International Treaty Examination — Agreement between the Government of New Zealand and the Government of Australia for the establishment of a Joint Scheme for the Regulation of Therapeutic Products

I move, That the House take note of the report of the Health Committee on the international treaty examination of the Agreement between the Government of New Zealand and the Government of Australia for the establishment of a Joint Scheme for the Regulation of Therapeutic Products. I think it is valuable to give a bit of background to this, and remind members in the House tonight that this is simply the report back on the treaty. It is not a report back on the inquiry, and it certainly is not a report back on the implementing legislation, which is still to be tabled in this House. So it is in a rather peculiar position that we are debating tonight, because there is not a lot to debate. We do not have the implementing legislation, where the rigour of the recommendations of the select committee inquiry report, of which there were 34 recommendations, and the discussions between the New Zealand and Australian Governments—through both the therapeutic goods agency and Medsafe—are now progressing on developing the rules and orders.

But I go back to 2000, when the joint agency was proposed by Ministers of the Crown, which then enabled the New Zealand Government to decide that it was not proceeding with the New Zealand Healthcare and Therapeutic Bill. With the development of talks about a new agency, the need for a New Zealand - only bill to look at regulating complementary medicines became redundant.

After this, a discussion document was put out by Medsafe, for the Ministry of Health, and I have to say that in that time, from just a discussion document on the joint agency, much misinformation, many fears, and many concerns of those in the complementary health-care medicine sector were stirred up. We would go into places around the country and find people wearing black armbands, saying: “We don’t want this agency.”, but they did not know why. They did not know that the proposal was for an entirely new construct of an agency; not an agency based on the model of Food Standards Australia New Zealand, which is another agency that regulates food safety between Australia and New Zealand. This was an entirely new approach.

They did not understand that at all, but they were told by some in the House to vote against it. They did not understand it, and they were told to vote against it because it was going to restrict their choice to complementary medicines—which was not something that had even been considered. They were told that if they went into a health-care shop, they would pay substantially more for their complementary medicines, which the community believes it has the right to take at its own risk, and we would not argue with that.

So this was just a discussion document, but it did stir the industry up, and it stirred up the Opposition to demand an inquiry, which I think was quite valuable. We held the inquiry in 2002, and it was held at the same time as the process between the two Ministers was continuing. Many on the committee did not understand and felt that because an inquiry had been called for by the Health Committee, the Ministers of both countries should stop the work they were doing on a proposed joint agency. That was patently absurd. No moratorium was ever declared on that work in progress with both ministries.

The treaty examined by the select committee was another interesting bite at the cherry, and another opportunity for those who were opposed to the agency to stir the public up again and come in with the same rhetoric, fears, and prejudices about what was proposed. The treaty covered only the establishment of this unique and innovative arrangement for a new agency. It covered only the structure of the establishment of the agency with a ministerial council, with the Minister of Health of New Zealand and the Federal Minister for Health of Australia on equal footing for establishing the rules and the standards in delegated legislation. We did get—and I think this was very valuable—some sound advice from the Regulations Review Committee, which is forever the watchdog of the development of legislation. Its advice and recommendations will be really valuable in the drafting of any implementing legislation.

The board of the new agency, of which there are five members, will be the operating arm of the agency. It will be led by a managing director with powers consistent with those of a chief executive officer of any State-owned enterprise in New Zealand. They are not unbridled powers. We heard that term all the time—that this managing director will have unbridled powers. The powers are actually commensurate with those of a chief executive officer.

The agency will have accountability to both countries. The treaty is not the instrument to provide that clarity. During the select committee review process of the treaty, it was frustrating that members who still do not understand the construct of this new agency tried to find the clarity in the treaty. Treaties do not set up the powers and the orders; they are merely the instruments to set up the enabling structure for the powers and orders to be written, and they are only now being written.

We did get advice from the Regulations Review Committee about delegated legislation, and that was something about which we all felt very keenly, and Mr Richard Worth will be very pleased we did. We had very good advice from Debbie Angus and from the Regulations Review Committee that our delegated legislation would need to comply with New Zealand principles.

