Hodgson Pete: New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill — First Reading 
Hodgson Pete: New Zealand Public Health and Disability (Enhancement of Competition) Amendment Bill — First Reading 
[Volume:629;Page:1823] 
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.