PHARMAC economic analysis and “savings” claims

Abstract

PHARMAC frequently claims that it achieves savings through its negotiations practices and approvals process for new medicines. In the 2017 financial year, PHARMAC claims to have achieved $52 million in savings for New Zealand. PHARMAC further claims that between 2005 and 2016, it saved the District Health Boards nearly $6 billion.2 This note provides an explanation and critique of these claims, and a summary of the economic analysis, negotiating strategies, and decision criteria used by PHARMAC as well as the consequences of PHARMAC’s approach. It also includes examples that illustrate the trade-offs that are less visible in funding decisions.