USTR Reports about New Zealand and Pharmaceutical Drug Policies


USTR's 1999 NTE Report

Access for Pharmaceuticals -Pharmaceutical Management Agency (PHARMAC)

PHARMAC was established in 1993 as a limited liability company to manage the purchasing or funding of pharmaceuticals for the Health Funding Authority (HFA). The HFA is responsible for purchasing health services and supplies for all New Zealanders. PHARMAC administers the National Pharmaceutical Schedule on HFA's behalf. The Schedule lists medicines subsidized by the government and the reimbursement paid for each pharmaceutical. The schedule also specifies conditions for prescription of a product listed for reimbursement. At its creation, PHARMAC was exempted from New Zealand's normal competition laws, an exemption upheld in a 1997 High Court ruling in an umbrella court case brought against PHARMAC by New Zealand's Researched Medicines Industry (RMI) association. While New Zealand does not per se restrict the sale of non-subsidized pharmaceuticals in New Zealand, private medical insurance companies will not cover unsubsidized medicines. Thus, PHARMAC effectively controls what prescription medicines will be sold in New Zealand and, to a large extent, at what price they will be sold.

Pharmaceutical suppliers complain that it is difficult to list new chemical entities and line extensions on PHARMAC's schedule. In general, PHARMAC will not apply a subsidy to a new medicine unless it is offered at a price lower than currently available subsidized medicines in the same therapeutic class or unless the producer is willing to lower its price on another medicine already subsidized in another class. Pharmaceuticals can also be delisted if a competing product is selected to serve the market as the result of a tender or if a cheaper alternative becomes available and the manufacturer of the original product refuses to discount its price to that of the lower-priced alternative. PHARMAC's use of reference pricing, the practice of doing trade- off deals between classes of drugs, and tendering practices can negatively affect a company's revenue return on its intellectual property. The United States and New Zealand governments have begun a dialogue with the aim of alleviating impediments to market access from PHARMAC's practices.


USTR's 1998 NTE Report (same language in 1997 report)

Pharmaceutical Management Agency (Pharmac)

Pharmac was established in 1993 as a limited liability company to manage the purchasing or funding of pharmaceuticals for the four public regional health authorities (RHAs). Replacing the RHAS in 1996, the single Transitional Health Authority (THA) is responsible for purchasing health services and supplies for all New Zealanders. Owned by the THA, Pharmac administers the national pharmaceutical schedule on its behalf. The schedule lists medicines subsidized by the government and the reimbursement paid for patients for each pharmaceutical. The schedule also specifies conditions for prescription of a product listed for reimbursement.

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In 1997, Pharmac suggested that it might try to control its escalating costs by tendering for a sole national supplier in some pharmaceutical classes.

The government and individual pharmaceutical firms have begun a dialogue to discuss Pharmac practices. The firms are promoting a transparent subsidies decision-making process based on sound medical evidence -- designed to divorce pharmaceutical pricing decisions (left to the market) from government decisions on how to distribute its public health budget. Some are also suggesting a type of appeal mechanism so that firms denied a Pharmac listing can bring to the government's attention additional research proving a new medication's specific effectiveness. In general, Pharmac may become part of a growing public and political discussion of health care reform and whether New Zealand's universal pharmaceutical subsidization (regardless of the ability to pay) is an efficient or sustainable use of public funds.


USTR's 1996 NTE Report

LACK OF INTELLECTUAL PROPERTY PROTECTION- Pharmaceuticals

The New Zealand government adopted amendments to its Medicines Act in 1989 which significantly weakened patent protection for pharmaceutical products. In response to international concern, New Zealand passed the Medicines Amendment Act in 1990 to replace the 1989 legislation. However, the 1990 Act waived government liability for trademark or copyright infringement related to the importation, sale or distribution of medicines for which the patent has expired. Consequently, materials under copyright or trademark that are used in connection with an "off patent" medicine imported by the government (e.g. pamphlets) now may be imported, reproduced, translated, or adapted without permission from the holder of the copyright or trademark. In practice, the government has not actually imported such "off patent" medicines since the enactment of the 1990 Medicines Amendment Act. The Copyright Act of 1994 preserves the ability of the government to parallel import printed materials associated with parallel imported medicines for which the patent has expired.

ANTI-COMPETITIVE PRACTICES- PHARMAC

Another issue which adversely affects both New Zealand and foreign pharmaceutical companies is the monopsony purchasing practices of the Pharmaceutical Management Agency (PHARMAC). Established in 1993 by New Zealand's four government-owned regional health authorities to manage the purchasing or funding of public medical services, PHARMAC is effectively exempted from New Zealand's normal competition laws. PHARMAC controls a pharmaceutical schedule on which all government-subsidized pharmaceuticals are listed. Private medical insurance companies, furthermore, will not cover unsubsidized medicines. Thus, PHARMAC effectively controls what prescription medicines will be sold in New Zealand and, to a large extent, at what price they will be sold.

Pharmaceutical suppliers, domestic and foreign, complain that it is difficult to list new chemical entities and line extensions on PHARMAC's schedule. As PHARMAC tries to restrict the growth of New Zealand's pharmaceutical budget, suppliers must be prepared to offer substantial discounts to be listed. Pharmaceuticals can be de-listed if a new, cheaper alternative becomes available, and the manufacturer of the original product refuses to discount its price to that of the new lower priced alternative.


USTR's 1995 Report

INTELLECTUAL PROPERTY PROTECTION- Pharmaceuticals

In July 1989, the New Zealand government adopted amendments to its Medicines Act which significantly weakened patent protection for pharmaceutical products. In August 1990, in response to international concern, New Zealand passed the Medicines Amendment Act, which replaced the 1989 legislation.

The Medicines Amendment Act of 1990 was accompanied by the Trademark amendment Act and the Copyright Amendment Act, which waive government liability for trademark or copyright infringement related to the importation, sale or distribution of medicines for which the patent has expired. Consequently, materials under copyright or trademark that are used in connection with a "off patent" medicine imported by the government (e.g. pamphlets) now may be reproduced, translated, or adapted without permission from the holder of the copyright or trademark. The completely revised Copyright Act of 1994 preserves the ability of the government to parallel import printed materials associated with parallel imported medicines for which the patent has expired. In practice, the government has not actually imported such patented medicines since the enactment of the legislation.

In August 1992, New Zealand repealed Section 51 of the Patents Act of 1953, which contained permissive rules for the grant of compulsory licenses of pharmaceutical products. This repeal brought New Zealand's Patent Act into conformity with the pharmaceutical product provisions of intellectual property legislation in other industrialized countries.