On The Case

27 Jun 2008

The High Court Herceptin Debate: To Fund or Not to Fund?

In April, in an unprecedented move, eight women suffering from breast cancer took on the might of the Crown pharmaceutical funding agency Pharmac in the High Court. Although it may yet prove to be a pyrrhic victory, they secured an order that Pharmac reconsider a crucial decision on Herceptin funding.

Introduction

The High Court ordered Pharmac to re-consider its 2006 decision not to fund the 12 month Herceptin programme for women with early stages of the HER2 positive form of breast cancer. The highly anticipated ruling was handed down by Justice Gendall on 3 April 2008, in the case of Walsh & Ors v Pharmac.

Pharmac is the Crown entity which approves funding of pharmaceuticals. The High Court challenge to Pharmac's decision-making process came from eight female breast cancer patients and supporters of the Herceptin treatment, who had been forced to fund their own 12 month treatment at an annual cost of up to $70,000.

The 2006 decision not to fund the 12 month programme was overturned on the basis that there was no consultation with interested parties. Therefore Pharmac was ordered to undertake formal public consultation.

Although 28 grounds of challenge were put forward by the plaintiffs, only one was successful and the remaining 27 grounds advanced by the plaintiffs were all refused.

Background 

Herceptin is a drug which treats an aggressive form of breast cancer known as HER2. In 2006 it was only available for those patients in New Zealand with advanced HER2. For those patients with less advanced breast cancer, Herceptin could be prescribed but had to be privately funded at an annual cost of $70,000.

However, 32 other OECD countries publicly fund a 12 months Herceptin treatment for early HER2 positive victims, leading to claims that this is now the international standard for developed countries. It is in this context that Roche Industries (a pharmaceutical supplier) applied to Pharmac for funding of the 12 month treatment in 2006.

Pharmac made three decisions which were attacked by the eight breast cancer victims who brought the claim, namely:

1. the July 2006 decision not to fund the 12 month early stage Herceptin programme at that time;
2. the April 2007 decision to fund a 9 week early stage treatment instead;
3. the decision to refuse special funding of Herceptin to the eight women based on exceptional circumstances.

These three decisions by Pharmac were challenged under a process known as judicial review, which means that the Judge was not able to decide whether the Pharmac decisions were right or wrong, but did have the power to overturn the decisions if they were:

1. made illegally;
2. made with bias or serious procedural irregularities;
3. completely irrational.

The Claim

Among other grounds, the plaintiffs said that there was a lack of consultation with interested parties; bias on the part of Pharmac who had pre-judged the issue based solely on its budgetary constraints in light of the high costs of treatment; and procedural problems because Pharmac had given directions to its own advisory board and taken directions from the District Health Boards (DHBs). The plaintiffs also argued that the decisions were irrational given the amount of evidence to support the 12 month treatment and lack of evidence to support the 9 week treatment.

The Decision

The Judge found that the second decision to fund the 9 week early stage Herceptin treatment was made properly and without bias, was supported by evidence (even if a contrary decision was similarly supported) and therefore rational, and that Pharmac had undertaken wide ranging formal consultation. This meant the second decision was unassailable.

The third decision not to grant special funding to the plaintiffs due to exceptional circumstances was also found to be lawful. This was because the plaintiffs clearly did not meet the exceptional circumstances criteria.

The first decision was attacked on a number of fronts. The Judge found that Pharmac was entitled to take into consideration:

1. the high cost of Herceptin in relation to its government allocated budget and government priorities for health funding;
2. the fact other treatments and services may suffer if funds were diverted for the 12 month programme;
3. the views of its advisory body, despite the fact Pharmac had given it directions.

However, Pharmac did not formally consult interested parties before the first decision in July 2006. Pharmac's explanation for not consulting was that none was required as it was not a final decision to decline funding but a resolution not to fund “at this time”. The Judge agreed with the plaintiffs that the first decision was a final decision not to fund, that Pharmac’s practice of not consulting when funding was to be declined was “questionable”, and that circumstances required that formal consultation be carried out due to the high public interest in the decision.

Conclusion

Pharmac’s first decision of July 2006 not to fund the 12 month Herceptin treatment was therefore overturned by the High Court. Pharmac must now carry out formal consultation then re-consider Roche's application for the programme. In doing so, the Judge directed it to consult "openly and fairly with those who have a legitimate interest". The Judge also noted that the fact the current 9 week programme is in place cannot pre-determine any outcome but may influence Pharmac given that there will be a treatment in place - albeit of shorter duration - should the 12 month programme again be declined.

Finally, the Judge suggested that Pharmac refrain from its policy of seeking the "support" of DHBs before deciding not to list a drug for funding. This is because it is the DHBs who ultimately fund any listed drug, not Pharmac, hence DHBs may be seen to have a vested interest in agreeing with the preliminary decision not to fund.

This decision is of interest both to consumers of prescribed drugs which may be eligible for public funding and equally to pharmaceutical companies. For both parties, the decision sheds light on the decision-making process of the Crown agency charged with allocating funding. In particular, the message seems clear that Pharmac should err on the side of caution and consult when a decision is high profile and of particular importance to those affected.

Pharmac has now completed the required consultation process and has received 300 submissions, reflecting the intense public interest of this issue. Pharmac is due to release its new decision in July. In the end the final funding decision still lies with Pharmac - given the consultation process was appropriate. It might decide again not to fund the programme. But for the plaintiffs, the fact that Pharmac has been forced to consult further and make a new decision is, in itself, a victory. Time will tell whether that victory is more symbolic than real.

Authors

Earl Gray

Partner - Intellectual Property

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John Shackleton

Partner - Dispute Resolution

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Tracey Walker

Partner - Dispute Resolution

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Richard Watts

Partner - Intellectual Property

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Sarah Chapman

Senior Associate - Intellectual Property

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Claire Foggo

Senior Associate - Intellectual Property

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