There was opposition yet again to this model, and it was felt that the matters that were proposed should be covered by rules and should be in primary legislation. What the members who proposed this do not understand, though, is that they do not know how those matters will fit into the implementing legislation. There was a fear that the back-pocket legislation had already been drafted and would be slam-dunked on to the table.

The Regulations Review Committee also highlighted for us that there are different approaches between Australia and New Zealand on the disallowance procedures, and that we had to be aware of those while drafting the legislation. We did not agree with the Regulations Review Committee that rules and orders should be amended by the House. They should be agreed to by both Governments.

A lot of fear was whipped up that we could have less representation, and therefore we would lose our sovereignty. I cannot imagine a Minister of Health—now or in the future—ever signing away the sovereignty of our New Zealand way in a new agency.

We were also concerned about compliance costs. Again everybody who was opposed to this came up with the rhetoric that it would cost more and, yes, for complementary medicines, we did hear that costs of $3.1 million will be transferred to the industry, but nobody who came before us said that we did not need regulation in this field. The main driver of the agency is to protect community safety, and there are risks with those products.

It was amazing to hear the fearmongering on this from the Opposition, in particular from the Greens. I hope they feel happy when they see the implementing legislation, because we are proceeding with this, and it will require the amendment or the revocation of the Medicines Act of 1981, and amendment to the medicines and dietary supplement regulations.

In conclusion, it is sad to see that the bulk of responses came from consumers, health practitioners, and industry players from the complementary medicines sector, who did not appear to be commenting on the proposals in the discussion paper or the treaty, but were reacting to the misinformation being circulated during the consultation period. They claimed there were no risks from, and therefore no need to regulate, complementary medicines. They were fearful of increasing prices and decreasing product choice, and they objected to decisions being made by an Australian bureaucrat about which products they could access.

I am now confident that with the treaty in place, and with the Minister’s oversight and leadership on the development of this unique agency, all those fears will be dispelled.

The National Party has for a long time supported closer economic relations with Australia, and for a long time we have supported encouraging our businesses to enjoy a larger market. In fact, this very afternoon I was with the Hon Hugh Templeton, one of the originators of Closer Economic Relations, who has been a great enthusiast for Australia and New Zealand developing an environment where each other’s businesses can make the most of a larger market. But when we look at the international treaty examination of the agreement between the Government of New Zealand and the Government of Australia for the establishment of a joint scheme for the regulation of therapeutic products, we see a Labour Government that simply has not listened to its own Health Committee or even its own members of the Health Committee, let alone the large number of submitters who are deeply concerned about the compliance costs potentially placed on New Zealand businesses, particularly small and medium-sized businesses, which make up the backbone of our economy. This is very much the hallmark of an arrogant Labour Government that has simply stopped listening. We have had two reports. One was from the select committee, advocating that the Government not go ahead with it. Yet, despite that, it has signed a treaty. It has consistently not listened.

It is worthwhile going through the various aspects of the Health Committee’s report, and the history, indeed, is important. Both Medsafe and Therapeutic Goods Administration in Australia released a joint discussion paper in 2002, which attracted more than 1,600 responses from various firms and New Zealand businesses. What happened? We learnt that the select committee’s main finding was that the proposal to regulate complementary health-care products jointly with Australia should not proceed. So what did the Government do? It went ahead and signed the treaty. It did not listen to the 1,600 submissions. The report goes on to state: “This option was not supported by the Government in its response to our report. Many of our concerns remain unresolved. … Some of us are concerned that the Government signed the agreement with Australia before we had even tabled the report on our inquiry into how best to regulate dietary supplements.” Well, if ever there were an example of a Government that after 5 long years has simply become arrogant and has simply stopped listening, it must be this Labour Government. It is time it went. It has a maximum of only 12 months. If ever there were a Government that stopped listening, it has to be this Labour Government.

