Mythbusting Pharmac

Where we dispel some misunderstandings about what Pharmac does and how we do it.

Myth: Pharmac cares more about money than lives.

Truth: The people who work at Pharmac want all New Zealanders to live longer, healthier, happier lives. We care about money only because we have a finite budget which we need to manage carefully.

In 2023/24, the Pharmaceutical Budget will be $1.245 billion. We will invest all of this into medicines, vaccines, and related products for New Zealanders.

A pie graph showing 90% of people use 16% of funding. 10% of people use 84% of funding..
How the spend on community medicines is spread among medicine taking New Zealanders

Myth: Pharmac only funds cheap bulk medicines

Truth: 3.81 million people receive funded medicines each year. 10% of those people account for 84% of the spending on medicines.

These are expensive medicines to treat conditions such as autoimmune conditions, cancer and hepatitis C.

Over time, the percentage of funds used by the top 10% of people is increasing. 6 years ago 10% of people accounted for 79% of spending.

Myth: These medicines are available in 80 other countries, but not in New Zealand

Truth: Medicines might be ‘available’ in other countries, but it doesn’t mean they are Government funded. 

In New Zealand, if a medicine is funded, generally 100% of its cost is covered by the government.

On average in the OECD, governments and compulsory insurance only covered 58% of community medicine costs. Most of the rest is coming out of patients’ pockets.

In Germany and France, government and compulsory health insurance cover 80% or more of medicine costs. By contrast, in Latvia, Poland and Lithuania, almost two-thirds of medicine spending was paid by patients.

Pharmaceutical expenditure: 2019 OECD Indicators(external link)

Out-of-pocket spending as a share of final household consumption: 2019 OECD indicators(external link)

Myth: Australians have access to lots more funded medicines

Truth: Australia does fund more medicines. However, unlike New Zealand, they do not have a fixed budget.

In the 2021/22 financial year the Australian Pharmaceutical Budget spend was AU$14.7 billion. In 2021/22, Pharmac's budget was $1.085 billion. 

Pharmac is legally required to stay within the budget the Government has allocated for medicines, vaccines and related products

In addition, Australians pay more for each prescription, generally about AU$30. Most New Zealanders only pay $5. In New Zealand, you do not have to pay the co-payment after you’ve received 20 prescriptions in a year. This means your medicine is likely to be free after you’ve paid $100 each year. In Australia, the cap is closer to $1500.

While no system is perfect, the New Zealand model means cost is less of a barrier for people to access the medicines they need.

Read more about the Australian Pharmaceutical Benefit System(external link)

Myth: Because Pharmac gives suppliers sole access to the New Zealand market, we are more likely to have stock issues.

Truth: New Zealand has fewer stock issues than Australia in general. When we give suppliers sole access to the funded market, we also make them responsible for ensuring that medicine is available. There can be financial penalties for suppliers who fail to keep medicines in stock.

The contracts we have with suppliers has meant we have had fewer issues reach consumers. Generally, we are able to find replacements for medicines with a supply issue.

Medicine notices of brand changes and supply issues on our website

Myth: Pharmac buys and sells medicines.

Truth: Pharmac doesn’t buy medicines. We just decide which ones the government will pay for. Pharmacies buy medicines from suppliers and pharmaceutical companies. The Ministry of Health then reimburses pharmacies at the rate we agreed with the pharmaceutical company.

Read more about our role in supply management

There are 2 exceptions to this, vaccines (except the influenza vaccine) and COVID-19 treatments.

Myth: Pharmac refuses to fund new drugs

Truth: We are committed to funding medicines that are proven to make a difference for people. Price is not the only issue with many new medicines. Our clinical advisers tell us whether any new medicine has the evidence to back up the claims made by pharmaceutical companies. 

In 2021/22 we funded 6 new medicines and widened access to 16 other medicines. 

An estimated 118,747 more people benefited from our 2021/22 funding decisions.

Read more:

How Pharmac works

The journey of a funding application

What factors we consider when make a decision

Our operating policies and procedures manual

Myth: Pharmac only funds the cheapest medicines.

Truth: When negotiating with pharmaceutical companies, we consider a range of factors. Price is one of these. However, we also look at things like taste, packaging and a medicine’s overall impact on the health sector. For example, how do people take it? Is it a pill or do they need to see a nurse or doctor for an injection?

We have the Tender Medical Evaluation Subcommittee. It is made up of GPs, pharmacists, nurses and other experts. As part of the tender process, they examine every brand of medicine that might be funded. They check the taste, the feel, how easy it is to get into the package.

The annual tender is one way that we get better prices for medicines.

Learn more about the Tender Medical Evaluation Subcommittee

Myth: Pharmac funds ‘knock off’ medicines that aren’t as good as ‘brand name’ versions.

Truth: Funded medicines must be approved by Medsafe. If we fund a ‘generic’ brand, it is as safe and effective as the original medicine.

About generic medicines

Some medicines are very complex. There can even be differences between batches made by the same company. Always talk to a health professional if you notice side effects from any medicine.

About biological and biosimilar medicines