New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill — First Reading 
New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill — First Reading 
[Volume:629;Page:1820] 
New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill 
First Reading 
HEATHER ROY (Deputy Leader—ACT) 
: 
 I move  
That the New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill be now read a first time. 
 Currently Pharmac enjoys an exemption from Part 2 of the Commerce Act. The Commerce Act is the cornerstone of the New Zealand economy covering all business conducted in New Zealand. Its purpose is to promote competition that benefits consumers. The Act recognises that competition will not always produce the desired outcomes and allows for certain anti-competitive activities or restrictive trade practices to be authorised where the public benefit of the activity would outweigh any anti-competitive detriment. However these exemptions are kept to a minimum and should be monitored and reviewed to ensure that competition is not limited more than is necessary to achieve the best results. This bill seeks to remove Pharmac’s exemption from Part 2 of the Commerce Act. At the appropriate time I intend to move that the bill be considered by the Commerce Committee. 
Before progressing a little history is necessary to understand how an exemption came about in the first place. Pharmac was established in 1993 with the purpose of controlling pharmaceutical costs. Its establishment was supported by all parties on the basis that it was necessary to contain costs. Pharmac was granted an exemption from competition laws to purchase pharmaceuticals for the four regional health authorities. The exemption was considered necessary to allow the regional health authorities to all purchase medicines at the same price. Pharmac at this time was owned by the four regional health authorities. The regional health authorities were later disbanded to form a single health funding authority which continued to own Pharmac. 
When the reduction from four separate purchasing bodies to just one took place it was questionable that the rationale for the Commerce Act exemption still existed but the exemption remained. Today with the public health sector comprising 21 district health boards Pharmac is now a stand-alone entity managing the pharmaceutical schedule on behalf of the Crown. Today the scope of the exemption gives Pharmac carte blanche in all its commercial dealings free from any scrutiny or liability under the Commerce Act. 
Originally the exemption was contained in the Health Reforms (Transitional Provisions) Regulations 1993. It has moved through a series of different legislations and today the New Zealand Public Health and Disability Act is where it exists. Pharmac determines what medicines are subsidised. It negotiates prices with manufacturers and operates other cost control strategies. The pharmaceutical schedule lists subsidised medicines the subsidy level and the conditions under which the drug can be prescribed. 
Pharmac uses a number of bargaining strategies in its dealings with the pharmaceutical companies to drive prices of listed medicines down. One such strategy is that of sole supply. Pharmaceutical suppliers tender to become sole supplier of medicines in a therapeutic group. Where this strategy is engaged other companies can supply medicines but patients pay the full cost of those medicines. In practice if a company fails to win a tender then medication is effectively shut out of the market for a given period. 
There have been several high-profile disasters resulting from sole supply arrangements. The most common is that of paracetamol. Each time the contract comes up for renewal the supplier changes and each time supplying adequate amounts of paracetamol is a real issue. Most recently a cheap and nasty brand was chosen for sole supply. The pills were so cheap that they did not have the coating that makes them easy to swallow and the elderly especially had difficulty swallowing them. Many instead of trying went without pain relief because they just could not swallow the pills. 
Many Kiwis rely on anti-hypertensive agents to control their high blood pressure. One of these Felodipine was another high-profile disaster with Pharmac changing brands back and forth. Plendil one of the brand names had been the brand of choice until Felo ER came in at a better price. Thousands of patients were forced to change and general practitioners noticed that their patients’ blood pressures which were previously well controlled on Plendil were alarmingly unstable. Further investigation showed that European data on Felo ER had been falsified and the actual amount of active ingredient in the pills was questionable. Patients were changed back to Plendil. But in the meantime Plendil stocks in the country were low because this brand had lost its control for sole supply. Pharmacists at the brunt of all of this were expected to scurry around the country to find what stocks they could. 
Another strategy Pharmac enlists is agreeing to list new medicine on the condition that the pharmaceutical company reduce the price of another product that is already listed. This happens in two ways and is best described using examples. The first is between therapeutic groups. An example—Merck Sharp and Dohme agreed to decrease the price of Simvastatin a cholesterol lowering agent in return for its ACE inhibitor Enalapril being relisted. The second way this happens is with deals within a therapeutic group: the best example of that at the moment is risperidone an anti-psychotic agent previously available only in tablet form. It has recently been developed as an injection which is much easier to administer and the results are more reliable because patients do not need to take the tablets daily. Pharmac has reached a deal with manufacturer Janssen-Cilag. The company has drastically dropped the price of the tablets in order for the injectable risperidone to be listed. 
Using strategies such as these Pharmac has been able to obtain reductions in the overall cost of pharmaceuticals. The purpose and effect of such agreements is to substantially reduce competition and choice for patients. If it were not for Pharmac’s exemption these arrangements would raise serious issues under Part 2 of the Commerce Act. 
I have little doubt that the following arguments will be raised in the course of this debate about why the exemption is absolutely necessary for Pharmac to function. In its briefing to the incoming Minister of Health in 2005 Pharmac vigorously defended its right to the exemption with statements such as: “The exemption means PHARMAC’s activities cannot be challenged on the grounds that for example PHARMAC is taking advantage of its market power or that its activities lessen competition in the market.” Statements like this show that Pharmac clearly believes it is above the law. This alone is reason enough to remove the exemption. 
