Divergent spender: State‐societal and meso‐organisational mechanisms in the containment of public spending on pharmaceuticals in a liberal capitalist democracy

Abstract

For two decades, New Zealand has been placed consistently at the foot of OECD rankings for state expenditure on pharmaceuticals. In this article, we explore New Zealand's containment of pharmaceutical spending as a ‘divergent’ case of pharmaceutical policy in a liberal democracy. To elucidate the likely institutional mechanisms and interests behind this phenomenon, we conducted a case study of New Zealand's drug reimbursement policy. In doing so, we derived sensitising concepts from major accounts of pharmaceutical policymaking (Corporate Bias Theories and Reputational Theory) and theories of the western state (Historical Institutionalism and Corporate Domination Theory). Drawing on 28 expert interviews and documentary analysis, we identified three main mechanisms of spending containment. First, New Zealand's state bureaucracy use pricing strategies that rely on a spending containment strategy coordinated by bureaucratic managers. Second, these managers shape the policy preferences of expert committees involved in scientific drug assessment. Third, on a meta-level, conditions for spending containment are enabled by the judicial-legislative arena. As such, we find support for Historical Institutionalism and Reputational Theory and more limited support for Corporate Bias Theory and Corporate Domination Theory. Our explanation posits further conceptual linkages between the macro/societal and meso-organisational theoretical levels.