A new, independent report has called for a major overhaul of Pharmac’s decision-making process for funding drugs in New Zealand.
The Milne Report, commissioned by Multiple Sclerosis New Zealand (MSNZ), said it was time Pharmac based its funding decisions not just on the cost of a drug or medical device, but on the wider fiscal impact the funding would have on New Zealand society as a whole.
The report was created by health economist Dr Richard Milne and colleagues in New Zealand, Tasmania and Singapore, and is an economic case study evaluation of ocrelizumab — a drug newly funded to treat the primary progressive form of multiple sclerosis (PPMS).
MSNZ president Neil Woodhams said the report was focused on one drug for MS, but its findings had clear implications for the way Pharmac funded all chronic disease drugs and devices in New Zealand.
"The report we commissioned makes clear that Pharmac’s traditional funding decision model, often waiting years to access the cheapest medicines possible, is not necessarily a cost saving when the costs to wider society are taken into account.
"The Milne Report recommends that for Pharmac to make quicker and smarter funding decisions, it needs to include whole of society costs, including loss of income, loss of tax and superannuation contributions for both the person with MS and their partner and whānau, as well as the costs of hospitalisations, equipment, comorbidities, and the cost of caring for those with a disability."
The report shows Pharmac’s funding model is a cost utility analysis (CUA) — a subset of cost effectiveness analysis. In this, Pharmac weighs up the direct healthcare costs and makes decisions relative to its own ring-fenced and capped budget.
However, the Milne Report proposes that by Pharmac including all costs to society in a cost benefit or cost utility model, it would give a wider view of the financial impact of a disease, in addition to medical costs.
"A cost benefit model, widely used overseas, was recommended by the NZ Treasury in 2015 for all budget initiatives.
"It has never been made clear why Pharmac has used a cost-utility analysis instead of a cost-benefit model," Mr Woodhams said.
The report concluded if Pharmac were to make funding decisions based on the total cost to society, it would change the ranking of new pharmaceuticals listed for funding, while reflecting the true value of the medicine.
Treatments that reduce long-term disability and improve quality of life would be meaningfully valued, meaning patients could have a better quality of life for longer, enabling them to either return to work or work more productively.
It makes the point that in MS, treatment is more cost-effective when initiated earlier in the course of disease, and/or at younger ages.
The Milne Report showed indirect costs for MS accounted for more than half of the total cost to society annually for the disease, and was not accounted for in Pharmac funding decisions.
It justified Pharmac spending $22,057 per annum per person on ocrelizumab for patients with PPMS, rather than the $4673 in the present economic model. — APL
