Managing medicine supply
How PHARMAC manages medicine supply to New Zealand
Medicine supply problems occur throughout the world for a number of reasons, such as problems with manufacture or availability of raw materials.
Many people depend on regular supply of medicine to maintain their health, so continued availability of funded medicines is of concern to PHARMAC. Despite the myth that sole supply contracts lead to stock supply issues, the reverse is true. New Zealand experiences comparatively fewer supply issues than most other countries due to PHARMAC’s approach to managing supply.
While supply contracts are not common internationally, when a pharmaceutical supplier signs a contract with PHARMAC they accept responsibility to maintain ongoing supply.
They are also required to notify PHARMAC if they become aware of a possible shortage.
Due to PHARMAC’s close involvement with the medicines supply chain, we have a number of mechanisms in place that enable us to respond rapidly when any medicine supply issues arise.
New Zealand is a relatively small and geographically isolated country with a correspondingly small pharmaceutical market (around 0.1% of the global pharmaceutical market). Because most production occurs overseas, New Zealand is vulnerable to international changes in demand and supply of medicines. These changes can be difficult to predict, and may arise because of things like manufacturing shortages, increases in demand because of an epidemic, natural disasters, or changes in regulatory rules in other countries.
Many of these factors are outside the suppliers’ control, but we try to reduce the risk of out of stocks occurring through the way we contract with them. For example, our contracts require companies to notify us when stocks fall below a certain level and for suppliers to pay us to cover the cost of a replacement product. This enables us to take steps to encourage continued supply or communicate rapidly when a disruption to supply is likely.
However, events such as product recalls can occur and take the market by surprise. In these cases PHARMAC works closely with suppliers and obtains clinical advice where necessary to ensure suitable alternatives are able to be sourced.
We work closely with DHBs and their agents to manage notification of any supply issues and manage our relationship with suppliers through our contracts. Recalls of medical devices can occur and in these cases, PHARMAC works closely with Medsafe and the suppliers to ensure users, prescribers, orderers and the rest of the supply chain are well-informed. There are often patient-level registries which can assist with direct communication and management of replacements products.
Deciding when to notify people that stock of a product may run out is always a judgement call. If notice is given too early ‘panic buying’ may occur and stock may run out.
Many stock shortages do not result in stock running out. We work with Medsafe, DHBs, DHB agents, the Pharmacy Guild and other pharmacy-representative groups when deciding what public notice is required and when.
Why have contracts?
The main mechanism we have for continuing supply is a legally enforceable contract with pharmaceutical suppliers. In addition to a supplier’s general responsibility to maintain ongoing supply, the contracts mean that if they become aware of a possible shortage, they are required to notify PHARMAC so that action can be taken. The company is also usually liable for any extra costs involved in sourcing another product.
The contracts require suppliers to let us know if stock levels fall below two months’ supply or if they become aware that an out of stock is possible. With advance notice, we can take action (see below for examples of types of action we might take).
We receive routine updates about stock levels from pharmacists, wholesalers and pharmaceutical suppliers through our existing relationships (we have a contract management team whose role is to manage contractual supply relationships), or via our 0800 contact line or website.
We take a company’s supply track record into account when we are thinking about awarding a supply contract.
We consult on medicine funding decisions so that people can raise any supply concerns they are aware of, along with other issues.
Responding to supply issues
When we become aware of a potential supply issue, we act as quickly as we can. There are a number of ways we can manage these issues:
- We work with the supplier to find alternative stock.
- If the medicine is under a sole supply contract, we can suspend sole supply so we can seek supply of alternative medicines during the suspension period.
- We consult with Medsafe, the Government’s medicine regulator, about the possible use of unregistered medicines. If appropriate, we can seek urgent Medsafe registration for an alternative medicine.
- We use stock management tools, such as advisory notes to clinicians and pharmacists, or we can require medicines to be dispensed in smaller amounts, to avoid stockpiling.
- We can investigate the possibility of finding an alternative medicine supply from overseas.
- We recover the costs of sourcing alternative stock through our supply contracts.
- We communicate with pharmaceutical wholesalers, pharmacists and their professional organisations so they can manage stock requirements.