APPENDIX 1
More criticisms of Pharmac This appendix lists and comments on some additional criticisms of Pharmac encountered in the course of this research. Although this review does not consider that some of these criticisms have force, they all have a welcome accountability aspect. They oblige Pharmac to explain to its political masters, suppliers and the public why its allocation decisions are in accord with its statutory objective. Public criticism and challenge are a necessary disciplinary check. Pharmac is not subsidising the drugs my condition needs A common criticism, in mainstream media and in submissions by individuals to parliamentary select committees, is that Pharmac has not approved a subsidy for a medicine the complainant wants subsidised. Those complaints commonly fail to recognise that with a given budget constraint, taxpayers can only spend extra money subsidising one medicine if they spend less on subsidising at least one other medicine. The complainants whose cases are picked up in the mainstream media are not asked to identify which medicines Pharmac should subsidise less.125 In effect, they are arguing that the budget constraint should be eased. Pharmac does not set its budget. Pharmac sometimes errs in assessing therapeutic efficacy Assessing the validity of this complaint in any detail is beyond the expertise of the author and the scope of this report. Of course, Pharmac’s experts have incomplete information. The experts in the pharmaceutical companies who have been assessing a new medicine for years should know more than Pharmac about its likely therapeutic efficacy. Pharmac’s experts can only assess the evidence in front of them.
42 PHARMAC: THE RIGHT PRESCRIPTION?
It will naturally be incomplete and have an advocacy element. Statistically, it is inevitable that they will sometimes wrongly reject a subsidy application and sometimes wrongly accept one. No alternative structure or change of personnel would prevent that. It is intrinsic to the problem of incomplete information. The open question is whether Pharmac is making such errors too often, statistically speaking. This study has not uncovered any evidence either way on that aspect. Pharmac considers only costs to the CPB, ignoring fiscal costs elsewhere As already mentioned, it is not true as a general proposition that Pharmac considers only the costs to the CPB, ignoring fiscal costs elsewhere. Nonetheless, this research has encountered strongly held industry views that Pharmac does put more weight on fiscal savings to the CPB than on savings elsewhere in the health system. It is plausible that this criticism has some validity given the budgetary emphasis in Pharmac’s statutory objective. Pharmac focuses too much on fiscal costs and too little on system net benefits This criticism has real force. Pharmac’s statutory objective clearly obliges it to have an overall fiscal focus. The cut-off threshold for subsidising medicines is determined by a fiscal constraint rather than by the opportunity cost to society. That situation represents a potential welfare loss for Kiwis. It is intrinsic to the binding budget constraint in the New Zealand model. If the criterion for listing a medicine were based instead on a threshold for, say, QALYs per dollar that was much the same year in year out, the annual budget would be more flexible.
