Drug subsidies

November 16th, 2015 at 12:00 pm by David Farrar

Thomas Lumley blogs at Stats Chat:

There are new, very promising treatments for some cancers, which work by disabling one of the safety mechanisms in the immune system so that it can attack the tumour. These treatments have been approved in the US for melanoma and the most common type of lung cancer, and they look better than anything we’ve seen before.  The problem is the price, more than NZ$200,000.

In New Zealand, roughly 2000 people die of melanoma or lung cancer each year. At the current market prices, a course of treatment for each of them would absorb more than half of Pharmac’s budget.

It would cost $400 million a year for the one drug.

There really are people whose disease completely vanished, but only about one in sixteen. Two thirds didn’t see any response. Even for the people who have no detectable disease we can’t yet know if the benefits will last a few years or a lifetime.

Pharmac is not going to fund these treatments at anything like the current price in the current budget. That’s not a matter of debate or public pressure. It’s just not happening. It won’t add up. Conceivably, the government could decide to come up with the money to fund the treatments outside the current Pharmac budget. I don’t think that would be the best way to spend the money, but I’m glad to say this is the sort of decision I don’t get to make.

$400 million for a 1 in 16 cure rate is unlikely to occur.

Over the next few years, other companies will introduce treatments that attack the same or related immune checkpoint targets, and competition will make the price fall. At some point, it will be worthwhile for drug companies to make Pharmac an offer it can accept, as happened recently with Humira, Pharmac’s current top spend (which turns off the immune response in a somewhat similar way to how the new cancer treatments turn it on).

Five years ago, you couldn’t get these treatments if you were a billionaire. In ten years or so, I expect these or similar treatments will be effectively free to New Zealanders. At the moment, we’re in the painful transition period, where the manufacturers can afford to target only the wealthiest individuals and insurance companies.

Exactly. There is always that transition period from no one can afford it (as the average cost of a new drug approved by the FDA is $4.5 billion) to when governments can subsidise it for most people.

Incidentally Pharmac’s budget has increased 25% since 2008 – from $636 million to $795 million. In real terms that’s an 11% increase.

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The difficult decisions of rare disorder treatment

September 2nd, 2015 at 2:00 pm by David Farrar

Stuff reports:

A Masterton woman who has flown almost 400,000 kilometres to get life-saving treatment for a rare disease is angry that New Zealand is now the only developed country that does not fund treatment for it.

Mother of three Allyson Lock has Pompe disease, a rare degenerative disorder that can be fatal if left untreated.

As of Tuesday, Australia has begun spending A$40 million ($43.8m) over the next five years on funding treatment for the disease – leaving New Zealand “dragging the chain”, Lock said.

“When you’re on treatment you can plan a life, you can plan things. But when you’re not, all you can plan is your funeral.”

A medication called Myozyme is available for Locke and 10 other known Kiwi Pompe sufferers, but it costs about $500,000 a year and is deemed too expensive by the government drug-buying agency, Pharmac. 

Unless you believe money grows on trees, there is a limited health budget. On a compassionate level I think most of us want people with treatable disorders to get that treatment, and are happy to pay taxes for it.

However there obviously has to be some threshold at which the opportunity cost is too high – that the money you spend on one individual, means dozens of others don’t get their treatment funded.

I’m not sure what the threshold is. I’m glad Pharmac has to make those calls, not me. And it’s awful for those who can’t get their treatment funded.

But if 40 years of treatment will cost taxpayers $20 million, is that affordable? It is for one person, but then does that mean every treatment for every person must get funded? And what if the $20 million only expands life expectancy by five years?

As I say very hard decisions.


Difficult cases

January 21st, 2014 at 11:00 am by David Farrar

Stuff reports:

Access to costly but life-saving treatment for rare diseases comes down to looking cute on TV or knowing a politician, sufferers say.

Allyson Lock is one of only eight Kiwis diagnosed with Pompe disease, an incurable degenerative disorder. Untreated, it can be fatal, but Mrs Lock of Masterton and other sufferers have been refused treatment because of its cost.

A medication called Myozyme is available, but it is expensive and gets no funding from government drug-buying agency Pharmac. Costs vary according to a patient’s age, weight and severity of illness, but in Mrs Lock’s case have been estimated at $575,000 a year.

She said patients with similarly unusual illnesses had obtained funding for expensive treatment, which was unfair. “They say it’s too expensive, but there are other treatments that cost more. If your family can get you on TV, if you’re a little kid, if the public gets into an uproar, you get funded. That’s what it comes down to.”

It’s probably true that public sympathy plays a role in decisions. But regardless, these are difficult decisions. There is obviously a limit at which the Government can fund treatment, as every dollar spent on one treatment is a dollar not spent elsewhere. $575,000 a year is hugely expensive.  I’m not saying what the limit should be, as fortunately not my decision. And you can only have empathy for those with such conditions that need hugely expensive treatments.

New Zealand Organisation for Rare Disorders executive director John Forman raised the prospect of legal action against Pharmac’s funding refusal, and said it was unacceptable every other developed country was treating its Pompe patients, except New Zealand.

I’m not sure that is quite correct. In some countries I believe it is funded for juveniles only, which is a different variation of the disease.

It would be interesting to know what are the most expensive treatments that are funded by Pharmac. Is there a hard limit, or is it a combination of price and effectiveness?


Goff knows you don’t do unilateral bottom lines in trade

May 31st, 2011 at 11:51 am by David Farrar

Phil Goff was Foreign and Trade Minister for many years, and most would say he was a very good trade minister. The China FTA is a huge credit to him (and Clark).

