Gay Keating explains why the Trade Minister's assurances on Pharmac don't go far enough.

Countries negotiating the Trans-Pacific Partnership Agreement this month are battling against adopting United States law, particularly on medicines. The "fast-track" approval given to President Obama requires US negotiators to push other TPP countries to change their laws to match US laws, including intellectual property and medicines.

No wise country would change laws to make their health system more like the US's. Last year's international comparison by the US Commonwealth Fund showed overall the US is at the bottom. There's only one indicator where the US does better than us. The United Kingdom does better than us on most indicators and better than the Americans on everything.

The same report shows the US annually spends US$8508 ($12,830) per person on health care (the most expensive). New Zealand is below US$4000 per person, similar to Australia, Sweden and the United Kingdom. Part of the US cost problem is their intellectual property laws on licensing medicines that the "fast track" authority wants to foist on us. Here's how it works.

Patents give creators of new medicines monopoly rights for 20 years. After that, others can manufacture a "generic" copy of the brand-name drug. Generics sell at a much lower price because newcomers don't invest in development.


All manufacturers have to provide valid scientific trial data demonstrating their medicines are effective and safe. Generic manufacturers of pre-existing medicines (say, penicillin) usually don't have to repeat all the trials. They do have to show the generic is the same as the original penicillin. Or if it is very similar, but not identical, a smaller range of scientific tests are needed to show how "penicillin-similar" compares with the brand-name original.

In some countries the initial manufacturer gets a period - separate from the patent - to keep the basic scientific trial information on the medicine as exclusive data. Until "data exclusivity" has expired no generic manufacturer can share use of the scientific data on effectiveness and safety. This can add years to the monopoly during which the medicine is only available at the original brand-name high price.

Countries vary widely, from no data exclusivity (immediate sharing of the scientific test results), to the US rules that effectively give 12 years for some medicine types. It can vary with manufacturing process - those made biologically ("biologics") typically have longer data exclusivity than those made by chemical processes.

Countries also vary on whether a fresh monopoly period would be given for minor changes in the original product formulation ("evergreening"), or whether you can prepare and test (but not yet sell) generic copies of a brand-name medicine during the 20-year patent period.

Each additional year of patent or data exclusivity is an extra year of high monopoly prices. By one Australian estimate, introducing biologically manufactured similar medicines one year earlier for 10 drugs could have saved more than A$200 million ($223 million) in a year. The figure in New Zealand for just seven drugs is at least $25-50 million every year.

The Obama Administration wants to save US$16 billion over 10 years by changing their law to bring their data exclusivity for biologics down to the middle range (seven years) and prohibiting evergreening. Yes, even the Obama Administration wants to change the laws "fast track" would make the rest of us live by.

For years, Trade Minister Tim Groser has promised that New Zealand will retain the fundamentals of Pharmac. But Pharmac does not control the licensing of medicines, that is done by another arm of the Government - Medsafe, which is part of the Ministry of Health.

Surely licensing arrangements that affect the price of medicines is one of the fundamentals on which a Government medicine purchase system is built. We need an assurance from the minister that licensing arrangements for medicines are part of the Pharmac fundamentals he has promised to protect.


He needs to confirm that data exclusivity for biologics will not extend beyond five years and there will be no extension of evergreening for medicines.

New Zealanders deserve a guarantee that we will not end up with US laws that even the Americans do not want.

• Dr Gay Keating is a Wellington-based public health specialist and researcher.