Decision to change PHARMAC’s approach to competitive procurement

Decision

We're pleased to announce the decision to start offering and awarding Principal Supply Status in our competitive procurement processes.

This will create a consistent approach between the community and DHB hospital markets, improving the methods that we have used for many years.

Any changes to the original proposal?

This decision was subject to consultation on 4 August 2020 which was sent to suppliers,  healthcare professionals, patient advocacy groups and on PHARMAC’s website for anyone else wanting to have their say, as well as an earlier consultation to pharmaceutical suppliers on 10 July 2020.

The Principal Supply Status approach will be implemented, largely as proposed, in the annual Invitation to Tender (ITT) that will be issued in November 2020 for contracts that will commence from 1 July 2021.  It may also be utilised in other competitive procurement processes that we undertake going forward.

We received useful feedback on the proposed contract terms for the principal supplier relating to audit provisions, and we are currently considering these suggestions prior to finalising the terms and conditions for the 2020/21 ITT.

Who we think will be most interested

  • Pharmaceutical suppliers
  • Health professionals, including prescribers and pharmacists
  • Patient advocacy groups

Detail about this decision

Starting with the 2020/21 Invitation to Tender, PHARMAC will replace the use of Sole Supply Status (in the community) and Hospital Supply Status (in DHB hospitals) with Principal Supply Status. This change will give PHARMAC greater flexibility to fund alternative brands for those who may experience, or are at heightened risk of, adverse clinical outcomes due to a brand change.

In the case of community pharmaceuticals, this means that alternative brands might be listed in the Schedule (under Special Authority criteria) or funded through our exceptional circumstances framework, under specified criteria for patients who:

  • are experiencing adverse clinical outcomes following a brand change, and wish to change back to their previous brand, or
  • have unique clinical circumstances that would put them at heightened risk of adverse clinical outcomes, and their prescriber wishes to avoid a brand change, or
  • have circumstances that mean they require a temporary delay to a brand change (eg pregnancy or pending surgery).

In the case of hospital medicines, Principal Supply Status would operate essentially the same as Hospital Supply Status does now.

Our response to what you told us

We’re really grateful for the time people took to respond to this consultation. A summary of the main themes raised in feedback and our responses to the feedback received are set out below. 

Theme

Comment

Responders provided feedback on potential categories of patients and classes of medicines that would particularly benefit from alternative brands being available.

We appreciate the information provided and will be considering this in further detail as we make decisions about individual products.

Some responders noted that this change would not have a material impact on reducing risks associated with supply disruptions.

This change is not intended to address supply chain risks, and we agree that it will be unlikely to have an impact in that regard.

Some responders were concerned that this would result in multiple brands being funded for every pharmaceutical, and that this would result in additional cost to the supply chain.

Brand changes are generally well-tolerated, and we expect that funding of alternative brands will not be required for most products.

It was noted that prescribers often prescribe by brand, including for brands that are no longer funded, which can make it difficult for a pharmacist to ascertain whether or not they specifically intend for an alternative brand to be dispensed.

We agree that generic prescribing is preferable when a specific brand is not required and we note that Medical Council prescribing guidelines in this regard.(external link)(external link)

Where a specific brand is intended, prescribing by brand with ‘no substitution’ specified, as per the Medicines Regulations 1984, Regulation 42 (4), provides clarity to the dispensing pharmacist.

Suppliers provided some feedback about draft contract terms relevant to Principal Supply Status, particularly in relation to auditing usage relative to the alternative brand allowance limit.

We will be carefully considering these suggestions as we finalise the 2020/21 ITT terms and conditions in the coming weeks.

Suppliers noted that the contractual arrangements for alternative brands would not be managed through the ITT and were keen to better understand what the contractual arrangements would be for any alternative brands.

Our intention at this stage is to enter into new agreements with suppliers for medicines that we wish to fund as alternative brands through the Schedule.

Some responders had concerns about the potential for creating niche markets, particularly in relation to commercial viability and regulatory consents.

We agree that these are important considerations, and we will be working with suppliers of alternative brands in the future to ensure viable ongoing supply of registered products.

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.