| 2oth June 2007 |
Medicines bill 'gives away trade benefits'
Author: MEADS Sarah; FAUNCE Thomas - Published in Dominion post 20/06.07
Dietary supplements may now be safe from proposed legislation before Parliament but drug prices will rise as a result of onerous new patent obligations inherited if the bill is passed, argue Sarah Meads and Thomas Faunce.
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THE Government is still seeking to pass the controversial Therapeutic Products and Medicines Bill, by effectively exempting natural health products from its coverage. It is banking on the rest of the bill being acceptable and that this amendment will be enough to satisfy other parliamentary parties.
However, the bill still incorporates pharmaceutical patent obligations Australia recently took on under its free trade agreement with the United States and these are set to undermine advantages in patent law New Zealand enjoys over Australia _ for no gain.
In 2004, Pharmac estimated these obligations could increase the cost of medicines to New Zealand taxpayers by $30 million to $40 million a year _ 6 per cent of its annual drug expenditure. The single trans-Tasman agency would be formed from the existing Australian body that regulates the safety of medicines in several Australian states. This body and the Australian equivalent of Pharmac have undergone substantial changes to comply with patent obligations in the free trade agreement.
These obligations are far more extensive than those in multilateral World Trade Organisation agreements, where they would not be tolerated. This is important because New Zealand's patent law and its international obligations are different to Australia's in key areas.
The single agency will want to apply the same patent rules to medicines in both countries. "Linkage evergreening" rules applying to pharmaceutical patents are but one important example of patent law changes that New Zealand could inherit through the back door if this bill is approved.
Such "linkage evergreening" provides firms holding patents for high-sales-volume drugs with new mechanisms for extending their market monopoly. This "linkage" mechanism involves a requirement that the drug safety regulator inform any relevant patent holder if a generic drug manufacturer intends to enter the market.
That provides patent holders with greater capacity to use "linkage evergreening" tactics to block further applications, reducing competition, and delaying entry of cheaper generic medicines.
Pharmaceutical "evergreening" describes the tactics drug companies use to try to extend the patent of an existing drug after it runs out, for example, by arguing for a new therapeutic use of a known compound.
The Canadian Government recognised such potential harm in the North American free trade agreement. It fought these linkage provisions, and created a separate organisation to supervise claims. The Australian Government was so concerned that it passed legislation with "anti-evergreening" protections when it took on these obligations. Will New Zealand?
Whether these will be effective is a matter of debate but they will certainly not apply to cases in New Zealand under the trans- Tasman agency. Moreover, New Zealand patent law encourages "springboarding", which enables generic manufacturers to bring medicines to the market up to five years sooner than Australian law would allow.
Further, in developed countries, the sale of medicines is controlled by two separate mechanisms. One regulator checks safety and quality of new medicines. A separate body governs the commercial exploitation of intellectual property rights. However, under the bill, when an application is made by a drug manufacturer to the safety and quality regulator, patent information must be supplied. The regulator is then obliged to notify patent-holders when they have received an application for a generic version of their product.
Applicants who misrepresented patent information would face far harsher penalties than if they misrepresented the product. In other words, commercial rights would rank above safety.
"Linkage" turns the medicines safety regulator into an informer, and supervisor, of private property rights, a task it is not equipped to perform. Submissions on the bill by Pharmac and others asked the Government to remove "linkage" altogether and for other patent obligations to be clarified. These may affect patent extension, the definition of "innovation", fast tracking, data exclusivity, parallel importation and compulsory licensing
With the select committee unable to reach agreement, the Government now aims to satisfy parties opposed to the bill by introducing an amendment to remove natural health products from compulsory coverage. Whether this will also include any changes relating to patent obligations has yet to be signalled.
If trade is the bill's overarching agenda, the Labour Party (its key sponsor) should insist that the obligations inherited in Australia's free trade agreement are carved out of the bill unless New Zealand receives equivalent trade benefits.
At the very least, an economic and health impact analysis should be undertaken to inform New Zealand's response.
At best, the bill involves giving away important "bargaining chips" the Government could use in other trade-related deals, without capturing health gains or direct trade benefits for New Zealand citizens.
Further, consider the strategic industry advantages if New Zealand avoids "linkage evergreening" while Australia has it. That would provide substantial encouragement to generic pharmaceutical companies, still reeling from new Australian legislation imposing significant disincentives on the generic pharmaceutical industry, to move to New Zealand.
* Sarah Meads is a consultant in international trade and public health in developing countries. Dr Thomas Faunce is senior lecturer in the Medical School and College of Law and director of the Globalisation and Health Project at the Australian National University.
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