Gordon Campbell on the TPP revelations about Pharmac

The health system transparency measures contained in the latest Wikileaks revelations about the TPP have been a long running concern. The fact that the Pharmac-related transparency measures would entail a cost to the government was being grudgingly conceded in December 2013 at least:

The Government had committed to protecting the fundamentals of the Pharmac central drug-buying agency in the face of changes sought by the United States.

However [Trade Minister Tim Groser] would not rule out some extra cost to the Government to meet so-called transparency rules on Pharmac that would allow drug companies to challenge Pharmac’s decisions. That could require new regulations and there could be a cost involved with that.

The potential costs go well beyond the mere enactment of regulations. In an article called “ The Neutering of Pharmac” in the November 2012 issue of Werewolf, I interviewed the Australian academic Dr. Deborah Gleeson of La Trobe University about how the transparency rules that lay Pharmac’s operations open to legal challenge would be likely to impact on the organisation. Basically, the transparency measures could be used by well-heeled pharmaceutical companies to cripple the organisation by attrition in the courts –and/or render Pharmac so gunshy of being challenged that caving in and buying the latest wrinkle on a drug treatment would be preferable to a costly legal battle over whether the added benefit for the drug in question did or didn’t justify the price being asked, relative to other treatment options or priorities.

As I pointed out in the November 2012 article, the TPP negotiations are occurring at a time ripe with lucrative pickings for the pharmaceutical industry:

As the baby boomers retire, governments around the world are facing possible blowouts in their budgets for essential medicines. To the pharmaceutical lobby, the risk is exactly the opposite – if they fail to achieve a purchasing regime that satisfies them, they stand to miss out on a golden profit opportunity over the next few decades. Both sides therefore, have a keen interest in the outcomes of the Trans Pacific Partnership (TPP) trade deal with respect to drug evaluation, approval and pricing –

In the Werewolf article, Kevin Sheehy of Medicines NZ – the drug companies’ lobbying arm – identified Big Pharma’s prime concern about Pharmac’s usual modus operandi. Was Sheehy’s main complaint with Pharmac that it pays too little for the drugs that it buys, or that it doesn’t buy a large enough range of them?

Sheehy : “Its more about the range. And buying new products on a regular basis. The pricing, I think, we’re relatively accepting of… It is more about that we would like more new products to come on-stream sooner.” His submissions have sought to identify bottlenecks in that process.

What may these be? Essentially, Big Pharma has identified three bones of contention. The first of these had to do entirely with the transparency measures:

When it comes to the clinical approval and purchasing decisions made by the likes of Pharmac (and its clinical advisory panel, PTAC) the drug companies want to establish (a) more clinical inputs beforehand (b) more opportunity for appeals against clinical and funding decisions afterwards and (c) more robust avenues of compensation for any undue delays.

In summary, the beef that that US drug companies have with Pharmac is that it routinely (a) under-invests in innovative prescription medicines (b) makes unpredictable funding decisions (c) pays insufficient heed to the clinical experts on its PTAC expert panel and (d) operates in a non-transparent way. Guilty as charged on all counts, Sheehy confirmed when that summary list of grievances was read to him. If the TPP renders any or all of those grievances liable to legal challenge – either directly or via investor state dispute procedures – Pharmac’s effectiveness would be comprehensively gutted, and New Zealand’s medicines bill would escalate significantly.

The political question right now is : what extra costs has the government estimated will accrue from the transparency measures being mooted within the TPP ? The Key government has had plenty of time to calculate what these costs might be, given that Groser began talking publicly about making Pharmac more transparent back in late 2012, on the eve of the TPP round that was held in Auckland. There should be a ballpark figure at least by now, two and a half years later.

Like ‘ efficiency’ the term ‘ transparency” is a buzzword that sounds benign. In practice, it would not be. The transparency measures being sought would be trying to hobble Pharmac’s ability for instance, to carry out therapeutic reference pricing. Pharmac uses therapeutic reference pricing to link the prices it pays for new drugs to medicines that are already being subsidized, if they happen to have similar therapeutic effects. “So that’s an important mechanism for keeping costs down,” Gleeson said, “and for making sure that if new medicines are priced higher than existing medicines that are available, that is because they have additional clinical benefit.”

Wording then becomes crucial. In the 2005 Australia /US Free Trade Agreement, Australia managed to retain reference pricing by dint of inserting a clause about re-imbursement being based on ‘objectively demonstrated therapeutic significance.’ In earlier TPP drafts that phrase, Gleeson told me, was in the Annex, but not in the part of the text to do with how the re-imbursement amount is determined. “[Instead] there is some wording in the text about how the amount should be determined on the basis of ‘competitively derived market prices’, or alternative benchmarks that ‘appropriately recognize the value of patented or generic pharmaceutical products.’ But there’s no mention of therapeutic significance in that [re-imbursement] part of the text.”

Again the political question would be : in his efforts to protect Pharmac and its operations, has Groser ensured that Pharmac’s purchasing and re-imbursement policies are based on “ objectively demonstrated therapeutic significance” – and not on ‘competitive market prices’, or on an ‘appropriate’ recognition of value ; which if adopted, would be criteria that would leave Pharmac wide open to legal challenge.

Are there reasonable grounds for concern within the TPP process that US negotiators have been busily devising a system whereby their ability to intrude on Pharmac’s decision-making – and to sue if it doesn’t deliver the outcomes they prefer – will become entrenched? “Yes,” Gleeson said. “ And there could also be a chilling effect. If Pharmac is concerned about the possibility that the pharmaceutical industry could contest its decisions, then that could have an impact on the decisions that are made as well.”

Best, So Far

For me anyway, Frances Quinlan’s band Hop Along has been the top discovery of the year to date. Here’s “Waitress” (from their just-released second album Painted Shut) plus a live version of the “Sister Cities” track. They’re from Philadelphia, with Frances on vocals, her brother Mark on drums, Joe Reinhart on guitar, and Tyler Long on bass.

Besides the quality of the songwriting – “I Saw My Twin” is another highlight among six or seven solid tracks on Painted Shut – Frances’ fearless vocals are what really sets the band apart. With that in mind, here she is doing “Dancing With Myself” with just her guitar on a couch way back in 2008, when the group was known as Hop Along, Queen Ansleis.

From around the same period, here she is singing the “ Bruno Is Orange” track from their first EP. This is a live version recorded on the front lawn, with her friends and relations gathered around her in a semi-circle, trying to do the harmonies. Sure looks like fun.

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