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### Viewing cable 04WELLINGTON596, NEW ZEALAND-AUSTRALIA REGULATORY AGENCY TO RAISE

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
04WELLINGTON596 | 2004-07-13 04:04 | 2011-04-28 00:12 | CONFIDENTIAL | Embassy Wellington

`

    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

`