Cunliffe David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
Cunliffe David: Debate on Crown Entities Public Organisations and State Enterprises — In Committee 
[Volume:646;Page:15669] 
Hon DAVID CUNLIFFE (Minister of Health) 
: 
 I thank the member who has just resumed her seat Barbara Stewart for a very helpful contribution. I will take a short call to make several points. 
The first is that I think most members of this Committee would agree that the Pharmac single purchasing model is fundamentally sound and that it delivers considerable benefits to New Zealanders by stretching our health dollar much further than it would otherwise stretch to the tune of probably $1 billion to $1.5 billion a year. We should reflect upon the fact that according to almost all of the conventional measures that have been shown in this Health Committee report Pharmac is a well-managed and well-run organisation that is doing its job. Pharmac’s 2007 annual review showed that during 2006-07 close to 32 million prescriptions were subsidised—a rise of nearly 12 percent on the previous year. That means an extra 3.3 million were subsidised during the past year and at least 2.7 million people had their medicines subsidised. The scale of this and the scale of the savings that it renders to New Zealanders are such that in any discussion of Pharmac—although any organisation no doubt is capable of improvement—we must be very very careful not to throw the baby out with the proverbial bathwater. 
The second point is that there is always a debate at the margin around the fundamentally utilitarian model of funding allocation in Pharmac’s drug provision which boils down to the greatest medicinal benefit for the greatest number given a relatively fixed level of resource. At the margin there are discussions of how we fund new and innovative drugs that are hellishly expensive but may at the margin deliver extra benefits to a small number of people. That is a very very difficult debate at any level—economics or ethics for example; the philosophy of the utilitarian model versus the innovation model is difficult to get one’s head around. However the system we have which is based on clinical decision-making through the advisory committee the Pharmacology and Therapeutics Advisory Committee process and the use—although no doubt no measure is perfect—of an objective framework through the quality adjusted life years measure is a sound approach because it is a heck of a lot better than the squeaky wheel getting the grease. 
One thing is certain. It is that in the pharmaceutical industry there is an enormous premium attached to lobbying an enormous amount of money washing around in defence of not only intellectual property rights but also monopoly rents by producers and fairly good evidence that in many cases the price of medicines bears no relationship to the cost of production or research but bears every relationship to what it is perceived that the market will stand. In that regard if we did not have something like Pharmac then frankly we would have to invent one because the public of New Zealand needs a defence against those deeply vested and powerful interests nearly all of which are overseas-owned. That is why we have Pharmac. 
Is a model like Pharmac capable of improvement? The Government’s view is that it is fundamentally sound and that once again it has turned in a very good performance—managing its funding to within 0.1 percent of budget adding 11 new medicines and widening access to 28 others. That is a pretty good record of achievement but I note that the  
Medicines New Zealand 
 strategy and  
Actioning Medicines New Zealand 
—the second document for which my colleague Peter Dunne has the primary responsibility for overseeing—suggest several forms of improvement. The first is around the consultation processes. It is not sufficient for any organisation to use the fundamental validity of its business model as a reason not to have good stakeholder relationships. I am confident that Pharmac understands that there is much value to it in improving the transparency and communication levels in those stakeholder relationships. I am comfortable that it is well on that pathway and that that should continue. 
Finally let me say in respect of the point about Medsafe raised by the member speaking previously that I expect that Medsafe’s actions particularly in the area of complementary medicines will be proportionate appropriate and well understood by the sector and that there is more dialogue to be had in that regard. Thank you Mr Chairman. 
Report noted.