Reference of New Zealand’s Drug Shortage Management Measures

Zhang Jie,Zhang Fang＊

(School of Business Administration,Shenyang Pharmaceutical University,Shenyang 110016,China)

Abstract Objective To provide a scientific reference for China’s drug shortage and supply mechanism by conducting a specific study on New Zealand’s management measures for dealing with the shortage of drugs.Methods Through reviewing the official website of the New Zealand Pharmaceutical Management Agency (PHARMAC)and relevant literature,the specific measures to deal with drug supply and shortage in New Zealand were sorted out,and then some countermeasures were put forward for our domestic drug supply.Results and Conclusion PHARMAC worked closely with the pharmaceutical suppliers and signed contracts to maintain their relationship.A sound drug supply mechanism has been established to respond to various supply issues.At present,there are some problems in drug supply in China,such as the lack of timely publicity of shortage information,the lack of management team for supply,and the lack of alternative drug supply mechanism.China should learn from the PHARMAC to establish a supply contract management team to promote the transparency of drug shortage information and seek alternative drug supply actively.

Keywords:New Zealand; drug shortage; drug supply; supply contract

In order to better satisfy people’s health and clinical demand for rational drug use and to reform the mechanism for ensuring the supply of drugs,in June 2017,a number of key measures were put forward in the “Opinions on Implementing the Reform and Improvement of the Mechanism for Guaranteeing the Supply of Shortage Drugs” by the Division of Drug Policy and Basic Drug Systems of China[1].In 2018,training courses on shortage of supply security policies were held by the Department of Medicine and Administration in Shanghai and Shandong respectively[2].On January 17,2019,the General Office of the State Council issued the “Notice on the Issuance of the Pilot Program for the Centralized Purchasing and Use of Drugs by State Organizations”.The notice regulated that enterprises should establish a reporting system for emergency reserve,inventory and shutdown in accordance with sale contracts.To improve the drug supply system,corresponding disciplinary and emergency measures should be taken for enterprises that cannot supply drugs with quality and quantity.

Drug shortage is a global problem,therefore,the Central Committee of the Communist Party of China and the State Council attach great importance to drug supply.In recent years,as the reform of the medical and health system has been continuously promoted,drug supply guarantee system is improved greatly in China[3].As a result of the close cooperation between the New Zealand Pharmaceutical Management Agency (PHARMAC) and the drug supply chain,New Zealand has established a relatively sound drug supply mechanism to respond quickly to any drug supply problems.Based on the experience drawn from New Zealand’s drug supply management model,some scientific references were put forward to solve the problem of drug shortage in China.This can help to improve China’s drug supply guarantee mechanism.

1 New Zealand’s approaches to manage drug shortages

1.1 Supply contract

New Zealand is a country with a relatively small drug market,accounting for about 0.1% of the global drug market[4].Since most drugs are purchased overseas,New Zealand is vulnerable to changes in international drug demand and supply.PHARMAC is a New Zealand government agency responsible for the continuous supply of drugs.Meanwhile,New Zealand Medicines and Medical Devices Safety Authority(Medsafe) has the primary responsibility for drug safety supervision.Medsafe has the right to determine which drugs are safe and effective for New Zealanders.The purchased drugs in New Zealand must undergo a high-quality drug supervision process.The main mechanism for the continuous supply of PHARMAC is to sign effective contracts with drug suppliers.In addition to the suppliers’ general responsibility to maintain continuous supply,the contract also requires suppliers to inform PHARMAC in time when the drug stock is below two months’ supply or there is the possibility of drug supply shortage.This can ensure PHARMAC to take emergency measures quickly when supply is interrupted.The drug company usually bears any additional costs involved in purchasing another product.