He also knows that one rule to trade negotiations is that the parties do not publicly lay out bottom lines, or rule things out. The reason for this is simple – doing so destorys negotiations. The moment one country says publicly “we will never ever agree to this”, it means all the other countries will do the same. And then you have nothing to negotiate.

So reading the Andrea Vance story:

New Zealand’s drug-buying agency should not be sacrificed for a trade deal with the United States, Labour leader Phil Goff says. …

But Mr Goff said yesterday: “We should not be trading Pharmac off for a free trade agreement with the US.” The agency was an “absolute bottom line and we should not be trading it away”.

You need to understand Goff is saying something in Opposition, he would never ever say in Government.,

For the record as a fiscal conservative, I think Pharmac is great and keeps the cost of drugs down for the NZ taxpayer. I find it hard to imagine that the US could offer us something so good that the Government would consider major changes to Pharmac. But again to have negotiations proceed in good faith, you can’t lay down unilateral bottom lines in public.

Personally I’m sceptical that the US will offer anything greatly worthwhile in terms of trade access. Their rhetoric is much stronger than their commitment to free trade.  However there are strategic advantages to the US in concluding an agreement, so maybe they will actually offer something decent.

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Editorials 26 April 2010

April 26th, 2010 at 11:00 am by David Farrar

The Herald looks at Pharmac:

The drawing up of free-trade agreements is always an exercise in compromise. Sometimes, unpalatable concessions have to be made with an eye on the bigger picture. …

At the forefront of American concerns will be two issues – the strength of our dairying industry and the role played by Pharmac, the Government’s drug-buying agency.

The US farming lobby will want little conceded, while American pharmaceutical companies want Pharmac’s role drastically reduced.

The drug companies say an end to New Zealand’s anti-competitive drug-funding system would give its people quicker access to new and expensive medicines.

US drug companies can introduce these new and expensive medicines at any time. Whether or not they gain a subsidy from the state is another issue.

Trade Minister Tim Groser has described Pharmac as “an outstandingly successful public institution”, which has saved taxpayers hundreds of millions of dollars. The estimated savings in a five-year period are enough to have built the Starship hospital.

Mr Groser has also said that, as the principal economic adviser at the Ministry of Foreign Affairs and Trade, he had negotiated with the US on Pharmac 10 years ago and had seen no need to make concessions.

That is reassuring. But the issue will doubtless be raised again, as New Zealand covets a free-trade agreement with the US. Hard choices will have to be made.

The Government has already bowed to pressure and allowed some slippage in Pharmac’s integrity. With the taxpayer uppermost in its mind, it should hesitate before venturing further down that path.

I agree Pharmac is of great value to New Zealand. The gains from a free trade deal would have to be significant for us to agree to changes to Pharmac.

The Press remembers ANZAC Day:

The history of Anzac Day remembrance has been shaped by memory and ideals – memories and ideals that have changed over the decades since the landing on the Gallipoli Peninsula in 1915.

The commemoration therefore has reflected the great alterations that New Zealand has undergone in those 95 years.

Yesterday’s services saw the men and women of World War II and will continue to see many of them in future years. But their number is dwindling and thoughts thus turn to the Anzac Days of the future. …

Voices last week were raised, predicting a decline in turnout over the coming decades, but that is unlikely to eventuate. The respect for what our fighting men and women achieved and the honour they brought us is now deeply and uncontroversially embedded in the nation’s psyche.

The Press pages on New Zealand’s military history, which we printed in the lead-up to Anzac Day, are but one example of this. They were prized by readers, and schools have taken them in large numbers. A hunger exists for hearing again the old tales of valour and service.

The men and women who performed those deeds will not be forgotten and Anzac Day will live on in their honour.

While on TV, once again I found Maori TV did best.

The Dominion Post looks at Fiji’s proposed media restrictions:

The primary function of Fiji’s proposed new media regulator is “to encourage, promote and facilitate the development of media organisations and services”. It sounds reasonable.

There is just one problem. In order to perform its duties the Media Industry Development Authority is being given the power to fine and lock up journalists, editors and publishers, censor news reports, search premises, seize documents, and shut down news organisations.

Coating a dictator’s iron fist with a veneer of legality does not soften the blow.

The commodore is labouring under a misapprehension. The misapprehension is that he is the big man in the Pacific.

He is not. He is a tinpot dictator who has gained power at the point of a gun and is destroying his country’s economy and prospects and the institutions, already weakened by three previous coups, that underpin good government.

The news media is one of them. Journalists, editors and publishers will bear the immediate brunt of the latest restrictions, but the real losers are the Fijian people, who have already lost the right to learn what is happening because of “emergency” regulations put in place last year.

Free speech is a fundamental pillar of democracy. “Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter,” said Thomas Jefferson, the author of the American Declaration of Independence.

Another great Jefferson quote.

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Frog on Pharmac

December 1st, 2008 at 2:00 pm by David Farrar

Frog has an interesting post on Pharmac. I disagree with Frog about banning advertising and the conspiracy theory about the drug companies writing the story in the SST about Pharmac and drugs it won’t fund.

However I do agree that the Pharmac model is fundamentally a good one, and the best way to get further drugs funded is to increase the budget for medicines (which National is doing) rather than try and reverse Pharmac decisions on particular drugs.

There is always a limit though to the ability of the public health system to fund every medicine we would like. This is why I think peopel should be encouraged to have their own health savings accounts which can be used to meet exceptional health care costs. The Singapore model is one worth investigating.

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