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Cablegate: New Zealand-Australia Regulatory Agency to Raise

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 WELLINGTON 000596

SIPDIS

STATE PASS USTR FOR BWEISEL
STATE PASS FDA FOR OFFICE OF INTERNATIONAL PROGRAMS/WALTER
BATTS AND JULIA HO
STATE FOR EAP/ANP AND EB/TPP/BTA/ANA
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/GPAINE

E.O. 12958: DECL: 07/12/2014
TAGS: ETRD NZ
SUBJECT: NEW ZEALAND-AUSTRALIA REGULATORY AGENCY TO RAISE
INDUSTRY'S COSTS

REF: A. AUCKLAND 118
B. 03 WELLINGTON 1273
C. 03 WELLINGTON 1191
D. 01 WELLINGTON 798

(U) Classified by DCM David R. Burnett. Reasons: 1.5 (b) and
(d).

1. (C) Summary: U.S. makers of medical devices and dietary
and nutritional supplements face the prospect of additional
regulatory costs to enter the New Zealand market -- but
perhaps not as high as the industry had feared. An
Australian-New Zealand authority to regulate therapeutic
products in both countries probably will accept U.S.
certification of products, and not just European
certification, as the industry had expected. On the other
hand, the agency will aim to recover all regulatory costs
from the industry. Representatives of U.S. manufacturers
fear such costs could drive many of their products out of the
New Zealand market.

2. (U) Meanwhile, the pharmaceutical industry has endorsed
the joint authority, while worrying that the agency will ban
direct-to-consumer advertising. Such advertising has helped
a number of pharmaceutical companies to boost sales of
unsubsidized medicines in New Zealand. It has provided one
of the few means available in a highly restricted market for
pharmaceutical manufacturers to build sales for products that
consumers pay for entirely out of pocket. End summary.

New regulation
--------------
3. (U) The Australian and New Zealand health ministers signed
a treaty December 10 to set up a trans-Tasman agency to
regulate therapeutic products, including medical devices,
prescription and over-the-counter medicines, dietary and
nutritional supplements, and cosmetics and toiletries (ref
B). When the agency opens its doors in July 2005, it will
replace the Australian Therapeutic Goods Administration (TGA)
and the New Zealand Medicines and Medical Devices Safety
Authority (Medsafe). Both governments are jointly working to
establish a framework for the agency and instructions for any
necessary legislation.

4. (U) For New Zealand, the agency offered a solution to a
long-acknowledged deficiency. Medical devices and
health-care products have been virtually unregulated in the
country. Medsafe does evaluate pharmaceuticals before
allowing them on the market. An adviser to the health
ministers suggested the cost to New Zealand of participating
in the joint agency would be less than if it had tried on its
own to extend its regulatory authority to devices and other
non-drug medical products.

Higher costs
------------
5. (C) Nonetheless, the adviser, Selwyn Katene, acknowledged
that New Zealand's regulatory costs would increase
significantly under the joint agency. For example, the
number of New Zealand-based staff members needed by the new
agency would be at least double the 35 people who now staff
Medsafe. Moreover, Katene noted that all the agency's costs
would be passed on to the industry. Fees for registering
products would be set to recover the costs of regulation,
although Katene said his government recognizes it may need to
phase in such fees to alleviate the pain to industry. But
with regulation over non-drug products, Katene said, "the
industry's halcyon days are over." Many distributors of
medical devices and complementary goods expect the higher
fees to harm their sales in New Zealand (ref C). They
advocate setting fees according to the size of the product's
market, with Australia's population being five times that of
New Zealand.

6. (C) The joint authority initially had intended to require
additional documentation and possibly a quality-control audit
for products that do not have European certification yet have
U.S. Food and Drug Administration (FDA) approval. However,
Katene -- who asked that his comments July 9 not be shared
with industry -- said New Zealand Minister of Health King had
decided that requiring two certification processes was
unreasonable.

7. (C) That decision should greatly relieve representatives
of U.S. medical-device manufacturers, who have argued that
additional certification would increase the cost and time for
marketing their products. A number of representatives met
with King on June 25 and -- according to Katene -- influenced
her thinking on the issue. Katene, a New Zealander, serves
as secretary to the joint agency's ministerial council, which
is composed of the two health ministers. They will appoint
the agency's five governing board members.

Advertising's future
--------------------
8. (C) On June 17, the Researched Medicines Industry
Association of New Zealand (RMI) -- the pharmaceutical
industry association -- announced in a news release its
support of the joint agency. Lesley Clarke, RMI's chief
executive, said July 9 that the association had long backed
the concept of a joint authority, since it would provide one
point of entry for pharmaceutical companies to both Australia
and New Zealand. RMI issued the news release to bolster
parliamentary support for the agency, after the media
reported that the agency's compliance requirements could put
medical-device and complementary-goods companies out of
business.

9. (C) However, the pharmaceutical industry worries that the
new agency could mean an end to its ability to advertise its
unsubsidized prescription medicines directly to New Zealand
consumers (ref A). Australia allows only disease-based,
awareness-building advertising, with no mention of product
names. Some pharmaceutical companies have built a
significant private purchase market in New Zealand -- in one
case, as much as one-third of its sales -- as a way to
counter the limits of a system of government-subsidized sales.

10. (C) On that issue, Katene would say only that Minister
King had been instructed by the cabinet to "harmonize" with
Australia and that a decision for or against
direct-to-consumer advertising had not been made.
"Harmonization" generally has been thought to refer to New
Zealand's adopting the Australian rules, with Australia
seeing no need to change.

11. (C) Clarke said that, other than Minister King, members
of Parliament are supportive of or ambivalent about
direct-to-consumer advertising. Only Minister King appears
to be adamantly against it, joining a small doctors' group --
and no consumer groups -- that advocates a ban. Clarke
predicted that such advertising would continue to be allowed,
with a ban requiring the repeal of existing law and with
Minister King lacking her colleagues' support.

12. (C) Comment: Allowing FDA certification would remove one
potentially discriminatory barrier to U.S. products. Post
remains concerned, however, about the potential decline in
sales of U.S. medical devices and other therapeutic products
due to anticipated higher regulatory costs and about the
possibility that pharmaceutical companies -- already
constrained by New Zealand government policy -- would lose
their ability to generate private sales through advertising.
Post hopes these concerns could be conveyed in the Trade and
Investment Framework Agreement talks with New Zealand
scheduled for July 20.
Swindells

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