Gregory John Coyle: How does the operation of PHARMAC’s ‘Community Exceptional Circumstances’ policy align with the distributive justice principles of fairness and equity?

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Frank Macskasy Frankly Speaking blog fmacskasy.wordpress.com 27-28 february 2013 - rare diseases disorders - New Zealand Organisation for Rare Disorders -NZORD

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Address to the New Zealand Organisation for Rare Diseases (NZORD) Rare Diseases Day Seminar

28 February 2013

Rydges Hotel, Wellington

Address to the New Zealand Organisation for Rare Diseases (NZORD)
Rare Diseases Day Seminar

28 February 2013

Rydges Hotel, Wellington

Dr Greg Coyle
Health Researcher
greg_coyle@nzf.salvationarmy.org
ph 0275-110-353

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Thank you for inviting me to talk about my research. The subject was fairness and how we might know if agencies are being fair when we ration health care, particularly pharmaceuticals, in New Zealand. The subject of distributive justice has exercised many great minds and been the subject of large amounts of literature and academic endeavour. People have expressed strong feelings about rationing and writers have theorised and philosophised about it.  However we dissect this problem, and the many diagnoses through which we postulate about how the problem ought to be managed, surprisingly few academics in New Zealand have proposed solutions.

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Today I would like to spend a few minutes talking about my study into PHARMAC’s operation of the exceptional circumstances policy (now renamed the Named Patient Pharmaceutical Assessment scheme). This policy of PHARMAC’s was interesting to me because it is located at the very boundary where the needs of the whole society and the needs of an individual meet. Examples of how we ration healthcare in New Zealand in an explicit manner are very rare.

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I do not wish to suggest that health rationing is rare – it most certainly is not – but it is mainly done in an implicit manner and patients and families often will not be aware that it is even happening. PHARMAC is one agency which is explicit about limiting care. Many of you know this well.

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So the questions I suspect that you want answered is how much cost for the treatment of a person with a rare diseases is too much? As a country do we have processes to decide this? Are the processes rational and fair? Would providing more money for public health mean that other sectors like education, police, welfare, public housing or recovering from natural disasters would be given less? These questions all appeal to the principles of distributive justice for answers.

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Any description of justice has a central desire to attempt to define the moral authority of laws. Aristotle described the formal criterion of justice that still today probably wins the greatest agreement:

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 Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 1

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…that we should treat equals equally and treat unequals unequally, in proportion to that inequality.  Common to all the positions on justice, we still consider justice to be a positive thing which is applied to decisions, procedures, laws, actions and events. Across the wide range of substantial ethical theories and principles of distributive justice, no one theory commands a universal acceptance.

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John Rawls, an American philosopher, developed a theory of ‘justice as fairness’the chief purpose of which was to ensure that utilitarian and consequentialist thinking, in meeting the greater good, would not sacrifice the position of individuals.

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 Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 2

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He presented the principle that each person is to have an equal right to the most extensive liberty compatible with a similar liberty of others. However when social and economic inequalities are to be arranged, they should be arranged so that they are both to the greatest benefit of the least advantaged and attached to positions and offices which are open to all under the conditions of fairness and equality.

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Amartya Sen, a contemporary welfare economist, philosopher and winner of a Nobel Prize for economic science in 1998, developed a contemporary widely held view of distributive justice. Sen identified what just societal arrangements might be by taking Rawls principles and expanded on them to include an understanding of how costs and benefits fit into a justice paradigm.

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 3

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Sen described how distributive justice as fairness should be viewed from the view of procedural justice and just outcomes for individuals.

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“...the roles of institutions’rules and the organisation, as important as they are, have to be assessed in the broader more inclusive perspective which is inescapably linked to the world which emerges, not just the institutions we happen to have

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He clarified perceptions of distributive justice in terms of a person’s capability to experience justice.  Sen’s notions of justice are ultimately linked with the capability of people and how their lives are lived in the world.

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Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 4

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Unlike Rawls, Sen held that the reach of health equity is immense and health care must be of primary importance in any discussion on social equity and justice.

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…health equity cannot but be a central feature of social arrangements in general

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Consequently, using these two philosophers, I posed the question of PHARMAC:

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 5

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How does the operation of PHARMAC’s Community Exceptional Circumstance’policy align with the distributive justice principles of fairness and equity as described by John Rawls and Amartya Sen?

