Editorial: Pharmac more important than US deal

Photo / Thinkstock

Opinion

The heat is coming on New Zealand in a free trade negotiation with the United States over this country's method of providing subsidised medicines. Decisions about which medicines will be subsidised are made by a specialist Government agency, Pharmac, which also negotiates the rates at which it buys them. US pharmaceutical suppliers have long maintained that this is unfair.

This week their interests were pressed upon President Obama by 28 US senators who sent him a letter of concern saying that in their view, "intellectual property" was not sufficiently protected in a trade agreement between New Zealand, Singapore, Brunei and Chile that the partners are now trying to extend to the US.

Intellectual property is the protection of inventors' rights, and most modern trade agreements include common recognition of patents and copyright. The pharmaceutical industry is particularly deserving of this protection. Companies that invest billions in the discovery and development of a safe, effective medicine need a fair return on their investment.

If patent protection is the extent of the US drug companies' concerns about Pharmac, it should not be too hard to reach a compromise in the Trans Pacific Partnership. But if they hope to undermine Pharmac's role as a public purchaser, New Zealand must stand firm.

There is nothing in Pharmac's role that offends any principle of free trade. Pharmac does not decide what medicines may be traded in New Zealand, it decides which ones will be bought at public expense. If the unsubsidised price puts a drug out of most people's reach, that is a matter for the companies that set the price. They cannot expect their products to be subsidised by the New Zealand taxpayer as of right.

Pharmac's job is to shop around, drive hard bargains and get the best value for public money. Public purchasing policy can be a trade barrier when it favours domestic suppliers over foreign competitors, or any nation's suppliers over another's, but Pharmac does neither. It gets the best deal it can for the taxpayer regardless of where it finds it.

And it has done remarkably well. A survey of 14 developed countries last year found New Zealand spent the least on medicines, at US$2510 ($3152) a person, and the United States spent the most, US$7290.

America has the world's most expensive health services and the developed world's poorest coverage. It is struggling to reform its health system while setting its plans firmly against a publicly funded single purchaser of services for those who cannot afford competitive private insurance. Until it solves the conundrum it has set for itself, it is in no position to insist that trade partners abandon a system that works well.

Pharmac's medicine selections do not always please everyone in this country. Its professional decisions are often open to argument, and it was overruled after the last election by the newly elected Prime Minister who decided he was a better judge of the value of Herceptin for a type of breast cancer.

But he has said he will take "a fair bit of convincing" that Pharmac should be altered for the sake of the Trans Pacific Partnership.

His Trade Minister, Tim Groser, who as a negotiating official has heard the American case many times before, remains unmoved. He has described Pharmac as "an outstandingly successful institution" that in five years has saved the taxpayer the equivalent of the cost of the Starship hospital.

If only the whole public health system was as hard-nosed in its purchases. Pharmac must not be a bargaining chip in any trade negotiation. If the US is going to make it a deal-breaker, so be it.