Deborah Gleeson: US proposal on Pharmac a bitter pill

16 comments
Photo / Thinkstock
Photo / Thinkstock

During the latest round of negotiations for the Trans Pacific Partnership in early September, the United States tabled a revised version of text proposing restrictions on the operation of Pharmac and similar schemes for subsidising medicines and medical devices.

As with all draft negotiating texts for the TPP, the latest text of the euphemistically titled "transparency" chapter is not publicly available.

Some commentators speculate that the US may have wound back its demands after resistance from other TPP countries to its earlier drafts. This seems highly unlikely.

Pharmac, New Zealand's Pharmaceutical Management Agency, has been very successful in ensuring that New Zealanders have access to essential medicines at affordable prices.

It does this through a number of highly effective mechanisms that allow it to source prescription medicines at lower prices than most other OECD countries.

So it is hardly surprising that the US pharmaceutical industry has long complained about the effects on its profits, and has targeted Pharmac's effective processes.

In recent years, the US Government (on behalf of its pharmaceutical industry) has attempted to impose controls over the operations of drug subsidy schemes of other countries through free trade agreements - firstly through the Australia-US Free Trade Agreement and later through its agreement with South Korea.

The TPP represents the latest - and most aggressive - attempt. And the US seems to be particularly targeting Pharmac this time.

The lessons from previous free trade agreements are salutary. Australia successfully preserved its Pharmaceutical Benefits Scheme's processes for making decisions about which medicines to subsidise (and how much to pay for them) during its free trade negotiations with the US in 2004.

But the US learned from this experience, and was subsequently much more aggressive (and more successful) in imposing constraints on South Korea.

An earlier version of the US proposal, leaked in 2011, shows that its demands for the TPP have been even more extreme than with the Korean scheme .

The proposals included clauses that would directly interfere with Pharmac's processes for obtaining value for money and ensuring equitable access to medicines.

It is also important that Pharmac can continue to ensure that prices of new drugs reflect their clinical benefits. The 2011 proposals contained wording that would mean newly patented drugs would command much higher prices than medicines already available, even if they offered little or no additional clinical benefit.

Under other provisions, pharmaceutical companies could appeal against Pharmac's decisions on which drugs to subsidise and how much to pay, and would have more influence at key points in Pharmac's processes. Such changes would only benefit the industry - not consumers.

The New Zealand Government is adamant that the "fundamentals" of Pharmac are not up for negotiation. But exactly what does this mean?

The US does not aim to dismantle Pharmac itself, but to impose restrictions that would affect many aspects of Pharmac's operation.

Any intrusion into domestic decision-making about medicines - even seemingly reasonable requirements for greater "transparency" - could have profoundly negative consequences for Pharmac's ability to manage expenditure and ensure value for money.

Despite the modest size of the New Zealand market, the stakes are high.

It seems highly unlikely that any new US proposal will be more moderate than its predecessors, although it is possible that provisions in the 'main' text may be diluted while more onerous provisions appear in separate 'side letters' for each country.

There is a risk that New Zealand will be pressured to accept such provisions in exchange for potential access to US markets (phased in over a long time) for its agricultural products.

New Zealand would be wise to pay close attention to the experience of Australia and South Korea, and to the long run implications for Pharmac of each provision of the TPP text. But this is not easy.

The text not available for public scrutiny, and the Health Select Committee has refused to hear from academics about the public health risks, or to allow health practitioners to hear public submissions.

Dr Deborah Gleeson is a public health academic from La Trobe University in Melbourne. She is visiting New Zealand this week for a seminar series on public health and the Trans Pacific Partnership Agreement.

Have your say

We aim to have healthy debate. But we won't publish comments that abuse others. View commenting guidelines.

1200 characters left

Sort by
  • Oldest

© Copyright 2014, APN New Zealand Limited

Assembled by: (static) on red akl_a3 at 23 Jul 2014 09:41:01 Processing Time: 307ms