Should the government buy medicines for people who could afford the drugs themselves?

This is one question asked in a new report by think tank The New Zealand Initiative. Written by Bryce Wilkinson, the report analyses the government’s drug-buying agency Pharmac.

Pharmac: The right prescription? gives credit to Pharmac for lowering the costs of many medicines. It achieved this through a combination of buying power and tough commercial negotiations.

The agency has been successful in achieving its mission. It is delivering low-cost prescription drugs to New Zealanders. And it does so in a cost-effective way.

But is this good enough? And does the Pharmac model make sense?

“Many Kiwis can afford the drugs they need,” Wilkinson explains. “With their taxes, they pay for Pharmac. Pharmac then buys drugs for them. But if that is so, why can’t they pay for their drugs themselves?

“If you cannot afford a drug you need, the government could give you cash. In this way, the government’s support would target people most in need.”

Wilkinson’s report questions whether the government needs to pay for medicines for everyone. “It is absurd that both millionaires and beneficiaries should receive subsidies. Why not focus on those who most need help?” Wilkinson asks.

His report also suggests that private health insurance could cover drug prescriptions.

“Insurance providers are free to offer cover for drugs. And New Zealand is free to import drugs. We should allow people to choose what cover for prescriptions they want,” Wilkinson says.

Pharmac has sometimes been controversial for the choice of which drugs it covers. But as long as it is subsidising drugs for all, this will not change.

“To preserve what is good about Pharmac, let’s target the subsidy better. There is no clear need to subsidise people who do not need it. We do not subsidise wealthy people’s grocery shopping either,” says Wilkinson.

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