US embassy cable - 05WELLINGTON119

UNCLAS SECTION 01 OF 02 WELLINGTON 000119 
 
SIPDIS 
 
STATE PASS USTR FOR BWEISEL AND DKATZ 
STATE PASS FDA FOR OFFICE OF INTERNATIONAL 
PROGRAMS/RUSSELL CAMPBELL 
STATE FOR EAP/ANP AND EB/TPP/BTA/ANA 
COMMERCE FOR 4530/ITA/MAC/AP/OSAO/GPAINE 
 
SENSITIVE 
 
E.O. 12356: N/A 
TAGS: ETRD, NZ 
SUBJECT: NEW ZEALAND AND AUSTRALIA DELAY STARTUP OF JOINT 
REGULATORY AGENCY 
 
REF: 04 WELLINGTON 596 
 
1. (SBU) Summary:  New Zealand and Australia have agreed to delay 
the startup of a joint agency to regulate therapeutic products in 
both countries, after encountering difficulty in lining up 
political backing for legislation necessary to set up the agency. 
In New Zealand's case, that difficulty partly arises from the 
coming national election.  An adviser to New Zealand's health 
minister fears a delay until after this year's election could 
doom the trans-Tasman effort and force New Zealand to upgrade its 
own regulatory regime, at a much higher cost.  Meanwhile, the 
industry believes itself to be in a stronger position to 
influence the government to address its concerns about the 
agency's fees and certification requirements.  The New Zealand 
government -- often criticized by business for having a tin ear 
to its concerns -- may have to pay heed to industry this time. 
End summary. 
 
2. (U) The trans-Tasman agency had been scheduled for launch July 
1 and now could be delayed until July 1, 2006, although it might 
start earlier.  It would regulate prescription pharmaceuticals as 
well as other therapeutic goods, including medical devices and 
health-care products that have gone virtually unregulated in New 
Zealand (reftel). 
 
3. (U) In New Zealand, industry's support for the joint agency 
has been conditional.  U.S. manufacturers of medical devices and 
complementary medicines want the agency's costs to be addressed, 
contending that the current plan to charge full cost-recovery 
fees would harm their sales and put some of their distributors 
out of business in New Zealand, where low operational costs have 
allowed for generally lower prices than in Australia. 
Pharmaceutical companies want assurances that the agency will not 
be used as an excuse to ban direct-to-consumer advertising, which 
some firms have used successfully in New Zealand.  Such 
advertising is prohibited in Australia and personally opposed by 
New Zealand Minister of Health Annette King. 
 
4. (U) Medical-device representatives also fear higher costs if 
the agency follows through with plans to exclusively conduct all 
conformity assessments -- audits of manufacturers and testing of 
products to ensure they meet relevant standards.  Such plans 
would give the agency monopolistic powers, accompanied by 
monopolistic costs, the representatives say.  The agency also 
presumably would follow the Australian practice of accepting CE, 
or European, certification.  The plans leave unresolved how the 
agency would handle products having U.S. Food and Drug 
Administration certification but not CE certification. 
 
5. (SBU) With New Zealand's Labour government lacking sufficient 
strength in Parliament to pass the implementing legislation 
alone, it is turning to the industry for help in recruiting 
support from the ranks of opposition parties.  On January 24 and 
February 10, Minister King made a pitch for help at meetings with 
representatives of the pharmaceutical, medical devices, over-the- 
counter medicines and complementary medicines sectors.  The 
representatives termed the meetings the "most positive" they have 
had with the government since their discussions on the agency 
began in 1998.  With the government now acknowledging that it 
needs the industry's backing, the representatives hope to take a 
tougher line in pushing their concerns, whose resolution would 
allow them to fully support the agency. 
 
6. (SBU) Meanwhile, an adviser to Minister King said that the 
delay in the agency's startup could jeopardize its future, 
especially if legislation is not approved before the next 
national elections, which must be held by September.  For 
example, Labour's ability to form another coalition government 
may depend on support from the Green Party, which adamantly 
opposes the agency because of fears about the loss of sovereignty 
and the effect on consumers' health choices and access to dietary 
supplements. 
 
7. (SBU) Unable to agree on a joint statement on the delay, the 
New Zealand and Australian governments issued separate 
statements.  The statements were released February 9 in Canberra 
and February 10 in Wellington.  According to Minister King's 
office, Australian Parliamentary Secretary for Health Christopher 
Pyne opposed Minister King's desire to state that the agency's 
governance and accountability arrangements would be included in 
the legislation rather than in regulations alone.  (Minister King 
did not mention the issue in her statement.) 
 
8. (SBU) Comment: The dispute is emblematic of the difficulties 
both governments face in attempting to harmonize their economies, 
a goal of the Closer Economic Relations arrangement begun in 
1983.  The issue of "sovereignty" is extremely sensitive for the 
relatively small New Zealand, just one-fifth the population of 
Australia.  Hence, Minister King would like the joint agency's 
governance arrangements enshrined in legislation to address this 
sensitivity.  (Australian officials have griped privately that 
New Zealand will have an equal number of representatives on the 
agency's board, while Australia would shoulder most of the 
startup costs.) 
 
9. (SBU) The New Zealand government is also reportedly nervous 
that Australia might become impatient and look elsewhere for a 
partner.  Australia, which is said to be seeking to position 
itself as a hub for regulatory services in the Pacific region, 
has held discussions with Canada on a possible joint regulatory 
agency. 
 
SWINDELLS