Pharmac Announces New Wave of Sole-Supply Deals

New Zealand's Pharmaceutical Management Agency (Pharmac) announced that it has approved a new wave of sole-supply agreements for public-funded pharmaceuticals, including oncology treatment letrozole, allergy therapy promethazine, natural vitamin B-12 analogue hydroxocobalamin, pizotifen, and testosterone undecanoate. For pizotifen, Swiss pharma Novartis' Sandomigran sole supply will be effective from 1 July 2010. In addition, as Sandomigran is the only brand of pizotifen listed in New Zealand's Pharmaceutical Schedule, no delisting of other brands will be involved. However, for all the other four drugs, the winners of sole-supply status will see their respective products listed on 1 February 2010, and reference pricing will be applied to other brands of corresponding products two months later. The sole supplies of these drugs will start from 1 July 2010. The drugs subject to three months' reference pricing and then delisting include Novartis's Femara (letrozole), French firm Sanofi-Aventis' Phenergan (promethazine), U.S. company Schering-Plough's Panteston and Andriol Testocaps (both testosterone undecanoate), and Neo-B12 from U.S. generic major Hospira.

Outlook and Implications

In a bid to provide affordable pharmaceutical products to New Zealanders, Pharmac has been utilising a broad range of mechanisms to impose control over the pricing and subsidisation of drugs, when and where applicable. This latest pricing and reimbursement announcement has involved two of its many cost-control measures, namely reference pricing and sole-supply tendering. In order to reach sole-supply deals, Pharmac usually issues requests for proposals for the pharmaceutical companies to bid for the sole supply of certain off-patent drugs, with the cheapest suppliers winning the tender. For the winning manufacturers, the sole-supply status undoubtedly expands their products' market share and sales volume; however, it is usually based on a significant price reduction. On the other hand, the sole-supply deals also usually lead to the reference pricing and delisting of the brands of drugs in the same sub-category as those that have the bids. In the case of the five aforementioned drugs' new supply arrangement, sales of Novartis' Femara, Sanofi-Aventis' Phenergan, Schering-Plough's Panteston and Andriol Testocaps, and Hospira's Neo-B12 will face a significant drop in sales, as the consumption of these products will no longer be reimbursed by Pharmac from next July.