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