By Stuart Jeanne Bramhall
June 19, 2011
Wikileaks has revealed that the US is collaborating with Big Pharma to pressure New Zealand to abolish PHARMAC.
PHARMAC was established in 1993 to contain prescription costs. It is a world-renowned state agency and is currently exempt from World Trade Organization (WTO) anti-competition rules.
All this will change if our National-led government proceeds to negotiate a Trans-Pacific Strategic Economic Partnership with its US and Asian trading partners.
The power of bulk purchasing
A single agency that purchases medications for millions of people has the power to pressure pharmaceutical companies to cut costs. This is one situation where market competition does lower prices, as multiple manufacturers producing virtually identical drugs compete to sell their products to PHARMAC.
Medications on PHARMAC’s approved list are subsidized, so patients pay only $3 for each prescription. The formulary consists mainly of generic drugs, where they are available, and brand name drugs where the manufacturer has agreed to a volume discount.
If a drug company won’t agree to a discount, its drug doesn’t appear on the PHARMAC formulary.
Pfizer has refused to discount the price of its antidepressant Zoloft. Because patients must pay the full cost of a Zoloft prescription, it’s rarely prescribed in New Zealand.
There are exceptions. If medical research indicates that a new, non-discounted drug fills a clinical need, it will be included on the formulary as a “special authority” drug. That means the prescription will be subsidized only if the doctor fills out a “special authority” form certifying that the patient meets specific diagnostic criteria and has failed to respond to one or two comparable drugs on the formulary.
The envy of the world
Thanks to PHARMAC, New Zealand, unlike most of the industrial world, has been able to limit the growth of prescription costs to the rate of inflation – despite a significant increase in demand.
Not surprisingly, PHARMAC’s formation was followed by near constant litigation from drug companies, so that legal costs accounted for 18 percent of its budget in the early years.
The drug companies charge that New Zealand is failing to pay its share of research costs, which is a pretty self-serving claim, given the record profits the pharmaceutical industry reported in 2010 (averaging more than 15-20 percent of revenues), the billions devoted to marketing identical “me-too” drugs, criminal penalties for fraudulent business practices and exorbitant CEO salaries.
The Trans-Pacific Strategic Economic Partnership threatens to do what the pharmaceutical industry could not - open New Zealand to escalating drug costs and booming profits for the private sector.
Stuart Jeanne Bramhall is a retired American physician living in New Zealand.