Pharmac often offers the argument that the removal of the exemption will result in a flood of vexatious litigation and it points to various court cases over the years. But the claims that litigation is vexatious are simply not borne out in case law. Pharmac has only ever been involved in cases raising important issues of principle. Pharmac has attempted on a number of occasions without success to strike out causes of action brought against it by pharmaceutical companies. Furthermore the courts have found against Pharmac on a number of issues and determined that Pharmac is subject to other commercial legislation including the Fair Trading Act. 
Pharmac argues that it does not control access to the market but merely controls access to Government subsidies. The reality in fact is that without a subsidy a pharmaceutical supplier will find market access difficult if not impossible. Even with a part charge it would still be difficult to obtain any credible market share. Doctors generally prescribe the medicine that is fully subsidised so that the patient does not have to pay any costs except the dispensing fee. Pharmac’s status as a monopsony buyer means that it does control market access and market share and this is precisely the reason that its practices should come under the scrutiny of the Commerce Act. Pharmac has publicly stated often that its practices and procedures are not anti-competitive and do comply with the Commerce Act. Empirical evidence suggests otherwise. But if that is Pharmac’s view there should be no need for the exemption to remain in place and this House should look forward to Pharmac’s support of the bill. 
Pharmac’s exemption is neither necessary nor justifiable. It denies choice for doctors and patients limits public access to new medicines and discourages research and development. Without the Commerce Act exemption patients would be able to access the medicine that best treats them—often at a lower cost—instead of being limited to whichever medicine Pharmac bureaucrats have endorsed. Like everyone else in the economy Pharmac should be subject to the courts’ jurisdiction and the central plank of economic policy. The basic economic philosophy in the current economic age is a deregulated market where better products can be secured at lower cost through the normal processes of competition and the dynamics of a contestable market place. There is no reason for Pharmac to be exempt from this basic concept. People’s lives and their quality of life are affected significantly by Pharmac and the decisions it makes. Rules that make it impossible for New Zealanders to gain access to medications that improve their quality of life and in some cases save lives do not belong on our statute book. 
I commend this bill to the House and I look forward to the support of the other parties. 
Hon PETE HODGSON (Minister of Health) 
: 
 I thank Heather Roy for a sensible contribution in opening this debate. It is a contribution that has been thought through but it is one that I disagree with. The Government will not be supporting the legislation. But I think that the member who has just resumed her seat needs to hear from me as to why that support will not be forthcoming. 
I received this member’s bill some weeks ago and took a look at it. I read the bill read the explanatory note and thought that the member had the beginnings of a logical argument—especially the idea that now that there are no longer four regional health authorities maybe there was something that needed to be considered. 
I decided that I would therefore seek the advice of the following parties: first of all Pharmac; secondly the Ministry of Health; and thirdly and more important I actively sought the advice of the Ministry of Economic Development and the commerce officials within the Ministry of Economic Development whose judgment on these matters I know to be of a high quality because I have been lucky enough to spend time as Minister of Commerce. I further asked that those officials write me one paper—and that if there were differences in views across the silos of the Government that they could be expressed in one paper but I would have one paper none the less. I received one paper and I have it in front of me. I have shared it with a number of other parties. I say straightforwardly to the member that nobody whom I asked supported the member’s bill. In fact officials from the Ministry of Health from Pharmac and from the Ministry for Economic Development advised as one that the exemption be retained. Why might this be? 
First of all we need to acknowledge that the member seeks to remove Pharmac’s exemption under section 53 of the principal Act which of course is broader than the exemption that would be retained under section 2(7) of the Commerce Act. That is basically the technical nature of the member’s proposition. Let us remind ourselves that Pharmac’s estimate—which of course could be wrong but the member might like to come up with another one if she disagrees with it—is that its behaviour its monopsony purchasing modus operandi saves the New Zealand taxpayer approximately $700 million a year. The pharmaceutical industry association with which I had some dealings when I was Minister of Research Science and Technology—in fact I have had a lot of dealings with the pharmaceutical industry—itself agrees with that figure. The association uses American dollars and its figure is US$500 million. 
So both the buyer and the seller agree that that roughly is the saving to the New Zealand taxpayer and to an extent the member’s bill would put that money at risk. I simply do not get it. It is true that it would not put it all at risk and I am not suggesting that it would—in fact I do not know how much it would put at risk—but there is no way that this member’s legislation if it were to pass would result in cheaper drugs. 
The idea that somehow or other Pharmac seeks to reduce competition in New Zealand and therefore reduces choice for New Zealanders is wrong for two reasons: firstly it does not reduce competition for New Zealanders because we can go and buy the drugs if we want them and secondly it does not reduce choice because—and the member has failed to acknowledge the obvious—the pharmaceutical industry is broader than New Zealand. It exists in other countries. It is of course very much a global industry and the players in the industry—the large pharmaceutical companies—happen to be amongst the largest companies in the world. The industry is bigger than New Zealand. This is not taxis which is a local market; this is pharmaceuticals which is a global market and the underlying thesis of the member that therefore competition is damaged is palpably wrong. 
