NZ is heading towards a two-tier health system, and it could get a whole lot worse, writes George Laking.

You are sitting in a doctor's clinic next to someone you care about greatly, who has just learnt they have incurable cancer. Although there is a treatment that can help, it offers only a 10 per cent chance to still be alive in five years. But, says the doctor, there is a new treatment that can offer 20 per cent in five years, and maybe even a cure.

In New Zealand, how things go from here depends on the effectiveness of Pharmac, our publicly funded medicines purchasing agency. Perhaps Pharmac has been able to sign a deal for the new treatment and you can relax. But if it hasn't, the next thing you will hear is that the medicine can still be had, for a cost. A typical figure would be $2000 per week for a year, or sometimes $120,000 for a three-month course (a third option, to take part in clinical research, is not always available).

And now it's decision time. Perhaps you say, "Let's do this thing!", and get to work on your credit card, or your mortgage, or community fundraising, to make it happen. Or perhaps you are like the other people I have seen in my clinic. A quiet look at the floor, an exchange of glances with the person next to you ... "I'm sorry, doctor, that's just not going to be possible." And so we make do with the resources available.

Why do these things happen? Although Pharmac gets criticised when it can't strike a deal, the underlying issue is the price of medicines. No one expects medicines to be free. But why so expensive? The answer is because that's what people are willing to pay. When you've got them over a barrel with concern for someone they care about, they are willing to pay quite a lot.

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The mathematics are simple. You have to maximise [unit price] x [units sold]. The ethics are also simple. As publicly listed companies, major pharmaceutical manufacturers are obliged to maximise return to their shareholders.

I'm writing this because of a worry, voiced by many of my colleagues, that New Zealand is headed towards a two-tier health system. Previously, there hadn't been a great difference in treatments available in public and private. But we now see the above scenario more often. In our increasingly unequal society, there will be many for whom the new price is out of reach.

As doctors and health professionals, we fear the Trans-Pacific Partnership Agreement will only make things worse. Development of these secret documents has been one-sided, to the exclusion of civil society and advantage of commercial interests. It is clear the US pharmaceutical industry has a particular disdain for Pharmac.

The US Government noted that "industry has expressed serious concern about the policies and operation of New Zealand's Pharmaceutical Management Agency (Pharmac), including, among other things, the lack of transparency, fairness, and predictability of the Pharmac pricing and reimbursement regime, as well as the negative aspects of the overall climate for innovative medicines in New Zealand".

Their actual complaint is that Pharmac is a threat to profitability. By putting a steely-eyed broker into the equation, Pharmac removes the "you've-got-me-over-a-barrel" psychology of medicines pricing.

Trade Minister Tim Groser promised New Zealanders that any TPPA deal would keep "the fundamentals of Pharmac intact". But that is only part of the story.

The recently leaked "TPPA Annex on Transparency and Procedural Fairness for Pharmaceutical Products and Medical Devices" reveals a fundamentally intact Pharmac, tied up in a procedural and legalistic straitjacket.

Under the proposed changes, Pharmac would be pressured to make important decisions within shorter time frames under more intensive input and scrutiny from industry. There would also be more strenuous requirements to release information which could be used to challenge decisions through a review process.

Pharmaceutical companies could respond to Pharmac decisions by suing the Government in offshore tribunals (investor-state dispute settlements). The threat of expensive lawsuits would constrain Pharmac's efforts to get the best deals.

The end result is that Pharmac's ability to deliver would be less. Inevitably, New Zealand's health system will grow its second tier. You have to ask why the TPPA's authors would go to the trouble of writing an "annex" document on pharmaceuticals? Why pharmaceuticals, and why not tractor tyres, or instant coffee?

For this, New Zealanders can take credit, because the obvious answer is Pharmac and the constraint it offers on otherwise unfettered pursuit of profit.

• George Laking is a medical oncologist who works in Auckland and Northland. He also advises Pharmac. He writes here on behalf of Doctors for Healthy Trade.