NZIER Community Pharmaceuticals Report 2022

NZIER has today released its 2022 Community Pharmaceuticals Report. This report looks at the overall trends in the Government-funded medicines budget for New Zealand in the 15-year period between 2006/07 and 2020/21.
We recommend reading the executive summary of the report as a starting point. Below are some key ideas which have come out of the report.

(1) The report identifies that there is a $332 million investment gap in medicines that are publicly funded and made available to patients through the public health system in New Zealand.

  • This is the amount of additional investment that would be required on top of the current budget to have the same level of investment in medicines as existed in 2006/2007 in real terms (i.e. inflation and population adjusted).
  • The additional investment is required because, despite some new investments being made, there have also been significant transfers of already existing medicines spending from other parts of the health system into the Combined Pharmaceutical Budget from 2012 onwards, which has hidden the fact that the core funding (community pharmaceutical expenditure) has been dropping [see Figure 2].
  • As a  result, when compared to the total Health budget which has grown by 1.0% in real terms over the 2006-2021 period, the community pharmaceuticals budget has decreased by 2.9% on an annual compound growth basis [see Table 1].

(2) One solution to this investment gap would be a corrective real terms adjustment of $332 million to maintain stability in pharmaceutical investment relative to other health and social investments [See Table 2].

  • This corrective action approach was taken by the Government with the DHB deficits in Budget 2022. The Government has also taken a multi-year approach to funding the health system with a confirmed and committed  $14.9 billion over the next four years. It is the first Budget ever to take that multi-year approach.

(3) Looking forward from 2022, the medicines budget received  $191 million investment but only over a 2-year period ($72 million (2022/23)and $120 million (2023/24)), rather than a four-year period as for other parts of the system. This lack of funding commitment and stability was raised by the Treasury as the only major health budget issue in their Budget Economic & Fiscal Update (BEFU) for 2022.

  • Other near-term issues include the need for the medicines budget to also include investment in COVID-19 vaccines and therapeutics going forward, which will put more pressure on an already stressed medicines budget situation.

Publicly funded community pharmaceuticals are a critical and valuable enabler for both New Zealanders’ ability to self-manage health conditions and for the health system to function optimally. They, therefore, require protection from ongoing budget erosion. There also needs to be an alignment of the medicines budget appropriation to the broader health systems budget and planning cycles.

To read the full report, please click here