‘Fairness for Healthcare Technologies’: some detail on the risks to PHARMAC at last?

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Calls within New Zealand for the Trans Pacific Partnership negotiations to be conducted with at least a modicum of transparency have been denied. Our Trade Minister Tim Groser is reported as saying that calls for transparency are motivated by wish to blow the deal apart before it is signed. That is despite calls from the US, which one would have presumed is best placed to benefit if the TPPA is signed, for there to be greater transparency about negotiations which will affect millions of Americans. The New York Times points out that the usual reason for classifying negotiations as involving ‘national security information’ is to protect American security interests rather than negotiations its politicians are entering into.

The European Union has moved to increase the transparency of its equivalent trade agreement with the United States, including details about the opportunities member states will have to comment upon the details of the proposed agreement before it is voted on.

Those concerned about the secrecy of the TPPA negotiations have been particularly worried about the impact of a new agreement upon the ability of PHARMAC, New Zealand’s pharmaceutical purchasing agency, to negotiate as effectively as it has in the past. Some have gone as far to claim that the TPPA will gut PHARMAC. News items from 2011 report Trade Minister Groser as saying that the ‘fundamentals’ of PHARMAC are not on the table but that it would be foolish to rule discussion of PHARMAC out of trade negotiations.

The release by wikileaks of what appears to be a discussion document prepared for the TPPA titled ‘Fairness for Healthcare Technologies’ has confirmed that principles which will impact upon PHARMAC have been part of the negotiations. Jane Kelsey has said that the principles in this document would cripple and hold PHARMAC to ransom.

The title of the report itself raises a question, how does the idea of fairness apply to healthcare technologies? Or ‘what does fairness for healthcare technologies amount to?’ Surely fairness with respect to health care technologies only makes sense if we move to thinking about the interests of parties involved in the production, provision and use of healthcare technologies. So tax payers (in the case of New Zealand), the government and agencies such as PHARMAC, those needing healthcare and companies creating pharmaceuticals and other health technology. With that thought in mind it is interesting to see the principles the report includes, so as to form a view about whose interests are foremost in the TPPA negotiations.

PARA X.1, principle (b) does mention generic pharmaceuticals as being of importance, so far so good. But if we move to PARA X.3 which is about the procedures that a government might choose for listing pharmaceuticals there are a number of provisions that could conceivably threaten PHARMAC in the ways that critics have worried about.

(b) disclose to applicants within a reasonable, specified period all procedural rules, methodologies, principles, criteria (including those used, if any, to determine comparator products), and guidelines used to determine the eligibility for, and amount of, reimbursement for pharmaceutical products or medical devices

While this seems like a fairly benign requirement, it is one that might be very effective in the event that a PHARMAC decision to decline to list a pharmaceutical company’s product. They might reply that it’s only fair and in the interests of creating a level playing field that there is complete transparency about the basis on which such decisions are made. However, this is not, nor will it ever be, a level playing field. The resources at the disposal of large corporations to lobby, appeal, produce contradictory evidence and so on will always outstrip the modest resources of a New Zealand governmental agency. Rather than fairness in negotiating perhaps this will function to lean an already tilted board game so far that all of the pieces fall into the lap of the biggest player.

(c) sound economic incentives and the operation of competitive markets, or the adoption or maintenance by a Party of procedures that appropriately value objectively demonstrated therapeutic significance of high quality patented and generic pharmaceutical products and medical devices, for the efficient development of and access to such products and devices.

I am puzzled by what ‘objectively valued’ might mean in this context. One way to judge that would be by looking at the price of pharmaceuticals within a global marketplace, but surely that might amount to an argument for New Zealand paying more than we already are. ‘Party’ in (d) refers to agencies such as PHARMAC.

