The way Pharmac operates is not only unfair on patients and drug companies that develop medicines, but it inhibits development in New Zealand, an advocate for US drug firms says.
The United States drugs industry is seeking major changes to the way Pharmac runs in ongoing Trans Pacific Partnership (TPP) talks.
Joseph Damond, a senior vice-president of the Washington-based Biotechnology Industry Organisation, was in Wellington last month to speak with politicians, including Trade Minister Tim Groser, and New Zealand negotiators in the TPP.
Neither Health Minister Tony Ryall nor Mr Groser would comment yesterday on Pharmac or the talks that finished at the weekend, but the decision by Mr Ryall last week to add medical devices to its purchasing duties may draw further criticism.
Mr Damond said New Zealand had pockets of excellence in medical research and was strong on early-stage research, but not at the stages of clinical trials, product development and manufacturing.
"Part of the reason has to do with Pharmac," Mr Damond said.
Given the history of Pharmac, the Government's bulk-buying drug agency, the low chance of medicines trialled in New Zealand being approved by Pharmac put developers in a bind if the drug worked, he said.
If it was approved by Medsafe but not taken up by Pharmac, the person developing the medicine would ethically have to continue to fund patients to continue with the drug.
"Or as is more often the case, you are not going to take the risk of doing the clinical trials and drug development in New Zealand at all, notwithstanding the fact that there are some very good people there.
"New Zealand has some real excellence in this area but it is in danger, because of some of these issues, that that excellence may not be realised."
New Zealand pharmaceutical spending as a share of total health spending was one of the lowest in the OECD.
Auckland hosts TPP
Auckland will host the 15th round of TPP talks in December, a month after the US presidential elections.
The talks could be significant if Barack Obama is returned for a second term.
A victory by Mitt Romney may stall talks as his Administration decides on the appointment of a new representative.