It is important to say that neither Pharmac nor the Government is interested in eliminating or diminishing competition amongst pharmaceutical companies. If we through our actions in New Zealand were somehow to send most of the pharmaceutical companies of the world to the wall we would be damaged by that. Is this happening? No it is not happening because New Zealand has 4 million people and does not have an ability to damage large companies to that extent and does not seek to. 
The debate about Pharmac and the Commerce Commission has been around since the commerce exemption was put in more than a decade ago. I remind the member of the paper written from memory by Lexchin and Caygill that looked at those issues some years ago and did not suggest what the member is suggesting in her member’s bill. It is important that the member acknowledge that this Government has already looked carefully at that. 
 I want to make another point. Why do we have a Commerce Act? The underlying reason for having a Commerce Act is to promote competition in order to reduce prices for consumers. I repeat: reducing prices for consumers is the reason we have a Commerce Act. Yet paradoxically if the exemption to Pharmac were removed there would not be a reduction in prices to consumers; there would be an increase. Actually it is not consumers; it is taxpayers. That is the $700 million or part thereof I mentioned earlier in my remarks. So actually I do not get it. 
In respect of the member’s comments about paracetamol does she think that changing the exemption to the Commerce Act would alter that? In respect of her comments about falsified data or whatever other allegation she has—and I do not say they are wrong; I simply do not know—is she saying that exemption from the Commerce Act would alter that? Is she saying that the deals that are done or the deals within deals that are done are a bad thing? Is she saying that going to Merck Sharpe and Dohme and saying that we will do a deal for one drug but not another etc. is a bad thing? Does she think that saving taxpayers’ money is generally a bad thing? If so then we are absolutely on opposite sides of the deal here. 
My focus as Minister of Health of course has to be to ensure that New Zealanders get the best most affordable access to pharmaceuticals that is possible. So as I mentioned in question time an hour or two ago I am proud that we managed to get more medicines funded in this country than for example Australia and at some fraction of the cost. This country runs its health system on about 7 or 8 percent of GDP. America runs its health system on 14 percent of its GDP. Americans spend more than three times per head on health than we do and they die 6 months earlier. There is no relationship between the amount that is spent on drugs as an example and health expectancy or life expectancy. There is virtually no linkage. There is for some drugs but generally speaking the linkage between expenditure and health expectancy or life expectancy is very very modest indeed. Most of the effects we get from improved health in this country come from things like clean water good nutrition and attention to exercise. 
In essence I do not get where ACT is coming from or why. I look at the ACT party and see its position in the political spectrum as being a party that likes low taxation. I think everyone would agree that ACT has stood for and continues to stand for low taxation. In question time today and at earlier times the ACT party has consistently stood for better access to drugs. Low taxation and better access to drugs are legitimate valid positions to take in a political debate. If that is ACT’s position why has it put up a bill that says: “Let’s have more drugs because we like that; let’s have less money to buy them with because we are for low taxation; and let’s ankle tap the one organisation that can bring prices down.”? I do not get it from an ACT perspective. I certainly oppose it from my own but I do not understand why ACT would stand for more drugs in society and for low taxation but at the same time say that the one organisation that delivers cost effectiveness across the pharmaceutical arena should be ankle tapped. I do not get it and I think the ACT party stands for more than one thing. 
Hon TONY RYALL (National—Bay of Plenty) 
: 
 If everything is so good with Pharmac why does it rate only 5½ out of 10? That is the mark the Minister of Health gave Pharmac in the House during question time yesterday. I think that is one of the reasons why Mrs Roy has brought this bill to the House. 
National does want to be associated with a debate on this Government’s management of drug buying in this country. I can tell the House this: that the Minister talks about cost effectiveness but the biggest beneficiary of cost effectiveness under this system has been the Government. I can tell the House this: that per head of population spending on pharmaceuticals in this country has been dropping every year in the last 4 or 5 years. That is not something that the Government should be proud of. 
So National thinks it is opportune to debate the role and function of Pharmac and the output of drug policy by this Government for this reason: there is incredible discomfort in this country about how medicines policy is being run. Hundreds of people have marched to Parliament to express frustration at the funding of our drug-buying policy in New Zealand. We have seen Dave Bowman and other people needing the drug Temozolomide come to Parliament and present a petition of their concerns about Government underfunding of drug buying in New Zealand. Tomorrow we are to see people concerned about access to the drug Herceptin. Those cases indicate the disquiet there is in this country about our medicines and drug buying policies. Further earlier this year a group called the Access to Medicines Coalition was set up comprising a wide range of organisations including the AIDS Foundation and Alzheimer’s arthritis and asthmatics organisations all wanting to promote improved access for medicines. 