(d) ensure that the Party’s determination of the reimbursement amount for a pharmaceutical product or medical device has a transparent and verifiable basis consisting of competitive market-derived prices in the Party’s territory, or an alternative transparent and verifiable basis consisting of other benchmarks that appropriately recognize the value of the patented or generic pharmaceutical products or medical devices at issue

The thought seems to be that the prices PHARMAC negotiates should be ‘competitive market prices’ or other benchmarks that ‘appropriately recognise the value’ of pharmaceuticals or devices. Given that PHARMAC negotiates with corporations about which products they will list and at what price, why should any other price setting deliberation enter into this apart from what PHARMAC will pay and what the corporation will provide it for? There is something very counter intuitive about very powerful companies needing additional principles to strengthen their arm when it comes to negotiations and something incoherent about it being in an agreement that is ultimately supposed to be about free trade. The relationship of these principles to fairness is puzzling, the only interests promoted here are those of the pharmaceutical and health care technology companies. That’s not fairness.

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3 thoughts on “‘Fairness for Healthcare Technologies’: some detail on the risks to PHARMAC at last?

  1. The contradictions in this whole issue are hallmarks of the current administration: what we see is, on the one hand, a wish to (be seen to) participate widely in the free market whilst retaining fairly tight control over the domestic consequences. That’s pretty apparent in the tension between what you identify as the negotiation of competitive market prices and the appropriate valuation of goods. To me, those are at opposite ends of economic models: on the one hand, prices are established via the free market model; on the other, there is some ‘appropriate’ value that inheres to a good that must be regulated in some way.
    You are puzzled by what ‘objectively valued’ might mean–to be clear, the reference in the para is to ‘appropriately valu[ing] objectively demonstrated […random policy speak…] products.’ Once more, there is a sense that there is some means of objectively demonstrating the worth or value of a good; although I *think* what they are trying to say is that the effectiveness of the product has been objectively (whatever that means) demonstrated. In practice, what this really means is that the worth of something is that which can be readily seen to contribute to the balance sheet: higher value goods are, in this model, objectively better.
    The fairness referred to in the policy really relates to the ability of companies to ‘fairly’ trade: that is, that they will not waste large amounts of money on R&D when there is not a relatively assured market. I think it’s important not to confuse ‘fairness’ in the colloquial sense with the meaning inferred in international trade negotiations: a free market simply means to ensure that the market is sufficiently open and profitable to the corporates, not that there is any attendant fairness to the consumer (that, in itself, is mediated through Pharmac).
    All this, it has to be said, is pretty standard in drafting legislation and regulatory policy these days: giving the impression of a consumer/free market focus whilst ensuring the power is kept in the hands of ministers (because of a general fear that ceding power will lead to ill-informed halfwits messing things up with our wealthy overseas ‘partners’ whom we must, at all cost, honour and follow: the sheep in question aren’t just those on their way to Mexico and Saudi).

  2. Hi Clare, thanks for these thoughts.

    On ‘appropriately valuing objectively demonstrated clinical significance’, yes you’re quite right that does seem to imply something different from objectively valuing. The operator ‘objectively’ is still troubling when applied to clinical significance, but less odd that it would be in the case of ‘value’.

    On the ‘fairness’ point. Yes, I can see that when applied to this context it would have more to do with a trade environment which is free from ‘unfair’ intervention. Extending that to the impact of a less restricted trade environment upon consumers, tax payers etc might be stretching the sense a little too far. What struck me about the terms used in the annex, and they are very much the observations of someone who rarely looks at documents produced for negotiations such as this, is that the terms used are very familiar from debates about fairness and healthcare systems. The Daniels and Sabin ‘accountability for reasonableness’ frame work has been influential in the US, UK and other countries. Their basic point is that the grounds on which we decide which treatments are to be funded are so arguable that is essential we have an account of what ‘procedural justice’ amounts to here. They claim that transparency and decisions being open to revision in the light of appeals are important. So, the way in which the wording of the annex aligned with this influential work made me wonder if whoever wrote it was consciously referring to considerations that have a grounding in the literature, and could be used to mount arguments in its favour. I have no idea whether reports such as this are written by policy people within a ministry or whether the wording might result quite directly from stakeholders.

    For what its worth, I’m skeptical about ‘accountability for reasonableness’ and also wonder whether this might be a good illustration of how it can be applied in ways that might not lead to a fair negotiation or outcome. I think there are strong arguments for Pharmac continuing to hold its cards close to its chest when negotiating with such powerful companies.

  3. Pingback: TPPA – it’s Taking People’s Power Away | The Green Lips

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