Let us have a look at the scope of the joint agency itself, because it includes medicines, medical devices, and complementary health-care products. Also, in May this year, it was announced that the joint agency would also regulate blood, blood products, and blood components. I personally have no problem with that at all, but I do have great concerns when I see Pharmac in its submission noting considerable worries about the joint agency proposal, including possible increases in the costs of generic drugs, particularly for small-market products, and possible increases in patent terms of medicines. In its written submission, it suggested that the flow-on effect of the free-trade agreement between Australia and the United States of America could amount to between $85 million and $135 million over 3 years. That has to be a very serious submission. It does make one worry greatly when the Government has gone ahead, signed the treaty, and said: “Don’t worry. Trust us. We’ll bring out the legislation.”, and when Pharmac, an organisation that has served New Zealand very well, is bringing up some very serious concerns.

The committee went on and said that Pharmac noted that the increase to the estimated cost in fees and charges incurred by the New Zealand industry would be $20 million. Of the total, we also note that the national interest analysis refers to costs borne by the Crown under New Zealand’s regulatory regime. Of the total $4.2 million currently funded from the Crown revenue, $1.1 million would remain as an ongoing cost to the Crown, but the remaining $3.1 million would, under full cost recovery—the mechanism preferred—transfer to industry as part of the estimated $20 million.

I think it is relevant to look back at that initial report of the committee that inquired into the proposal to establish the trans-Tasman agency in the beginning. It reported back in December 2003. What did it say about compliance of the joint agency proposal with regulatory guidelines? It said that the Government, before it makes any decisions on the proposed trans-Tasman agency to regulate therapeutic products, will ensure that it demonstrates that all its requirements in respect of best regulatory practice have been fully complied with, including the five principles and guidelines—efficiency, effectiveness, transparency, clarity, and equity—set out in the 1997 code of good regulatory practice administered by the Ministry of Economic Development. Has the Government done that? No, it has not. It has not even bothered to follow the code of good regulatory practice and its five principles that must be basic to any legislation that is formulated.

💬 Hon Damien O'Connor: What a load of rubbish!

I hear from across on the Government side that this is a load of bollocks. It is not a load of bollocks. It is absolutely important, if we are to go into a joint agency of this nature, that these basic things of sorting out good regulatory practice are worked out before we enter into it, and the Government has failed in that respect. The report goes on and states that the Cabinet Office and Ministry of Economic Development requirements relating to regulatory impact statements and business compliance cost statements should have been sorted out. They have not been sorted out. In fact, they were very defective, and the select committee drew attention to that in its report.

In terms of the structure of the joint agency, the point is made that the treaty provides for a unique and innovative arrangement between New Zealand and Australia, and we in National are not necessarily opposed to that. We see that compared with the Food Standards Australia New Zealand agreement, on this occasion there is an equal sharing of power at the top of the agency, which is far better than the Australian states totally outweighing New Zealand in terms of the balance of power. However, we are concerned about some of the other arrangements, and we note that the agency is intended to be accountable to both Governments and will be broadly structured on product type. It will be headquartered in Canberra, but there will be offices in both New Zealand and Australia.

Only last Friday I was visiting both Nutra-life Health and Fitness (NZ) Ltd and Healtheries, both companies that have paid great attention to good manufacturing practice. They asked why one of the offices—particularly the one to do with complementary medicines and health-care products—could not be in New Zealand to balance the situation. There is a suggestion—and I see the Minister shaking her head. Is she listening? Let us hope she is, because this is a reasonably positive and constructive suggestion to balance the situation.

Then we go on to legal issues, and indeed there are a number of legal issues relating to the joint issues and delegated legislation. I must point out that the report of the Regulations Review Committee raises two key concerns. The first is that some of the matters proposed to be dealt with in the rules are matters of policy and principle and ought to be in primary legislation. I point out that the chairman of that committee, Richard Worth, did an excellent job.

On behalf of New Zealand First, I rise to speak to the report of the Health Committee on the international treaty examination of the agreement between the Government of New Zealand and the Government of Australia for the establishment of a joint scheme for the regulation of therapeutic products. As the select committee report states, New Zealand First is opposed to the treaty agreement, particularly as it pertains to therapeutic products. This treaty, and the subsequent signing of it, has been beset with problems right from the very outset when the main finding of the Health Committee inquiry into the proposal to regulate complementary health-care products jointly with Australia was that it should not proceed.

