Interim response to outcomes of the Pharmac review

We wrote to Hon Andrew Little, Minister of Health, on 28 July 2022 with our interim response to the final report.

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Pharmac welcomes the opportunity to share how we are giving effect to the outcomes of the review. This is our interim response, with our full implementation plan, including an outline of resourcing needs, due with you by the end of October 2022.

The new arrangements for the health and disability system provide great opportunity to improve New Zealanders’ health, including achieving health equity for Māori and other population groups. As we work to deliver improvements, we will give effect to te Tiriti, bring a stronger consumer focus to our work, and collaborate effectively with other system entities. A more integrated health and disability system will support people to better access and use medicines and medical devices, strengthening the contribution our work can make.

As set out in this response, there are many dimensions to the improvements we want to make, such as enhancing assessment methods, stronger partnership with Māori, strengthening our focus on equity, better incorporating consumer voices in our work, and sharing more impactful information about our work. We look forward to working with a wide range of stakeholders as we make these improvements ahead, as well as ensuring we support and are responsive to the priorities and progress of other organisations. 

Recognition of review work

We welcome the review’s findings and agree with key areas for our improvement. We are grateful to everyone involved in the review – from the review committee through to the individuals and groups who shared their views – for the analysis, commentary, recommendations and suggestions related to our work.

Alongside the recommendations and commentary on many issues, it was reassuring to hear the committee’s recognition of the important role Pharmac plays, and their view that the overall model is sound and continues to deliver significant benefits for New Zealand.

We also appreciated the Government’s timely response to the review, giving certainty and direction to Pharmac and the wider health and disability system as we head into a new phase. Our focus now is on giving effect to the Government’s response, while continuing to draw on the underlying review work itself. 

Giving effect to Pae Ora

We welcome the establishment of Te Whatu Ora – Health New Zealand and Te Aka Whai Ora – Māori Health Authority and see good opportunities ahead. A more integrated system will support improved access to, and use of, medicines and devices. A strong collective focus on te Tiriti and health equity is also essential to delivering better and fairer health outcomes.

As noted in the Government’s response to the review, the new system arrangements address many of the directional changes sought by the review committee. We are committed to meeting our obligations set out in Pae Ora and will be guided in all our work by the new Act’s health sector principles; by the six priority areas in the recently released interim Government Policy Statement; and by other key strategies and plans.

We already see a strong connection between the Pae Ora health sector principles and what we want to achieve, including our response to the review, and how we will work ahead. By living our organisational values – Tūhono, Whakarongo, Wānanga, Māia and Kaitiakitanga – we can work more effectively with others and maximise our contribution to what Pae Ora seeks to achieve.

We also recognise the expectations outlined in the review for effective governance of Pharmac and a continued focus on performance improvement. 

Our process for this response

As we work towards our full implementation plan in October 2022, we are carefully considering all review-related material, including the supplementary reports. We need to ensure our work programme reflects the best options for our improvement and can be effectively resourced.

We also recognise the value of working with others to design improvements. For some key areas, such as a stronger focus on equity, work programmes across several organisations need to be better connected. We want our contribution to support a more integrated approach in the best possible way.

In addition to close work with our staff to develop our response, to benefit from other perspectives, we sought input from Te Whatu Ora, Te Aka Whai Ora and Manatū Hauora Ministry of Health. We also involved our advisory network: Pharmacology and Therapeutics Advisory Committee (PTAC), the Consumer Advisory Committee (CAC) and Te Rōpū Māori, our Māori advisory group. Our advisory network is hugely valuable to us, recognising also the broad cultural, community and health sector connections and knowledge members bring. 

Our approach

Our interim response is structured by four key priority areas, which we feel capture the essence of the improvements we want to make, and which the review and Government response were highlighting. The key priority areas are:

  1. Enhanced assessment and decision-making
  2. Doing more to achieve health equity
  3. Te Tiriti excellence
  4. Better involvement of and collaboration with others.

While this response discusses each priority area in turn, all four are closely interconnected. For example, our commitment to te Tiriti underpins all of our work and commitments, and many of the commitments related to enhanced assessment and decision-making will also do more to achieve health equity. A summary table showing all our actions together is set out in Appendix 1.

In discussing each key priority area, we cover:

  • What we are aiming for
  • Where we’re currently at
  • Actions and initiatives underway or commencing in 2022/23
  • Further work and considerations, including resourcing required, for our full implementation plan in October 2022. 

Comment on other key matters highlighted in the Government’s response

With a focus on four key priority areas, we recognise that these do not highlight all the important issues raised in the review and Government response. It will become clear ahead, however, that many important issues sit within the priority areas. We would also like to comment briefly on some other key matters.

