis Tait, in the agency’s 1998 Annual Review.
“It was the most comprehensive exercise of its type that we have undertaken and it highlights our commitment to decisions based on careful evaluation of all the evidence, wide consultation and thorough communication of our decisions.”
Evidence from the clinical literature was informing decisions. Pharmaceutical companies were fearful of missing out entirely, but others were willing to cut their margins to stay in the market. It was a formula that would underpin many impressive deals to come.
Last updated: 13 September 2018