TPP and the Pharmac reality

Written By: - Date published: 11:37 am, August 18th, 2015 - 34 comments
Categories: health - Tags: , , ,

National (worst “dealmakers” ever) have already given up on protecting Pharmac in the TPP negotiations. Key glibly says that the government will just cover any increased medication costs. Sounds easy doesn’t it, but here’s the reality under which Pharmac operates today:

Pharmac plea for more money rejected by Government

The Government rejected Pharmac’s bid for more money in this year’s budget, despite the drug purchaser’s concerns it could not invest in new medicine.

And while Pharmac’s $5 million gain will allow it to tread water, officials advised the Health Minister he would need to revise his expectations if the agency did not get the modest $11m extra it was asking for.

King said the Governmnent’s decision meant New Zealanders would miss out on potentially life-saving drugs. “The money could have been used for cutting edge treatments for cancer and purchasing a wider variety of new medicines which can make a huge difference to people’s lives,” she said. “In submissions to the Minister, DHBs pointed out that their current levels of funding are not keeping up with the demand for medicine.

If the TPP goes ahead Key’s promise to meet increased costs will quickly be “forgotten”.

34 comments on “TPP and the Pharmac reality ”

  1. dukeofurl 1

    Its not just the money:

    ” Of all available new medicines approved by Medsafe, just 13 per cent were Pharmac-funded.”

    Operating budget is $795 m, so a $5m increase is 0.63%

  2. Tricledrown 2

    The free market these right wing cronies keep harping on about is nothing more than a protection racket for giant monopolies.

  3. McFlock 3

    So they’ll cover increased costs when they don’t cover current costs?
    Sounds legit.

    It’s one thing to be a damned liar, but the insulting thing is that he doesn’t even put any effort into his lies.

    • dukeofurl 3.1

      Dont worry Mike Hosking will be onto it !

      • McFlock 3.1.1

        I’m waiting for him to announce that most coronary medications can be replaced simply by holding a signed picture of our PM close to the patient’s heart, so we don’t need pharmac anyway.

    • Tracey 3.2

      exactly. wont give extra money to fund more medicine but will pay more to an offshore pharma for the same amount.

    • Pat 3.3

      the polls to date indicate he hasnt needed to….one would expect that the scales must eventually fall.

  4. Rolf 4

    It is not just the money. This is an annexation of USA by agreement. Japan used the same method the annex Korea 1910, the Koreans were to be second class Japanese. Tokyo called the shots. Our future natural partners would be China and Russia. Now kiwis will be second class Americans in the same way, decision will be made in Washington and by US mega business, kiwis just US serfs. .

    • lprent 4.1

      Russia? You have to be kidding.

      • McFlock 4.1.1

        there’s always the possibility that they pull finger and rebuild their navy, I guess. But that would take 20 years or so – apparently they haven’t laid down any decent-sized ships (carriers, cruisers) since the cold war.

        • lprent

          I was thinking more about their rather broken economy. But it is part of the same issue.

          One major reason that the economy is broken appears to be the increasing level of resourcing that has been going into the military and security systems since Putin took control. Doesn’t matter how you account for it (anticipating the usual rather strange arguments), that kind of diversion of resources is essentially dead weight on the economy.

          • McFlock

            Yeah, but it’s going to their most immediate security needs, too: ground forces, aircraft development, and the internal security forces.

            To project that power outside of the region, like down to NZ as Rolf suggested, they need to keep the sea lanes open. Not with that navy.

            China’s another issue entirely, though.

  5. Charles 5

    But he said patients would not have to pay more for prescriptions as a result.

    However, Key later tried to down play the likely cost to the Government and drug buying agency Pharmac.

    “I’m not even really convinced Pharmac will end up having to pay a little bit more even if patents are longer because ultimately they have such buying power in the way they do things it would be really at the margin,” he said as he headed into Parliament’s Question Time.

    There might be a small increase in funding for Pharmac as a result but that would be far outweighed by the extra income from taxes that the Government would receive. It would mean New Zealand was highly likely to subsidise more drugs, Key said.

    “For consumers there will be no change. They won’t get more expensive.”

    That Key bloke is a context-mixing, context-free zone.

    Consumers = everyone who even buys disprin at supermarket.
    Consumers also = patients/everyone getting prescription only medicine from doctor

    Key claims consumers will be covered for prescriptions. For all consumers there will be no extra charge on existing patent medicines. Pharmac subsidised by government using taxes (how else), but also Pharmac sells at higher price to consumer (Government tax take in GST will increase).