In the report we note that there are a number of legal issues that relate to the joint agency. The agency will be established and have legal status under Australian legislation, and this raises further questions about how New Zealand’s interests will be protected. I was quite surprised to see that the Government did not support the first report that was issued by the Health Committee. New Zealand First agrees that there needs to be some regulation in the health-care industry. I think that most New Zealanders would be totally unaware that complementary health-care products are currently unregulated. We agree that consumers must have confidence in the products and that the ingredients claimed to be within those particular products are actually contained within those products.

Like my colleague, I was very fortunate to spend some time at the Healtheries and the Kordels manufacturing plants in Auckland. I was very pleased and impressed with the rigorous testing regime that occurs before any of their products are manufactured. The continual checks during production and the quality process are a whole part of the entire manufacturing process. These two manufacturers and their consumers can be totally assured of the safety, the quality, and the efficacy of all their products. It was very impressive to see the level of care in all their products.

💬 Hon Annette King: That’s the Australian standards.

Although it may be an Australian standard, it can be implemented here in New Zealand. New Zealand First believes that this, too, is a sovereignty issue. We do not want to have the New Zealand role in this agency reduced to that of an Australian state, and that was noted in the legal issues part of the report that came back from the Health Committee. It is an insult to New Zealand, particularly when we are not even a state of Australia. It is also an interesting fact that some of the Australian states do not follow the highly prescriptive regime that Australia wants New Zealand to follow as a result of this treaty. So, definitely, some questions need to be asked there. Why should this new agency impose this rigid regulatory regime on New Zealand? People usually have to get their own house in order before they start on someone else’s house. Matters of policy and principle that should be dealt with in the New Zealand Parliament should not be dealt with in an agency that has been set up in Australia. That must undermine our sovereignty, even if we do have a branch set up here in Wellington.

We are also concerned that the complementary health-care products and the dietary supplements actually come under this particular treaty. We in New Zealand First believe that they should be treated as a totally separate category and a totally separate class of product—definitely not to be included as an integral part of the treaty. Natural health-care products should not be controlled in this very same rigid way and by the very same people who control the pharmaceutical products. We know that there is a difference in purpose for pharmaceutical products and for the complementary health-care products. There should also be a separate office for administering the complementary health-care products. After all, the bottom line is that these products are seen as being preventive rather than as a cure for disease. Most people take these products so that they will not contract an ailment, rather than to cure a disease or to relieve the symptoms of an illness.

Our third concern lies with the major impact that this treaty will have on a large number of New Zealand industries already involved in this particular sector. Every impact report that the Health Committee received on this proposed change has highlighted the detrimental effect for New Zealand businesses. So why should we vote for a treaty that does not recognise the concerns that the entire industry has recognised? It is quite surprising. This industry, like every other industry, requires a level of innovation often brought about by small businesses to stimulate and to grow the entire category. As I said before, innovation is absolutely essential in an industry such as this. I know for a fact that many of these small businesses—a lot of them do tend to be small businesses in this particular area—are already prepared to meet the standard quality requirements, such as ingredient testing, good manufacturing practice guidelines, and labelling to ensure the overall industry integrity. So why not develop a New Zealand - based system? We believe that the increased compliance costs and the additional regulation imposed by this trans-Tasman agency will cause many of these small businesses to close. That is definitely not something that we want to see occur, at all.

As New Zealand is the smaller partner in this treaty, our interests will, we believe, be very much under-represented. The increased cost of products to consumers and the compliance costs for manufacturers will result in the closure of some of these businesses—and we actually heard that from some of the people involved in the Australian industry. When we look at the treaty, we believe that it will definitely lead to higher prices for consumers and higher compliance costs, especially among the smaller New Zealand - based companies that supply only the domestic market. Not everybody exports across to Australia.

Like many other MPs in this House, I have been absolutely overwhelmed by the number of emails I have received that are firmly opposed to this trans-Tasman treaty proceeding. I estimate that I have received well over 50 emails that are opposed to this joint regulation. That number could even be closer to 75. I have not received one solitary email advocating that this joint agency should proceed. I must admit that all these emails are not from one particular area in New Zealand. They have come from throughout New Zealand. There appears to be a total lack of support for this proposal from the complementary health-care industry in New Zealand and from many of the consumers in this particular industry.

