RMI

Medsafe fee increases
ill advised

"The increase in Medsafe fees is an opportunistic grab to fund a deficit of $2 million and it may ultimately result in patients missing out on new medicines that are licensed for sale in other countries but not New Zealand," said Dr Pippa MacKay, the chair of the Researched Medicines Industry Association.

"Medsafe has already said that the enormous fee increases will not result in any improvement in service and outcomes. There is a backlog of applications and it takes around three years for an application to be processed, compared to only 15 months in Australia.

"An eight fold increase in charges with no expectation of service improvement is not something that is going to win a lot of support," she said.

Also, for many products the evaluation fee of $122,652 will not be readily recoverable through sales in this market, even assuming the medicine gains PHARMAC funding. About 35 applications for new prescription medicines are submitted to Medsafe every year but on average PHARMAC ultimately approves subsidises for only about eight. Commercial realities will therefore mean that companies will need to think carefully about investing $123,000 with only a one in five chance of achieving funding.

The continued availability of the range of medicines expected in a developed country is therefore seriously at risk.

Justification for fees increase?

The Government claims that the 'fees sit well under those of other countries, including Britain and the United States' but this fails to recognise the relative size of these markets. On a per capita basis the new Medsafe fees for evaluating prescription medicines will be the most expensive in the world. They equate to $NZ613, 000 for a new chemical entity in Australia and an outrageous $NZ12 million in the EU.

In a press release Medsafe further justified the fee increases by saying that "A costing model which took into account annual application volumes, personnel requirements, salaries, accommodation, operating costs and direct costs for enforcement and prosecution activities was used to determine these fees."

Perhaps Medsafe should own up to what they advised the industry during the consultation round – that no costing models were used to derive evaluation fees. Instead the fees have simply been set at 50% of the fees currently charged in Australia. This is hardly in keeping with Treasury guidelines for the setting of charges in the public sector to ensure proper account is taken of efficiency, equity and fiscal concerns.

The fact that Medsafe has not increased its fees for 15 years is clearly an issue, but to be stung with a 700% increase in one hit would be difficult for any industry to accommodate, yet alone one where the monopsonic purchaser, PHARMAC, has flat-lined expenditure since 1993 by refusing to fund many products and severely restricting access to those that are funded.

Unilateral recognition of FDA or EU decisions? If the Medsafe system is not working and the joint trans-Tasman agency fails to eventuate 'do nothing' is not an option. Perhaps it is time to reconsider an alternative approach, and recognise the decisions made by another authority. The United States' FDA and the European Union's EMEA have international standing as expert agencies and their evaluations already factor into Medsafe's decision making. It would be irresponsible not to consider all options. With the current situation, even those options that were previously not considered ideal may now need to be brought to the table. Some RMI members have indicated that a number of innovative medicines, currently in use in other parts of the world, may not now be presented for registration with Medsafe. They say the fee structure, the time it takes to process medicines, and then the approach by PHARMAC means that it will be uneconomic to even begin the process of registering medicines.

Think globally, act locally Medsafe forgets that New Zealand operates in a global market. It says that it 'does not consider that a 350% increase in the fee to apply for consent to conduct a clinical trial is material in the context of a clinical trial budget'. New Zealand is one of a number of countries competing internationally for clinical trial work. The value of clinical research is acknowledged by the Government and efforts are being made to attract this research and increase the number of trials undertaken here. Sadly, New Zealand's international attractiveness for research investment is already tarnished by the severe cost-containment policies that are employed here and this increase in fees will not help improve our chances of making the desired gains in this area. Medsafe has also observed that even with its massive increases its fees pale into insignificance when put alongside the total cost to research and develop a pharmaceutical product – about US$800 million. While this is correct it is a spurious comment. The decision to enter each and every individual market is based on the marginal costs and returns derived from that market, not the sunk cost of the drug development programme. In New Zealand the returns are low and marginal costs are skyrocketing and tough commercial decisions will need to be made.

Dependence on the future of the joint trans-Tasman agency

Medsafe has predicted that the number of applications for new prescription medicines will reduce by about 70% as suppliers await the establishment of the proposed joint regulatory agency with Australia.

So, why would a company pay $123,000 to lodge an application for a new product and wait three years or more for the process to be completed when the same product licensed in Australia will be able to enter the New Zealand market once the joint agency is up and running?

Unfortunately however, this is completely premised on the assumption that the joint agency will in fact go ahead. As we now know, the future of the proposed joint agency is far from certain. The Government does not, at this stage, have the numbers to see the necessary legislation through and the issues raised by stakeholders and opposition parties could take a very long time to be addressed and resolved.

The sad fact is that it has taken ten years to get to this point, and New Zealand now only has weeks to get it sorted. Indeed, it might already be too late.

So, as well as considering the impact of the Medsafe fees hike in the interim, we also need to think seriously about the situation we will find ourselves in should the joint agency not proceed.

This newsletter is published on behalf of the
Researched Medicines Industry Association of New Zealand
The views and opinions expressed in this publication
are not necessarily those of the RMI.

For further information:
The Researched Medicines Industry Association Inc
PO Box 10447 Wellington
Phone 04 499 4277

www.rmianz.co.nz

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