Decision to award market share agreements for various wound care products

Hospital devices

Decision

PHARMAC is pleased to announce the approval of market share agreements, which award Hospital Supply Status (HSS) for six wound care subcategories.

These HSS agreements differ from other PHARMAC hospital medical devices agreements because they guarantee a single supplier a portion of a specified DHB market in return for competitive pricing and quality products.

These are the first HSS contracts awarded by PHARMAC for hospital medical devices. Products will be listed from 1 November 2016, with HSS taking effect from 1 July 2017.

If DHBs purchase the types of products within any of the HSS subcategories below, they must purchase the agreed portion from the HSS supplier’s brand(s).

The agreements cover a small number of wound care subcategories.  This will allow DHBs to benefit from some savings while setting the foundation for similar activity in other medical device categories.

Consultation feedback was an important part of our decision-making process.  We appreciate the time people took to provide feedback on our proposal and have made changes to our approach as a result.

HSS has been awarded to each of the six wound care subcategories below:

HSS subcategory

Market share

HSS brand(s)

HSS supplier

IV pressure pads

80%
(DV limit 20%)

Cesablic

Defries Industries New Zealand Limited (“Defries”)

Low adherent dressings with adhesive border

80%
(DV limit 20%)

Asguard Flex +

Protec Solutions Limited (“Protec”)

Combine dressings (non-sterile)

80%
(DV limit 20%)

Bamford

WM Bamford & Co Ltd (“WM Bamford”)

Combine dressings (sterile)

80%
(DV limit 20%)

Bamford

WM Bamford & Co Ltd (“WM Bamford”)

Foam adhesive dressings (with and without border)

75%
(DV limit 25%)

Mepilex
Mepilex Lite
Mepilex Border
Mepilex Border Lite
Mepilex Transfer
Mepilex XT

Mölnlycke Health Care Pty Limited (“Mölnlycke”)

Foam non-adhesive dressings

80%
(DV limit 20%)

Biatain

Universal Specialities Limited (“USL”)

These agreements were the subject of a consultation letter dated 4 July 2016.

Some changes were made as the result of consultation feedback and these are detailed in Appendix 1 above.

Details of the decision

PHARMAC has entered into single supplier market share agreements for each of the six wound care subcategories outlined in the table above.  This is the result of a request for proposal (RFP) that was issued in September 2015.

PHARMAC received clinical advice from the Wound Care Advisory Group (WCAG) throughout the RFP process.  The WCAG is made up of practicing wound care specialists who work for DHBs. 

The HSS supplier’s products for each HSS subcategory will be listed in Part III of Section H of the Pharmaceutical Schedule from 1 November 2016, with HSS effective from 1 July 2017 to 30 June 2020.

This means that the HSS supplier’s products will be listed at the new price from 1 November 2016.  From 1 July 2017 to 30 June 2020, DHBs must only purchase the HSS brand of wound care products within the HSS subcategory, with some allowance for discretionary purchasing (DV limit).

If a DHB is not currently purchasing the types of products that meet the definition of the HSS subcategory, it does not have to start purchasing the HSS brands as a result of this decision. 

The list of HSS products, DV pharmaceuticals and HSS subcategory definitions will be available prior to 1 November 2016 on PHARMAC’s website, in both a PDF document and an Excel spreadsheet.

Suppliers with existing national agreements for wound care products, that have not been awarded market share agreements, will continue to have their products listed on the Pharmaceutical Schedule.

All suppliers awarded HSS currently provide wound care products to DHBs and they will provide training and education on the appropriate use of their products.  This will be arranged in a format and times agreed with individual DHBs.

Transition period

The transition period will be from 1 November 2016 to 30 June 2017.  This is longer than originally proposed as some DHBs have provided feedback that they will need longer than six months to manage the required changes.

The additional transition time will also allow greater lead in time for both HSS Suppliers and non-HSS Suppliers to manage stock to the appropriate levels.

While not all HSS subcategories would involve a product change for DHBs, most require at least a partial change to meet market share obligations. 

DV Limits

The Discretionary Variance (DV) limit allows DHBs to purchase a small proportion of products within the HSS subcategory from non-HSS suppliers, while setting a limit on this so that the DHBs’ market share obligations to the HSS supplier are met.

The DV limit is the maximum percentage of the total HSS subcategory market allowed for discretionary purchasing.   PHARMAC will calculate DV limit compliance annually.

If DHBs are compliant with an HSS subcategory DV Limit at a national level, PHARMAC will take no further action.  If DHBs are non-compliant with an HSS subcategory DV limit at a national level, the HSS supplier is entitled to seek compensation from any non-compliant DHBs.

PHARMAC will provide DHBs with a DV limit report before and after the transition period and as needed to support DV limit compliance.

Feedback received

We appreciated all of the feedback we received and acknowledge the time people took to respond.  All consultation responses were considered in their entirety in making a decision on the proposed changes. 

PHARMAC has also engaged with a number of stakeholders who sought additional information and clarification during the consultation period.  The engagement process has provided stakeholders with a better understanding of the proposal and an opportunity for PHARMAC to better understand the potential impacts of the proposed changes.

The following issues were raised in relation to specific aspects of the proposal:

 Theme Comment
Engagement with DHBs during the evaluation phase

PHARMAC received objective clinical advice from its Wound Care Advisory Group, during the evaluation process and expected further clinical feedback as a result of the consultation.

Based on the consultation feedback, PHARMAC delayed its decision so that it could engage directly with all DHBs about the proposed changes.

This engagement was received positively by DHBs and in most instances, they reported that they were now confident with the processes followed and that the proposed changes would be manageable.

The feedback received from DHBs since the consultation closed was also considered in making this decision.

Information provided about proposed HSS products not previously used in DHBs 

Information provided about the evaluation process 

Scope of the proposed HSS subcategories 

Support with product conversion, training and education Certainty of supply

Where specific questions were raised during the consultation period PHARMAC answered these promptly to help ensure submissions were based on a sound understanding of the proposal.Post-consultation engagement has been mostly with DHB clinical and procurement staff where detailed information was provided about:

  • Expected DHB specific financial impact
  • The evaluation process including clinical advice received
  • Proposed product specifications
  • The scope of the proposed HSS subcategories including what, if any, changes they would have to make to their current purchasing within each subcategory
  • Proposed contractual obligations for the HSS suppliers around stock holding, product quality and performance, and transition and ongoing education and training support
Because of consultation feedback, PHARMAC has amended the HSS supplier agreements.  Further information about this is provided in Appendix 1 above.
Avenue for raising concerns PHARMAC will work closely with DHBs and suppliers throughout the implementation of the agreements to ensure any transition issues are promptly identified and addressed.
Performance of proposed HSS products In addition to the clinical advice provided by the Wound Care Advisory Group, PHARMAC has sought feedback from other clinical experts both nationally and internationally on product performance in DHBs or DHB-like settings.  PHARMAC is confident that the proposed products are clinically suitable for use in DHB hospitals and their hospital-provided community services, and that the DV limits will be sufficient to meet the needs of patients for whom the HSS products are not suitable. 
Transition timeframe PHARMAC acknowledges that market share agreements for medical devices are new to DHBs and suppliers. We have extended the transition timeframe by two months to allow more time for the necessary changes to be made before the HSS period begins.

Further questions and information

If you have any questions about this decision, you can email us at enquiry@pharmac.govt.nz or call our toll free number (9 am to 5 pm, Monday to Friday) on 0800 66 00 50.