Pricing strategies, executive committee power and negotiation leverage in New Zealand's containment of public spending on pharmaceuticals

Abstract

This paper explores policy mechanisms behind New Zealand's remarkable track record of cost containment in public pharmaceutical spending, contrasting with most other advanced economies. We drew on a review of official policy documents and 28 semi-structured expert interviews. We found that decision making in pricing and reimbursement policy was dominated by a small group of managers at the Pharmaceutical Management Agency (PHARMAC), the country's drug reimbursement and Health Technology Assessment Agency, who negotiated pharmaceutical prices on behalf of the public payer. In formal negotiation over patented pharmaceutical prices these managers applied an array of pricing strategies, most notably, ‘bundling’ consisting of discounted package deals for multiple pharmaceuticals, and ‘play-off tenders’, whereby two or more pharmaceutical companies bid for exclusive contracts. The key pricing strategy for generic drugs, in contrast, was ‘blind-tenders’ taking the form of an annual bidding process for supply contracts. An additional contextual condition on bargaining over pharmaceutical prices was an indirect strategy that involved the cultivation of the PHARMAC's ‘negotiation leverage’. We derived two cost containment mechanisms consisting in the relationship between pricing strategy options and various reimbursement actors. Our findings shed light on aspects of the institutional design of drug reimbursement that may promote the effective use of competitive negotiations of pharmaceutical prices, including specific pricing strategies, by specialist public payer institutions. On this basis, we formulate recommendations for countries seeking to develop or reform policy frameworks to better meet the budgetary challenge posed by pharmaceutical expenditure.

Evolutionary trend analysis of the pharmaceutical management research field from the perspective of mapping the knowledge domain

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Tenders for generics and biosimilars: a challenging purchasing policy

“…Outside Europe, other studies presented data of savings in the generics invoice of 2-9%, in Jordan [5], and price cuts of more than 70% for oncologic and antiretroviral drugs in South Africa between 2013 and 2016 [6]. Likewise, Main et al [7] also reported that New Zealand had contained pharmaceutical expenditures in the last 40 years using an array of strategies, including tenders for generic drugs.…”

Unlocking hidden potential: advancements, approaches, and obstacles in repurposing drugs for cancer therapy

“…Cancer drug treatment costs were found to be even higher in the USA, with a median cost 2.31 times higher than Europe, and the financial burden is more often borne by individuals and private insurance companies than the government [ 7 , 10 , 11 ]. In a New Zealand (NZ) context, despite a remarkable track record for restraining public pharmaceutical expenditure, the drug purchase agency PHARMAC’s funding has increased by 25% over the four years to March 2022, in a large part, to fund more cancer drugs publicly [ 12 , 13 ]. Global cancer drug sales are projected to increase even further in the next few years, from $193 billion USD in 2022 to $377 billion USD by 2027, with the drivers including earlier cancer diagnoses and decreased mortality resulting in longer treatment periods, as well as increased access to novel cancer drugs in more parts of the world, and the continued influx of new drugs to the market [ 14 ].…”