Why are we seeing this mobilisation of user opinion happening now? I suspect it is because of the legacy of Labour under-investing in pharmaceuticals year in year out. I have said before that per head of population spending on pharmaceuticals in this country has been dropping. So at the last election the National Party made a commitment that we would boost the budget for pharmaceuticals by $25 million. That would have made a difference to a whole lot of New Zealanders. It would have meant that we were no longer falling behind our own standards on a per head of population basis. At present we are not even keeping up with inflation on that basis and New Zealand should not be proud of that. That is what this Government has done. It has just got the wrong priorities in the health system. We have strategies frameworks guidelines and protocols to kingdom come but when it comes to actually delivering more services and more pharmaceutical assistance to New Zealanders the Minister stands up and says that we are doing more than Australia that it is cheaper here than in Australia and that it is a great thing for New Zealand. But he fails to say that per head of population our spending on pharmaceuticals has been falling for the last 4 or 5 years and that is nothing that this Government should be proud of. 
The National Party would like an opportunity for Parliament and the people of this country to debate the performance of Pharmac and the medicines policy. New Zealanders want the opportunity to come forward and tell their stories of how they have been affected by the system. They thought that United Future might give them this opportunity but we are now finding out that the Government’s medicines review is to be a closed-door Ministry of Health cook-up job. Ordinary people—the people who are at the frontline of dealing with this Government’s medicines policy—will not have the opportunity to come forward and express their frustration that we are not keeping up our pharmaceutical expenditure on a per head of population basis which would have been an easy ask for any Government that was determined to fix the issue. 
BARBARA STEWART (NZ First) 
: 
 On behalf of New Zealand First I rise to speak to the New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill. New Zealand First will not be supporting this bill. We very carefully considered this bill and all of the concerns surrounding it. New Zealand First has long advocated that there should be a review of the efficiency of Pharmac. 
Our concerns have focused principally around the number and types of drugs that New Zealanders are able to receive for their various conditions and illnesses. We believe that all New Zealanders should have equitable access across each district health board in New Zealand to the best possible drugs so that the best possible health outcomes can be secured for eligible people. We find that this bill does not address our fundamental concerns. We cannot accept that this proposal will improve availability or ensure equal access to the most appropriate drugs irrespective of where a person lives in New Zealand. 
We acknowledge that Pharmac has a very difficult role and manages a limited budget in the face of strong pressure to increase expenditure on pharmaceuticals. As the Minister has pointed out Pharmac saves many millions of dollars per annum for the taxpayer and this is spent on additional medications. New Zealand First awaits the development and refinement of a long-term medicine strategy as the best way forward must surely be based on a thorough analysis of our current system and of international trends. We are very aware that this issue is totally separate from the member’s bill that we are discussing. 
In 2000 a review of Pharmac’s operating policies and procedures was undertaken. We note that part of that review commented on the Commerce Act exemption. Over the 2002-03 period there was communication with the industry regarding the use of alternative models for purchasing pharmaceuticals and the impact on research and clinical trials in New Zealand. This communication did not result in any recommendations for change. The debate with the industry has taken place over a long period and Pharmac has not abused its exemption over this time. Many of the actions identified by the industry as detrimental have been found to support reasonable objectives for the health system. We are very aware too that the industry has raised concerns about Pharmac’s exemption from its inception. But we repeat that New Zealand First does not believe that this bill deals with the real issues and that a more comprehensive appraisal is due. 
The value of the Commerce Act exemption in isolation is very difficult to quantify in real terms to consumers. New Zealand First is committed to the subsidising of pharmaceuticals for the benefit of all New Zealanders and to obtaining the best deal possible both in price and quality. We believe that Pharmac has to achieve its purpose of ensuring that all New Zealanders have access to safe and effective medicines and this is where we want the focus of Pharmac to remain. New Zealand First believes that with the passing of this bill there would be the potential for the sector to use the legal system and the Commerce Act to delay and influence decisions—this would really be expected business behaviour. Litigation as we all know is costly and of course time delays impact negatively on any benefit Pharmac provides to consumers. This bill would impact negatively too on the overall pharmaceutical budget because at best it fails to confront the real issues and at worst it could lead to additional costs and/or time delays. New Zealand First will be opposing this bill. 
SUE KEDGLEY (Green) 
: 
 The Green Party has long supported the independence of Pharmac and greatly values the way that that independence helps to insulate the New Zealand market from the influences of the global pharmaceutical industry which let us face it is dominated by 10 to 12 very large multinational corporations. Those corporations are amongst the wealthiest companies in the world. They have budgets bigger than New Zealand’s and therefore have huge leverage and influence. Obviously the goal of most—probably all—pharmaceutical companies is to get the highest possible return for their shareholders. They would like to get all their drugs into New Zealand at the highest price the market will bear and with as many drugs as possible subsidised. If companies increase their prices—as they seek to do—our choice is reduced not increased. 
Heather Roy in particular has given us lots of examples of drugs and I will give another—the breast cancer drug Herceptin. As Tony Ryall pointed out people will be here tomorrow demonstrating their concern about it. He said there was huge disquiet in New Zealand about why people cannot get access to this drug but there actually should be huge disquiet here about why the price of Herceptin in New Zealand is 50 percent higher than it is in the United Kingdom. Why should that be? What possible justification is there for that? Does it cost 50 percent more to ship it to New Zealand—or is the price of oil to blame? Obviously not. 