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Then I discovered that Sen and Rawls are no different to other philosophers in that they have plenty to say about justice but do not offer much advice to decision-makers about how to make rational and fair decisions. I decided to distill their theories into four questions which decision-makers could ask of themselves to discover (or simply begin to debate) whether their decisions are fair and just.

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Here are my 4 questions. I use the term ‘distribution’to mean decision, policy, funding or delivery of a service:

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 6

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  • Would the most advantaged in society accept this distribution if they, at an instant, found themselves to be the least advantaged in society and requiring such distribution for themselves?

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 7

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  • Is this distribution arranged so that it is attached to positions and offices which are open and accountable to all?

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 8

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  • Is this distribution based on the efficiency of substantive opportunities and on procedural fairness in defining efficiency?

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 9

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  • Is this distribution based on information available to decision makers about the capability of this person to do things he/she has good reason to value?

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In my research I gathered literature from around the world and data about PHARMAC’s Exceptional Circumstances policy in New Zealand.

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 010

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I engaged with key informant interviews, with past or present PHARMAC personnel, Ministers of Health and patient advocacy organisations including NZORDS. I studied media stories of interviews of pressure groups, pharma companies, patients and doctors speaking about Community Exceptional Circumstances.

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I utilised Official Information Act requests to PHARMAC, the Ministry of Health, The Department of Prime Minister and Cabinet, the Minster of Health and the Minister of Finance. I studied PHARMAC’s governing legislation and select committee submissions on the formation of PHARMAC, a Court of Appeal Judgment involving PHARMAC and Exceptional Circumstance claimants and 3 theses written about PHARMAC.

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This was a wide sweep of what is known about PHARMAC’s Exceptional Circumstance policy. I searched these data sets for both regularly occurring themes and themes which directly informed the research questions about the decision-making process utilised to decide on Exceptional Circumstances claims.

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I used Rawls and Sen philosophical questions to propose a template for decision makers to explore and understand this rationing tension exercised in the PHARMAC exemplar. Here is what I found.

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 011

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We see the two purposes for PHARMAC in the governing legislation. One is to approve subsidy on an adequate range of quality pharmaceuticals for the general community. The second purpose is to approve subsidy for citizens whose needs are not met by the general schedule and considered exceptional.

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 012

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The evidence showed that in PHARMAC’s first purpose, general allocative policies have been highly successful in procuring an adequate range of quality medicines at internationally low prices. PHARMAC has saved the New Zealand health system approximately $1.17 billion in 14 years. This has been achieved by methods of utilitarian efficiency analyses relying heavily on the Quality Adjusted Life Years calculation. PHARMAC has also expertly utilised subsidising and purchasing decisions based on evidence of clinical effectiveness.

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PHARMAC has also taken advantage of its exemption from Part II of the New Zealand Commerce Act (1986) using market dominance to exercise monopsonistic procurement practices. PHARMAC has been accountable to Parliament and the public and demonstrated effective use of substantive opportunities imparting the greatest pharmaceutical benefits for the greatest number of people with the funding provided to it.

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However, in PHARMAC’s second purpose,

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 013

(Slide 13)

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… its success has been achieved, in part, by managing the claims of individuals in exceptional circumstances in a way that has not closely aligned the Rawls’and Sen’s principles of fairness, equity, openness and consistency.

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The research shows that using the functions required of it by governing legislation, PHARMAC well achieves its statutory purpose. However, in doing so, PHARMAC must deal with the tension between justice as fairness to individuals whose needs are exceptional, and fairness to the needs of wider society.

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There are three structural problems here. The first is that PHARMAC has no stated philosophical principal on which to base its decision-making other than limiting expenditure to achieve its budget, which is not a principle but an outcome. The Minister, parliament, the courts, the Ombudsman, DHBs, the pharmaceutical industry, doctors or patients have no way of knowing if the decisions being made by PHARMAC are fair to both the community and the individual.

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Despite all the reviews and exhaustive consultations with the public, academics, professions and the pharma industry, neither PHARMAC nor the government has articulated the principles and values by which this agency will operate. We have a notion that the medicine strategy is being implemented by principles of utilitarianism, based on an economic calculation of need, providing for the greater good at the expense of the few.

