Pharmaceutical pricing in New Zealand

All New Zealand residents are covered by a national public health system, and approximately 80 % of all health expenditure is publically financed. A well-regulated system of privately owned pharmacies supplies outpatient pharmaceuticals, while inpatient pharmaceuticals are provided in secondary care facilities. New Zealand does not use pharmaceutical price controls, leaving prices to be determined by negotiation. However, the public health system has a very effective monopsony purchaser, the Pharmaceutical Management Agency of New Zealand (PHARMAC). PHARMAC negotiates the prices of inpatient, outpatient and cancer pharmaceuticals, vaccines and medical devices, and manages a capped national budget for outpatient and cancer pharmaceuticals. PHARMAC also sets (separate) national positive formularies of publically funded outpatient and inpatient pharmaceuticals, and administers access schemes for pharmaceuticals that are not on these formularies. PHARMAC uses a variety of mechanisms to obtain favourable prices, including competitive tendering, sole supply contracts, reference pricing, bundling deals, risk sharing agreements and promoting use of generics. Health technology assessment is used extensively in decision making and price negotiations. As a result, New Zealanders have universal and nationally consistent pharmaceutical coverage, with lower patient pharmaceutical co-payments than many comparable countries.