Pharmac will need to engage more with other parts of the health system and the public - particularly Māori - the Health Minister says, after an independent review of the agency.
The panel of independent experts chaired by Sue Chetwin made 33 recommendations, and Health Minister Andrew Little said the government agreed in principle with most of them.
"The days of the independent republic of Pharmac are over," Little told media this morning. "Pharmac is part of our health administration, it needs to be working appropriately with the rest of the health administration.
The panel found Pharmac's approach "in all likelihood" had contributed to Māori and Pacific people receiving a lower share of new medicines funded over the last decade.
Little said while they also found Pharmac's model had delivered significant benefits, these needed to be shared more equitably across communities - particularly Māori and Pacific.
"As a result of this review, Pharmac will have a much greater focus on improving the health of Māori, Pacific peoples, disabled people and other groups who do not yet share equitably in the benefits Pharmac provides," he said.
Pharmac had confirmed to him it accepted the findings, was committed to making the necessary changes, and had work already under way to achieve them, Little said.
However, there was considerably more work still to be done, including working with other health organisations.
The drug-buying system was set up nearly three decades ago with the purpose of securing the best health outcomes from reasonably available pharmaceutical treatments.
Little said the panel's terms of reference had focused on whether Pharmac's decision making was suitably transparent. He said most of the recommendations focused on that aspect, as well as making sure the agency was collaborating appropriately with other parts of the health system.
Other recommendations focused on Pharmac taking on board the voices of health consumers and those with lived experience on conditions, particularly for those with rare disorders.
Little said the report made clear the way decisions were made around particular drugs - particularly around cancer and knowing some cancers have higher incidence among Māori - did not really take those inequities into account.
"The Māori Health Authority will now have a critical role to play in making sure that there are more equitable decisions on pharmaceutical decisions by Pharmac," he said.
The report was critical of Pharmac, but was not saying there was wholesale failure by Pharmac or its board and leadership, he added.
"It's not a question about heads rolling, it's about Pharmac 30 years into its life readjusting to I think a different set of expectations."
He said Pharmac had been set up with the intention of getting the best deals possible, but after 30 years that had become the only strategy.
"Getting the cheapest possible drugs isn't the only health strategy," he said.
"Getting good spending decisions, bearing in mind a bunch of other objectives such as good coverage, dealing with all the strains of a particular disease or infection, those things are equally important. So, it's about tweaking the way Pharmac operates so that we do genuinely get the best outcomes including better equity."
He said there were a small number of recommendations the government disagreed with, including on the timing of addressing the underlying issues.
The government disagreed with the panel's recommendation for vaccine responsibilities to be split up, saying more could be achieved with the sector working together and Pharmac using its purchasing power to provide vaccines to New Zealanders.
With Health NZ becoming the principle purchaser of medical devices, it also made sense to reconsider the recommendation that Pharmac should transfer its responsibilities around that, and in the meantime the status quo would continue.
"An exception to that will be medical devices which are in the nature of a capital expenditure," he said. This would include things like MRI machines, which he said he would expect to be handed to Health NZ sooner rather than later.
He said a strategy for rare disorders also needed to be developed, but that was the Ministry of Health's responsibility with Pharmac's involvement, "so we will fundamentally change the way we approach rare disorders".
In a statement, Pharmac welcomed the report and the government's response.
"There are important improvements for us to make and we look forward to working with other health agencies on implementing the recommendations supported by the government," it said.
Little said a roughly two-year transition period would be expected while Health NZ, the Māori Health Authority and the Ministry bedded down the changes from the wider health reforms, and during that time Pharmac could adapt the way it was operating.
"I'm confident we will do that," he said. "Pharmac is there already, it's established ... all the elements are there I think to provide a much better working environment for Pharmac to make its decisions in."
Little said he would ensure the body knew what was expected when dealing with other organisations.
"Pharmac operates independently of ministers in their procurement decisions but on the way they operate and their relationships with other entities, actually I can direct them about the way they go about their business, engaging with the ministry, engaging with other entities. And I'll be making sure they've got very clear instruction about that."
He said the other lever he could pull as minister was removing members of the board if they failed to live up to expectations.
Māori had responded positively to the changes being made, including the establishment of the Māori Health Authority and principles in the health legislation, Little said.
"My expectation is that we've got all our, kind of, ducks in a row now to really transform what our health system does for Māori, for Pacific and for other population groups too".
The minister said he did not think there was anything malicious or deliberate on Pharmac's part in not achieving equitable access to drugs, but the review's findings would mean they would now be under statutory obligations to achieve that.
- Pharmac must secure equitable outcomes for all New Zealanders, especially for Māori, Pacific and disabled people
- Increased engagement and shared decision-making with Māori including honouring Te Tiriti o Waitangi
- Cancer medications should by and large be considered in the same ways as other drugs, with a focus on equity
- Greater transparency over processes, decision-making and information for the public, consumer groups and people needing accessible information
- Consumer advice and lived experience should be considered, including for people with rare disorders
- Stronger collaboration with other health agencies
- The agency should better explain its highly technical work and the impacts on people's health, with equity of outcomes clearly visible
- Pharmac should continue to promote responsible use of medicines, including with restrictions such as on antibiotics - to prevent development of resistance - and on products in short supply to ensure they are available for those in most need