Lecture 13: Medicines and government policy

Question 1

what are the uncertainties and value judgements about drugs?

Answer 1

• no drug is completely safe
• no drug works every time, for everyone
• data on safety and efficacy is incomplete (limitations of clinical trials, evidence changes over time)

Question 2

what are the value judgements about drugs?

Answer 2

• safety vs efficacy vs cost
• majority vs minority interests

Question 3

what are the government roles in drugs?

Answer 3

• deciding which drugs should be available in their country
• improving access to drugs (through paying for some or all prescribed drugs)
• controlling costs
• supporting pharmaceutical industry

Question 4

how does the government decide on which drugs should be available?

Answer 4

Licensing/registration of drugs based on criteria:

• quality
• safety
• efficacy
• cost-effectiveness
• in NZ this is carried out by medsafe

Question 5

what are the issues with the online availability of medicines?

Answer 5

• challenge regulators in individual countries
• risks include: contamination, inaccurate doses, inappropriate drugs

Question 6

what questions are raised when trying to improve access by funding medicines?

Answer 6

• how much should the government pay?
• how much should the patient pay?
• which conditions should be covered?
• which drugs should be covered?
• different countries have different answers

Question 7

what is the funding of medicines like in NZ?

Answer 7

• from 1941, nearly all prescribed medicines funded through the Pharmaceutical Benefits Scheme
• costs increased dramatically due to new products and increasing prices
• no incentives for patients, doctors or pharmacists to contain costs

Question 8

how have the costs changed over the years?

Answer 8

per person in 1986 dollars

in 1943
- 2.1 prescription items, total cost $11.40

in 1986
- 9.1 prescription items, total cost $105.60

Question 9

what were the attempts to contain costs in 1985-1993?

Answer 9

• introduction of out-of-pocket payments
• 1985$ $1 per prescription
• 1988: $5 and $2
• 1991: $15 and $5
• 1992: $5, $7.50 and $20
• 2000s: $3
• 2013: $5

Question 10

what was the result of the health reforms in 1993?

Answer 10

formation of PHARMAC
- to manage government expenditure on pharmaceuticals

Question 11

what does PHARMAC do?

Answer 11

• pharmac has a fixed budget which it cannot exceed
• pharmac decides which medicines the government will fund, conditions for funding, and the price the government will pay
• uses government’s monopsony power to reduce prices

Question 12

what must happen with the pharmac strategies?

Answer 12

must show benefit over medicines already funded

Question 13

what are PHARMAC’s strategies?

Answer 13

• reference pricing
• cross-company deal
• tendering
• targetting
• expenditure caps

Question 14

what is reference pricing?

Answer 14

PHARMAC pays price of the cheapest drug in a class. if other companies do not drop their prices, patients must pay the difference

Question 15

what are cross-company deals?

Answer 15

PHARMAC negotiates with a company to lower prices on one product in exchange for something else the company wants

Question 16

what is tendering?

Answer 16

for some drugs, pharmac calls for companies who want to be either the sole supplier, or preferred supplier

Question 17

what is targetting?

Answer 17

restricting funding to people most likely to benefit from using the drug

Question 18

what are expenditure caps?

Answer 18

PHARMAC and the manufacturer agree on the number of people who are likely to need the drug in a year, and therefore a certain level of expenditure. if more of the product is prescribed, PHARMAC does not pay for this: the manufacturer refunds the subsidy paid

Question 19

what are the effects of this strategy?

Answer 19

prices falling, but expenditure continuing to grow because of the introduction of new more expensive medicines, and growing volume of medicines used

Question 20

what does this show?

Answer 20

the estimated effect of PHARMAC on drug costs shows that without pharmac, expenditure would be very high.

Question 21

what does this show?

Answer 21

pharmac had a huge impact on expenditure

Question 22

what does this show?

Answer 22

NZ expenditure has gone down over the years (although NZ is incomplete) and other countries expenditure has increased

Question 23

what does this show?

Answer 23

medicine prices are very low in NZ

e.g. salbutamol is $45 in australia, $91 in Germany, $13 in NZ

Question 24

what are the controversies of drug funding?

Answer 24

• zero-sum game: savings to government equals loss of profit to the industry. initially litigation, attempts to gain public support by manufacturers
• patients ‘forced’ to switch drugs
• many groups concerned about lack of access to new treatments
• patient co-payments can be very large if medicine is not fully subsidised

Question 25

what can be said overall about government funding drugs?

Answer 25

• governments have several important roles in relation to pharmaceuticals
• roles can conflict or reinforce each other
  e. g. goals of increasing access and controlling expenditure can reinforce each other