There should be great disquiet too about why the drug costs $75000 to $100000 per treatment. I think it is frankly obscene that companies are charging $100000 for drug treatments. There are more drugs in the pipeline at $300000; there are even some at $700000. Why are companies charging more in some countries than in others? There should be huge disquiet about that. If 300 women have Herceptin at $100000 a year that costs $30 million. That is money that cannot be spent elsewhere. Members should not get me wrong. I will support women’s right to have access to the drug Herceptin but I am concerned about why we should have to pay $100000 a year—50 percent more than the price in the United Kingdom—for that drug. So it is absolutely in our national interest that we have a drug purchasing agency that is as independent and as strong as possible and that is able to negotiate access to pharmaceuticals for the cheapest possible price. 
In our view if we got rid of the exemption the main beneficiaries would be Russell McVeagh and other large law firms. The pockets of Russell McVeagh would be filled which would inevitably lead to litigation and that would be used as a tool to undermine Pharmac’s ability to negotiate access to pharmaceuticals at the cheapest price. What on earth would be the point of that? The litigation would be used to impose injunctions delay decisions tie up resources and pursue more lengthy litigation. That would impact on the pharmaceutical budget overall so New Zealand would end up paying more not less for pharmaceuticals and the precious health dollar would be stretched even further. If a court case costs $1 million that is $1 million of precious health money that could be spent on a whole lot of other things. 
We have to remember too that we are not talking about eliminating competition for drugs only competition for the subsidy for drugs. Pharmaceutical companies have monopoly power over patented medicines so competition occurs only when a drug is off patent. I think this bill is part of a wider campaign to undermine Pharmac so that pharmaceutical companies can make more money and sell their drugs at whatever price they can manage. Far from encouraging this campaign we should be doing everything in our power to protect and strengthen Pharmac to ensure that we can get access to pharmaceuticals as cheaply as possible. 
Barbara Stewart talked about dealing with real issues; there are real issues we should be dealing with. Why is there no requirement for consumer information on all drugs sold in New Zealand? Why does the only information many GPs have about drugs come from pharmaceutical companies? Why is there not a mandatory requirement to report adverse reactions to drugs? So the Greens are concerned about many issues. We welcome the fact that New Zealand is to have a medicines policy but this bill unfortunately would just drive up costs and undermine choice for consumers in this country. 
TARIANA TURIA (Co-Leader—Maori Party) 
: 
 Tangata whenua believe that in matters of hauora—our health and well-being—it is not enough simply to be absent of disease. Health is about creating the optimum conditions for our full potential to be realised. In that view we are firmly committed to a focus on the determinants of health and well-being including poverty housing income discrimination and the environment. 
We will support the referral of the New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill through to the Health Committee. We will do so because we believe that the New Zealand public has a right to tell us whether it believes the current Commerce Act exemption is essential for Pharmac’s ability to achieve positive health outcomes. The key issue for the Maori Party is whether it will make a difference to the health of our people and whether it will ensure that people are able to get access to the best medication if they need it. 
Pharmac should be subject to the same scrutiny as others. Pharmac has argued that if it loses its Commerce Act exemption it will be forced to spend money on defending litigation rather than on securing health outcomes. I certainly have some sympathy for that view because I can recall that when Pharmac was first set up a number of cases were brought against it which cost a considerable sum of money. The complicating factor with the Commerce Act cases is that it is not only legal fees that are required but also fees for economic expertise—often from international sources. The reality is that one has to question the real value to the health of the nation if our resources end up being tied up in litigation. The Maori Party absolutely appreciates the perspective of Pharmac that the goal of economic efficiency is not the only goal in terms of health and well-being. It would seem sensible that Pharmac’s actions in undertaking its drug-purchasing activities should be subject to the same scrutiny as the actions of others in the market place. 
The health and well-being of our whanau are very important. Those issues affect us deeply personally and collectively. I want to raise some questions that keep me awake at night. Why is the cancer death rate for Maori females 89.6 percent higher than the non-Maori female rate? Why is the ischaemic heart disease mortality rate for Maori females 119.2 percent higher than the non-Maori female rate? And why is the Maori female age-standardised rate for cerebrovascular disease 52.8 percent higher than the non-Maori female rate? Those statistics are stunning in their severity and as a nation we must care enough to do something about them—not because we want to close the gaps but because we believe that health is not a privilege but a right. 
We hope that in supporting the referral of this bill through to the select committee the submissions that we receive will keep us focused on the bigger picture and on how to achieve health gain through improving people’s access to pharmaceuticals and to better health-care. The pharmaceuticals we are talking about are the best and those that will improve the quality of life. Will this legislation lead to a buyer’s market or a seller’s market and most of all how will it improve the health and well-being of the people? As I said earlier the Maori Party is prepared to support the referral of the bill to the select committee so that the debate can be held. 
