Roy Heather: International Treaty Examination — Consideration of Report of Health Committee Agreement between the Government of New Zealand and the Government of Australia for the establishment of a Joint Scheme for the Regulation of Therapeutic Products 
Roy Heather: International Treaty Examination — Consideration of Report of Health Committee Agreement between the Government of New Zealand and the Government of Australia for the establishment of a Joint Scheme for the Regulation of Therapeutic Products 
[Volume:620;Page:15518] 
HEATHER ROY (ACT) 
: 
 The proposed trans-Tasman agency will see the regulation of therapeutic products in New Zealand and Australia and that includes three categories: medicines medical devices and complementary health-care products. ACT New Zealand was opposed to that treaty for many reasons that I will go into but I would like to say that like National MP Mr Paul Hutchison we have also been great supporters of closer economic relations with Australia. However that does not mean that New Zealand should find itself in the position of blindly following what our trans-Tasman neighbour wants us to do. There are times when we must stand up and protect what we have here in New Zealand—times when we feel that we have something much more valuable than what our cousins across the ditch want us to look at with regard to closer economic relations. 
 The history of the treaty is very interesting. It has been described fairly well by most of the other Opposition parties but I would like to mention briefly the arrogance in which the signing of the treaty was gone about. The signing happened on 10 December 2003 just a couple of days before a lengthy well-documented and well-researched report by the Health Committee was tabled in the House. 
I think that the arrogance of the Government warrants mention because the select committee worked very hard on that report. We were very proud of the findings we came up with and we were all in broad agreement on the recommendations. But it was clear as time went on that the Minister of Health and the Government had made up their minds they would completely ignore the report and its recommendations—well before it was due to be tabled. In fact we received quite blatant criticism from the Minister of Health for taking far too long to reach our recommendations and table the document in the House. She seemed to forget that the committee had had a pretty heavy workload in relation to her legislation before it—which of course gains priority over any inquiry that might be held. So the arrogance of the Government in that move should be noted for the record. 
The Health Committee as I say went through a fairly exhaustive process in the inquiry and again in the examination of the joint agency. We had several submissions one of which was from Pharmac and that has been noted in the report. 
Pharmac had many concerns although the officials started their submission to us by stating that they supported the joint agency. But they had many criticisms. Of particular concern was the fact that the full-cost recovery model could mean a significant escalation in the cost of registering medicines in New Zealand. That should be of concern to us both to small companies and to much larger ones. Pharmac stated that it had reservations about aspects of the proposal but as I say it supported the joint agency. 
Its other concerns included possible increases in the cost of generic drugs to the country—particularly for small-market products—and possible increases in the patent terms on medicines. Of course that should be of great concern to Pharmac because it relies heavily on patents coming off earlier rather than later in order to provide cheaper medication to New Zealanders. In its written submission to us Pharmac noted that unless rules were very carefully drafted the cost of increases with regard to patents as a flow-on effect of the free-trade agreement between Australia and the United States could amount to between $85 and $135 million over a period of 3 years. We note that the estimated cost in fees and charges incurred by the New Zealand industry would be $20 million. Those are not small figures; they are large figures and they should be taken very seriously. 
But the most interesting thing of all and something I questioned Pharmac on when its officials came before us was that Pharmac had made a submission as a result of the discussion document in 2002 in which it categorically stated that it opposed the joint agency—for the very same reasons mentioned in the most recent submission—but had then changed its mind and stated that it supported the joint agency. I wondered how that had come about and I believe that what probably happened was that the Government told Pharmac that it should in its written submission support the joint agency despite its concerns. 
One of the things that concerns ACT most is the increased compliance costs that will likely be a result of the joint agency. We have documented that well in the report. There was a general consensus around the committee table about the worry of increased compliance costs particularly on the complementary health-care industry and on consumers. As I say we went into a great deal of detail in our inquiry report in that regard. 
Many of us considered that perhaps a third category to regulate complementary health-care products as a class in their own right might have been the way to go and there was also long discussion about the possibility of mutual recognition—each country maintaining its own recognition within the broader band of a joint agency. But that according to the Government is a complete no-goer although I have to say that the reasons are still completely foreign to me and I believe to most other Opposition members. Many committee members were concerned about the adequacy of the regulatory impact assessment. Sue Kedgley previously went into that in detail so I will not say any more about it. 
The Regulations Review Committee had some very pertinent remarks to make. Those were mentioned by Labour member Steve Chadwick in her first speech. She thanked the Regulations Review Committee for the report and the work it had done but I believe that the points it raised are still very pertinent. 
There were two main issues that the committee felt needed to be addressed. The first was that some of the matters proposed to be dealt with in the rules were matters of policy and principle that ought to be in primary legislation. The second was that there were significant differences in the disallowance of regulations in New Zealand compared with Australia and that rules and orders made by the agency needed to be subject to the same requirements for scrutiny and disallowance that applied to all other delegated legislation in New Zealand. The committee members were concerned that the treaty did not deal with that matter adequately. 
