The speed and scale of the New Zealand health reforms are unprecedented in health management. Four regional health authorities (RHAs) purchase a mix of services within a capped budget, through contracts with health providers _ 'the purchaser-provider split'. Despite the clear objective of more efficient health services allocation, the regional operation of the 'split' has come under intense scrutiny and is to be extensively modified over the next 18 months.

Pharmaceutical expenditure is 'demand' driven. As doctors are eager to do the best for their patients, even in areas of therapeutic uncertainty, there is always the potential for wasteful prescribing. The contestable environment of the reforms has provided a unique milieu for the development of a variety of initiatives to minimise the risk inherent in pharmaceutical expenditure. Control has focused predominantly on 'quick-fix' supply-side initiatives, with less attention to the demand-side, especially in general practice.

General practice budget holding
The major thrust of budget holding in the New Zealand primary care sector is for pharmaceutical and laboratory contracts within a partially subsidised fee-for-service system. The reforms have stimulated about half of the general practitioners to form groupings, primarily to maximise financial gain and to minimise risk from budget-holding contracts with the RHAs. The budgets are presently based on each group's historical pharmaceutical expenditure, although there is a move towards a demographic basis as better practice data become available.

Budget holding for subsidised drugs aims to focus prescribers on resource allocation as a whole, rather than on one drug in isolation. There is a perception that this could engender a more parsimonious attitude to prescribing which could translate into more visits for repeat prescriptions and possibly more visits in general. General practitioners are trained as individual patient advocates and their prescribing may not reflect a societal perspective. Furthermore, most do not have the knowledge about socially efficient health care delivery to act economically. Budget holding in New Zealand is still in its infancy and it remains to be seen what impact it will have on pharmaceutical expenditure. Evidence from the U.K.1,2 suggests quantitative and qualitative reductions in pharmaceutical expenditure in fund-holding practices, but evidence for a sustained effect is lacking.3

General practice pharmacists
Academic detailing can reduce pharmaceutical expenditure4, but its effectiveness in New Zealand, with economic efficiency so explicit a goal, remains to be defined. Nonetheless, budget-holding contracts have provided for the employment of practice pharmacists to co-ordinate formulary development and prescribing audit. Their effectiveness is very much dependent on the availability of credible current prescribing information. Most practices still depend on analysis of prescribing data from a central pricing office which was originally established to reimburse pharmacists. The data do not include those scripts costing less than the patient co-payment, which constitute a significant proportion of all prescriptions. Another difficulty with the prescribing data is that New Zealand privacy laws do not permit the indications to be recorded on the prescription. Feedback of prescribing data therefore lacks the added value of the denominator needed to define prescribing cost-effectiveness.

Prescribing variability and prescription audit
There is an unsubstantiated belief that prescribing variability is inefficient, but the level of variability indicative of 'inefficiency' is unknown. In a New Zealand study, prescribing variability was reduced by promoting consensus in the choice of medicines. This resulted in significant savings in prescribing costs5 and formed the blue-print for the establishment of the New Zealand National Preferred Medicines Concept (PreMec) in 1992. The concept6 is a prescribing quality assurance program which provides credible, audited and personalised feedback on prescribing after voluntary registration. The program includes visiting pharmacists, medicines information bulletins and case studies of hypothetical prescribing scenarios.

Although the intention is for the RHAs to collaborate in the management of pharmaceutical expenditure, each has developed its own strategies. The RHA contracts for PreMec services are piecemeal, thus preventing the full potential of the services from being realised. Benefits directly attributable to PreMec have been difficult to demonstrate. This is because the total number of New Zealand general practitioners is too small to allow statistically significant differences between control and intervention effects to be shown. The cost effects of changing prescribing regulations such as the recent re-introduction of monthly dispensing and changes in patient prescription charges have also blurred the definition of any cost savings attributable to demand-side interventions.

Financial incentives
The unique combination of a fee-for-service reimbursement system and budget holding results in unusual financial incentives. There are signs that ethical principles are being manipulated for economic reasons. In some regions, budget-holding general practitioners may keep a specified proportion of the annual savings in pharmaceutical expenditure as a personal incentive. Others have obtained financial assistance from pharmaceutical companies to support practice salaries of non-prescribing paramedics, claiming that the influence of industry has been removed from any effect on pharmaceutical management. Financial incentives may confer a real conflict of interest between the general practitioner and the patient7, and the conflicting practice objectives resulting from this are considered inherently unstable and inefficient.8

Prescribing guidelines
The fiscal incentive of budget holding in general practice has unleashed a veritable boom in prescribing guidelines. There is even a commercially-driven initiative producing 'Guidelines for guidelines'! Some would argue that it is the process rather than the end result that matters. The utility of any prescribing guideline depends on the extent of 'ownership' by the prescribers, the extent to which there was deviation from the guidelines in the first place, and explicit incentives to reward compliance. The present lack of data on indications makes it difficult to evaluate compliance from a national perspective, but there are some exciting possibilities within the practices. The practice pharmacists have an important role in driving and co-ordinating these quality assurance initiatives.

The challenge
The challenge for the RHAs is to match new strategies for pharmaceutical management with the best health outcomes. Outcome measures of these initiatives to reduce pharmaceutical expenditure are poorly defined and even more poorly resourced, with very little support from either the science funding agencies or the RHAs. New Zealand's relatively small population and advanced health care facilities provide a unique opportunity to establish a national structure to promote and evaluate cost-effective prescribing strategies which also reflect the ethical issues. However, the goal posts keep changing.


T.J.B. Maling

Department of Medicine, Wellington School of Medicine, Wellington, New Zealand