The pharmaceutical industry is totally reliant on research.

The global spend on drug development is estimated to be $80 billion with half of that going to clinical trials. The New Zealand share of this investment has declined markedly.

Today investment in pharmaceutical R&D in New Zealand is some 20% of what it was 10 years ago ($100 - $20 million).

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 understand 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. New Zealand has done the opposite. A rigid procurement regime focussing on delayed and restricted access and the cheapest generics available has cost the New Zealand economy millions in forgone pharmaceutical investments and the positive spill-over that flows from such investments.

Other countries, such as the UK and Australia, encourage clinical trials of medicines in order to not only deliver innovative medicines to patients at an 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.

The erosion of the value of intellectual property through PHARMAC's reference pricing regime and the truncation of effective patent life in New Zealand contributes to the hostile commercial environment.