We outlined in the report the disadvantages to the treaty and I want to mention those briefly. The first is a reduced ability to regulate according to the specific conditions and preferences of New Zealand. New Zealand will lose its sovereignty and identity in relation to the registration of medications. 
The second disadvantage is the reinforcement of the existing trend for pharmaceutical firms to shift their regulatory activities to Australia as they rationalise those activities. There are probably many members on the other side of the House who think that that is a good thing. There is a very anti - pharmaceutical firm attitude in this country and we are seeing the repercussions of that now with the mass exodus of such firms. In particular the Government should be worried about the loss of tax revenue that will result from that exodus. 
The third point is that regulation may well lead to higher prices for consumers and to higher compliance costs falling on manufacturers and suppliers especially among smaller New Zealand - based companies that supply only the domestic market. Again what we will see in this country is a loss of innovation—something we have greatly prized in years gone by. But with heavy regulation in place as we see under the Therapeutic Goods Administration regime in Australia many of the smaller companies will just not be able to afford or will lose the time and energy they presently have to cope with that. 
I make too a brief mention of medical devices. Similarly there may be an increase in the price and a reduction in the choice of medical devices due to those becoming the subject of regulatory controls. 
To sum up I tell members that ACT does not agree that the Government should have ratified the treaty. We feel that the concerns raised by the Health Committee during the inquiry into therapeutic goods and its subsequent recommendations were not adequately addressed by the New Zealand Government when it formulated the treaty. We are particularly concerned that a thriving local industry will be harmed and disadvantaged with the imposition of a very heavily regulated and bureaucratic Australian regime when other more appropriate options are available. I have mentioned what I feel those are. We believe that ratification of the treaty will result in increased compliance costs to those in the industry and will particularly affect small business. As a smaller partner in the treaty we also fear that New Zealand interests will be significantly under-represented and that increased costs and loss of choice for products will be the consequences for New Zealanders. It will be a very sad day for New Zealand. 
Hon ANNETTE KING (Minister of Health) 
: 
 I thank the Health Committee for its examination of the treaty and for its comments on the important issues of sovereignty accountability and the impact of the joint scheme on New Zealand industry and on the health and safety of all New Zealanders. The proposal to establish a joint trans-Tasman therapeutic products agency and regulatory scheme has been developed over a number of years through successive Governments. In fact when I became the Minister the joint regulator had already been agreed to in principle by the previous National Government. I looked at the work that had been done by the previous Government and agreed that we should proceed with the agreement that it had made in principle. In fact this Government announced some time before the select committee inquiry that we would be proceeding. 
The proposal had been carefully crafted to provide New Zealand with a new world-class sustainable regulatory system through an arrangement of equal partnership with Australia. In fact it is seen by the Australians and by New Zealand as an extension of CER. When I recently met with the Leader of the Opposition Don Brash he gave a commitment that the National Party would work to ensure that the joint regulator became a reality. He said that it was a good deal for New Zealand. It is an innovative arrangement that will preserve and grow New Zealand’s— 
Dr Paul Hutchison 
: You weren’t at the meeting. 
Hon ANNETTE KING 
: I was at the meeting. It is an innovative arrangement that will preserve and grow New Zealand’s influence over the regulation of therapeutic products and sustain our capability to make sound regulatory decisions that protect public health at a lower cost to industry than other options. It also has a fair and secure arrangement that will safeguard New Zealand’s sovereignty and will ensure proper accountability and parliamentary oversight of the agency. 
It is important to recognise that maintaining the status quo is not a viable option for the future regulation of therapeutic products in New Zealand. The existing medicine legislation is 20 years old. It is outdated and no longer provides an appropriate framework for managing the risks associated with the full range of therapeutic products now available. New Zealand’s regulatory scheme is unsustainable in the medium to long term. For example under existing legislation—and I do not know whether Heather Roy is aware of this—pre-market approval is not required for medical devices in New Zealand regardless of the level of risk associated with their use. I think New Zealanders would be shocked to know that. Thus there is no assessment of the safety quality or performance of devices such as heart valves or pacemakers before they are placed on the New Zealand market. In contrast pre-market approval is required for lower-risk products such as anti-dandruff shampoos and fluoride toothpaste. That situation is untenable and cannot be left to continue. The public health and safety of all New Zealanders is far too important for us to ignore that situation any longer. 
Through the joint agency we will build a strong and confident arrangement that is respected internationally. New legislation is therefore required to modernise New Zealand’s regulatory scheme and bring it into line with international norms for the regulation of therapeutic products. On its own New Zealand will struggle to maintain the capacity and capability to regulate therapeutic products into the future. It will become increasingly difficult for New Zealand to recruit staff with the knowledge and expertise needed to evaluate the increasingly complex and sophisticated therapeutic products now being developed. There is already a worldwide shortage of such expertise. Gaps that exist in New Zealand’s expertise will increasingly diminish the regulator’s ability to adequately assess and manage the risk to public safety arising from the use of medicines and medical devices. There will inevitably be delays in approving products under the status quo system so that New Zealanders will be denied timely access to new products that are available in other countries. 