Contracts with pharmaceutical companies may also include rebates on the cost of drugs or equipment.Rebates are paid by pharmaceutical companies to the District Health Boards (DHB) through PHARMAC.Rebate means that the price published in the drug schedule is higher than the actual net price paid by DHB.Accepting rebates means that DHB can subsidize a pharmaceutical company at affordable cost,and suppliers can protect their net sales prices in New Zealand from the impact of the international market.Therefore,it also guarantees a relatively sound supply mechanism in New Zealand.

1.2 Contract management team

PHARMAC has a contract management team that manages contractual supply with pharmaceutical suppliers or receives routine updates from pharmacists,wholesalers and drug suppliers on inventory levels through its hotline 0800 or website.It has the following contacts such as telephone hotlines:0800 660050; fax:6449747819 and website:https://www.pharmac.govt.nz.When PHARMAC considers awarding a company’s supply contract,it usually takes the company’s supply tracking record into consideration first.When the drug is under patent protection,PHARMAC negotiates with the suppliers about the price of the patent drug.Because suppliers are competing for fixed budget funds,PHARMAC will focus on priority investment,which will enhance the degree of competition among suppliers.In this case,negotiation is a way for PHARMAC to avoid the monopoly of patent product suppliers.

When drugs are no longer protected by patents,other suppliers can sell generic drugs.Intense competition among many suppliers may lead to substantial price reductions.In some cases,price reductions exceed 90%[5].When PHARMAC tenders,the winning company will become the sole supplier of subsidized drugs or medical devices,usually for a fixed period of three years.This gives them the greatest impetus to provide PHARMAC with the best price.This further enhances the stability of the supply mechanism.

1.3 Information communication

When making decisions,PHARMAC will seek expert advice from many fields.(1) Pharmacology and Therapeutics Advisory Committee (PTAC) is the main Clinical Advisory Committee of PHARMAC,which provides objective advice to PHARMAC on drug matters.(2) Consumer Advisory Committee (CAC)will provide advice to PHARMAC from a patient or consumer perspective.(3) PTAC Subcommittee will provide professional clinical evaluation for specific categories of drugs.(4) Medical Devices Advisory Group will provide recommendations on medical devices to PHARMAC.

Deciding when to inform people that the stock of a drug may run out requires careful preparation.If the notice is given in advance,people may have “panic buying” and cause unreasonable stock depletion.In fact,many stock shortages do not lead to inventory depletion.PHARMAC works with Medsafe,DHB,DHB agents,Pharmacy Industry Associations and other pharmacy delegations to determine when public announcements are needed.

1.4 Solutions

When PHARMAC realizes the potential supply problems,it will take action as soon as possible to solve them in a variety of ways.First,PHARMAC works with suppliers to find alternative inventory.Second,if the drug is an exclusive supply contract,PHARMAC can suspend it so that alternative drugs can be used during the suspension period.Third,PHARMAC consulted Medsafe,the government drug regulatory agency,to understand the possible uses of unregistered drugs.If appropriate,emergency registration of alternative drugs can be sought.Fourth,PHARMAC can apply inventory management tools,such as consultation notes from clinicians and pharmacists,or PHARMAC.Fifth,PHARMAC can require a small amount of drug distribution to avoid a decrease in storage.Sixth,PHARMAC can investigate the possibility of finding alternative drug supplies from overseas.Seventh,PHARMAC will recover the cost of purchasing alternative inventory through supply contracts.Last but not the least,PHARMAC can communicate with drug wholesalers,pharmacists and their professional organizations to solve the problems.

