Decision to modify the transition between funded brands in the Schedule

Hospital devices Medicines

Decision

We’re pleased to announce that we’re simplifying the transition period for brand changes made to community medicines and aligning the transition period in the community and DHB hospitals.

The effect of the decision is that:

  • Reference pricing will be removed from the transition period of brand changes in the community (Section B of the Pharmaceutical Schedule) following a competitive procurement process, for example the annual tender process.
  • The initial transition period during a brand change in the community and DHB hospitals will be aligned.
  • Important dates and further information are detailed below.

Any changes to the original proposal?

This decision was subject to a consultation letter dated 13 July 2018.

The proposed transition period was approved as consulted on with some minor changes:

  • For Additional Stock Pharmaceuticals (ASPs) or other products where PHARMAC requires suppliers to hold four months of stock (compared to the normal two months), PHARMAC will provide at least two months written notice of another supplier’s brand of the Pharmaceutical being listed and a seven-month initial transition period
  • The proposal does not impact on PHARMAC’s ability to apply reference pricing for other commercial activities

Who we think will be most interested

  • Suppliers and wholesalers
  • Community and hospital pharmacies and pharmacists
  • Patients and their families

Important dates

The changes to the transition period will first be reflected in the 2018/19 Invitation to Tender which is due to be released at the beginning of November 2018. The Invitation to Tender document will be amended to reflect the approved changes to the transition period.

The anticipated dates the changes would be implemented from for the 2018/19 Invitation to Tender are stated below.

Note that any outstanding decisions from previous annual tender processes would continue to be implemented as under the current arrangements outlined in the relevant Invitation to Tender document.

The proposed changes will also be reflected in upcoming competitive processes outside of the annual tender process.

What will the effect of this decision be?

For illustration purposes, the effect of the decision for the 2018/19 Invitation to Tender is as follows:

For patients and pharmacies

From 1 July 2019 decisions for the 2018/19 Invitation to Tender that result in a brand change will no longer use reference pricing as part of the transition period. During reference pricing the outgoing brand is only partially subsidised by PHARMAC, this means that there is the potential for patients or pharmacies to have to pay the difference in cost to continue to use the outgoing brand during the transition period. This proposal means that patients can continue to use both brands during the transition period at no extra cost to them or pharmacies.

For wholesalers

From 1 July 2019 decisions for the 2018/19 Invitation to Tender that result in a brand change will not have reference pricing as part of the transition period. Wholesalers will be less likely to be left with excess stock at the end of the transition period as both brands will be listed with full subsidy for longer.

For suppliers

From 1 July 2019 decisions for the 2018/19 Invitation to Tender that result in a brand change will not have reference pricing as part of the transition period. The removal of reference pricing should decrease the risk of the outgoing supplier being left with excess stock at the end of the transition period.

For hospital pharmacies

From 1 February 2019 the transition periods in community and DHB hospitals for decisions in the 2018/19 Invitation to Tender will be aligned. For brand changes this will result in an increased transition period in DHB hospitals of five months compared to the current two month transition period.

Our response to what you told us

We’re really grateful for the time people took to respond to this consultation. All consultation responses received were considered in their entirety in making a decision on the proposed changes. Common issues raised during consultation, and our comments on these, are summarised in the table below. 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.

Theme PHARMAC comment

Responders were supportive of the proposal, noting that the proposal would reduce wastage, allow better stock control and reduce the chance of out-of-stock situations occurring during a brand change.

Noted.

Responders noted that the current transition period is not appropriate, with one response stating it should be longer while another stated it should be shorter.

Noted.

A responder noted that the proposal reduced the chance for PHARMAC to make savings through reference pricing.

We understand that this proposal will result in the loss of potential savings but consider that the small loss of savings is justified through a more efficient system for both PHARMAC and external stakeholders.

A responder noted that the number of notifications from PHARMAC would be increased but noted the proposed change would help the supply in community during brand changes.

We believe that the number of notifications would not increase as a result of this change, and could be decreased as the transition period is simplified.