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Access
to Medicines
Commerce Act
DTC Advertising
Patents
PHARMAC
Regulatory
Research and Development
Access
to Medicines
New Zealand has one of the lowest pharmaceutical
cost structures in the developed world because the emphasis is placed
on procuring older and cheaper generic medicines at the expense
of modern innovative ones.
Prescription medicines play a vital role in
the prevention, amelioration and treatment of disease and disability.
Yet when compared with other developed nations New Zealanders' access
to modern innovative medicines is severely restricted - slow and
low.
Since the establishment of the Pharmaceutical Management Agency
(PHARMAC) in 1993 New Zealand's public investment in medicines has
not kept pace with increases in health spending. It has fallen from
11% of public health spending in 1993 to 6% in 2007. This is in
spite of an expanding and ageing population, technological advances
and a marked increase in the number of prescriptions being written.
This situation is aggravated by the reduction in patient co-payments
(from $15.00 per prescription down to $3.00) introduced as part
of the Primary Health Care Strategy. Now we have an increased number
of prescriptions for low cost items such as paracetamol and low
dose aspirin being subsidised from the same capped budget that is
available for innovative medicines.
Compared with other OECD nations New Zealand
shares bottom place with Czech Republic, Poland and South Africa
in terms of access to modern oncology drugs*.
In New Zealand per capita funding of pharmaceuticals is only 76%**
that of Australia. In 2005 the average drug spend on pharmaceuticals
in OECD countries was 18% of public health expenditure compared
with only 6% in New Zealand.***
* Jonsson B, Wilking N, Annals of Oncology 18 (Supplement
3) iii2-iii7, 2007
** NZ Pharmaceutical Industry Taskforce -
NZ Medicines Strategy submission, p71.
*** NZ Pharmaceutical Policies, Castalia, August 2005
Commerce Act
When PHARMAC was established in 1993 it was considered that an exemption
from Part II of the Commerce Act was necessary to allow the RHA's
to all purchase medicines at the same price under the Pharmaceutical
Schedule.
However, the scope of the exemption serves to give PHARMAC 'carte
blanche' in all its commercial dealings, free from any scrutiny
or liability under the Commerce Act.
Subsequent changes to the structure of the public health sector
mean that PHARMAC is now a stand-alone entity, managing the Pharmaceutical
Schedule on behalf of the Crown.
The current exemption covers all agreements entered into by PHARMAC
allowing it to enter into what would otherwise be anticompetitive
contracts where other suppliers are effectively excluded from the
market thus lessening competition in the market.
This artificial manipulation of the market and the absence of a
level playing field mean that New Zealanders do not benefit from
competition and the incentives that derive from that competitive
environment.
Direct-to-Consumer Advertising (DTC Advertising)
The RMI supports freedom of speech and the ability for companies
to promote their products as long as they comply with the law and
the Code of Practice as agreed to by all researched medicine companies
in New Zealand.
In New Zealand many medicines that are reimbursed in other countries
remain unsubsidised, and therefore can only be made available via
private purchase. Well-regulated and socially responsible DTC advertising
is therefore an effective way to reach these patients and ensure
they are offered choice.
Such advertising also plays an important part in raising disease
awareness e.g. obesity and heart disease.
The growth of uncontrolled internet marketing of medicines renders
a ban on disciplined and controlled DTC advertising meaningless
and counter productive.
Patents
The current patent term in New Zealand is 20 years from the date
of filing of an application. The RMI recommends New Zealand aligns
its IP protection with our major trading partners through the adoption
of a Supplementary Protection Certificate system as currently in
use in Australia, USA, Japan and the European Union.
The Supplementary Protection Certificate is an administered rather
than a court-based extension procedure. The rules governing the
amount of extra patent time are tightly defined and have automatic
and non-discretionary elements. An SPC is defined as the difference
between the date of the first market authorisation within the country
concerned for a new pharmaceutical and the patent filing date less
five years. The maximum permitted SPC is five years, which means
that for every year above 10 years' development time enhanced EPL
is correspondingly reduced. In effect a maximum SPC of five years
provides an incentive to curtail development time to 10 years. From
the above it is clear that the SPC regime is much more sophisticated
than a mere five years' addition to a patent term. It is case-sensitive,
with the extra time awarded being dependent on the length of the
drug development interval. It penalises companies that take more
than 10 years to bring a drug to market.*
* The SPC was first applied in the European Union
in January 1993 and introduced in Australia in 1998. See Council
Regulation 1768/92 of June, 18 1992 concerning the creation of a
supplementary protection certificate for medicinal products; Supplementary
Products, a guide for applicants, UK Patent Office 1992; the Australian
Intellectual Property Laws Amendment Act 1998.
