IHS Global Insight Perspective | |
Significance | From 1 July 2010, sole-supply tenders will come into effect for five public-funded drugs—namely pizotifen, testosterone undecanoate, hydroxocobalamin, promethazine, and letrozole. |
Implications | Apart from Sandomigran, the only listed brand of pizotifen, the sole-supply deals for the drugs will result in three months' reference pricing, and then the delisting of non-tender-winning brands including Novartis' Femara (letrozole). |
Outlook | In most cases, it is generics makers that have won the sole-supply bid. This cost-containment mechanism, together with other measures, is therefore making it more challenging for multinational drug companies to sell their innovative products in the New Zealand market. |
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.
Drugs Affected by Sole-Supply Deals | |||||
Drug Name | Active Ingredient | Drug Maker | Dosage/Presentation | Current Subsidy/Price (NZ$) | New Tender Subsidy (NZ$) |
Sandomigran | Pizotifen | Novartis | 500 mcg/100 tabs | 21.10/24.10 | 21.10 |
Letara | Letrozole | Douglas (New Zealand) | 2.5 mg/30 tabs | 146.46 | 26.55 |
Arrow-Testosterone | Testosterone undecanoate | Arrow (New Zealand) | 40 mg/100 capsules | 60.71 per 60 capsules | 79.92 per 100 capsules |
Promethazine Winthrop Elixir | Promethazine hydrochloride | Sanofi-Aventis | 5 mg per 5 ml/100 ml bottle | 3.53/8.51 | 3.10 |
ABM Hydroxocobalamin | Hydroxocobalamin | ABM Pharma (New Zealand) | 1 mg per ml, 1 ml/3 injections | 9.21 | 6.15 |
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.
From Pharmac's perspective, the constant negotiation and tendering will keep the agency's spend on funding drugs within the budget allocated to it. However, as shown in most cases, it is usually generics that win the sole-supply bid, with low prices. It certainly makes New Zealand one of the more challenging markets worldwide for multinational pharmaceutical companies to launch and sell their innovative products. On the other hand, there is also a risk of supply shortage with only one supplier for certain drugs, as seen in 2006 with the supply shortage of adrenaline.