Analysis: It’s only taken 13 years. But this afternoon, health ministers are expected to announce a compromise that shares responsibility for procuring $1.5b of medical devices a year.
Simeon Brown and his associate David Seymour are seeking to stamp their authority on Health NZ and Pharmac, after the agencies and their predecessors spent years bickering over responsibility.
It’s been “frustrating for stakeholders”, the ministers acknowledge.
To be clear, the money all essentially comes from the Health NZ budget – but depending on what the device is, one agency or the other will be responsible for negotiating a purchase deal. Critically, of course, the ministers want savings.
On Tuesday morning, Newsroom business journalist Alice Peacock joined dozens of doctors, dentists and other healthcare professionals packed into a room at BNZ’s central Auckland offices to hear Brown speak to the bank’s latest healthcare insights. He was there to talk about hospitals’ delivery against the Government’s health targets – we also wanted to talk about procuring medical devices.
Brown tells us the split between Health NZ and Pharmac will provide clarity for the market, and that should be good for the health budget.
“There are definitely efficiencies to be found,” he says. “We want to make sure we’re getting the best devices so that we can deliver the best care for patients.”
It’s always been the pharmaceuticals that have got the headlines; the funding of high-priced drugs for cancer and other serious illnesses that have prompted marches on Parliament, and have dominated election campaigns. Pharmac has $1.7 billion a year to spend on drugs.
But at $1.5b, medical devices cost almost as much and are equally important. It’s just, we’ve tended to take them for granted.
The ministers wrote last week to Paula Bennett and Dr Lester Levy, the chairs of the two agencies. “The medical devices sector is seeing ever-accelerating innovation, and there will be trade-offs between adopting this new innovation and managing costs,” they wrote.
Newsroom understands Health NZ will lead procurement for 28 classes of devices that are less therapeutic but have higher integration requirements with facilities and models of care – such as hospital beds, diagnostic machines, and imaging equipment. Right down to cotton swabs and bandages.
Pharmac will be assigned responsibility for assessing 27 categories of more technical devices with a direct therapeutic impact on patients – devices that often need a high level of clinical input. Examples of these devices are surgical implants and anaesthetic machines. This is intended to be transparent, giving manufacturers the confidence to invest in innovation which aligns with demand and meets contracting criteria.
Seymour has the delegated ministerial responsibility for Pharmac. We spoke with him about this last month – and about the agency rift that for so long had left procurement of medical devices in a halfway house.
This week, he’s just happy to have a compromise solution, even if it lacks the clarity of placing the full responsibility with Pharmac, as ministers were advised as far back as 2012. “It never happened,” Seymour observes. “Then the DHBs were merged into Health NZ, and there was a recommendation for them to take over. It was rejected. The industry has been exasperated by the uncertainty.
“Device procurement has been paralysed for at least 13 years.”
Arguably, Pharmac’s experience negotiating with rapacious drug companies means it’s well-equipped to negotiate with suppliers of medical devices too. But what’s more important is that a sustainable solution is found; it’s still a halfway house, but it’s a halfway house that’s built to last.
Seymour’s looking forward to finally announcing a more efficient solution on Tuesday afternoon. “As I said in August, we need to identify where each agency adds the most value, outline which devices are best procured at a national level, and consider how both agencies can deliver better patient outcomes.”
Some might well be dubious about how well this two-agency approach will work, given Pharmac and Health NZ’s poor record of collaboration. But the two ministers will confidently expect them to work together.
For instance, if Health NZ is looking at new MRI machines, it can draw on Pharmac’s independent evaluation expertise. Pharmac would provide a high-quality Health Technology Assessment to inform Health NZ’s procurement process.
Health NZ can also use its ability to bulk-purchase and re-tender contracts. I understand a recent example is procurement to address glove supply and pricing risks, where Health NZ initiated short-term tenders to secure a reliable supply and saved more than $3 million.
Procurement isn’t glamorous. Nobody gets as excited about a million dollars’ worth of cotton swabs and bandages as they do about million-dollar wonder drugs. But this is a gritty area where there really is potential to save money – which can then, ideally, be redirected to providing more and better healthcare.
Brown’s main object in turning up to the function in central Auckland on Tuesday morning was to talk about Health NZ’s quarterly results against five Government-mandated targets, like reducing waiting times for elective surgery or for initial assessments.
But we’ve said this before: repeatedly weighing the prize pig doesn’t make it any fatter. These targets are well and good and grab the headlines, but they don’t generally drive system-wide improvements – rather, they encourage hospital managers to focus resources on those five targets at the expense of other priorities.
Brown describe the results to June as “encouraging”; most districts aren’t yet achieving most of their milestones, but they’re heading in the right direction. (There are some North Island districts like Counties Manukau that are lagging badly; something Brown isn’t highlighting.)
“The good news is, overall, patients are being seen sooner,” Brown says. “And of course, the Government’s provided – through a record $600 million increase in funding to Pharmac – 33 new cancer medicines, which is meaning more timely access to patient treatment and more medicines available too.”
And that helps make our point. When you procure the right tools, for the right price – whether they be cotton swabs or cancer meds – then that helps deliver quality healthcare to those who need it. Targets measure outcomes; good procurement actually drives better outcomes.