I must say in all fairness that I have received one letter in favour. That letter was from a member of the pharmaceutical industry who was concerned that we work with Australia because: “It wants critical mass in its regulatory system for pharmaceuticals.” It appears that this treaty is really being used as the instrument for change in the complementary medicines industry. New Zealand First questions the motives of the Government in agreeing to a treaty that has no tangible benefits for New Zealand. We strongly recommend that the Government explores options for administering a New Zealand - based regulatory framework.

I rise on behalf of United Future to make our comments on the Government’s treaty that was signed on 10 December with the Australian Government in relation to the regulation of therapeutic products, medical devices, pharmaceuticals, and complementary medicines.

The Health Committee looked predominantly at two areas. We looked at how complementary medicines should be regulated and then, with the kinds of conclusions we came to on those matters, we looked at how this proposal affected those outcomes and whether we thought it was a viable option. For instance, the industry was very clear in its dealings with us that it accepted there was a need to strengthen the regulatory framework, which is currently a very weak structure in New Zealand—that is, regulating complementary medicines. However, I guess the area that the industry seemed to feel a bit ripped-off by was the fact that it felt that it had had ripped out of its hands the chance to develop a system of its own that suited the New Zealand - innovation aspect of that industry and to set up a system that would facilitate trade through mutual recognition.

The things that came out when we looked at what a strengthened domestic regulatory system could include are very interesting, and highly relevant to the outcome of this treaty. First of all, any regulatory system would need to be risk based. When one is talking about vitamin pills, and products that, in general, make what we would term “wellness” claims, as opposed to therapeutic claims, then the intention that this treaty has of bringing complementary medicines into the same category as pharmaceuticals—transferring them from their current status of being regulated under foods—United Future agrees with the industry is a complete overkill.

Several other people who have spoken tonight talked about tours they have had through complementary medicine factories. I spent some time with members of the Health Committee at the Comvita factory in Te Puke. What struck us on entering that factory, which at the time we were there was manufacturing and processing honey, was that on one side of the factory, honey was being processed to put on one’s toast; it was being processed as a food product. Directly over the corridor that same honey was being processed to treat wounds. The difference we saw between one side of the factory and the other was almost the difference one sees between a warehouse and a science fiction movie. Because the standards—the very necessary standards that one needs to have in place for the processing and manufacturing of pharmaceuticals—are extremely rigorous, as they should be. But when one applies these standards to very low-risk products it does start to look rather ridiculous.

One of the things the industry understands it does need is a central register—a simple electronic lodgment. Of course one of the areas that this treaty does not cover, and which came up very strongly in our inquiry, is that we would like to see—and the industry is very keen to see—that complementary health-care products are regulated, based on a negative list. This includes a list of ingredients that are not permitted, as opposed to the white list that focuses on a very substantial list of things that are permitted. The industry is well aware of the need for good labelling practice and better customer information. It is committed to excellence in good manufacturing practice, and that needs to be monitored and enforced properly. But one of the things that has really marked out the New Zealand industry, and set us apart in many ways from other countries, has been the huge development over the last 20 to 30 years of innovative products that started often in very humble beginnings, in people’s garages. They have now developed into amazing products that are well able to move beyond making just “wellness” claims. There is now very clear scientific evidence of their therapeutic efficacy, and they are well able to move into that area because of that evidence.

The next thing the Health Committee did was to have a reality check. We realised that the Government did seem fairly hell-bent on signing this treaty, so we took a very realistic approach and made a series of recommendations to be considered, on the understanding that the Government did intend to go ahead with the treaty. Let us be clear here. This treaty, which was signed on 10 December, was literally signed while the ink was drying on the select committee report that was waiting to be tabled. I think we did have a slight slap in the face sense about an inquiry that had been undertaken very seriously. We had taken a huge amount of time out to listen to the concerns of both consumer groups and those working in the industry. We had listened to their proposals and their fears. The Health Committee also visited the Therapeutic Goods Administration. A huge amount of work had gone into this, only to find suddenly that at the end of the day it did not actually matter—that this proposal was going ahead, without taking any time to pause and reflect on the recommendations of the report.