If New Zealand were to have its own stand-alone regulatory scheme for therapeutic products it would first be necessary to develop new legislation to address the current anomalies in regulatory coverage and to bring New Zealand’s— 
Dr Paul Hutchison 
: I raise a point of order Madam Speaker. I want to make the point that the Minister is speaking outside the lines of the report. The chairman of the Health Committee made it clear that the debate should be about the report and not the Government’s agenda. I am deeply concerned that the Hon Annette King is using this debate purely as a vehicle to talk about the Government’s agenda and not the report. I would ask you to ensure that she sticks to the report. 
Hon ANNETTE KING 
: Speaking to the point of order I have listened to the whole debate. Members ranged widely over every issue that they wanted to cover and I think that it is important that I get the opportunity to range over similar issues myself. 
Madam DEPUTY SPEAKER 
: Ruling on the point of order the Minister was speaking about the report and the matters in the report and there was nothing that was different from what the last six or seven members have spoken about. 
Hon ANNETTE KING 
: If New Zealand were to have its own stand-alone regulatory scheme for therapeutic products it would first be necessary to develop new legislation in order to address the current anomalies in the regulatory coverage and to bring New Zealand’s regulation into line with international best practice in therapeutic product regulation. In order to administer the regulatory scheme it would be necessary to significantly increase the regulatory capacity and expertise and to maintain that expertise in therapeutic products as they grow in complexity and sophistication. Even if it were possible to recruit the staff for such a regulator the cost of regulation would be unacceptably high given New Zealand’s small population and market size. Going it alone was not a viable option. For the reasons I have given the current Government and past Governments have recognised that New Zealand’s system for the regulation of therapeutic products is not sustainable and that the best way to ensure sustainable regulatory capacity and appropriate protection of public safely in the future would be through collaboration with another regulator. 
Three possible models of collaboration were considered. 
Hon Murray McCully 
: Stop reading it. She’s reading it. 
Hon ANNETTE KING 
: What is the problem with Murray McCully? I think he is somewhat distressed and upset. I would just like him to listen; this is a serious debate. Three models of collaboration were considered. First there was the model of unilateral recognition which meant that New Zealand would have to accept the regulatory decisions of other regulators which would be regulators outside New Zealand. That would have meant that we would not be able to respond to safety issues but would be reliant on other regulators’ decisions. Second there was the model of mutual recognition. If we wanted to have mutual recognition the New Zealand regulator would have to have another regulator that had confidence in New Zealand’s own decisions. I am afraid to say that New Zealand does not have a lot of legislation in place and we could not compare ourselves with another regulator. Mutual recognition was declined as an option before we became the Government—not since we became the Government. The third model was the development of a joint therapeutic products regulatory agency which will retain New Zealand’s voice in decision making. It will allow the pooling of resources with Australia in order to overcome the deficiency in regulatory capacity. It will share the regulatory costs which will reduce the impact on New Zealand industry and it will create a single CER market for therapeutic products and a one-stop shop for those wishing to market products in both countries. It was for those reasons that the previous Government and this Government agreed that a joint regulator under the expansion of CER was the best way to go. 
We also looked at compliance costs and I think they are an important consideration in moving towards the arrangements that we want to have for the joint-agency cost recovery will be on the same basis as in other industries and best-practice guidelines for cost recovery will apply. The cost to New Zealand businesses will actually be lower than for a stand-alone agency because regulatory costs are shared across the larger New Zealand - Australia market. However in order to protect small businesses it is intended that under the fees and charges rules that will be developed for the joint scheme a form of fees relief will be available for small businesses with low sales volumes. 
The Health Committee noted—and I would like to read this to the House because this has been misinterpreted all evening—that: “the Australian Regulatory Impact Statement states that Australian firms may have an early competitive advantage over New Zealand firms seeking approval for new products under the new system.” The committee mistakenly interpreted that statement as support for the view that New Zealand companies would be at a disadvantage under the joint regulatory scheme. In actual fact that statement was taken out of context. It related to permanently exempting therapeutic goods from the Trans-Tasman Mutual Recognition Arrangement not from the joint scheme. I ask the members who have raised that point to go back to the agreement between the Governments of Australia and New Zealand and to read page 11 of the impact statement. When they have read it I want them to tell me they got it wrong because they have got it wrong. On governance and sovereignty New Zealand will have an equal voice with Australia. It will become very clear very soon that New Zealand’s voice is equal with Australia’s in all respects. It will be equal in terms of what is accountable in this Parliament and it will be equal in terms of legislation. [ 
Interruption 
] I am listening to the members of the Opposition because I know that behind the scenes they have also been talking to the Australians about the agency about CER about how important the relationship with Australia is and about how important it is to have a joint regulator. I find it interesting that they are denying that this evening.