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Cablegate: Industry Sees Higher Costs Under New Zealand-Australia

VZCZCXRO6701
RR RUEHNZ
DE RUEHWL #0475/01 1722314
ZNR UUUUU ZZH
R 212314Z JUN 06
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 2921
INFO RUCPDOC/USDOC WASHDC 0062
RUEHNZ/AMCONSUL AUCKLAND 0791
RUEHBY/AMEMBASSY CANBERRA 4458
RUEHDN/AMCONSUL SYDNEY 0448

UNCLAS SECTION 01 OF 02 WELLINGTON 000475

SIPDIS

SENSITIVE
SIPDIS

STATE PASS USTR-JJENSEN
STATE PASS FDA FOR OFFICE OF INTERNATIONAL PROGRAMS
STATE FOR EAP/ANP-DRICCI AND EB/TPP/BTA/ANA-MBGOODMAN
COMMERCE FOR ABENAISSA/4530/ITA/MAC/AP/OSAO
SYDNEY FOR CS

E.O. 12958: N/A
TAGS: ETRD ECON NZ
SUBJECT: INDUSTRY SEES HIGHER COSTS UNDER NEW ZEALAND-AUSTRALIA
REGULATORY AGENCY

REF: (A) 05 WELLINGTON 119; (B) 04 WELLINGTON 596

1. (SBU) Begin summary: Proposed rules for a new Australian-New
Zealand regulatory agency for therapeutic products will make it
costlier for U.S. makers of medical devices and complementary
medicines to operate in New Zealand, according to the manufacturers'
representatives. They contend the proposed rules, issued May 23,
would drive many of their products out of New Zealand. In contrast,
the pharmaceutical industry expects the agency would expedite the
process for obtaining marketing approval for medicines and would
save the industry in regulatory costs. Its support of the agency,
however, hinges on the New Zealand government continuing to allow
direct-to-consumer advertising of prescription drugs, which is not
allowed in Australia. Meanwhile, the government does not yet have
enough political support to pass the legislation necessary to set up
the agency. End summary.

2. (U) Australia and New Zealand signed an agreement in December
2003 to provide unified regulation of prescription pharmaceuticals
as well as therapeutic goods that have been virtually unregulated in
New Zealand, including medical devices, over-the-counter medicines,
dietary and nutritional supplements, and cosmetics and toiletries
(ref B). The proposed agency -- the Australia New Zealand
Therapeutic Products Authority -- would replace the Australian
Therapeutic Goods Administration (TGA) and the New Zealand Medicines
and Medical Devices Safety Authority (Medsafe). The deadline for
public submissions on the draft rules is August 15. The New Zealand
government is hoping to introduce legislation in July to establish
the agency and open the agency's doors in the second half of 2007.

3. (SBU) The agency's opening has been delayed a number of times
previously (ref A), and passage of the implementing legislation is
far from certain. The Labour-led New
Zealand government lacks the votes in Parliament to pass the
legislation on its own and has no support yet from any other party.
Some opponents are concerned about Australia's possible dominance of
the agency, and others are worried that it would mean higher costs
for industry and consumers in New Zealand. Proponents say that New
Zealand's participation in the joint agency would cost less than if
it tried on its own to extend its regulatory authority to devices
and other non-drug health products.

Medical devices, complementary medicines
----------------------------------------
4. (SBU) Under the proposed rules, the agency would require licenses
for all therapeutic goods and recover all its regulatory costs
through fees and charges. That would be particularly burdensome for
New Zealand's medical device and complementary medicine sectors,
which have not been required to obtain pre-market approval for their
products and pay no licensing or other regulatory fees. While the
draft rules provide for a three-year transition period for product
licenses to be obtained, industry representatives expect the fees to
be so high that they will have to seek cheaper sources -- outside
the United States -- for medical devices and complementary
medicines. They expect the fees to be similar to those already
charged in Australia, which has a population and market roughly five
times as large as New Zealand's. They predict the compliance costs
would force many smaller distributors and importers out of business
in New Zealand.

5. (SBU) The draft rules also provide that the agency would conduct
all conformity assessments for medical devices, including audits of
manufacturers and testing of products to ensure they meet relevant
standards, which also would increase the sector's costs. Medical
device representatives noted that the proposed agency would accept
European certification, but not U.S. Food and Drug Administration
certification. As one representative said, that points to the need
for a mutual recognition agreement between Australia and the United
States, which presumably would enable the joint agency to accept FDA
certification.

6. (SBU) The industry representatives said they support the agency
in principle, recognizing the need for regulation of their products
to ensure public safety. However, they were disappointed that their
years of consultations with the government about their concerns
regarding a new regulatory regime were not reflected in the
proposal. They had hoped that the government at least would set
fees according to the size of the product's market.

Prescription drugs
------------------
7. (SBU) On the other hand, the pharmaceutical industry sees the

WELLINGTON 00000475 002 OF 002


joint agency as an improvement over New Zealand's existing small and
overtaxed regulatory regime, in which obtaining marketing approval
for prescription medicines can take more than three years. The
agency also could represent a cost-savings by providing a single
point of entry for both markets, as opposed to requiring a product
license in each country. The industry is concerned, however, about
whether labeling rules and other such requirements could be met
within three years. It is advocating a five-year transition period.


8. (SBU) The drug industry also says it will withdraw support of the
agency if the New Zealand government uses it as an excuse to ban
direct-to-consumer advertising (DTCA), which some firms have
employed to boost sales of unsubsidized medicines in New Zealand's
tightly restricted market. Australia allows only disease-based,
awareness-building advertising, while New Zealand is the only
country in the world besides the United States that allows the
pharmaceutical industry to promote its products directly to the
public. (The government is reviewing its policy on
direct-to-consumer advertising of prescription medicines, in
preparation for drafting new legislation on the regulation of DTCA.
Such legislation is necessary because the law that would enable New
Zealand to participate in the joint agency also would repeal the
Medicines Act 1981, which allows DTCA.)

Comment
-------
9. (SBU) The joint agency's higher regulatory costs could lead to a
decline in sales of U.S. medical devices and other therapeutic
products in New Zealand. Failure to recognize FDA certification
also would add a discriminatory barrier to U.S. medical devices.
While the need for improving regulation of therapeutic products in
New Zealand should be acknowledged, post suggests these concerns be
raised in the Trade and Investment Framework Agreement talks with
New Zealand scheduled for July 27.

MCCORMICK

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