Money and Medicines: An Economic Analysis of Reference Pricing and Related Public-sector Cost-containment Systems for Pharmaceuticals with Special Reference to New Zealand, by Alan Woodfield, John Fountain and Pim Borren (a review)

Neil Quigley and Lewis Evans

No 19040, Working Paper Series from Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation

Abstract: Money and Medicines (WFB) analyses government provision of prescription pharmaceuticals in New Zealand focussing on the performance of the Pharmaceutical Management Agency Ltd. (Pharmac). Pharmac is a wholly owned subsidiary of the Transitional Health Authority (THA) and has the responsibility of managing the national Pharmaceutical Schedule on behalf of the THA. Pharmac does not purchase pharmaceuticals but it does set the terms and conditions under which pharmaceuticals are subsidised to the final consumer. The operation of Pharmac is so closely intertwined with the unique characteristics of the market for pharmaceuticals and government policy towards the health sector that it is not possible to consider any of these individual elements in isolation. The approach adopted by WFB is to weave the key economic and New Zealand institutional factors into all of their discussion and evaluations. To a certain degree this reflects the "Pharmac" focus of the book but makes it more difficult for even an informed reader to understand the scope and insights of their analysis and arguments. Some critical features of the pharmaceutical market are not mentioned until late in the book and on occasions are not drawn out as central issues. We believe that it would have improved the clarity of the arguments made in the book if the authors had written a comprehensive introduction summarising the key characteristics of the pharmaceutical market and Pharmac's role in it. We start by briefly providing such an introduction.

Date: 1998
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