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Decisions of PHARMAC to fund Opdivo and Keytruda

Ombudsmen Act 1975
Related legislation:
New Zealand Public Health and Disability Act 2000
Legislation display text:
Ombudsmen Act 1975, New Zealand Public Health and Disability Act 2000
Pharmaceutical Management Agency
Leo Donnelly
Case number(s):
Issue date:

A complaint was made to the Ombudsman that PHARMAC took too long to approve the May 2015 application to fund the metastatic melanoma cancer drug Keytruda.[1] The complainant considered that PHARMAC gave insufficient consideration to the grave health needs of metastatic melanoma cancer patients, and delayed funding Keytruda in order to obtain a more competitive price. She considered that PHARMAC should have acknowledged the clinical efficacy of Keytruda at an earlier juncture and afforded it a higher priority rating, which may have improved health outcomes for metastatic melanoma cancer patients.

The complainant also considered that PHARMAC had not released credible information to explain the decision to fund another PD-1 inhibitor Opdivo[2] (from July 2016), and then to fund Keytruda (from September 2016). She stated that melanoma patients had not been aware of the Opdivo funding application and were ‘very surprised’ when PHARMAC announced the decision to commence public consultation, on the same day as the government announced $50 million additional funding for PHARMAC. She considered that PHARMAC then also undertook a complete ‘U-turn’ when it consulted on the funding of Keytruda in June 2016. She considered that families which lost loved ones in the period before any PD-1 inhibitor medicines were approved for funding by PHARMAC had no way of knowing if the decision-making process was fair.

In September/November 2015, PHARMAC had received recommendations from relevant committees that the Keytruda application be funded as a low priority due to concerns about efficacy and cost. It was then ranked by PHARMAC in December 2015, and discussions with the supplier continued.[3] In early 2016, PHARMAC received a proposal for Opdivo which had better clinical evidence and more favourable commercial terms. From around February 2016, the clinical advice PHARMAC received suggested that PD-1 inhibitors had a similar therapeutic effect. PHARMAC subsequently reached agreements to fund Opdivo and Keytruda, with revised commercial terms. After separate processes of public consultation,[4] both medicines were approved for funding and listed on the pharmaceutical schedule.

The Ombudsman concluded that the manner in which PHARMAC prioritised the Keytruda application was not unreasonable, and was in accordance with its statutory objectives of obtaining the best health outcomes within the available funding. PHARMAC was entitled to rely on the expert advice it received from its clinical advisors, and used its position to negotiate prices with the two suppliers. It also took reasonable steps to keep the public informed of the progress of the two applications.

This case note is published under the authority of the Ombudsmen Rules 1989. It sets out an Ombudsman’s view on the facts of a particular case. It should not be taken as establishing any legal precedent that would bind an Ombudsman in future.

[1]     Keytruda is a PD-1 inhibitor, which is a relatively new class of drugs which activates the patient’s immune system to attack cancer cells. The generic name for Keytruda is pembrolizumab.

[2]     The generic name for Opdivo is nivolumab.

[3]     The PHARMAC priority list is confidential. It is reviewed on a quarterly basis, although it can be reviewed out of cycle if new evidence emerges. The cumulative total cost of the items on the priority list (in rank order) is then matched against available headroom in the Combined Pharmaceutical Budget to determine which investments PHARMAC will work on to progress for funding.

[4]     Under PHARMAC operating policies, public consultation generallyoccurs after the medicine has been assessed, prioritised and a provisional deal is reached with the suppliers.

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