Additional listings on the Pharmaceutical Schedule of a range of orthopaedic implants and associated products with Johnson & Johnson (New Zealand) Limited

6 July 2017

Hospital devices Decision

PHARMAC is pleased to announce the approval of an amendment to the suture agreement with Johnson & Johnson (New Zealand) Limited (“J&J”).

This was the subject of a consultation letter dated 6 June 2017.

In summary, the effect of the decision is that:

J&J’s DePuy Synthes range of orthopaedic implants, and associated products will be listed in Section H, Part III, (‘Optional Pharmaceuticals’) of the Pharmaceutical Schedule from 1 August 2017.
DHB hospitals can purchase these items directly from J&J.
For the DHBs that currently use these products the national agreement will deliver savings.

Details of the decision

In April 2016 an orthopaedic implants and associated products request for proposal (“RFP”) was released requesting proposals for non-exclusive national agreements for medical devices, to PHARMAC for a listing on the Pharmaceutical Schedule and J&J responded to this request.

The purpose of the RFP was to secure national contracts for DHB hospitals to purchase from, and to provide replacement contracts for the current Health Benefits Limited (HBL) suite of hip and knee contracts that expired in April 2017. The J&J contract was extended to 31 July 2017.

J&J’s proposal was to add additional schedules to its current Agreement for suture implants to incorporate all products in their orthopaedic implants and associated products portfolio in line with the scope of the RFP.

The list of products will be available on PHARMAC’s website from 1 August 2017, in both a PDF document and an Excel spreadsheet.

This will result in national savings of approximately $940,000 per annum to DHBs that use these products, based on current usage.

The agreement is not exclusive. DHBs can continue to purchase other brands of orthopaedic implants and associated products at their discretion.

Educational services will be provided by J&J to DHB personnel on appropriate use of its orthopaedic implants and associated products and will be arranged in a format and at times as agreed with individual DHBs.

Feedback received

PHARMAC appreciates all of the feedback that it has received and acknowledges the time people took to respond. All consultation responses received by 23 June 2017 were considered in their entirety in making a decision on the proposed changes. Most responses were supportive of the proposal, and the following issues were raised in relation to specific aspects of the proposal:

Theme	Comment
The Attune range was not specified under brand names proposed for listing, and concern was raised that it would not be available under this agreement.	The Attune range is included in the proposal but was submitted under the brand of DePuy Synthes and was not identified separately due to this.
Concern was raised around price transparency for products used in both private and public hospitals and individual surgeon arrangements with suppliers. Are PHARMAC taking into account the true spend, and cost, of these products including the freight costs and services around them, and therefore are the projected savings taking these issues into account.	PHARMACs role in medical devices is to provide nationally agreed pricing for DHB Hospitals. PHARMAC does take into account the supply chain and supporting services required in each category and how they impact cost. All savings reported are based on status quo usage at the new pricing offered and any impacts that might arise from different freight or service costs. The savings reported is an estimate based on the purchasing patterns, support requirements and product volumes, with the assumption these parameters will remain relatively stable in the next 12 months.
Complexity of the contract’s pricing structure makes it difficult for DHBs to analyse and to make purchasing decisions against other contracts. DHBs preference is for contracts without complex pricing arrangements.	As more of the PHARMAC model is applied to Medical Devices it is envisioned complexities will reduce. In the national contracting phase PHARMAC is accepting proposals with varying levels of complexity in order to give DHBs opportunities to access maximum levels of savings where possible, and give suppliers a level of assurance in their market share to be able to offer savings opportunities. PHARMAC will work with DHBs to assist with analysis to support optimal purchasing decisions.
More information was sought on what PHARMAC wanted from a consultation, and guidance on the type of specific feedback that would be most informative.	PHARMAC is required to consult on all provisional Listing Agreements. This is to ensure the needs of the stakeholders are taken into account and any issues are able to be resolved before a final decision is made. Feedback can be on anything you want PHARMAC to clarify, consider or address prior to making a final decision.
Several requests from DHBs for more detail relating to supply chain and pricing specific to their DHB.	Provided as requested.

More 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.