This thesis explores how government funded public health agencies distribute or ration resources to citizens. Utilising John Rawls’ and Amartya Sen’s principles of distributive justice, four test-questions are proposed to assist decision makers analyse the fairness and equity of their rationing decisions. PHARMAC, the agency responsible for the procurement and subsidisation of medicines in New Zealand, is used as an exemplar through which to investigate the elements of distributive justice described by Rawls and Sen.

Specifically, research was conducted into PHARMAC’s ‘Community Exceptional Circumstances’ (CEC) policy. Under this policy, in a capped government funding environment, the pharmaceutical needs of the whole society are rationed against the needs of people whose needs are considered ‘exceptional’. Data were gathered from official documents, PHARMAC’s governing legislation and a New Zealand Court of Appeal case which tested the legal validity of the CEC policies and procedures. Data were also gathered through studying 23 media stories about CEC. Key informant interviews were conducted of past or present PHARMAC senior staff, Ministers of Health and patient advocate groups.
The research shows that PHARMAC’s general allocative policies have been highly successful in procuring an adequate range of quality medicines at internationally low prices, saving the New Zealand health system approximately $1.17 billion in 14 years. This has been achieved by methods of utilitarian efficiency analysis (cost-utility analysis and Quality Adjusted Life Years) and careful purchasing decisions based on evidence of clinical effectiveness. 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. However, PHARMAC’s 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.
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. The test-questions developed in this thesis propose a template for decision makers to explore and understand this tension.