"Price management" and its impact on hospital pharmaceutical expenditure and the availability of medicines in New Zealand hospitals

Value Health. 2008 Dec;11(7):1214-26. doi: 10.1111/j.1524-4733.2008.00353.x. Epub 2008 May 16.


Objectives: In 2002, the Pharmaceutical Management Agency (PHARMAC) began negotiating new price contracts for 90% of hospital pharmaceuticals on behalf of all New Zealand (NZ) public hospitals ("price management"[PM]). The present study was undertaken to examine the impact of 3 years of PM on hospital pharmaceutical expenditure, and the impact of the new contracts on the availability of medicines.

Methods: Annual savings for 29 major public hospitals (financial years 2003/4 to 2005/6) were calculated from the data from 11 hospitals and data from PHARMAC. Inpatient and total hospital pharmaceutical expenditure (IPE, THPE) (2000/1 to 2005/6) were calculated from the data from 23 hospitals. Hospital pharmaceutical expenditure (2000/1 to 2005/6) was compared with community pharmaceutical expenditure (CPE) in NZ, and with THPE in the UK, Canada, Norway, and Sweden. Surveys were undertaken (2004, 2005) to examine any changes in medicine availability resulting from the new contracts.

Results: Annual savings were NZ$7.84 million (m) to NZ$13.45m (2003/4 to 2005/6). Growth in IPE slowed for all hospitals in 2003 to 2004. Mean growth was higher for IPE and THPE than for CPE (8.8%, 9.7% vs. 1.9%). Mean growth in THPE appeared slightly lower in NZ (9.6%) and Norway (7.3%) than in the UK 14%, Sweden 12.5%, or Canada 10.2%. Some availability problems occurred with new contract items ("out-of-stocks"; products perceived as inferior). Problems were usually resolved in weeks, but some took more than a year.

Conclusion: PM was moderately successful saving NZ$8m to NZ$13m (6-8%) in 2003/4 to 2005/6 and slowing growth in IPE in 2003/4. Further research should examine whether the favorable economic effects can be sustained while unfavorable effects are minimized.

MeSH terms

  • Budgets / methods*
  • Drug Costs*
  • Humans
  • National Health Programs / economics
  • New Zealand
  • Pharmacy Service, Hospital / economics*