PHARMAC
Since the establishment of the Pharmaceutical Management Agency
(PHARMAC) over 10 years ago New Zealand's public investment in medicines
has not increased when measured using the consumer price index to
adjust for inflation. This is in spite of an expanding and ageing
population, technological advances and a marked increase in the
number of prescriptions being written. This situation is aggravated
by the reduction in patient co-payments (from $15.00 per prescription
down to $3.00) introduced as part of the primary health strategy.
Now we have an increased number of low cost items such as paracetamol
and low strength aspirin being subsidised from the same capped budget
that is available for innovative medicines.
PHARMAC has been extremely proficient in holding and reducing overall
expenditure. Initially price control restricted access to new innovative
medicines but in more recent years rationing and delaying tactics
have further compounded the access problems.
In New Zealand per capita public funding of pharmaceuticals is only
76%* that of Australia. In 2005 the average drug spend on pharmaceuticals
in OECD countries was 18% of public health expenditure compared
with only 6% in New Zealand.**
Between 2000 and 2006 Australia listed 78 new prescription medicines
on their PBS (pharmaceutical benefits scheme) whereas PHARMAC listed
only 20 of those on our community schedule.***
Independent international research^ shows that New Zealand cancer
patients are denied the modern medicines that are available to patients
in other parts of the developed world.
Two leading New Zealand doctors have stated "In terms of statin
availability and use PHARMAC's delays in making available appropriate
medications has probably caused more deaths and major morbidity
to New Zealanders than any other of their policies . . .. There
is a 35% greater chance of a New Zealander dying of cardiovascular
disease in the median follow-up period of 7.8 years compared to
an Australian."^^
* NZ Pharmaceutical Industry
Taskforce - NZ Medicines Strategy submission, p71
**NZ Pharmaceutical Policies, Castalia, August 2005
***"Access by patients in New Zealand to innovative new prescription-only
medicines, how have they been faring in recent times in relation
to their trans-Tasman counterparts" was authored by Michael Wonder,
Senior Health Economist, at Novartis Pharmaceuticals Australia.
^ Annals of Oncology, April 2007. Jonsson and Wilking, Stockholm
School of Economics and Karolinska Institute, Sweden
^^ Dr Chris Ellis and Andrew Harmer, New Zealand Medical Journal,
Feb 2008
Regulatory
The Medicines Act 1981 is seriously outdated and causes extreme
frustration for all involved. Earlier review proposals had been
shelved pending the establishment of a joint Trans-Tasman regulatory
agency (Australia New Zealand Therapeutics Products Authority).
An impasse developed when the New Zealand Government was unable
to pass the necessary legislation in 2007.
Medsafe does not have the capacity to process applications within
a reasonable timeframe.
The New Zealand market is too small to support a stand-alone approval
and registration regime for all evaluations.
Medsafe fees increased eight-fold in 2006 (from $15,300 to $122,625).
This has deterred applications for registration of new prescription
medicines in New Zealand. Applications to register new chemical
entities declined 60% in the 12 months following the fee hike. Forty-nine
percent of medicines subsidised on the pharmaceutical schedule have
annual sales in the New Zealand market with a value that is less
than the Medsafe registration fee.
Greater harmonisation of regulatory processes and recognition between
regimes is an inevitable part of globalisation.
New Zealand must evaluate alternatives to ANZTPA and a stand-alone
Medsafe. One alternative option would be a system based on the unilateral
recognition of the decisions of other respected international regulatory
authorities while maintaining capacity to perform full evaluations
where necessary. This would be similar to the Singaporean model.
The industry welcomes the interim initiatives of Medsafe to adopt
an abbreviated process with a much lower fee structure but notes
that this proposal will be very narrow and inflexible in its application.
Research and Development
(R&D)
The pharmaceutical industry is totally reliant on research.
The global spend on drug development in 2005 was estimated to be
US$58.3 billion with half of that going to clinical trials. The
New Zealand share of this investment has declined steadily.
In the USA the pharmaceutical industry invests twice as much on
R&D as any other industry.
The scale of global R&D investment and the development in biotechnology
favouring smaller specialist R&D providers, suggests New Zealand
has an opportunity to build on its existing biotechnology sector
focused on both agricultural and human therapeutics.
Most OECD nations not only accept that R&D and the commercial operating
environment for pharmaceutical companies are linked, they offer
incentives for the right to host R&D operations of pharmaceutical
companies - success requires partnership. New Zealand has done the
opposite. A rigid/procurement regime focussing on delayed and restricted
access and cheapest generics available has cost the New Zealand
economy millions in forgone pharmaceutical investments and the positive
spill-overs that flow from such investments. It is the missing dimension.
Other countries, such as the UK and Australia, encourage clinical
trials of medicines in order to not only deliver innovative medicines
to patients at a very early stage of their development, but also
as a mechanism to attract and retain clinicians and scientists.
The overtly hostile commercial climate confronting pharmaceutical
companies places New Zealand at a serious disadvantage when competing
for clinical trials.
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