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The second problem is that PHARMAC and its committees claim to use the 7 decision making criteria to guide decision making. However, my research showed that the priority, or weighting, of the criteria are never explained. So one cannot know which criteria were met or not met when PHARMAC comes to a rationing decision. The rationing decisions rely heavily on the cost utility analysis and arguments about clinical effectiveness, which do not enjoy universal clarity.

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PHARMAC’s reticence to fund some medicines has been proved right, but this highlights what a speculative business analysis of clinical effectiveness has proved to be.  Such a system creates a perfect muddle of information on which PHARMAC’s committees of experts decide. But, the one supreme criterion, “affordability” trumps all the other criteria and in reality the others appear to have a lower priority.

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The third problem is that under these conditions PHARMAC will always feel embattled and defensive because it cannot serve both purposes and adequately protect the Minister from criticism. My research showed that PHARMAC Community Exceptional Circumstances Committees don’t record the reasons for their decisions because they would most certainly be challenged. If I was a panelist I am not sure I would record the reasons for my decisions either because of the hazard of doing so.

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The pharmaceutical industry has worked out how to squeeze PHARMAC in the media over funding for pharmaceuticals for rare diseases particularly if these drugs are available overseas or the drug company has made a new drug available for a short period provided to individuals on compassionate grounds. Pressure groups, such as your own, highlight individual cases in the media appealing to the ‘Rule of Rescue’to raise public sympathy and put pressure on PHARMAC.

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The question eventually comes down to the government trading off granting special privileges to favored individuals against trying to ensure the absence of social abandonment of people suffering rare diseases. However, PHARMAC stands resolute against such attacks. It provides the public with the reassurance that they are doing their best under economic stringency and wait for the noise to die down. This satisfies Ministers. It does not satisfy the claimants and offends the fairness principle of distributive justice to such individuals.

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PHARMAC’s claim that it simply does not have the budget for $500,000 a year for drugs for a single person is quite true.

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But the government does have budgets for other things for example $30 million for a sports stadium in Christchurch, $8m a year on ministerial limousines, assisting a private boarding school in Wanganui for $3.8m,  a greater than $350m tax subsidy for the Lord of the Rings and Hobbit  pictures or the government considering recapitalizing the state coal company for $400m… I could go on. So it’s not about does the government have enough money to fund the treatment of rare diseases, it clearly does. The question is which buckets are full and which are empty and what value does the government ascribe to filling or draining these buckets? This is essentially the political role of government not a role for PHARMAC who is only required to manage its particular bucket. Cost containment is what it was set up to do and it does it very well.

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In this first purpose they are world beaters and we should celebrate the relatively large savings PHARMAC has made to replenish some of these buckets I talked about. However in this system the needs of the individuals with rare diseases will always take second place. To achieve budgetary control over the community pharmaceutical schedule and provide for people in exceptional circumstances are contradictory purposes. The first purpose is explicit meso-level rationing and the second purpose is explicit micro-level rationing. They are not the same and cannot be treated the same way. PHARMAC can only satisfy one purpose by the predation of the other. Doing both types of rationing in the one agency is simply not possible and it is not because we have bad people operating PHARMAC, in fact quite the opposite, it is because we have a bad design of the system.

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The National Health Committee’s attention is also on meso-level rationing and aims to provide guidance to DHBs on rationalizing core services. This committee is not focused on rare diseases or individual exceptional circumstance.
Well what system for analysing pharmaceuticals for rare diseases would I propose?
Firstly I believe PHARMAC should continue to do what it does well which is carefully analysing clinical effectiveness and cost utility in the approval of subsidy for medicines for public hospitals and the general community.

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 014

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I believe the second purpose of PHARMAC, to approve subsidy for medicines for individuals with rare diseases should be handled by another agency administered by the Ministry of Health. Shall we call it the ‘Rare Diseases Funding Agency’ Its chair and members should be appointed by the Minister of Health.
The definition of a rare disease would need to be investigated and developed but there are similar agencies in other comparable countries established for this purpose. For example in Australia the ‘Life Saving Drugs Programme’decides on the funding of orphan diseases as does one dedicated section of the ‘National Institute of Clinical Excellence’in the UK NHS. The Scottish and Canadian governments have also recently announced a special fund to ensure equitable access to medication for people suffering rare diseases.

