Cost increases caused by COVID-19

25 May 2020

[Name and contact details withheld]

Dear [name withheld]

REQUEST FOR INFORMATION

Thank you for your emails on 23 April 2020 and 25 April 2020 to PHARMAC’s Media Team, asking about PHARMAC’s $35 million budget increase.  I understand that your questions were addressed by our Media Team except for the following:

• What medicines/ ingredients are more expensive (as a result of COVID-19) and by how much have they increased?

These questions have been considered under the Official Information Act 1982 (OIA). 

No medicines listed in the community Pharmaceutical Schedule (Section B) have had a price rise, as yet, that can be directly attributed to COVID-19.  To date, PHARMAC has provisionally secured additional supplies of critical care medicines for use in DHB hospitals from alternative suppliers with a value of $5.3 million.  Further supplies of some pharmaceuticals are entering the supply chain over and above normal levels and costs of these are yet to be confirmed.

PHARMAC has used prior usage data to forecast the potential impacts of the supply disruptions.  The $35 million increase to the Combined Pharmaceutical Budget will support continued funding of medicines used in DHB hospitals and of medicines and devices in the community and ensure we can continue to secure supply of these funded pharmaceuticals into New Zealand.

Costs that will be funded from the budget uplift include:

• where an alternate brand of a medicine affected by supply issues has been secured (at a higher price)
• where prices have been impacted by additional transportation costs to get medicines and medical devices to New Zealand
• where medicines, under contract for a fixed period, incur price rises once the contract term expires
• the impacts of delays in savings transactions that PHARMAC had planned
• changes to funding access criteria. PHARMAC has widened access to some treatments with the aim of reducing demand on DHB hospital specialty services. This may mean that more people get access to a medicine or that people stay on treatment for longer than they would have otherwise. There is more information on this on our website.
• extensions to Special Authority approvals that were due to expire on 30 March and 30 April 2020. Again, this may mean that people stay on a funded treatment for longer than they would have otherwise. There is more information on this on our website [link removed as page archived].

PHARMAC is not expecting to fund new medicines from this $35 million budget uplift.

The price effects and supply disruption are expected to persist for some time. In addition to the $35 million increase, the Government has granted an increase of $160 million over four years to the Combined Pharmaceutical Budget. This will ensure that PHARMAC can continue to provide New Zealanders with uninterrupted access to funded medicines, vaccines, medical devices and other treatments while prices and supplies remain disrupted in the coming years.  

We trust that this information answers your queries.  We are making our information more freely available, so we will now publish selected OIA responses (excluding personal details) on our website.  Please get in touch with us if you have any questions about this.

Yours sincerely

Rachel Read
Manager, Policy and Government Services