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### Viewing cable 06WELLINGTON475, INDUSTRY SEES HIGHER COSTS UNDER NEW ZEALAND-AUSTRALIA

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06WELLINGTON475 | 2006-06-21 23:11 | 2011-04-28 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Wellington

`

    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

`