JUDY TURNER (Deputy Leader—United Future) 
: 
 I rise on behalf of United Future to speak to the New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill. Two things are at the heart of our decision to support the first reading. The first is that the bill gives the opportunity for hundreds—probably thousands—of constituents to put forward their cases regarding the choices made by Pharmac that affect their access to affordable medicines. All of us have received very very disturbing letters from people who are desperate for medication. Those people know the medication that they are waiting for is approved overseas by other jurisdictions they hope it will be prioritised and they deserve to have their cases heard. The second reason United Future is prepared to support this first reading is that it is now well known that we have a total commitment to the development of a national medicines strategy and we believe that select committee hearings on this matter could well throw up some very interesting considerations. 
However I want to clarify that the development of a national medicines strategy has nothing to do with restructuring or replacing Pharmac. We believe that the role of Pharmac will become apparent as a proper and comprehensive strategy is developed throughout that process. We are determined not to become captured by individual cases because the need is bigger than just responding to individual cases and to the desire for individual medicines. However in the current absence of a medicines strategy I personally want to commit to all the people who write to us that we will continue to advocate for them and to lobby Pharmac on their behalf to have their cases considered. 
Our support for the first reading of the bill should in no way be seen as a signal for ongoing support should it become apparent during the select committee process that the outcome would undermine the greater good. That greater good involves the chance to put in place an approach to pharmaceuticals whereby instead of asking whether the drug fits within our budget we take a whole-of-Government approach and ask what it would cost the New Zealand taxpayer if we did not supply in an affordable way the medicines needed to treat any given condition. 
The Hon Tony Ryall rightly brought to the House’s attention the fact that expenditure per head of population on pharmaceuticals is currently questionable. We also know that the percentage of Vote Health that is dedicated to purchasing pharmaceuticals is lower than it is in other jurisdictions that we like to compare ourselves with. So the bigger question is the appropriate priority that pharmaceuticals should take in the overall delivery of health services in New Zealand. Can market forces positively contribute to the availability and affordability of pharmaceuticals in New Zealand? Well a discussion should be held on that. Has the evolutionary role of Pharmac become unhelpful to the overall need to respond to new and innovative pharmaceutical options as they come online? Again that discussion must be held. 
Our commitment is to a national medicines strategy. However we see no harm in supporting the referral of this bill through to the select committee—we believe that can only help. But beyond that we would like to see what comes out of the select committee and then decide whether to support the bill any further than this current stage. We will support the first reading of the bill. 
RODNEY HIDE (Leader—ACT) 
: 
 I never ever thought I would stand up and say in this House what I am about to say and it shocks me to my quick that I am about to. My statement is this: bring back Annette. As a Minister of Health she was not great but boy did she outperform Pete Hodgson in terms of her understanding of the issues! The other thing I say about Annette King is that she was actually prepared to front up and explain the Government’s policy. Pete Hodgson has not got his head around the policy and he is not prepared to front up to the New Zealanders who pay their taxes who are the voters in this country who are the people we represent and who are being denied the very drugs they need—for their lives. People are dying because of the drug policy in this country. 
The Minister of Health is quite prepared to stand up in the House and justify the Government’s policy but he is not prepared to go out on the steps of our Parliament and meet the people who are the victims of it. I know that Annette King would have. I did not agree with her but she would have. Pete Hodgson though is too busy to meet women who are dying for the want of a drug. 
I was shocked by Pete Hodgson’s explanation of why he opposes this bill. His argument starts like this: “This bill really keeps the costs down. Look how much money we’ve saved.” OK that is one measure but being the Minister of Health is actually not all about saving money; it is about using money to best effect to save New Zealanders and that is what we did not hear from Pete Hodgson. In fact he went on to say that drugs do not make much difference as to whether a person lives or dies but clean water does. Well I can tell the Minister of Health for free that the women from my electorate in Auckland who are coming down to Wellington to protest his Government’s policy have clean water. Those women are in trouble and have to have radical surgery because of Pete Hodgson’s policy and failure to review what Pharmac is up to. His excuse is that drugs do not make a difference. I ask him to come out of Parliament at 1.15 p.m. tomorrow and tell that to the women who will be there protesting. 
I look forward to seeing Barbara Stewart out on the steps of Parliament explaining why she opposes the Health Committee having a look at what Pharmac is up to. I will be telling the people of New Zealand that New Zealand First had an opportunity that it did not take. It stopped it because New Zealand First is a poodle party. Its members jump to the tune that Pete Hodgson puts out. Barbara Stewart has an explanation to make tomorrow. 
I ask members to reflect on this: between 1997 and 2002 160 new medicines were listed in Australia—medicines that will save and improve the quality of Australians’ lives. New drugs are available because of research and technological development. We may ask ourselves how many new drugs were listed in New Zealand. The answer is 48. Australia listed 160 new medicines and New Zealand listed 48. In this House Barbara Stewart the Green Party and the Labour Party are saying that that is OK. Well the ACT party says it is not and that is why we support this bill. 
STEVE CHADWICK (Labour—Rotorua) 
: 
 I am delighted to get an opportunity to speak on this bill. Labour does not support this bill because Labour and this Government believe in delivering health to all New Zealanders in the most cost-effective manner. In our model of health the Primary Health Care Strategy is not measured on the basis of throughput in hospitals. As the health spokesperson from the Opposition said spending on pharmaceuticals has dropped. What a good thing that is if we are starting to focus on keeping people well and getting people to a doctor at a more affordable rate. That is what the New Zealand Health Strategy is all about. 