    Consumer pays two increases – once in taxes (something else doesn’t get funded with same tax dollar) and once again at the counter for higher priced medicines.

    • northshoredoc 5.1

      “Pharmac subsidised by government using taxes (how else), but also Pharmac sells at higher price to consumer (Government tax take in GST will increase).

      Consumer pays two increases – once in taxes (something else doesn’t get funded with same tax dollar) and once again at the counter for higher priced medicines.”

      PHARMAC doesn’t sell anything to ‘consumers’, they are responsible for deciding which medicines (medical devices in future) are subsidised in the community and hospitals.

      Prescription fees are set by DHBNZ in consultation with the pharmacy guild I believe they are pretty much identical regardless of the actual cost of the medication from the perspective of the end user.

      • Charles 5.1.1

        So if pharmac don’t “sell” anything, what are they “buying” as Key puts it, when he talks about their “buying power” and “paying more”? And how do their operations increase GST or “Taxes” going to government on an end product they don’t sell, or control the price of, if no one pays more at any stage?

        • northshoredoc

          PHARMAC act as DHBNZ’s manager of the pharmaceuticals budget

          All they do is set the availability of specific medicines on the pharmaceutical schedules (community and hospital) of medicines. All the ‘buying’ is done by hospitals or pharmacies.

          GST is charged on medicines being sold into pharmacies for distribution to patients.

          Key as usual doesn’t tend to know what he is talking about, regardless i nod’t believe there’s any chance of the TPP going through.

          • McFlock

            Isn’t the availability (i.e. whether it is subsidised or whether the patient pays full cost) set according to a budget, though?

            So if it lowers costs by subsidising a specific pharmacy medicine and thereby requiring the unsubsidised brands to be lower in price to compete, and that is regarded as anti-competitive by the TPPA, then wouldn’t all those brands increase in price?

            Or if the TPPA lowers the availability of generics in favour of brand medicines, doesn’t that lower the total number of medicines that can be subsidised within that budget?

            So the medicines that are no longer subsidised cost more?

            • Charles


              It sounds like one of those situations where Pharmac is at risk of being politically pushed into non-existence using the existing or to-be-adjusted terms of their brief.

            • northshoredoc

              The answer is complicated but I’ll try to summarise.

              “Isn’t the availability (i.e. whether it is subsidised or whether the patient pays full cost) set according to a budget, though?”

              Only really for new medicines which haven’t been funded before – it is rare for a medicine (chemical entity not brand) to be removed from the schedule.

              “So if it lowers costs by subsidising a specific pharmacy medicine and thereby requiring the unsubsidised brands to be lower in price to compete, and that is regarded as anti-competitive by the TPPA, then wouldn’t all those brands increase in price?”

              There is not much reference pricing anymore as many of the medicines are now so cheap that reference pricing isn’t required – for example the medicines for lowering acid in the stomach (pantoprazole, omeprazole, lansoprazole, ranitidine) are all different (and very low) priced – there is a similar situation for cardiovascular drugs, where reference pricing does take place there are medicines with “part charges” where the supplier has decided not to meet the lowest price in the market.

              “Or if the TPPA lowers the availability of generics in favour of brand medicines, doesn’t that lower the total number of medicines that can be subsidised within that budget?”

              The generics that are available will remain available – assuming the suppliers continue to supply to NZ, where an issue may occur is with new generics entering the market if there is an elongation of patents from what is currently the norm in NZ (20 years patent life or if no patent 5 years data exclusivity from registration with Medsafe).

              “So the medicines that are no longer subsidised cost more?”

              Yes, whenever that occurs the unsubsidised medicine will be more expensive – for example if you wanted to buy Losec at the moment it would cost considerably more than its funded generic counterpart.

              …. hope that makes sense.

              • Tautoko Mangō Mata

                NorthShoreDoc: I would appreciate your comments on the following:

                According to Professor Kelsey, Pharmac is the most exposed of any programme in a TPPA country, especially since it assumed responsibility for medical devices as well as pharmaceuticals.

                While the ‘transparency’ Annex is not enforceable by other states, there are numerous ways the US and the pharmaceutical companies can force New Zealand to make changes that would seriously undermine Pharmac’s effectiveness and workability.

                The most immediate is the certification process, where the US can refuse to bring the TPPA into force in relation to New Zealand until Pharmac’s regulations and procedures are changed to meet what the US says the Annex requires.”


          • Charles

            Thanks. Also been reading Pharmac’s website… “who they what they do”.