We have a huge myriad of concerns. When one first reads the Government’s response to the Health Committee’s report, it, seems very much like it is endorsing many of our recommendations. But there are three recommendations that the Government does not support. As far as I am concerned these are perhaps the most key and the most substantial of our recommendations. If I had to draw a bottom line on this issue for United Future, it is the request from the industry that complementary medicines and products be regulated within their own category. I may be wrong here, but I suspect that the Minister herself would possibly be prepared to consider that option, but is unable to offer it because there is a complete unwillingness on the part of the Australian Government, which is partnering with us in this treaty, to give it even a second consideration.

Also, the Government—and I would probably rank this as my second concern with this treaty—does not make any provisions for the recommendation that a negative list be used because of the fact that it requires a high threshold of harm to be substantiated. So we are disappointed about that. The other thing that concerns us is that there seems to be a dismissing by the Government of our concerns about the impact of this treaty on the small businesses that make up part of our industry here in New Zealand. When we look at the Australian Government’s own response sheet to the treaty, it is spelt out very clearly in black and white, and makes the point that the advantage to the complementary medicines industry is very much on the side of the Australian market. The Australian Government sees that there is huge advantage to the Australian industry, over the New Zealand industry, and obviously that makes it a real plus for Australia. We need to make sure that any treaty we sign gives us at least the same advantage as anybody we are partnering with. United Future is becoming increasingly concerned. We have been lobbied, as have other members of Parliament, by vast numbers of people all expressing their concern. I think we need to remember, too, that there are several groups here. There are consumers, importers, manufacturers, and product developers, that are all seriously expecting to be badly affected by this treaty.

This international treaty that we are considering today must be one of the most contentious treaties to come before this House. The majority of MPs in this House oppose it, the Health Committee opposed it, most New Zealanders oppose it, and certainly most in the industry oppose it. So how on earth, one might ask, is it that we would be considering in this House today something that the majority of members of Parliament, and of New Zealanders, are opposed to?

Just to recapitulate briefly, in October 2000 Cabinet quietly agreed to establish a joint trans-Tasman agency to regulate dietary supplements and pharmaceuticals. Now it agreed to this in secret, behind closed doors. It did not consult New Zealanders, and it did not consult the industry. The industry thought that Cabinet was busily agreeing on legislation—begun under the previous National Party administration—to set up a New Zealand - based regulatory system. The industry thought that the legislation was well advanced and that Cabinet was happily working on it. Then suddenly, to its astonishment, the industry discovered that, behind its back, the Government had agreed to a treaty that will—and it will, it does not matter what Steve Chadwick says—be a first in the world where an agency based in one country will have total control to regulate an industry in another country.

So then Cabinet put out a discussion document and an overwhelming majority opposed it. Then the Green Party collected 30,000 signatures opposed to the proposed trans-Tasman treaty. That triggered a Health Committee inquiry, as Paul Hutchison has mentioned. Once again, the overwhelming majority of submissions were opposed to it. Then the Health Committee itself unanimously agreed to oppose the idea of harmonisation through a trans-Tasman agency and proposed that instead we should seek mutual recognition and strengthened domestic regulation, which the industry thought would happen through the legislation I spoke about earlier, and that that would be the most appropriate method of governing complementary health-care products in New Zealand.

Three days before the Health Committee’s unanimous report was to be released, we learnt suddenly that the Government was quietly and sneakily signing the treaty behind closed doors. In that case it was quite open, I must say. It actually invited a few of the media along. The Government signed the treaty and a couple of days later our unanimous Health Committee report came out opposing what it had done, and we had the extraordinary, and indeed probably unprecedented in recent times, occasion when MPs from all of the Opposition parties joined in a press conference to denounce what the Government had done.

