NEW ZEALAND

Anthem: “ God Defend New Zealand.”

“God Save the Queen”
 Demographics
• Population (in thousands): 4,334 (2009)
• Total fertility rate (per woman): 2 (2006)
• Adolescent fertility rate (%): 27 (2004)

Funding
• Per capita government spending (PPP Int $): 1,905 (2006)
• Per capita total spending (PPP Int $): 2,447 (2006)
• Total expenditure (% of GDP): 9.4 (2006)

Life expectancy
• Life expectancy at birth (years): 80 (2006)
• Life expectancy for females (years): 82 (2006)
• Life expectancy for males (years): 78 (2006)
• Neonatal mortality (per 1,000 live births): 3 (2004)
• Infant mortality (per 1,000 live births): 5 (2006)
• Years of life lost to communicable diseases (%): 5 (2002)
• Years of life lost to injuries (%): 17 (2002)
• Years of life lost to non-communicable diseases (%): 79 (2002)

Source: WHOSIS
The Market
In 2002, sales of pharmaceuticals by PhRMA
member companies totaled NZ $1,018
million (US $647 million).
Expenditure on subsidized non-hospital
pharmaceuticals rose from NZ $503
million(US $320 million) to NZ $512 million
(US $325 million) in 2003.
In 2002, NZ spent 4% of GDP on
pharmaceuticals.
 The supply side of the New Zealand pharmaceutical
market is characterized by an oligopolistic structure. That
is, primarily composed of a small number of very large
multi-national companies; with the exception of some
New Zealand/Australian based ‘generic’ manufacturers.
 Most pharmaceuticals are imported from around 150
European, Australian and North American manufacturers.
 The local New Zealand manufacturing base is small
(approximately 20 licensed manufacturers). There are no
longer any multi-national companies manufacturing
pharmaceuticals in New Zealand, and only two
significant manufacturers of generic medicines.
SPECIAL FEATURES
 With regard to patent protection, New Zealand has a flat
20 year patent term, with no extension.
 The only developed country other than US allowing
DTC advertisements.
 Entry to the New Zealand pharmaceuticals market is not
controlled. Any product that meets the safety standards
(established by the Medicines Act 1981) and which
achieves registration by the Ministry of Health can
freely be sold within New Zealand.
 Pharmaceutical Management Agency Ltd (PHARMAC)
PHARMAC
Pharmaceutical Management Agency was
created in 1993 to ensure that New Zealanders
get the best possible health outcomes from
money the Government spends on medicines.
It decides, on behalf of the District Health
Boards, which medicines are subsidized.
It maintains the NZ Pharmaceutical Schedule,
a list of the approximately 2000 prescription
medicines and therapeutic products subsidized
by the Government.
Pricing, Reimbursement and Access
 PHARMAC exercises monopolistic power over the access to
the NZ market.
 PHARMAC regularly conditions its acceptance of a product
on reimbursement or the manufacturer’s willingness to agree
to a generic-level price.
 Patients are required to pay a co-payment on all reimbursed
products.
 NZ does not restrict the sale of approved pharmaceuticals that
do not receive a pricing subsidy but most private medical
insurance companies will not cover the cost of these medicines
and doctors are often reluctant to prescribe them. As a result,
pharmaceutical companies may choose not to market a
medicine in New Zealand if it does not receive a government
price subsidy.
JTPA
July 2006 onwards -A single body responsible for
evaluating new medications for safety, quality and
efficacy for both Australia and New Zealand called the
Joint Therapeutic Products Agency (JTPA).
Once drugs are registered by the JTPA, the next stage
will be for the country’s pharmaceutical reimbursement
agencies to decide which drug products their
government will subsidise. 
New Zealand's, decision to put a medicine on the
subsidy list depends on the overall budget capital. And
such a decision determined by a tendering process for
the cheapest amongst similar but not identical drugs.
In New Zealand the PTAC (Pharmacology and
Therapeutics Advisory Committee) makes
recommendations to the Pharmaceutical
Benefits Pricing Authority (PBPA) and the
government on the suitability of a drug for
reimbursement on the Pharmaceutical Benefits
Scheme (PBS).
Sole tendering based on the cheapest price of the drug
available thus the fiscal saving in switching brands is
obvious, but the impact that it has on patients’ health is
difficult to measure and often hidden. In patients who are
well controlled on a particular brand, substitution could lead
to increased health care costs. 
E.g. When PHARMAC (Pharmaceutical Management
Agency Limited), the New Zealand public agency
responsible for the procurement of pharmaceuticals,-forced
the switch from Cipramil (a form of citalopram, an SSRI
antidepressant) to a cheaper preparation Celapram, there
were 25 reports of reduced therapeutic effect, including three
reports of suicidal ideation
HEALTH SPENDING
Three reasons can be advanced for New Zealand to be so
out of step with the pattern of expenditure observed in
other OECD countries:
New Zealand has been able to secure significantly more
rapid reductions in the prices of pharmaceuticals than
those enjoyed in other countries
New Zealand has not had access to the same degree of
improvement in the health status and quality of life as
has been enjoyed in other countries, and
New Zealand has not been able to achieve the same
degree of substitution from more invasive and costly
interventions to pharmaceutical-based treatments.
Access to medicines
Comparison of New Listings in Australia and
New Zealand from
June 1999 to June 2004

One New Zealand review undertaken in 2002 put the average time for
products to be listed following registration at 33.6 months.
New Zealand Funding of
Pharmaceuticals is Unusual:
New Zealand uses sole source tenders to bid down the price of
prescription medicines. Under this policy, only one or a limited
number of products are procured for each indication. The expectation
is that the winning bidder would agree to a lower price in return for
the opportunity to supply the entire New Zealand market demand for
that medicine.

Second, the budget for the funding of pharmaceuticals (in other

words, PHARMAC’s budget) is strictly capped. In New Zealand, it is
the entitlement that get adjusted through the year in order to remain
within the set budget. New drugs tend to be approved only if savings
are made on older drugs
New Zealand, uses Reference pricing to beat down prices of patented
pharmaceuticals.

Under reference pricing, the purchasing agency sets the price for
a whole class of drugs by reference to the cheapest drug in the
class, even if the class is so broad that the drugs within it are not
substitutable for each other for clinical purposes.
In New Zealand, reference pricing has a particularly strong impact
because the price of the winning medicine is applied to the entire
therapeutic group without differentiation for therapeutic effect. This
lack of differentiation means that more effective, but more expensive,
medicines within a therapeutic group tend to attract high copayments
in New Zealand.
New Zealand-Relatively Low price
country
Prior to the creation of PHARMAC in 1993 and
the full implementation of the current policies in
1997, New Zealand was a country with
relatively high prices of pharmaceuticals.
Acc to the Productivity Commission report
(using 1999 and 2000 data), New Zealand, is
enjoying lower pharmaceutical prices than many
OECD countries.
New Zealand’s Average prices is lower than
other OECD countries
PRICE DIFFERENCES-All
categories of pharmaceuticals

Source: International Pharmaceutical Price

Differences Research Report, Australian Productivity
Commission
Factors responsible for differences in
prices
Besides restrictions placed on access to medicines:
New Zealand’s lower per capita GDP.
The relative isolation of the New Zealand market.
Overall, pharmaceutical companies need to
recover the costs of research investment while a
drug is under patent. However, in some isolated
markets, they may have an incentive to sell
single-source patented medicines at less than the
full cost recovery price rather than not sell at all,
as long as the price is greater than the actual
marketing and production costs.