Pharmac’s drug-funding bonanza

By Karen Brown, Health Correspondent, Radionz | May 6, 2016

ANALYSIS: A funding boost from the government and DHBs means Pharmac is spreading its pharmaceutical-buying wings.

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Photo: 123RF

Less than a week after Opdivo – an alternative to immunotherapy drug Keytruda – was declared safe for use in this country, a deal was done.Pharmac is to fund Opdivo and more than 350 patients with advanced melanoma are set to begin taking it within eight weeks.

It’s the first drug of its kind, designed to harness the body’s own immune system to target and kill tumours, to be funded in New Zealand. Up to 700 patients who have had no effective funded treatment for advanced melanoma could be on it by this time next year.

Tens of thousands of patients with Hepatitis C infections will also receive high-cost drugs Harvoni and Viekira Pak, which can cure the condition in more than 90 percent of patients.

There’s also the funding green light for expanded access to temozolomide for 245 people with brain and neuroendrocrine tumours, expanded access to a drug to treat a kidney disorder in children, and funding for a form of hormone replacement therapy for women struggling with menopause.

All are subject to standard public consultation and approval by the Pharmac board next month, all expected to be plain sailing.

To those well used to caution and a conservative approach from Pharmac, it’s breathtaking.

It also follows the single largest funding increase in the agency’s 13-year history, announced by Prime Minister John Key and Health Minister Jonathan Coleman on Wednesday.

Pharmac has signed these deals – and a series of others still to be announced – knowing it will receive a $50 million budget boost next financial year.

About $39m of that would come from the government, earmarked soley for new pharmaceutical spending, with $11m from district health boards.

It takes Pharmac’s budget to $850m a year in 2016-17 – up from $650m a year in 2008.

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Health Minister Jonathan Coleman Photo: RNZ / Alexander Robertson

Mr Key and Dr Coleman were at pains to emphasise that what Pharmac funded was its decision.

They said the fact the agency had been able to negotiate deals for such a wide range of medicines, some very costly, was proof the contentious “Pharmac Model” was the right one.

“It saved well over $1 billion over the last decade that has been reinvested in new pharmaceuticals for New Zealanders,” Dr Coleman said.

“Each year through Pharmac’s buying power there’s $40-50m of savings that goes back into new pharmaceuticals that benefit the community.”

How did Pharmac manage it? Did it leverage extra money out of a government keen to see Keytruda or an equivalent immunotherapy drug funded for patients increasingly vocal about their lack of treatment options?

Pharmac chief executive Steffan Crausaz would not say what its top priority was among the seven new treatments funded.

He said it was Pharmac’s decision “100 percent”, not the government’s, about the funding priorities.

“What it really shows – if we turn to the melanoma example, and what Pharmac have been saying all along – is it is not just about taking the first cab off the rank with something that might be good and might have the effects we hope.

“We actually need to see that the treatment does what everybody claims it does and we need to see the evidence.

“We’ve also been very clear that there’s competition coming and other products, and it might have better data – as it transpired.”

Mr Crausaz was talking there about negotiations with Merck Sharp and Dohme, or MSD, which appeared from documents released last week to have become increasingly bitter, as rival supplier Bristol-Myers Squibb entered the arena with its funding application for Opdivo in March.

Mr Crausaz said the $50 million funding boost was “in the range” of the increased funding Pharmac sought from the government and DHBs.

He said the fact Opdivo was registered for advanced lung cancer, and for use in combination therapies for advanced melanoma, was irrelevant when it came to whether to fund it for advanced melanoma.

“Yes, absolutely the whole area of immunotherapy will move into other uses. Yes it’s already in lung cancer, but there will be bladder cancer and other solid tumours actually – as well as haematology, so blood cancers.

“This area is going to move and change and the evidence is going to move and we need to be alive to that and absolutely will be keeping it under review”.

The public was not being told what Opdivo would cost under the deal with BMS. Pharmac would not even say what proportion of the extra $39 million it would consume.

What about the view that funding such highly expensive breakthrough drugs is simply out of reach for New Zealand?

Pharmac’s negotiating capacity, with government imperatives, have proved that wrong. The Pharmac model, the agency says, is about a straightforward ability to negotiate, as with any business.

What could this funding boost for Pharmac mean for cash-strapped DHBs?

Labour health spokesperson Annette King said they would definitely pay.

“This means that DHBs already under pressure from a cut of $1.7 billion in health spending have to make even more cuts,” she said

Just how much of a brunt the rest of the sector may bear as a result would be revealed on Budget day.

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