March 2002 issue Pharmacy Today magazine

Hospital tendering&

$10m SAVINGS FORECAST

Small hospitals will benefit, but larger hospitals could be worse off if a national purchasing strategy for hospital pharmaceuticals is introduced.

The strategy has been prepared by Pharmac and the Hospital Pharmaceuticals Advisory Committee (HPAC), which included hospital pharmacy managers and purchasing officers. It was finalised and submitted to the Minister of Health last month, but will not be released to the public until the minister approves the final document, possibly next month.

Pharmacy managers and other members of HPAC had to sign a confidentiality agreement not to discuss the strategy contents before they began working on the proposed scheme.

However, hospital pharmacy managers commented that, in general, the national strategy would benefit the pharmaceutical budgets of smaller hospitals, while those in larger hospitals see the potential for their hospitals to be worse off. This is because some of the larger hospitals already have effective buying strategies or alliances.

Many commented that it was hard to predict the effects of the strategy, because of the lack of baseline information and a wide variety of usage reporting systems among DHBs, which prevents accurate comparisons.

Most pharmacists felt that a proposed, centralised system for Section 29 medicines would be useful.

Revised strategy

Pharmac chief executive Wayne McNee said the main difference in the final document involves the approval of new medicines. The overwhelming feedback was that hospitals wanted to continue making the decisions about using and funding new medicines.

The proposed process, to be trialled for two years, means that while Pharmac will provide guidance and advice on new medicines to District Health Boards, the DHBs will continue to make the final decision.

The strategy also allows DHBs to buy limited amounts of alternative brands of a medicine under a national purchasing agreement.

Pharmac will use the existing Pharmacology and Therapeutic Advisory Committee (PTAC), as well as the current process of specialist sub-committees. The strategy proposes to have more representatives from DHBs included on PTAC.

Initial draft

The initial draft of the strategy, published in November on the Pharmac website, proposed that Pharmac would negotiate national supply contracts to cover the top 90%, by expenditure, of hospital pharmaceuticals. Key groups contributing to this area could include antibiotics, cardiovascular drugs, psychiatric medicines, anaesthetic agents and cancer treatments.

In the initial draft, it is suggested that Pharmac set nominal savings targets - $3 million in 2002 up to $10 million in 2004 - but DHBs would retain control of their pharmaceutical funds.

Issues relating to obtaining baseline purchasing cost and usage data were also discussed in the initial draft.

At the moment IT systems in the DHBs vary considerably, and Pharmac has asked each DHB to identify the costs of improving their system and moving to common reporting codes.

Industry perspective

Astra Zeneca business director Dr Lance Gravatt said the pharmaceutical industry had a number of concerns about the strategy.

In its submission to Pharmac, Astra Zeneca raised the issues of supply continuity, and choice of different drug presentations, under sole supply contracts.

Other concerns include lack of detailed information on how the interface of primary and secondary care pharmaceutical schedules will be managed, and Pharmac involvement in the Section 29 medicine system.

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