PHARMAC seeks best deal for NZers through tender

Media Release 14 January 2007

PHARMAC seeks best deal for New Zealanders through tender

PHARMAC is continuing to secure the best possible value for the health dollar with the release of the latest tender round.

The Government drug funding agency is tendering for supply of 249 different medicines used in both hospitals and the community. Savings of $20 million per year are expected from the tender, which has been issued to pharmaceutical suppliers.

Tendering is one of the mechanisms used by PHARMAC to save taxpayers money, freeing up funding for use in other health areas. Approximately $400 million has been saved since the first multi-product tender was run in 1997-98.

Much like using a tender to sell a house, the pharmaceutical tender is a mechanism that is open and fair, promotes competition and provides incentives for participants (drug companies) to “put their best foot forward”.

PHARMAC’s Steffan Crausaz, Manager Funding and Procurement, says that the tender reflects general expectations that PHARMAC would get the best deal possible for New Zealanders.

“Effectively what it means is we can treat the same patients with the same products for lower cost. It’s a very efficient purchasing system that releases funding for use in other areas,” he says.

“The tender also provides an important opportunity for smaller drug suppliers – who typically manufacture and sell generic (off-patent) medicines – to access pharmaceutical subsidies. It is generally accepted by most people that, over time, healthy competition delivers the best results for consumers. Pharmaceutical purchasing is no exception: the effectiveness of PHARMAC depends on the extent of competition in the pharmaceutical market.

“In this way, New Zealand can take comfort from PHARMAC’s tender that it is getting the best deal possible – through a competitive process – for the relevant medicines.”

The current tender allows suppliers to bid for the individual community and hospital markets and, where applicable, for both. This can lead to greater savings from the larger combined market.

Steffan Crausaz says as well as producing savings, the tender enables guaranteed supply of small-volume products (through supply contracts) and has helped produce a much more vibrant generic drug market.

“The success of the tender depends very much on a healthy market, and it is pleasing that the number of companies supplying generic medicines has increased significantly since the first tender was run,” Steffan Crausaz says. “The tender encourages companies to make the best possible offer, and rewards successful bidders with a guaranteed market for up to three years.”

Successful bidders are contracted to supply and can be liable for costs and damages if they are unable to supply their products.

This year’s tender includes treatments for heart disease, raised cholesterol, depression, stomach ulcers and oral contraceptives.

Tender bids are due by 26 February 2007.

ENDS

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