  • Governance and accountability – As noted above, we agree on the importance of effective governance (and related matters like performance measurement, reporting and monitoring). In addition to our annual external audit by Audit New Zealand, we operate an external assurance programme and will continue to test important parts of our work. We will also review our performance framework during the next year and involve others in that work.
  • Medical devices – As recognised in the Government response, we believe management of medical devices is a strong fit with our capability. As at 1 July 2022, Pharmac has secured more than $500 million in expenditure and over 150,000 devices under national contracts. Since the first national contract was signed in 2014, we estimate the cumulative savings delivered for the health and disability sector is just over $100 million. Savings, however, were not our primary focus; other benefits have included consistent access and standard supply terms (including nationally consistent pricing), reinvestment of freed-up funds into new technology, as well as sustainability and transparency. Building on current engagement with key stakeholders, we will explore opportunities with Te Whatu Ora to further strengthen our connections and integration across this work.
  • Vaccines – We believe vaccines management is also a strong fit with the value we offer the health and disability system. We are working with a cross-agency governance group to improve how the immunisation system works together.
  • Cancer medicines – We agree with the review and Government response that cancer medicines should be considered in the same fundamental way as other medicines. A system focused on equity needs fairness at its heart. We will also continue to work closely with Te Aho o Te Kahu and others to continue high focus on management of cancer treatments.
  • Medicines for rare disorders – We agree the system needs to do more to improve the lives of people with rare disorders. We are looking forward to supporting Manatū Hauora in its important work to develop a rare disorders strategy. We will also prioritise engagement with our Rare Disorders Specialist Advisory Committee, and review our exceptional circumstances scheme to further test the policy settings we have in place.
  • Responsible use of medicines – Pharmac has an important contribution to make in this area, and we agree with the Government response that, through our role, we have unique tools to improve medicines access and use and equity of health outcomes. There is also a clear need for stronger coordination, given the important role of others (eg prescribing and dispensing) and broad determinants of whether and how medicines are used. 

Our context

The whakataukī – He rangi tā matawhāiti, he rangi tā matawhānui – speaks to the importance of a broad outlook. By understanding context, both ours and others’, we can understand respective opportunities and challenges, and work together more effectively.

The review and Government response are at the heart of our context, alongside other contextual factors that we feel are important to share.

  • Health reforms – As already indicated, we are strongly focussed on supporting the reforms’ early success, including greater consideration of system priorities (what they mean for our work) and sector readiness for Pharmac-initiated change. Improved integration is a reform imperative and will require additional effort by all involved.
  • Budget uplift – We were pleased with the funding uplift for the Combined Pharmaceutical Budget approved in Budget 2022, $191 million over two years. This uplift will result in many new medicines being funded, along with wider access to existing medicines. Delivery will require significant focus and effort from the Pharmac team within our existing resources. It is also important to recognise that, for any budget level, there will always be more medicines we want to fund than is possible.
  • COVID-19 vaccines – Responsibility for managing COVID-19 vaccines was transferred to Pharmac from 1 July 2022. We are giving this new responsibility significant focus, given its high importance and public interest. As earlier noted, the establishment of a cross-agency collaboration group is underway.
  • COVID-19 treatments – This continues to be an area of high importance, to ensure New Zealand has a portfolio of treatments as the variants and impacts of COVID-19 evolve. We have made good progress in ensuring a portfolio of COVID-19 treatments for New Zealand is available. Like most organisations, we have also faced significant COVID-19 related pressures in recent years, including direct impact on staff and ensuring continued supply of many medicines and devices that have faced disrupted supply chains.
  • Staff wellbeing – Any good employer needs to look after its staff. We are proud of the work our staff do, in a high-pressure environment that demands robust work and often attracts criticism. Our staff are our biggest asset; their wellbeing and capacity to deliver improvements must be top of mind. We are grateful for the ongoing commitment of our staff to both shape and deliver our response to the Pharmac review.
  • Resourcing – We recognise the high demands on health funding and importance of streamlining operations to free-up resources for new initiatives. Pharmac isn’t however a large organisation and manages over $1.8 billion of medicines and devices investment each year. Our full implementation plan in October 2022 will include detail on funding options (both deliverables and resourcing implications) for parts of our improvement programme.
  • Valuing what we have – As we plan improvements for a new phase, we encourage stakeholders to also see the strengths of the Pharmac model and our work. This includes our extensive network of expert advisors (across multiple domains), and our strategies to get high value for New Zealanders from the public money we spend – all in the pursuit of contributing as best we can to New Zealanders’ health and wellbeing.

For additional context, we have also attached our current strategy that we’re building on, to help show we’re working towards the directions recommended by the review. We are looking forward to evolving our strategy as part of our 2023/24 Statement of Intent.

Closing comment

We appreciate the opportunity to provide this interim response and look forward to completing our full implementation plan by the end of October 2022. We hope all stakeholders feel assured by our sincere commitment to make improvements in several important ways. Again, we thank everyone involved in the review and look forward to giving effect to the Government’s response.