Big Pharma: We don't want to kill Pharmac

A flurry of newspaper columns and editorials in the last few months have looked at New Zealand’s efforts to strike a free trade deal with the United States and the impact that might have on our drug-buying Government agency Pharmac.

You see, the US apparently considers Pharmac as anticompetitive and limiting the ability of US drug companies to sell their products in New Zealand.

According to University of Auckland law professor Jane Kelsey writing recently in the Herald:

The challenge to our pharmaceutical purchasing agency is an obvious second crunch point. The big-pharma lobby in the US and here has declared Pharmac ‘an egregious example’ of what it considers unfair practices. Leaked US and New Zealand texts reveal an initial standoff between the two parties. Yet the Key government has refused to take Pharmac off the table, raising concerns about what Trade Minister Tim Groser means by protecting the ‘fundamentals’ of our affordable medicines regime. Significantly, the Labour Opposition has broken the previous bipartisan consensus on free trade agreements and made Pharmac a red line issue.

Writing in the Herald, seasoned trade commentator Fran O’Sullivan puts it a bit more bluntly:

…we would have to sacrifice Pharmac before the United States will let our dairy farmers in.

This morning I received a letter from Medicines New Zealand, which represents the likes of Pfizer, GlaxoSmithKline, Roche and Merck Sharpe & Dohme – some of the biggest drug companies in the world.

“The medicines industry is NOT advocating for the abolition of Pharmac”, writes Medicines New Zealand general manager Kevin Sheehy.  Our industry works with agencies similar to PHARMAC all around the world. The central approval or funding agency model is fast becoming the norm”.

So what do the drug companies actually want if it isn’t seeking an end to Pharmac? “Some reforms to the Pharmac model,” writes Sheehy.

“These reforms stem from a long held and on-going concern that New Zealanders are not gaining access to best-in-class and first-in-class medicines.”

He then goes on to list what exactly the industry does want:

– Better transparency around funding applications and the Pharmacology and Therapeutics Advisory Committee (PTAC) as well as for the scientific evidence on which decisions are made. More transparency? Seems reasonable.

– Establish a timeline for processing applications and make decisions (“don’t sit on PTAC recommendations for many years”). Again, fair enough.

– Clear definition of decision criteria and how they are applied. Yep, makes for better decision making and transparency.

– Direct stakeholder representation to the clinical committees. Hmm, could be problematic – not sure about that, surely the clinical research should speak for itself and input should be independent?

– All health technology investment decisions made on similar grounds. Assuming that it is reasonable to make health technology investment decisions on the same terms, sounds reasonable.

– Intellectual property regime brought up to international best practice. This is the big unknown – what exactly does this mean? The IT and creative sectors are already struggling with this on copyright and software patents and it is a hugely factious issue. It could be enough to undo everything listed above. More info from the industry is needed here.

Sheehy goes on to claim that a free trade agreement with the US would not result in price hikes for drugs.

“Following Australia’s Free Trade Agreement with the US, Australia has benefitted from access to more innovative medicines, a flourishing generic market and the growth of their medicines expenditure has reduced. Any changes are highly unlikely to result in increased costs for medicines currently available in New Zealand.”

So, if not totally reassuring to proponents of the Pharmac model, certainly a different stance to what has been implied in the media – that the dismantling of Pharmac is a condition of us getting a FTA with the US and is a high priority of the drug companies.


  1. MainlyMe

    @ balthazar:
    Any legal framework designed in 1953 and applied to govern science and technology emerging 6 decades later can only be called “antiquated”.

    “…patent extension’s that the National government appear to favour.. ”
    Evidence of that assertion please, as I believe it to be 180degrees out of phase!

    For the record, NZ law had provision for patent law extensions until 1994, when they were repealed. Then in 2002 the springboarding provisions were adopted which eat into he valid life of a patent.

  2. balthazar

    One man’s antiquated system is another man’s legitimate system. NZ patent system should not be born of ‘international best practice’ which is borne of corporate lobbying rather than a true evidence based model to best suit the country.

    The pharma linked patent extension’s that the National government appear to favour provides benefits to pharma that are not provided to other businesses, especially those of interest to NZ. If they feel they deserve additional monopoly periods, they should provide an evidence base to have this. Pharma being expensive is not a true reason for the NZ government to alter the current system. Just as matching the USA is not a true reason to alter the current system.

    What benefit will it bring to NZ, social and economic.

  3. MainlyMe

    Supplementary explanation: in the above post it was my intention to emphasise the phrase “the law of any other country”. Apols that did not translate to the posted copy.

  4. MainlyMe

    Hello Peter;
    You express disquiet about what might be intended by MNZ’s expression “Intellectual property regime brought up to international best practice”. I expect it relates specifically to our antiquated patent regulatory environment.

    Successive Governments’ procrastination over IP-law reform has left New Zealand with ruling patent law written before Watson and Crick’s publication of the double helix, yet that same law is required to serve the inventions that derive from manipulations of that genetic code, computers, nanotechnology and a raft of science advances that could never have been anticipated in 1953.

    Thus New Zealand is subject to the most primitive patent environment in the OECD. There are so many aspects of our active law that fall short of “international best practice” that it would easily serve as a topic for an academic paper from an interested law academic. Many of these features make NZ an outlier (read dinosaur) in the world of international IP law.

    Somewhat ironically given that context, the aspect of our local patent law that most antagonises the pharmaceutical industry is not a part of the original law, but a recent amendment that was shuffled through parliament coat-tailing as an amendment immediately prior to the third reading of a totally unrelated bill passed under urgency without due revue process. This was the “springboarding” amendment of 2002 reviewed here ( ). This radical law-change, finessed by stealth during the pre-Christmas rush, effectively neutered well-established case law that decreed that performing clinical tests during the term of a patent to be a “commercial use” and so an infringement of that patent. Furthermore the amendment cynically exempted from patent infringement all activities… “reasonably related to the development and submission of information required under New Zealand law or the law of any other country” (my emphasis).

    So to specifically exemplify what that dramatic change could mean for the owner of a patented pharmaceutical product, a generic manufacturer could, without infringing, conduct an extensive trial in New Zealand, including selling the patent-protected pharmaceutical, at any time during the life of the patent, provided data supporting submission for registration of the pharmaceutical for any country in the world was an outcome of the sale. Imagine a scenario where early in the life of a patent (total life 20 years from first filing) a generic Pharma could institute a long-run, extensive sample clinical trial by selling the patent protected drug in New Zealand provided data related to drug performance was collected.

    Pretty cheeky, eh, and clearly out of step with international best practice? And not surprisingly an aspect that Pharmac is in no hurry to see changed. I will not be surprised if bringing this aspect of our law into closer alignment with the USA will be high on the priorities of US negotiators of the hoped for FTA involving both our governments, and one I won’t be sad to see ended.

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