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The Trans-Pacific Partnership Agreement:  The end of Pharmac as we know it?

Article by Angela Belich, Asssitant Executive Director - The Specialist, Issue 87, June 2011

New Zealand is engaged with nine other countries including the United States and Australia in negotiations over a ‘free trade agreement’, known as the Trans Pacific Partnership Agreement (TPPA). The arcane terminology, confusing (and often unexplained) acronyms and major consequences of seemingly innocuous differences in wording make it a difficult area to analyse. The secrecy of much of the process is not a help. There are two main health related issues of interest to ASMS members.


US pharmaceutical companies are lobbying their government to put limitations on “generic and anti-competitive drug buying” through the TPPA.

The US-Australian Free Trade agreement included a provision which required the parties to “recognise the value of innovative pharmaceuticals”. Australia then moved to a system in which patented drugs with no generic equivalent could no longer be compared to generics. This has meant a 60% increase in the price of some groups of drugs.[1]

Pharmac’s (New Zealand’s pharmaceutical purchasing agency) purchasing strategy has made enormous savings and appears to have had cross party support. However, the Prime Minister has made clear that, as far as he is concerned, changes to Pharmac are on the agenda.

It would be easy to use the precedent set by Australia (the wording seems harmless) and undermine the entire purchasing system. This does not at present seem to be the New Zealand negotiators’ position. (Their position paper was leaked last year). However it is easy to conceive that even a sniff of an easing in the United States protectionist policies on agriculture could cause a rapid change in New Zealand’s position.

The United States lobby group, Pharmaceutical Research and Manufacturers of America (PhRMA) has targeted New Zealand’s Pharmac as a problem that needs to be addressed in the talks. They say they want “the value of patented drugs reflected in the system” thus decreasing the power Pharmac has to negotiate over the price of some drugs. The approach at first sight contradicts a very similar approach to that of Pharmac that is taken by the United States’ own Medicaid programme. The United States has made the distinction that this is at a state rather than national level.

As well, PhRMA is urging the American negotiators to include 12 years of data protection on drugs derived from living organisms (biologics). This is an addition to the free trade agenda.

As a result of this lobbying 28 U S senators have signed a letter to President Obama asking him not to sign a TPPA that doesn’t include provision for protection for ‘innovative medicines’. Part of the lobbying strategy by the pharmaceutical industry is to seek the support of clinicians for what they call improvements to the transparency of Pharmac, to include greater clinician involvement and to put in place an appeal process. ASMS members have sometimes been less than happy with Pharmac’s processes so this may seem attractive. However, it would be naïve to assume that PhRMA or even the US government are concerned with the better health of New Zealanders or the more efficient operation of our health system.

Tobacco, Alcohol and Food

The convoluted rules that appear to be at work in ‘free trade agreements’ can allow companies to take action against governments that introduce measures that reduce the value of an investment or brand through something called “investor state disputes procedures”. Philip Morris International has used this procedure to dispute Uruguay’s right to have 80% of a cigarette packet display images of the consequences of smoking.

The Australian government has said it is not prepared to engage on “investor state disputes procedure” thus exempting itself from any future action by tobacco (or other) companies arguing that their investment has been devalued by government action. The New Zealand government has not.

New Zealand has joined with six other countries to dispute Thailand’s right to put warnings on alcohol labels at the WTO (posted on the WTO website). This would suggest that New Zealand will not be exempting this sort of public health initiative from the TPPA. New Zealand’s negotiators have also signaled their willingness to engage on “investor state disputes procedures”.


The TPPA could make it impossible for any future government to reverse a private sector insurance companies take over of ACC functions (as happened in 1999) if it involves an international company without paying massive penalties. This could also be the case with any other privatisations. Earlier New Zealand Governments have ‘reserved’ (which means that they don’t intend for such a provision to be included) on the proposal to allow a foreign financial investor to appeal the decision of a government to provide a financial service itself. It appears that this government is so far not intending to change that position so the threat of future New Zealand being unable to reverse such a decision has receded.

The TPPA was scheduled to be concluded by the APEC meeting in November but this now seems very ambitious. The next round of negotiations is scheduled for June in Vietnam.

Angela Belich

[1] Faunce , Bal and Nguyen ‘ Impact of the Australia-US Free Trade Agreement on Australian medicines regulation and prices’ Journal of Generic Medicine Vol. 7,1 18-29

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