Why, as Paul Hutchison asked, is the Government not listening? Why is Steve Chadwick just saying that all we are doing is fearmongering; that all that New Zealanders are opposed to is based on fearmongering? I can assure members that it is not; it is based on rigorous analysis of that treaty through a prolonged Health Committee inquiry and then an examination of the treaty. We have looked at the fine print. The more I look at the fine print the more implacably opposed I am, and the Green Party is, to that treaty. As part of the treaty examination process, the Government had to conduct a national interest analysis of the proposal. Finally, it had to make public its regulatory impact and a statement of the likely impact on New Zealand businesses and consumers from joining it.

Those documents confirmed what we had all predicted. I quote: “There would be significant increases in compliance costs for manufacturers and distributors of complementary medicines, especially smaller New Zealand - based companies, higher prices for consumers, and some brands have been taken off the market and that has led to decreased consumer choice.” That is what the national interest analysis showed. It showed that dietary supplements would be classified and regulated under the same system as medicines and that the new agency would operate basically as an expanded version of the existing Australian therapeutic goods agency. All it would be doing is extending its authority and control to New Zealand. We had been constantly reassured during the Health Committee that it would be quite different. When we looked at and analysed the treaty, it was exactly the same, apart from what I will mention about some of the governance arrangements. There would be 100 percent cost recovery. Manufacturers would have to obtain product licences for every single product they sold, meet good manufacturing practices and so forth, as well as 100 percent cost recovery. The major impact would be on small businesses and importers of products from overseas.

We also had access to the Australian Government’s regulatory impact statement and that was very interesting. It stated that Australian businesses that already had approval in Australia would have “an early competitive advantage over New Zealand firms that have to seek local approval for new products, and Australian businesses would benefit financially from having products on the market earlier than New Zealand firms, with great potential for enhanced profit.” In other words, the Australian businesses sought to benefit enormously by extending their market here, getting an early competitive advantage over New Zealand. The Australian regulatory impact statement also acknowledged the likelihood that companies would shift their operations to Australia as a result of the high compliance costs, which would reduce the New Zealand Government’s tax take.

The other point about the agency is that it will be headquartered in Australia and it will have legal personality in Australian domestic law. The treaty states: “To avoid doubt the agency shall not have international legal personality.” It will not be an international organisation. It will be set up under Australian legislation. Basically, it will be staffed principally by Australians and will essentially be an extension of the Australian Therapeutic Goods Administration. Most significantly, the agency will not only make all of the decisions and regulations about dietary supplements, it will also monitor and police all of those industries in New Zealand. We will have the spectre of Australian inspectors coming to New Zealand—Australian police, possibly—to enforce and monitor the dietary supplements industry, presumably closing down agencies or small shops that they feel do not comply. That is extraordinary. When I asked where is there another example in the world where an agency in one company has those sorts of powers, they said that there was not one.

The Minister has made great play about the fact that there will be a Minister from New Zealand and a Minister from Australia in a ministerial council, and that unlike the food agency where we have one vote out of 10, we will have those two Ministers at the top. That all sounds great, until one analyses the fact that basically all of the key powers over this industry will be delegated to a managing director who will have complete delegated powers for all regulations. Basically, it will not matter what the Ministers say in their ministerial council, all the key powers are delegated to a managing director who will be able to make rules without any recourse to our Parliament, but which will have an immediate effect in New Zealand.

It is worth remembering that the whole point of pursuing trans-Tasman mutual recognition with Australia was to benefit New Zealand businesses and consumers by eliminating regulatory impediments to trade with Australia. But the effect of this agency will be to burden New Zealand businesses with increased compliance costs and regulatory impediments that will be passed on to consumers, open up competitive trading opportunities for Australian businesses, and hand over control and sovereignty to that other agency. It is not only dietary supplements that will be affected. Pharmac has expressed grave concerns about it. As Paul Hutchison said, this could end up costing the taxpayer between $85 million and $135 million over 3 years. Pharmac says there will be significant increases in the cost of some medicines, resulting in their likely withdrawal from the market and a reduction in the number of generic medicines approved.

