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21 June 2021

Tiered cardiac device contracts available for DHBs

Joon Pan, NZHP

NZ Health Partnerships (NZHP) has secured a five-year contract for the supply of life-saving implantable cardiac devices, which is expected to make available $2.6 million in collective cost savings per year to 10 DHBs across the country.

The contract provides *$100.0 million in overall value and comprises a panel of four major suppliers for the full suite of pacing devices including pacemakers, implantable cardioverter-defibrillators (ICDs) and loop
recorders, as well as associated monitoring equipment.

The 10 participating DHBs are Auckland, Bay of Plenty, Canterbury, Capital and Coast, Counties Manukau, Hawke’s Bay, MidCentral, Nelson Marlborough, Southern, Taranaki, Waikato, and Waitemata.

“The contract gives DHBs access to a market share tiered pricing model. This arrangement is of particular benefit to smaller DHBs in need of this essential equipment, as pricing levels are not linked to spending power or purchasing volumes,” says NZHP Procurement Category Manager, Joon Pan.

“DHBs commit to a specific amount of market share with a supplier to gain access to the pricing for that level of commitment. The higher the commitment, the better the pricing.”

Because the pricing is based on a market share percentage, it is not determined by the amount of units a DHB buys or a spend amount.

“For instance, if a smaller DHB commits to a 40% market share with a supplier, and orders 1,000 units, they would pay the same price per unit as a larger DHB which also committed to a 40% share, but orders 10,000 units,” says Joon. “The contract has already saved one smaller DHB $63,000 annually on pacing devices.”

In negotiating the new agreement, Joon and the NZHP team focused on clinical outcomes – not just cost reductions. Therefore, the agreement includes a streamlined process for DHBs to add newly improved products to their contracts.

“We’ve made it easier for DHBs to access new technology when it becomes available. In the past, they would have to go through a rigorous process to add new products to their contracts, including clinical trials.

“We’ve added a new technology clause, so now new products can be added to the contract every quarter, on a conditional basis, until they’re clinically qualified.”

The rebate scheme meanwhile does provide additional benefits to DHBs buying larger number of devices.

“For those DHBs that do have larger spends, the scheme offers discounts that can be accumulated and reinvested when buying other products in the same portfolio.

“Since the contract includes all four major suppliers of pacing devices, physicians will still have access to the devices they know and trust, but with much better value overall,” says Joon.

“Surgeons want to be comfortable with the devices they are implanting as this directly impacts the patients and the clinical outcome. Price is not the only factor in their selection process. It is important to ensure they can continue to implant the devices they want to use that are fit-for-purpose, because in the end the most important factor is the patient’s life.”

*The five-year contract has an annual national spend of $20.0m.