The government set up the Pharmaceuticals Management Agency (PHARMAC) in 1993 to manage state expenditure on medicines. The agency negotiates with pharmaceutical manufacturers to achieve reduced prices for particular medicines, which it purchases from a fixed budget. The main functions of PHARMAC are:
- maintaining a schedule of subsidised medicines which doctors prescribe
- managing subsidies on some medicines and some medical devices for public hospitals
- overseeing special access programmes such as paying for medicines for people with rare health conditions
- promoting the best and most appropriate use of medicines.
PHARMAC’s purchasing strategies have been criticised by manufacturers and sometimes by patients and doctors. Manufacturers have argued that some highly effective new drugs are not available in New Zealand, and that the country does not contribute to the costs of research and development. Patients and doctors sometimes say their choice of medicines is constrained. There have also been debates about whether expensive new drugs should be subsidised if they benefit only a few people.
However, PHARMAC has been very successful in reducing the cost of medicines. As a result, pharmaceutical expenditure in New Zealand is low and has not grown as fast as in many other OECD countries. In 2016/17 New Zealand spent $849.6 million, about $181 per person. New Zealand spends about 8.3% of its health budget on pharmaceuticals, compared to 12.1% in the UK and 17.5% in Canada. There is now widespread consensus that the PHARMAC model works well and all major political parties support it.
The development of new, very expensive cancer treatments is challenging for governments and insurers who pay for medicines in many countries. In New Zealand there have recently been vigorous public debates about two medicines: Herceptin and Keytruda.
Herceptin (trastuzumab) is a treatment for a particular type of breast cancer. In 2007 PHARMAC agreed to fund a nine-week course for people with early-stage breast cancer. This was based on an assessment of the costs and benefits of the drug, including the impact of long-term use on patients’ hearts. The Breast Cancer Advocacy Coalition led a public campaign for the funding of a 12-month course, as recommended in the UK. Eight women with breast cancer, the ‘Herceptin Heroines’, took PHARMAC to court over the decision amid widespread public and media controversy. A National Party promise to fund 12 months of Herceptin was implemented after National won the 2008 election.
Another public controversy surrounded Keytruda (pembrolizumab). In 2015 PHARMAC refused to fund Keytruda to treat melanoma because of its very high cost and because strong evidence for its effectiveness was lacking. This led to media coverage and lobbying by patients and doctors. In 2016 PHARMAC received an application for funding for a competitor drug, and after negotiations with both companies and further evidence from clinical trials, in mid-2016 both drugs became funded for melanoma. Debate about funding for Keytruda to treat other types of cancer continued.
Medsafe, a business unit of the Ministry of Health, is responsible for the regulation of therapeutic products (medicines and medical devices) in New Zealand. Its activities are governed by the Medicines Act 1981 and the Medicines Regulations 1984. Medsafe’s functions include:
- approving medicines before they are made available to the public
- deciding whether medicines are made available on prescription, or are on general sale at a pharmacy
- monitoring the safe use of products
- removing products from use if they are shown to be unsafe
- licensing medicine manufacturers
- approving applications to conduct clinical trials.
It is possible (but illegal) to purchase prescription-only medicines from overseas suppliers without a prescription by using the internet. Medsafe undertakes border control activities to intercept these items.
Medicines tend to become more accessible over time, but there are exceptions. Pseudoephedrine, a popular over-the-counter remedy for blocked noses and sinuses, was reclassified as a prescription medicine in 2009 because of its use in the manufacture of the illegal Class A drug, methamphetamine (‘P’).
Prescription charges were reduced substantially between 2002 and 2007 as part of the Labour-led government’s Primary Health Care Strategy, which aimed to make primary care (provided by a GP or public health nurse) more affordable. By 2013 most people paid $5 per prescription item for most medicines. In 2018 free prescriptions for children under 14 were introduced.
Regulation of natural products
In the 2000s the New Zealand and Australian governments proposed establishing a trans-Tasman agency to assess the quality and safety of pharmaceutical and natural medicines. It was argued that New Zealand was not large enough to effectively and quickly assess new medicines.
Critics of this proposal claimed that businesses manufacturing natural products would suffer, and that people who used these products would no longer be able to buy them as easily. In 2007 the government decided it did not have enough support to pass the necessary legislation, and the agency was not established. The production of natural and traditional products continued to be governed by the Dietary Supplements Regulations 1985 or the Medicines Act 1981, neither of which were seen by the industry as appropriate models.
The National-led government in association with the Green Party began planning a new regulatory scheme in 2009 and consulted widely with consumers, suppliers, importers, manufacturers and practitioners. The Ministry of Health noted that there was insufficient information available about the number and turnover of natural products in the New Zealand market to determine the likely cost of such regulations. Nevertheless, in 2011 a Natural Health and Supplementary Products Bill (later the Natural Health Products Bill) was introduced into Parliament, where it languished until 2017.
Natural Products New Zealand, which represented most major local manufacturers and practitioners, had concerns about the initial bill but supported it in its revised form. Their view was disputed by the New Zealand Health Trust, which launched a media campaign to discredit the bill, claiming that it would limit consumer choice and seriously damage the New Zealand natural products industry. In turn, Natural Products New Zealand asserted that 'misunderstanding and misinformation' was being promoted.1 The bill was not passed before the 2017 election, and it has not been reintroduced by the subsequent Labour-led government.