Medicines boost will mean health trade offs and cost $1b, Treasury warned

Monday, 26 August 2024

Malcolm Mulholland of Patient Voice Aotearoa says the investment on Pharmac was a good one, despite Treasury's advising the Government the money would have been better spent on primary care or mental health.

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Treasury officials warned the Finance Minister that paying for promised cancer medicines would cost $1 billion, forcing trade offs in primary care and mental health ‒ advice Cabinet ignored.

The investment was the result of a National party election promise to buy 13 cancer medicines available in Australia, but not New Zealand. That morphed into a $604 million boost to Pharmac announced on June 24.

The agency would independently buy more than 50 medicines, expected to help about 175,000 people in the first year.

While a patient advocate says the investment has brought nothing but good news, doctors fear it will come at the expense of general practice.

Documents obtained through the Official Information Act reveal Treasury strongly advised Cabinet against the policy up until June 13, saying it would cost $1b over five years and leave very little to play with, come May 2025.

“Treasury considers that a $1b investment would have greater impact (both in health outcomes and in the number of people supported) in areas such as primary care or acute mental health services,” a Treasury analyst told health officials on June 7, in a draft comment to go with a report to Cabinet.

“After accounting for all Budget 2025 pre-commitments … only $636 million per annum, or 26% of Budget 2025 allowances, would be available to cover cost pressures and Government priorities,” it said, in bolded, highlighted text.

In a final report to Finance Minister Nicola Willis on June 11, Treasury said going ahead “will force difficult funding trade offs with other areas of the health system” and suggested an extra investment “could be prioritised in areas such as primary care or acute mental health”.

It also indicated Cabinet toyed with sticking to its initial plan to fund just 13 cancer drugs, but Treasury strongly recommended against this, saying it would only benefit 1000 people at most, break the Pharmac model and and create 'significant legal, financial, implementation and precedent-setting risk' as well as removing commercial leverage.

Sticking to the election promise could also hinder the Government's long term fiscal strategy and 'represent poor public financial practice,“ Treasury advised.

The final $604 million plan, leaked to The Post days before Cabinet signed it off, preserved Pharmac’s independence, but only accounted for the boost to the agency’s medicines budget, not ongoing costs for either Health New Zealand or Pharmac.

Finance Minister Nicola Willis has said less than $1b is left in new money on next year’s Budget, but she is confident she can find more savings next year. (File photo)

Instead Health NZ was allocated $38m for one year of rolling out the drugs in the country’s hospitals, but nothing beyond that, despite Treasury citing Health NZ’s “large operating deficit” as a problem.

Health Minister Dr Shane Reti said funding for Health NZ would be ongoing. “We want to see exactly what the costs are going to be … but I can reassure you that there will be funding for implementation for further years.”

Willis would not directly address a question on whether $1b was the total predicted spend over five years and declined to be interviewed.

Asked how the Government’s priorities might be impacted by the spend, Willis’ office pointed to comments made in the House on August 6: “After pre-commitments and some non-discretionary forecast items, there is currently less than a billion dollars remaining in the operating allowance for Budget 2025,” Willis said.

Labour’s health spokesperson Dr Ayesha Verrall said there was an “emerging crisis in the health budget”.

Labour’s health spokesperson Dr Ayesha Verrall says the advice around National’s cancer policy points to “political mismanagement“.

“You see how underfunding the health system for some short term political gain, ie, tax cuts, has led to a situation where they now have so many fires to fight in the health system that ultimately Budget 25 looks incredibly difficult.”

However, Willis has said she is confident she can find more savings, telling the House on August 6 the Government quickly found $5.9b per year to redirect to “higher value uses like police and Gumboot Friday, in Budget 2024”.

Malcolm Mulholland, of Patient Voice Aotearoa, says the investment on Pharmac was a good one, despite Treasury's advising the Government the money would have been better spent on primary care or mental health.

National’s cancer drugs policy was announced with fanfare on the election campaign but resulted in outcry when there was no funding for – nor mention of – the promise in Budget 2024 on May 30.

Verrall said the documents revealed how much of a “scramble” the Government was in after the public fallout.

Patient advocate Malcolm Mulholland said the spend was “extremely well justified” and would change lives for people who would otherwise have been forced to set up Givealittle pages or sell their homes to pay for medicines.

“We know that for every dollar spent on medicine we get about a $3 return. That to me is money well spent and front ends some of the problems patients could face further down the track if left untreated.”

Dr Bryan Betty, chairperson of General Practice New Zealand, said the return on primary care was about $13 on every dollar.

“If we do not invest in primary care the health system is going to be in major strife… This investment has to happen,” Betty said.

Luke Bradford, medical director of the Royal NZ College of GPs, said primary care and mental health were grappling with under funding for existing need and growing unmet need.

“If you're in that situation where [medicine] can buy you some extra time, of course that's massively wanted, but the trade off is, what aren’t you paying for? Are you not paying for access to a psychiatrist when crisis hits?

“Are you not paying for sufficient GPs, so local GP surgeries are shutting.”

Read more in the series Fractures on the Frontline examining challenges facing general practice.