Labour does not support this bill at all because we do not want the free market to reign over pharmaceuticals in this country. We absolutely do not want that. In 1993 the model of Pharmac was introduced into this country in order to stop litigation between the major pharmaceutical companies. Evidence has been tabled here today about the litigation up to 2000. It cost a lot of money—it cost Pharmac money to fight that litigation. Thank goodness a court ruling has since stopped the litigation and Pharmac can now spend its budget which may be quite well-controlled and capped on accessing more subsidised pharmaceuticals for people in New Zealand not on health money for drug companies. The court ruling has enabled Pharmac to operate a national pharmaceuticals schedule. It has not ruled out access to the market. If people want to have unsubsidised pharmaceuticals they can have them. It has not capped access to them at all but people have to pay for them. This issue is about funding the subsidised pharmaceuticals available to New Zealanders. It is about containing our costs. 
I went to Australia where we were asked how on earth we got the Pharmac model set up in this country. Those on the Health Committee will remember that trip. Pharmac is a fantastic model because it controls uncapped expenditure by pharmaceutical companies. It is a model that we would not want to get rid of. It is of global envy that we have a model with robust structures for getting drugs through subsidisation consideration by experts in the field. We go through the Pharmacology and Therapeutics Advisory Committee to get experts to give advice on the quality of life given by the drugs that people are asking to be subsidised. We would not want to get rid of a model like that which is the envy of everybody. 
The repeal of section 53 of the principal Act proposed by a very good member of ACT who understands the health environment is actually very very flawed. Labour does not support this bill at all. The important thing about the exemption and why we need it for Pharmac is simply that as a small country we need interconnectedness between Pharmac and the district health boards. That is what the exemption allows. It was set up for the four regional health authorities. They have gone. We now have 21 district health boards and the exemption needs to cover that breadth for this country and for our health system as it stands now. It does not protect other organisations that have entered into agreements with Pharmac; those can stand. 
Pharmac’s objective—and I think this is a really noble move—is to look at health gain not just at cost minimisation. We as a Government find that very important. We certainly do not support this bill. It would unravel the excellent work done by Pharmac. I am sorry to say that the bill certainly does not have our support. 
Dr JONATHAN COLEMAN (National—Northcote) 
: 
 It is my pleasure to be speaking in support of this member’s bill brought forward by Heather Roy and to confirm that the National Party will support it going to the select committee. A number of strong arguments have already been put forward by Mrs Roy regarding Pharmac’s exemption being removed so I do not think they need to be revisited. But this debate is an ideal opportunity to address the real issue for New Zealanders. The real issue that concerns people out in the street is that of access to medicines in New Zealand today. As we have heard Pharmac has already admitted to the Health Committee and the Government has confirmed that funding per head of population for pharmaceuticals has not kept up with inflation. That I think is a major injustice for the people in New Zealand. 
There is no question that New Zealand’s pharmaceutical policy needs to be reviewed—absolutely no question. And this is where we start to get problems. We hear that Peter Dunne will be leading this review but no one really seems to know much about it. We know that it will be run with the Ministry of Health but we do not seem to know any of the other details. The scary thing was that at the select committee Pharmac did not seem to know anything about the review either. It did not know what the goals of the review are did not know what its involvement would be and did not know what the actual impact of the review would be on it. 
It seems to me that the real issue is that it suits the Government to keep the people of New Zealand in the dark about the review. It does not want this review to be held openly. It does not want New Zealanders to have the chance to come and tell their stories in the open and to tell people how Pharmac is affecting their lives today. The Government is hoping that the Pharmac review will be just swept under the carpet. I might remind members as we have heard earlier this afternoon that this is just one of 69 reviews this Government is carrying out at the moment—69 bureaucratic wasteful reviews. Well I can tell members that the demand from the people of New Zealand is for a transparent review where they can come and tell their stories. 
The member for Rotorua has said that Pharmac is the envy of the rest of the world. She might want to come and meet some of the constituents who have come to my electorate office in Northcote. She might want to come and meet Mr and Mrs Mills from Northcote whom I have spoken to today. They are quite happy for me to talk about their case in Parliament because they want to be held up as an illustration of how Pharmac and this Government are not serving the interests of the people of New Zealand. 
Mr and Mrs Mills are retired people. They are good citizens they have paid their taxes and they have worked hard. Mr Mills is now 72 and he is in the early stages of Alzheimer’s disease. He has to take two drugs. He takes a drug called Aricept and a drug called Ebixa. They are not wealthy people but every month this retired couple has to pay $415 out of their own pocket at the local pharmacy so that Mr Mills can get the medication he requires to arrest the progression of his Alzheimer’s. His geriatrician at North Shore Hospital Dr Joe Singh says that without that medication Mr Mills would be deteriorating at a far more rapid rate. Can members guess what would happen then? Mr Mills would end up in long-term care funded by the New Zealand taxpayer. So we see that if the Government had had the foresight to invest in that gentleman’s care and to invest in the pharmaceuticals that thousands of New Zealanders like him need it would find that in the long run it would be saving money for the taxpayer. It would be saving money that could be spent elsewhere in the health system. 