2 Enlightenment and suggestions

2.1 Establishing a supply contract management team to promote information disclosure and transparency of inventory shortage

At present,the supply contracts in China are signed directly between the suppliers and the government.In the process of execution,the contract is affected by factors such as production accidents or games between different stakeholders.Discovering drug shortage in time is the premise of dealing with the problem.Information platform for drug shortage is not only the main medium for collecting information,but also an important channel for sharing the information[6].In the term of updating inventory information,China’s drug inventory is not open and transparent enough.As a direct drug use group,patients are in a passive position because of blocked information.PHARMAC has a contract management team responsible for contract supply or receiving routine updates of inventory information of pharmacists,wholesalers and drug suppliers through PHARMAC related contact hotlines or websites.PHARMAC provides information on medical aid decisions so that people can acquire any supply issues as well as other problems.In China,this method can be used for reference in the management of supply contracts.Therefore,a third-party contract management team should be established to manage contract supply on a full-time basis.At the same time,the transparency of information on the inventory shortage platform should be promoted to strengthen communication with pharmacists,wholesalers and drug suppliers for their overall participation.In this way,the execution of the supply contract can be guaranteed without any interference from stakeholders.Due to the information sharing,each party can understand the supply problem at any time,avoiding the overstock or expiration of drugs,so as to reduce the shortage of stocks due to hospitals’ own procurement[7].The publicity and transparency of inventory information can effectively alleviate the shortage problem caused by information asymmetry[8]and improve the efficiency of problem solving.

2.2 Monitoring the source of drug supply and setting up a professional advisory committee

Drug supply consists of many links,such as raw material sources,drug production,drug circulation,drug use and drug supervision,etc.[7].The source of pharmaceutical raw materials is the first step in the supply chain.We must strictly inspect the quality of raw materials and standardize the procedures for the entry of drugs into the procurement list.It is of great significance for the follow-up work of the supply chain[9].The Medical Security Bureau responsible for drug procurement can draw lessons from the establishment of expert advisory committees by PHARMAC.It can set up advisory bodies such as Pharmacological and Therapeutic Advisory Committees and Consumer Advisory Committees to provide consults on drug purchase.They can also provide professional and continuous suggestions for new drug entry process from their perspectives to improve drug supply because their views are more comprehensive,which can make the medicine supply keep in line with actual needs.In the field of pharmaceutical production in China,there are some quality problems.As a result,there is no good quality assurance for the source of drug supply.Drawing on the practice of Medsafe in charge of safety supervision,multi-party cooperation is needed in China to accelerate the evaluation of drug quality and efficacy consistency.Meanwhile,the drug bidding policy must be improved.Promoting the rapid and rational formulation of drug procurement plans is the key to ensuring drug supply[10].Once the suppliers enter the bidding list,we should choose the best ones according to their own strength and ability of continuous supply.When a supply contract is signed,the supplier’s supply tracking record should be studied carefully.Relevant departments should strictly inspect the sources of drug supply.At the same time,some advisory committees should be established to accelerate the development of highquality pharmaceutical services.Promoting structural reform on the supply side can substantially improve the quality and accessibility of drugs[11].

2.3 Finding alternative medicine supplies

The continuous advancement of health system reform means that we must take steps to keep up with it.Factors affecting supply can be divided into preventable and unpredictable ones.The winning bidder with volume purchasing will sign a continuous and exclusive supply contract with medical institutions,but the supply problems caused by production accidents occur from time to time.In addition to the shortage of drugs caused by the impact of production and other supply links,medical institutions are also responsible for some causes[12].Therefore,it is important to prepare a number of alternative solutions before problems arise.Drawing lessons from New Zealand’s rapid action in confronting potential supply problems,some solutions in line with China’s conditions are worked out.When the Medical Security Bureau realizes potential supply problems,it will act as soon as possible and manage them in a variety of ways.Firstly,the inventory demand in the process of drug production,circulation and use must be communicated in real time.Medical institutions need to carry out information exchange with the Medical Insurance Bureau,the National Health and Health Commission,drug wholesalers,pharmacists and other professional institutions timely and effectively.Medical institutions and suppliers can cooperate to find alternative inventories.If the drug is supplied exclusively,the medical institution can suspend the exclusive supply in order to seek alternative drugs during the suspension period.Medical institutions must recover the cost of purchasing alternative stocks through supply contracts.In addition,it is important to understand the possible uses of unregistered drugs.If conditions are necessary,emergency registration of alternative drugs can be sought.