Brendan Grabau: Medicines policy on wrong script

COMMENT

Helen Clark's declaration in Sydney last week that New Zealand will try to muscle in on Australia's free trade agreement with the United States is understandable. After all, countries globally would clamour for Australia's opportunity to secure a trade-liberalising agreement with the world's largest economy.

There are, of course, major sticking points that prevent New Zealand securing its own free-trade pact with the US. Usually these are perceived as its anti-nuclear legislation and its level of commitment to American defence operations.

However, a much more business-oriented reason explains why New Zealand will not anytime soon be engaged in US free-trade talks. Pharmac, the state drug-buying agency, is widely perceived as flawed and hostile to industry.

If Helen Clark truly wants trade closeness with the US, she will have to change the fundamentals of Pharmac and have the system of medicines subsidy on a different script. As things stand, Pharmac is totally alien to principles enunciated by Australia and the US in their free trade agreement.

That pact commits both countries to high-quality healthcare and improvements in public health, including the recognition of important principles. These include recognising the role medicines play in healthcare; the importance of research and development; the value in medicines that improve quality of life; and the need to promote timely, affordable access to medicines by transparent procedures.

These principles coincide with the balancing act which Australia and the US conduct between providing affordable medicines to their own, within their own budgets, and being fair to the industry that creates cures for disease.

New Zealand is seen as having failed to strike this balance, which would make it impossible for it to be part of a US agreement. Indeed, recent research by the Boston Consulting Group indicates that New Zealand would find it hard to abide by any of the above principles. And New Zealand's system is seen as damaging its ability to attract investment in its own research and development.

The Boston report concludes that Pharmac's bid to save money, by not recognising the value of medicines and regulating the pharmaceutical industry in a way that drastically and unreasonably reduces the price of medicines, has been detrimental. It has stopped industry from investing here, and even offering certain medicines to market here.

The Boston analysis suggests New Zealand is achieving only about 25 per cent of its potential in terms of commercial investment - and this is on the decline. Further, it appears that Pharmac's initiative to reduce the number of therapies available and restrict medicinal volumes consumed has been disastrous for some patients.

Dr Pippa MacKay, a fellow of the Royal New Zealand College of General Practitioners, has said that doctors and patients are concerned New Zealanders are now left with second-class medicines, or restricted in access to the few new medicines the Government allows.

And the Cancer Society president, Dr David Perez, has claimed: "Lack of access to medicines in New Zealand has undoubtedly shortened some people's lives because the system is focused on cost, not quality."

It is no wonder that Australian medicines are being sold here. As a leading pharmacist said earlier this year: "It is a well-known secret that pharmacies at Sydney and Melbourne airports are among the busiest in Australia."

There are clear links between the Government's treatment of the pharmaceutical industry and the country's poor performance in research and development. Because of the focus on rationing people's access to medications and the lack of reward for innovation, it is logical that global pharmaceutical companies will stop investing in New Zealand-based affiliates and scientists.

Plenty of countries, such as Singapore and Ireland, are ready to take up the opportunity.

It is also logical that the New Zealand system is seen as a trade barrier because the country is impeding full market access.

In Australia an effort has been made to ensure there is a balance of health and industry objectives in healthcare, and in the interests of all stakeholders. Australia has managed to maintain a healthy local industry, which now is the second-largest exporter of elaborately transformed manufactured goods.

Australia also has a well-oiled pharmaceutical benefits scheme. Control remains in Government hands, but the scheme will be made more transparent out of fairness to industry and consumers.

With the fine-tuning of the benefits system through the free trade agreement, it is predicted that Australian industry may benefit from an additional $1 billion in investment.

New Zealand must change the Pharmac system, and look to Australia to find ways to achieve critical balance. Otherwise the nation's health system will remain a nail in the coffin for any future free trade deal with the US.

* Dr Brendan Grabau is a consultant pharmacologist for the pharmaceutical continuing education programme at Melbourne's Deakin University.