            Seems they can negotiate the pricing, but cannot figure out how their operations would have direct effect on GST (as phrased in media story) as their operational budget doesn’t buy medicines. They take pride in saving people money ($5 billion’s worth apparently). And the DHB does the actual “buying” of drugs/medicines, or at least the funding comes from them? For Key not to be challenged on it, or comments made for clarity by the media/cheerleaders of TPPA, it could suggest no one knows what they’re taking about. It’s all highly technical to the layman.

            • northshoredoc

              “For Key not to be challenged on it, or comments made for clarity by the media/cheerleaders of TPPA, it could suggest no one knows what they’re taking about. ”

              …you might think that but I couldn’t possibly comment.

              Having chatted to the last 6 ministers of health over the years not knowing what one is talking about would appear to be part of the job description (Ryall excepted he came across as a clever bugger).

            • dukeofurl

              Think of it like a Macdonalds store.

              Its a franchise who buy from various suppliers at prices negotiated by the master franchise.

              The master franchise then has rebates for stores based on their volume or if a local franchise has more than one store and has higher volume.

              You can only buy from the approved list.

              With Pharmac the only savings amount to about $75 mill or so, out of a $750 mill spend.
              There is a small group of medicines on a special list.

              AS for own costs, not long ago the full cost was shown along with the subsidy and the co payment. This seems to have disappeared for some reason ( co payment was higher than cost ?)

              Australia has a similar scheme but I think they dont have a capped cost like we do

    • Draco T Bastard 5.2

      “For consumers there will be no change. They won’t get more expensive.”

      Of course there’ll be a change – we’ll be paying more through taxes.

      • Charles 5.2.1

        Using Key’s manner of speaking I think he means:

        no change = no jingly coins in pocket after purchase (commonly referred to as “change”), therefore “less money” was used/changed hands, “less money” used = less numerical items = “less” cost, therefore “they won’t be more expensive”. Seems each sentence he says relates to a different context and the meaning of the words bounce from colloquialisms back to factual statements. There is literally no way to figure out what he is saying.

        • One Anonymous Bloke

          His qualifiers are illuminating, if you know what I mean.

          • Charles

            Anyone without his track record, or position, I’d spend a little more of my limited brain-power in trying to understand. But since so many vulnerable people are getting the bad end of his arrangements, it’s just quicker and easier to regard everything he says as bollocks.

        • miravox

          It’s not just the change in cost, it’s the change in availability of some medicines and devices.

          The government is not going to increase the cost to patients, so any increased cost must be met through the taxpayer. Politicians have already noted that this may mean an increase in the health budget, with implications for other spending, or diversion of funds from other areas of the health system.

          If the government doesn’t want to increase the Pharmac budget then Pharmac has a few choices, I guess. One would be to delay the approval of new drugs and rely on the existing group of approved drugs. It does this anyway, especially when they can’t get a pricing agreement, but the delays between the release of the drug by a company and the availability to prescribe with a under subsidy may increase. Although this probably wouldn’t be possible under the TPPA.

          I guess patients could be actively encouraged to purchasing new meds without subsidy, allowing the government that that is their ‘choice’ (other drugs are available) and that when the drug is subsidised it will still be free to the patient. This would lead to availability based on ability to pay rather than need and have implications for health insurance.

          A second method would be to change the clinical criteria for which the medicine is available. This may force doctors to more often use different combinations of less suitable drugs, for longer periods, with variable results or to be creative in diagnoses to meet new criteria (for when say, the drug is available for one condition but not for a related condition with similar symptoms).

  6. les 6

    if only they’d managed to cap spending on the new flag debate to a lousy $20 mil Pharmac could have got the extra 6 mil it needed.Priorities I guess!

  7. dukeofurl 7

    Australia spent $9.148 bill in 2013-2014 year, the patient contribution was $1.5 bill.

    The average dispensed price per script was $42.40 of which the government share was $34.83

    The three drugs with the highest cost to government were Rosuvastatin ($287.9million),
    Atorvastatin ($279.2 million) and Adalimumab ($272.7 million).
    Preventative medicine doesnt come cheap ! Ive heard numbers which say 100 people have to take their meds to prevent ONE heart attack .

    • northshoredoc 7.1

      Australia’s quite different from NZ, even quite stark interstate differences.

      • Tricledrown 7.1.1

        Yes Australia got a special trade deal with the US to let more farm commodities in because they went into Iraq with GWBush.
        Part of that deal was they weren’t aloud to substitute drug’s with generic’s so Australia pays a lot more for prescriptions than NZ.

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