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The Rare Diseases Funding Agency in New Zealand would be similar to PHARMAC in that it would have a fixed budget determined by parliament for the specific purpose of deciding on all claims not just for pharmaceuticals, but also for home support and other necessary assistance for people with rare diseases in the community.  The agency would need to implement the medicine strategy including the objectives of efficient use of resources and fairness and equity considerations.

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I have no idea what the level of funding should be, but a starting point would be transferring PHARMAC’s budget for ‘Named Patient Pharmaceutical Assessment’scheme, I believe is $8m, to the Agency. This could also be topped up by government allocation depending on the priority the Minister of Health places on the people suffering rare diseases. The High Cost Treatment Pool fund in the Ministry of Health could be added to the funding of this new agency.

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Or, here’s an idea, a reallocation of a proportion of the savings made by PHARMAC could also be made to the Rare Diseases Funding Agency.

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Allocations would be made under contract to DHBs or other providers to deliver the medicines and services to the sufferers of rare diseases.

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I believe the Agency should be founded on the principles of distributive justice. The elements of such a system would be analysis by relevant national and international experts of clinical and rehabilitative effectiveness. There should be an analysis of substantive opportunities by economic evaluation and possibly PHARMAC could conduct these studies for the new Agency. This is what PHARMAC does well. Finally, there should be consideration of the fairness of decisions to individuals. Fairness can be a consideration because the Rare Diseases Funding Agency is separated off from the funding of pharmaceuticals of the wider public.

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The agency should demonstrate openness and transparency about it decisions. The literature on micro-level rationing strongly suggests that where rationing is involved for groups or individuals, there should be no secrets. Claimants should not be expected to accept decisions that affect their well- being unless they are aware of the grounds for making those decisions.

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A good model of openness and accountability to consider might be the investigation and reporting mechanisms of the Office of the Health and Disability Commissioner which I hold to be exemplary.

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Clearly PHARMAC and the Rare Diseases Funding Agency would have boundary issues and it would be in both agencies’interest to have a cooperative relationship. Details about the relationship and interactions with DHB’s and PHO’s would also need to be addressed to avoid the attractive possibility of cost shifting at the margins.

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The decision-making of the Rare Diseases Funding Agency should have regard for the capacity of individuals to enjoy that which they have good reason to value in their lives. There are several internationally accredited frameworks for deciding this, including the Accountability for Reasonableness Framework described by Sabin and Daniels. But there are other multi-criteria decision-making frameworks which could be researched and utilised.

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The Agency’s decisions should be subject to appeal by external panel. Such a panel would review the information provided by both the Agency and the claimants, including affordability, and make a binding final decision. I believe that there will never be a time when all the pharmaceutical or other health needs of people who suffer rare or common diseases will be able to be met.

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This day will never come.

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But such an agency which I am proposing, underpinned by distributive justice principles, will provide an accountable, cost effective and fair system for analysing and managing the limited resources which are available for this purpose. Such an agency has the potential to develop the international recognition for explicit micro-level rationing; not dissimilar to that which PHARMAC has achieved for explicit meso-level rationing .

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The challenges, frustrations and anxieties (and at times the possible unpopularity) faced by the Rare Diseases Funding Agency would be similar to that faced by PHARMAC. However, the Agency would have the freedom to develop expertise in the business of micro-level rationing. Importantly, their decisions would not affect the good work being done by PHARMAC in controlling the cost of provisions of the general pharmaceutical supply.

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In summary,

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 015

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…I submit that the current PHARMAC system delivers incredible value on behalf of the general community but it does not deliver justice as fairness to individual claimants who suffer rare diseases. I believe a new Rare Diseases Funding Agency, such as I have described, would.

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Dr Greg Coyle - NZORDS Presentation - Pharmac - 28 February 2013 - slide 016

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Thank you.
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Return to blogpost: “One should judge a society by how it looks after the sick and vulnerable” – part toru

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  1. Lou
    7 March 2013 at 10:34 am

    I like Coyle’s logic. It makes a whole lot more sense than Pharmac’s present policies. Hopefully a new government will look on this issue with a lot more compassion that Key has done.

  2. Janet G
    8 March 2013 at 8:07 pm

    There’s something very cruel in the way that PHARMAC chooses who get’s to live or not, with the medicines they buy. What if it was to happen to me or one of my children?

    I’ll be considering this when it’s election time next year.

  1. 8 March 2013 at 10:11 am

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