Prioritising pills for the people: Getting new medicines on schedule a complex process
The funding of pharmaceuticals is an issue that often makes its way into news headlines. Dr David Hughes explains how the agency’s medicine funding process works.
Every so often there’ll be a story in the media about a new medication or treatment that someone wants, and that Pharmac hasn’t funded.
In some cases, it’s a medicine we haven’t received an application for, or it hasn’t been approved by Medsafe. Sometimes the medicine is still undergoing clinical trials, which means it might be years away from being approved for use.
There can be confusion around how the medicine funding process works. It’s fairly complex and involves a lot of clinical data and analysis, which is why we bring in external clinical experts to help us make these decisions. The main steps in the decision-making process are shown in the flow chart.
We receive most of our funding applications from pharmaceutical companies and clinicians, but some come from patients or advocacy groups. More than a third of our applications are for cancer treatments.
Once we receive an application, we can take it to our PTAC (Pharmacology and Therapeutics Advisory Committee) or one of our specialist advisory committees to ask for their advice. While some applications arrive fully formed with all the information we need, others might require a fair bit of work at our end to get them ready for the next steps.
Seeking advice
Pharmac has 21 specialist advisory committees made up of 140 experts, each with expertise in specific clinical areas such as diabetes, cancer, immunisation and cardiovascular disease. These clinicians (both GPs and specialists), nurses, pharmacists and other health professionals assess the scientific and clinical evidence for a medication and where it might fit into a treatment system for a condition.
Some of the committees also have consumer members to ensure other perspectives are considered when recommendations are made about whether a treatment should be added to the pharmaceutical schedule.
PTAC is composed of the chairs of the specialist advisory committees and is there to take a broader look at the general benefits of a medicine to healthcare, whereas the advisory committees focus on their specific areas.
The main goal of these advisory committees is to provide Pharmac with advice on how effective the medicine is, in particular, compared with current funded treatment options. This includes what impact it might have on people, their whānau and caregivers and the wider health sector, and what the benefits and risks would be if it was funded.
Recently we have been able to bring in people with lived experience of a disease or disorder to some of our advisory committee meetings to talk about how this medicine might impact their lives.
Often the applications aren’t for brand-new medicines, but for new indications for existing medicines. For example, we fund pembrolizumab (Keytruda) for melanoma and a type of lung cancer, following funding applications showing evidence it is beneficial. But as time goes on, evidence has emerged showing pembrolizumab may also have benefit in other cancers, leading to applications for it to be funded specifically for those cancers.
Once a committee has finished looking at the evidence it will recommend whether Pharmac should fund, defer or decline an application.
Sometimes the committee will recommend we should decline an application because of concerns about the medicine. We consult publicly before formally declining an application.
The committee might point out that, while a medicine works, there are other similar medicines we already fund that are just as good. This might lead to a recommendation Pharmac only funds the medicine if it costs no more than currently funded options (a “cost-neutral or cost-saving” recommendation). Or the committee might defer a decision until there is more clinical evidence; with some newer medicines, there isn’t enough data to get us to the assessment point. We are open to receiving more data at any time to reconsider those medicines.
If it recommends that we do fund a medicine, the advisory committee gives this a low, medium or high priority.
Assessment gets under way
The next step for a medicine recommended for funding, is to go to Pharmac’s assessment team, which includes health economists. This team takes the evidence and summarises a wide range of information about Pharmac’s decisionmaking framework (called Factors for Consideration).
The Factors for Consideration include the health need of people with the condition, the health benefit of the new medicine compared with the current treatment, suitability of the new medicine, the health need for Māori and Pacific peoples and other priority populations, and cost.
As part of this exercise, the team undertakes a costutility analysis which is a measure of the cost-effectiveness of the medicine.
In some cases, the medicine might be cheaper than one we are already funding. Sometimes the medicine is very expensive and may or may not provide a lot of benefit.
Once these assessments are completed, Pharmac staff discuss a summary of the application’s assessment against the Factors for Consideration and where on our Options for investment (OFI) list the medicine should be ranked. The OFI is the list of treatments we would like to fund if we have enough budget. We publish the OFI list on the Pharmac website in alphabetical order. As you can imagine, the ranking of a medicine on the list is commercially sensitive.
Our focus is on funding the pharmaceuticals that deliver the best health outcomes for New Zealanders within our fixed budget, so we do not divulge how we have ranked an application.
How medicine gets funded
When a medicine is high on our priority (OFI) list, we aim to fund it when we have available budget. We are constantly working to increase the amount of budget available for funding new medicines. This includes finding savings through competitive processes when a funded medicine’s patent expires and generic equivalents, which are just as effective, become available at a lower cost. We also negotiate savings deals directly with pharmaceutical suppliers.
Once we have available budget, we work up a funding proposal, often involving commercial negotiations or a competitive process and contracting with the relevant supplier. We then do a public consultation before a decision is made. The aim is to achieve the best possible pricing so we can fund more treatments.
A funding boost from the Government in July 2022 has allowed us to fund 20 new medicines and widen access to 22 other treatments for implementation in 2022/23. One of those new medicines was Trikafta for people with cystic fibrosis which was funded from 1 April 2023 – described by patients as life-changing. Our economic modelling incorporated an expected life extension of 27 years. In addition, we have been able to fund three new medicines and widen access to nine medicines (as at 31 October) for implementation in the 2023/24 financial year.
Why so complicated?
What we are trying to do is difficult. Pharmaceutical companies – our suppliers – are businesses which want to sell their products. Meanwhile, Pharmac has to make some tough decisions on which medicines to fund for the best health outcomes for all New Zealanders, while staying within our budget. These two different objectives create a tension. We are working to share more of our assessments so clinicians and the public can understand what benefits they should expect from the medicines we are considering.
We understand how difficult it must be to know that a potentially life-changing treatment is available in another country but seems just out of reach here.
Pharmac has to take a much more cautious approach than similar agencies in other countries. This is due to the unique position of being both the decision-maker and holder of the fixed budget to fund medicines.
Every cent of the pharmaceutical budget is spent on medicines, always bearing in mind both the specific groups who need the current treatments, and the people who are waiting for other medicines to be funded.
I hope I have shone some light on how we make these difficult decisions.
David Hughes is Pharmac's chief medical officer and director, advice and assessment
This article was published by New Zealand Doctor on 31 January 2024(external link).