25th November 2011, Volume 124 Number 1346

Peter Moodie, Scott Metcalfe, Matthew Poynton

Difficulties with international comparisons

There are many reasons why health costs in general, and pharmaceutical expenditure in particular, are rising and at a rate where many countries now recognise they are unsustainable.1 In terms of managing pharmaceutical expenditure over the last 18 years, New Zealand’s Pharmaceutical Management Agency (PHARMAC) has by international comparisons been successful.2,3 However, that success has not come without criticisms from both within and outside the country.

It is therefore very important to ensure that the financial success of PHARMAC has not been at the expense of health gain, and one way to do this is by way of inter-country comparisons.4,5 An apparent natural comparator for New Zealand is Australia, as both countries have universal health care systems with roughly similar types of populations. Both have well-developed pharmaceutical regulatory systems, and funding systems which appear similar but have fundamental differences.

In particular, New Zealand has a budget which is set annually by the Minister of Health on the advice of PHARMAC, district health boards (DHBs) and the Ministry of Health.6 Decisions about such resource allocation are appropriately made by the Government of the day. By comparison Australia has the ability to seek more funding when it sees fit—a difference that should not be underestimated. The two countries also have very different co-payment systems, where in New Zealand the cost per item is much less than Australia.7 *

Making comparisons appears simple, but they can come up with results that appear valid but tell us little. For example, an audit undertaken by the Karolinska Institute on the use of oncology therapies in various countries (and sometimes quoted when looking at New Zealand’s funding8) was quickly discredited for both its methodological flaws and inappropriate conclusions.9,10 (See endnote †.)

A new comparison of New Zealand and Australia

To make useful comparisons, we need to ask a number of more detailed questions about the reasons for funding or not funding a particular medicine, including:

  • What framework was used for making the funding decision?
  • Was there any harm done by taking longer to fund a particular medicine in one country rather than another? Indeed was it ultimately an advantage to take the extra time?
  • Was the particular medicine good value for money compared with other options?
  • Were there alternative therapies available which were more cost effective?

With these sorts of questions in mind, Michael Wonder and Richard Milne in this issue of the Journal(http://www.nzma.org.nz/journal/124-1346/4966 8) have undertaken a detailed and systematic analysis comparing the extent and timing of new pharmaceutical funding decisions between Australia and New Zealand. They make a number of good points, particularly highlighting the fact that many patients cannot afford to pay for medicines out of their own pockets and that therefore both countries have comprehensive and universal pharmaceutical benefits schemes.

Accounting for differences?

However, while the lists in the Wonder and Milne article8 are comprehensive, there are differences in the way some medicines are funded in the two countries, and other issues, that have not been addressed.

Different systems—In the first instance, apart from pharmaceutical cancer treatments (PCTs), therapies in New Zealand used in a hospital setting are funded at the discretion of the individual DHB hospital and not PHARMAC. This particularly applies to infusion therapies. It therefore follows that some of the hospital medicines on the Australian list will not be found on the NZ Pharmaceutical Schedule, including bivalirudin for anticoagulation prior to surgery.

Secondly there are some minor errors including levetiracetam (for refractory epilepsy), which was funded in New Zealand on the Pharmaceutical Schedule through a Special Access scheme before it came off-patent.

Different time periods, metrics and opportunities to fund—Any number of comparisons can be done, and some will favour different views.

For instance, Wonder and Milne have used a long time period to gather their data. However (and if we suspend issues of validity, see below), this was also a time of significant fiscal constraint for New Zealand. Had they reviewed the last 2 years, where the Government has invested significant new money in pharmaceuticals, the lists would have looked significantly different with some 59 new medicines funded in New Zealand during that period.

Likewise, New Zealand has fewer restrictions and lists more treatments overall than Australia.7 (See endnotes ‡,§.)

There are also differences between the two countries in opportunities for funding. Pharmaceutical suppliers decide when they will bring products to market in each country, which means Australia and New Zealand may not have the opportunity to fund them at the same time.

The effect of a budget cap and cost effectiveness—Although New Zealand may in some cases be slower to fund a drug than Australia, the reality of a budgetary cap means that extra care must be taken to forecast expenditure and ensure that we are getting true value for money. In fact New Zealand spends half as much per person than Australia does on medicines in the community, and the direct patient costs are less than a quarter.7 (See endnote *.)

Talk about PHARMAC declining to list “highly cost effective pharmaceuticals” because of a pharmaceuticals budget cap8needs some thought. This is not so much because it implies opportunity costs managed by budgeting (which is true11,12) but that somehow Australia is funding highly cost-effective medicines that New Zealand is not. The article’s Table 38 does not state what these medicines are, particularly when many have NZ-funded alternatives, no cost-effectiveness information is provided, and some cost over $100,000 per quality adjusted life year (QALY) in the New Zealand setting.

We well understand the authors’ frustration at the lack of available cost-effectiveness information; this is not entirely of PHARMAC’s making.13 ††

Is the size of the list important?—Notwithstanding some data inconsistencies in the article, the more important question relates to the usefulness of the, “my list is bigger than your list” approach for inter-country comparison without a lot more supporting information. For instance in New Zealand there is a reticence to fund “me too” medicines unless there is a financial or other obvious clinical advantage.**

As an example, rosiglitazone (now withdrawn from the market due to safety concerns) was funded in Australia but not in New Zealand; however a similar medicine, pioglitazone, was. Likewise we have two angiotensin II receptor antagonists on the New Zealand Pharmaceutical Schedule (PS) and we can see little extra benefit from the other four funded in Australia.

What really matters?

From an international perspective, the realities of burgeoning health expenditure are beginning to sink in. Many affluent countries are more closely examining ways to not only reduce the growth of expenditure but also to seek ways to identify the best value for money.

The paper by Wonder and Milne8 adds to the debate.14 Ultimately however the question is about the quality of health care and the quantity of health gain, rather than numerical item counts and timecourses. We all agree that trans-Tasman comparisons of health gains from pharmaceutical expenditure invested and forgone may be valuable.4,5,8,15-19 ‡‡


Few countries can afford to fund all pharmaceuticals for all of their people all of the time, and the current international economic climate brings this into clearer focus. Various agencies have tried to solve the problem in different ways, varying from funding a restricted list that applies to the whole population, to funding most medicines but with a significant part charge, or as in the United States, funding for only selected groups and leaving others to fend for themselves other than in an emergency. For countries like New Zealand and Australia who have universal health coverage but restricted (and different) lists of funded pharmaceuticals, comparisons of those lists can occur, but are problematic. Comparisons need to be interpreted with caution as systems and policies vary between countries. That one country funds more new medicines than the other is one thing, but the more important questions are whether one country gets more health gains and more value for precious health dollars than the other.

Author Information

Peter Moodie, Medical Director; Scott Metcalfe, Chief Advisor Population Medicine; Matthew Poynton, Health Economist; Pharmaceutical Management Agency (PHARMAC), Wellington


Dr Peter Moodie, PHARMAC, PO Box 10-254, Wellington, New Zealand

Correspondence Email


Competing Interests



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