I am sure that tomorrow we will not see the Minister of Health out there greeting the ladies who are bringing the petition from Auckland. But if we were to I am sure we would see the nice-as-pie Mr Hodgson there. We would not see the angry shouting finger-pointing Minister of Health we see in the House because it is pretty hard to do that when one is confronted with the facts and when one actually meets women with breast cancer who are being denied the drugs they need to save their lives. It is hard to go out and start shouting in their faces is it not? But the reality is that those women cannot get the care they need in New Zealand. England and France cut through all the regulatory stuff. Their Governments said that they would not be held up by bureaucracy but that they would give these women the medications they need. They would not wait for breast cancer to spread to those women’s brains bones and livers. Those Governments were going to give that medication early because the research shows that that action would do well by those women. But that is the very reason this Government does not want an open review of pharmaceuticals. This Government does not want women like the women we will see on the steps of Parliament tomorrow coming and making their stories known because it is all too embarrassing and all too hard. So let us have an open review; that is what New Zealanders want. 
HEATHER ROY (Deputy Leader—ACT) 
: 
 I thank the many members in this House who have made a very positive contribution to this bill today particularly the National Party United Future and the Maori Party who are supporting the bill. The Minister had many questions for me and it is a pity that his office repeatedly refused me an appointment with him so that he could have gone through them with me prior to today but I guess that is the way things are with the Labour Government. The Minister sought a great deal of advice it would seem but what is more telling than who he sought advice from was who he did not seek advice from. There was no Treasury advice no industry advice and—most telling of all—no advice from patients: the people who actually matter and who at the end of the day are those who are suffering. 
These are the facts. The reason for implementing this exemption from Part 2 of the Commerce Act is long gone. Our health system has had several iterations since 1993 and there is no good reason now for this exemption to remain. New Zealanders do not have ready access to the medicines that are most effective in treating their diseases and illnesses. Countries that we like to compare ourselves with particularly Australia are doing much much better than we are. I do not know who is giving the Minister advice. He seems to think we are doing wonderfully well here but we are not. 
Kiwis have very limited choice in pharmaceuticals unless they are in a position to pay the full price for them themselves and doctors have very little choice when prescribing. One way to rectify this situation is to allow more competition in the pharmaceutical market place by removing Pharmac’s exemption from Part 2 of the Commerce Act and by supporting this bill. Reference pricing sole supply and doing deals with pharmaceutical firms are all anti-competitive strategies used by Pharmac. They result in less choice less competition and in the longer term inferior treatments and poor access to the new medications that other countries enjoy. Cost containment should not be allowed to compromise access and availability of quality health-care. 
This bill was never intended to attempt to fix all of Pharmac’s woes as Sue Kedgley seemed to think it was. This bill is in fact for a full exemption from Part 2 of the Commerce Act. Now it may be that a partial exemption is an avenue worth exploring; something that Pharmac might find a little more palatable and that would allow it some protection from the litigation that it fears. I urge members to vote for this bill to go to a select committee so that this exploration can be undertaken. 
I have to say that I am extraordinarily disappointed with the stand that New Zealand First has taken on this bill today. New Zealand First used to be a party that believed in the market. New Zealand First members used to believe in the exploration of ideas and submissions made at select committees by people who were affected but it seems that they have now become just the poodles of the Labour Government prepared to take anything that the Government says unquestionably and to promote it. 
In September 2000 Dr Joel Lexchin and the Hon David Caygill—a former Minister of Health of course—authorised a report to the then Minister of Health Annette King on Pharmac’s operating policies and procedures. The report noted that Pharmac says it does not take advantage of the exception but its authors said that they were not in a position to judge. They questioned whether Pharmac should continue to enjoy a full exemption. Their recommendation which was made at the end of that report—something that the Labour members failed to express in this House; at section 53 but perhaps those members did not read that far—was that careful consideration should be given to these issues and that an examination should be undertaken as to whether the current exemption from Part 2 of the Commerce Act should currently exist. Unfortunately Minister Annette King ignored that advice but 5½ years later this Parliament has the opportunity to undertake that examination by passing this bill at its first reading and sending it to a select committee. 
A thorough examination is called for. Public submissions and those from professional groups and Pharmac itself would shed new light on issues that have arisen in the rapidly changing world of pharmaceutical research and development. Like everyone else in the economy Pharmac should be subject to the court’s jurisdiction and the central planks of economic policy. People’s lives and their quality of life are affected significantly by Pharmac and the decisions it makes. Regulation that makes it impossible for New Zealanders to gain access to medication that improves their quality of life and in some cases saves lives does not belong on our statute book. For this reason I commend the bill to the House. I urge all parties in this House to send this bill to a select committee so that the exploration and the examination of this now defunct exemption can be explored properly. 
A party vote was called for on the question  
That the New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill be now read a first time. 
Ayes 57 
New Zealand National 48; Maori Party 4; United Future 3; ACT New Zealand 2. 
Noes 64 
New Zealand Labour 50; New Zealand First 7; Green Party 6; Progressive 1. 
Motion not agreed to.