October 26th, 2020

What healthcare companies can expect from Jacinda Ardern’s second term in New Zealand

Global political turbulence in recent years has left people questioning whether any election is a foregone conclusion, but Labour’s crushing victory in New Zealand to usher in a second term for Jacinda Ardern was an emphatic signal to healthcare companies to prepare for more of the same.

Ardern has become a hero symbol for progressives around the world, thanks to her decisive handling of COVID-19 and excellent communication skills, but her campaign slogan – “Let’s keep moving” – is perhaps a more accurate depiction of what is a pragmatic leader.

With a parliamentary majority, Ardern has a mandate to deliver sweeping changes, but her policy agenda and rhetoric suggests we can expect a small dose of incrementalism, alongside a remedy of fiscal discipline in the face of soaring COVID debt.


What does this mean for healthcare?


Despite devastating hits to the economy from the pandemic, Labour has promised to manage debt without eroding public services.

This means spending where necessary, including a NZ$1billion health budget over four years, with a focus on dental care, mental health and Pharmac.

Within that budget is a $200m investment for Pharmac; it should be noted the opposition National Party matched this commitment, specifically targeting cancer treatments.


What is Pharmac?

Pharmac is a New Zealand government agency that decides, on behalf of the Ministry of Health and District Health Boards (DHBs,) which medicines, pharmaceutical products and medical devices are funded through the Addendum list.

Pharmac negotiates three-year national contracts with suppliers as part of an annual tender process. The agency puts emphasis on free market competition to reduce prices, estimating to yield savings of around NZ$35m dollars each year.

This means that while a device or product is listed on the Addendum, it may only be partially subsidised to provide choice for DHBs.

DHBs can still use any medical device they prefer; they are not limited to medical devices listed on the Addendum by Pharmac. However, if the DHB wishes to use a device that is listed, then the DHB must use Pharmac’s contract.


 Decision-making powers of DHBs

 Procurement teams are then left to manage finances and ensure DHBs remain in budget by selecting medicines and devices from the list.

This can be a pain point for some healthcare companies who see their products neglected by budget-conscious procurement teams in favour of cheaper alternatives.

Budget constraints are in place for good reason; analysis by the Council of Trade Unions and Association of Salaried Medical Specialists suggests the healthcare system has been underfunded by NZ$3.2 billion since 2009/2010.


Restructuring of DHBs

During its first term in power, Labour conducted a review of the health and disability system. The subsequent report recommended cutting the number of DHBs from 20 to 12.

Indeed, Health Minister Chris Hipkins’ pre-election promise to “roll out the plan to improve the health system to deliver high-quality services, fewer DHBs, an increased focus on equity” should be of interest to any businesses targeting the New Zealand market.

The idea is for decision-making to be more centralised in a Public Health Agency to create national consistency across DHBs, the outcome of which will be an Agency with control over bureaucracy and Pharmac over what products are used by healthcare providers.

This centralising process has already begun; Pharmac has enjoyed increased decision-making powers, particularly on medical devices, but the full restructuring is expected to be completed within two years.


Where healthcare companies should focus their New Zealand advocacy


Healthcare companies cannot afford to sit back and wait for the restructuring to take place.

Building clinical consensus among key opinion leaders, healthcare professionals and health consumer organisations, in order to simultaneously influence DHBs and Pharmac, will be absolutely crucial.

This can be supported by solid health evidence and a media relations strategy to keep your products top of mind.

Labour’s reforms will be gradual, the winners will the healthcare companies that “keep moving” at the pace of policy implementation.

To discuss how your healthcare brand can gain visibility in New Zealand schedule a call here.

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