How does the operation of PHARMAC's 'Community Exceptional ...

pharmaceutical needs of people whose circumstances are considered
‘exceptional’ and whose needs are not able to be met by the first purpose.
Theme 1, ‘PHARMAC the Success Story’ demonstrated the efficiency of
PHARMAC’s procurement policies. These were described as highly effective
aggressive monopsonistic purchasing practices that have attracted both positive
and negative international attention.
Cumming et al. (2010) commented positively on New Zealand Treasury’s reports
on PHARMAC. These reports showed that PHARMAC had limited the cost of
medicines in New Zealand to an average annual rate of increase of 2% between
1994 and 2008. This compared with an annual rate of increase in the cost of
medicines of 15% in the 1980s (Cumming, et al., 2010). Cumming et al noted
that between 1994 and 2008 there was an overall annual rise in public health
spending of 7.2%. Finally, their research has shown that as a result of
PHARMAC’s procurement policies, subsidy management and cost containment
activities between 1993 and 2007, the New Zealand tax payer has been saved
$1.17 billion.
The OECD Report on Health Spending in 2010 described New Zealand as a
country with the lowest cost per drug category in the OECD range of countries
(OECD, 2010). PHARMAC has made a strong contribution to the New Zealand
economy, and more particularly to health services, by providing access to
medicines through subsidies at internationally lowest prices.
This success has been achieved largely by PHARMAC’s use of the exemption
from Part II of the Commerce Act (1986), which provides PHARMAC with the
freedom to act in this manner. PHARMAC’s procurement practices required
sellers to group their patented drugs with generic drugs when negotiating
purchasing contracts with PHARMAC. Sellers were also required to reference the
price of all the drugs in each drug category to the cheapest priced drug. In
addition, PHARMAC has extensively purchased generic medicines in favour of
patented medicines. These practices have reduced the ability of the holder of
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