Conclusions In the past, Pharmac provided an outstanding example within the public sector of what can be achieved when an agency is given a relatively clear and single overriding objective, narrowly interpreted, and develops a culture focused on achieving that objective. There is a general message here for the design of government agencies. Above all, Pharmac is to be applauded for the low prices it has achieved for imported pharmaceutical medicines and for the rigour and discipline it has brought to its task. Lower prices for imported products increase national income. The successful application of such techniques has allowed Kiwis to markedly increase the per capita volume of prescription medicines consumed since 1993 without increasing spending relative to GDP. Pharmac should systematically benchmark its performance against that of top medicine procurers in other countries. DHBs, the Ministry of Health and Treasury should ensure that it does. The concern that current arrangements are biased against introducing costly innovative new medicines has some merit. Pharmac may not have room for them in the budget even if they are worthy of inclusion. Pharmac could reduce this concern by repeatedly demonstrating and reminding the public that it does list new medicines on their merits, even when the cost is greater than for an existing subsidised product. A more serious weakness with current arrangements is that no one knows whether these are improving health outcomes, let alone the overall wellbeing of New Zealanders. Taking people’s money in taxes and dictating which medicines to spend it on disempowers taxpayers.
40 PHARMAC: THE RIGHT PRESCRIPTION?
This weakness manifests itself in various ways. Current arrangements create open-ended expectations Pharmac can never fully satisfy. One symptom is endless pressure to increase the subsidy budget because ‘more is always better.’ People can say their taxes entitle them to a say in what is subsidised. Anger, distress, disillusion and political agitation are understandable recurring consequences. This sense of entitlement weakens civility, self-reliance and resilience. The weakness reflects a lack of clarity about the subsidy’s policy rationale. The problem with private arrangements for which the CPB is the remedy is unidentified. As a result, no one can know whether a higher or lower level for CPB spending would be good or bad for overall wellbeing. In the absence of a public policy case for the subsidy, there should be a presumption against subsidising those for whom affordability is not a problem. It is cheaper to pay for private goods directly rather than through the tax system.124 For those for whom affordability is a problem, there should be a presumption in favour of cash assistance. Pharmac could still negotiate bulk discounts with a smaller CPB. Perhaps Pharmac would have less clout because there would be greater fragmentation of procurement. That might mean smaller discounts and less of a national income gain. The extent of this concern merits further analysis and debate. Benchmarking against countries that do not rely much on pharmaceutical subsidies should be informative. Conceivably, private hospitals and insurers could also hire Pharmac to negotiate on their behalf in the common cause. (That is if Pharmac were permitted to
