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