Analysis of Pharmaceutical Public Plan Policies, New Zealand

The problem

The Canadian Government was considering introducing a pharmaceutical procurement scheme based on the New Zealand approach to public funding of pharmaceuticals but didn’t know if the scheme would work well in Canada.

The New Zealand model drives down the price of pharmaceuticals by restricting the range of products it funds for each indication, creating competition between generic and innovative products. However, this approach narrows the choice of publicly funded medicines, can worsen health outcomes as a result of a greater range of side effects and lower compliance by patients.

How we helped

The key question for policy makers is whether financial savings from lower prices and more restricted choice of pharmaceuticals outweigh the costs of poorer health outcomes. Castalia collected evidence of New Zealand’s experience under its pharmaceutical funding model. We examined the costs and benefits of the model and then presented the analysis of the implications of New Zealand’s experience for Canada through workshops and presentations in every provincial capital in Canada. These workshops helped policy makers understand the health consequences that accompany the lower prices.

Impact

Most Canadian provinces did not follow New Zealand’s example, while others introduced elements of the New Zealand procurement approach. None of the provinces fully implemented the New Zealand model.