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### Viewing cable 05WELLINGTON577, NEW ZEALAND AIMING TO STEM SALE OF PRESCRIPTION

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
05WELLINGTON577 | 2005-07-29 01:01 | 2011-04-28 00:12 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Wellington

`

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

` `

    UNCLAS SECTION 01 OF 02 WELLINGTON 000577

    SIPDIS

    DEPARTMENT FOR EAP/ANP-TRAMSEY, EB/TPP/IPE-BSOILA AND
    EB/TPP/BTA/ANA-RARMSTRONG
    STATE PASS TO USTR FOR LCOEN
    COMMERCE FOR 4530/ITA/MAC/AP/OSAO/ABENAISSA

    SENSITIVE

    E.O. 12958: N/A
    TAGS: ETRD ECON KIPR NZ
    SUBJECT: NEW ZEALAND AIMING TO STEM SALE OF PRESCRIPTION
    DRUGS BACK TO U.S.

    REF: (A) WELLINGTON 119; (B) 04 WELLINGTON 1037

    ¶1. (SBU) Summary: With selected medicines much cheaper in New
    Zealand than in the United States, efforts are under way to
    impede the ability of Americans to purchase prescription drugs
    from New Zealand.  The New Zealand Ministry of Health is
    tightening the law to prevent doctors from prescribing medicines
    to non-New Zealanders.  Both the New Zealand agency that decides
    which medicines are publicly funded and its usual nemesis, the
    pharmaceutical industry, are working on other plans to counter
    any flow of prescription drugs back to the United States.  End
    summary.

    Affordable and safe
    -------------------
    ¶2. (U) Hard bargaining with pharmaceutical companies by New
    Zealand's national health care system ensures that its
    pharmaceutical prices are among the lowest in the OECD.  Under
    that system, the Pharmaceutical Management Agency (PHARMAC)
    decides which medicines will be subsidized by the government and
    how much reimbursement will be paid for each pharmaceutical (ref
    B).  The agency's bulk drug purchases account for 73 percent of
    prescription drug expenditures in New Zealand.  PHARMAC's
    practices result in prescription drug prices that are roughly 40
    percent less than those in the United States.  The perception
    that New Zealand maintains high safety standards for medications
    makes its more affordable drugs even more attractive to U.S.
    consumers.

    ¶3. (U) So far, however, only a trickle of U.S.-made drugs is
    brought to New Zealand and then re-imported back to the United
    States, according to PHARMAC and the industry.  That amount is
    expected to remain insignificant.  In fact, until recently, the
    New Zealand government assumed that it would be nearly impossible
    for U.S. consumers to make retail purchases of prescription
    medicines from New Zealand.  The Medicines Act 1981 allows
    doctors to prescribe medications only to patients under their
    care, and regulations that took effect in November 2000 forbid
    pharmacists from selling drugs overseas to any individual who
    does not have a prescription from a New Zealand doctor.
    (Previously, only the sale of prescription drugs to New
    Zealanders without a prescription was illegal.)  The regulations
    also extend the Medicines Act restrictions to drug sales over the
    Internet.

    ¶4. (SBU) However, in a recent case against a doctor who wrote
    bulk prescriptions over the Internet, the court broadly
    interpreted whether the patients were "under his or her care" and
    acquitted him of breaching the Medicines Act, according to Kevin
    Moar of the Ministry of Health's Sector Policy Directorate.  The
    government has appealed the decision to the High Court.  (The
    government has successfully prosecuted three Internet-based
    operations under the Medicines Act for retail sales of
    prescription medicines to overseas buyers without a prescription.
    One pharmacy's overseas sales accounted for 70 percent of New
    Zealand's Viagra allotment in 2002.)

    ¶5. (SBU) Moar said the Ministry of Health is working to change
    the law to restrict doctors to prescribing medications only for
    patients who are physically present in New Zealand or for New
    Zealand residents who are temporarily traveling overseas.  The
    amended law is expected to prevent retail sales of prescription
    medicines at subsidized prices to overseas consumers.  The
    government has set a deadline of July 2006 for the law to be
    changed, as part of an amendment that also would allow the
    startup of a joint Australia-New Zealand agency to regulate
    therapeutic products in both countries (ref A).

    ¶6. (U) Meanwhile, the amended law would not prevent re-
    importation of over-the-counter medicines or of prescription
    drugs sold wholesale, or at non-subsidized prices.  Wholesale
    prices for newer drugs are generally not that different in New
    Zealand and the United States.  However, wholesale prices for
    older drugs -- especially those older than 10 years -- and for
    over-the-counter medicines are much lower in New Zealand,
    according to PHARMAC's chief executive officer, Wayne McNee.  New
    Zealand pharmacies with wholesale licenses can sell medicines
    directly to the United States.

    A watchful eye
    --------------
    ¶7. (SBU) To counter such sales at the wholesale level,
    pharmaceutical companies in New Zealand have been modifying their
    contracts with wholesalers, restricting their onward sales only
    to New Zealand.  Pfizer, for example, altered its wholesalers'
    contracts after detecting substantial quantities of its drugs
    being sold from New Zealand to Asia.  If the industry were to
    discover large flows of its products being re-imported back to
    the United States, McNee fears it would restrict pharmaceutical
    supplies in New Zealand and raise their prices.  The drug
    companies certainly are monitoring pharmaceutical exports out of
    the country and "will move to protect themselves" if the problem
    becomes significant, said Lesley Clarke, chief executive officer
    of the industry association Researched Medicines Industry of New
    Zealand.  Meanwhile, she said, the industry considers a change in
    the law as the best way to prevent re-importation.

    ¶8. (SBU) McNee said PHARMAC stands ready to respond if re-
    importation causes pharmaceutical companies to cut the supply or
    boost their prices of prescription medicines in New Zealand.  In
    contracts with pharmaceutical companies, PHARMAC would increase
    the use of rebate arrangements.  Such contracts would stipulate
    that a drug would be sold at New Zealand pharmacies at what
    effectively is the international price, but that the drug company
    would reimburse PHARMAC for a set portion of that price.  This
    arrangement would preserve the agency's cost-savings, while also
    discouraging exports of the drug since its retail price in New
    Zealand would match that in the United States.  PHARMAC's use of
    rebates has increased dramatically in recent years, according to
    Stuart Bruce, communications and external relations manager for
    PHARMAC.  For example, rebates rose 29 percent over the past
    year, from NZ $80 million (US $54.5 million) to NZ $103 million
    ($70 million).

    ¶9. (U) The Medical Council of New Zealand, which registers
    doctors to practice medicine in New Zealand and monitors their
    standards and conduct, also is hoping to strengthen its
    guidelines for the prescribing of medications.  Its current
    guidelines mirror the Medicines Act in specifying that a doctor
    should prescribe medicines only to patients "under his or her
    care" and only to patients with which the doctor has had at least
    one face-to-face consultation.  Tania Turfrey, the council's
    registrar, said that although several doctors have violated those
    guidelines, no doctor has been disciplined under them.  She said
    the council plans to rewrite the guidelines later this year to
    include a stronger statement on the ethical dispensing of
    medicines.

    ¶10. (U) Comment: Normally, the government and the pharmaceutical
    industry are at odds, disputing pharmaceutical pricing policies
    that the government touts as reducing its citizens' health-care
    costs and that the industry says are denying it adequate return
    on its investment.  In this case, however, both agree on the need
    to prevent the re-importation of pharmaceuticals from New Zealand
    back to the United States.  While the government does not
    consider this issue to be significant yet, it is poised to act if
    its pharmaceutical supplies and prices are affected.

    BURNETT

`