The question is, what on earth is the point of this? Where is the benefit to New Zealand? All there is, is downside. That is why New Zealanders, the New Zealand dietary supplements industry, and members of Parliament are completely opposed to this. Hopefully, the Government will find that it will never get the votes to implement this unfortunate treaty into law in this Parliament.

The proposed trans-Tasman agency will see the regulation of therapeutic products in New Zealand and Australia, and that includes three categories: medicines, medical devices, and complementary health-care products. ACT New Zealand was opposed to that treaty for many reasons that I will go into, but I would like to say that, like National MP Mr Paul Hutchison, we have also been great supporters of closer economic relations with Australia. However, that does not mean that New Zealand should find itself in the position of blindly following what our trans-Tasman neighbour wants us to do. There are times when we must stand up and protect what we have here in New Zealand—times when we feel that we have something much more valuable than what our cousins across the ditch want us to look at with regard to closer economic relations.

The history of the treaty is very interesting. It has been described fairly well by most of the other Opposition parties, but I would like to mention briefly the arrogance in which the signing of the treaty was gone about. The signing happened on 10 December 2003, just a couple of days before a lengthy, well-documented, and well-researched report by the Health Committee was tabled in the House.

I think that the arrogance of the Government warrants mention, because the select committee worked very hard on that report. We were very proud of the findings we came up with, and we were all in broad agreement on the recommendations. But it was clear as time went on that the Minister of Health and the Government had made up their minds they would completely ignore the report and its recommendations—well before it was due to be tabled. In fact, we received quite blatant criticism from the Minister of Health for taking far too long to reach our recommendations and table the document in the House. She seemed to forget that the committee had had a pretty heavy workload in relation to her legislation before it—which, of course, gains priority over any inquiry that might be held. So the arrogance of the Government in that move should be noted for the record.

The Health Committee, as I say, went through a fairly exhaustive process in the inquiry and, again, in the examination of the joint agency. We had several submissions, one of which was from Pharmac, and that has been noted in the report.

Pharmac had many concerns, although the officials started their submission to us by stating that they supported the joint agency. But they had many criticisms. Of particular concern was the fact that the full-cost recovery model could mean a significant escalation in the cost of registering medicines in New Zealand. That should be of concern to us, both to small companies and to much larger ones. Pharmac stated that it had reservations about aspects of the proposal but, as I say, it supported the joint agency.

Its other concerns included possible increases in the cost of generic drugs to the country—particularly for small-market products—and possible increases in the patent terms on medicines. Of course, that should be of great concern to Pharmac, because it relies heavily on patents coming off earlier rather than later in order to provide cheaper medication to New Zealanders. In its written submission to us Pharmac noted that unless rules were very carefully drafted, the cost of increases with regard to patents, as a flow-on effect of the free-trade agreement between Australia and the United States, could amount to between $85 and $135 million over a period of 3 years. We note that the estimated cost in fees and charges incurred by the New Zealand industry would be $20 million. Those are not small figures; they are large figures, and they should be taken very seriously.

But the most interesting thing of all, and something I questioned Pharmac on when its officials came before us, was that Pharmac had made a submission as a result of the discussion document in 2002, in which it categorically stated that it opposed the joint agency—for the very same reasons mentioned in the most recent submission—but had then changed its mind and stated that it supported the joint agency. I wondered how that had come about, and I believe that what probably happened was that the Government told Pharmac that it should, in its written submission, support the joint agency, despite its concerns.

One of the things that concerns ACT most is the increased compliance costs that will likely be a result of the joint agency. We have documented that well in the report. There was a general consensus around the committee table about the worry of increased compliance costs, particularly on the complementary health-care industry and on consumers. As I say, we went into a great deal of detail in our inquiry report in that regard.

Many of us considered that perhaps a third category to regulate complementary health-care products as a class in their own right might have been the way to go, and there was also long discussion about the possibility of mutual recognition—each country maintaining its own recognition within the broader band of a joint agency. But that, according to the Government, is a complete no-goer, although I have to say that the reasons are still completely foreign to me and, I believe, to most other Opposition members. Many committee members were concerned about the adequacy of the regulatory impact assessment. Sue Kedgley previously went into that in detail, so I will not say any more about it.

The Regulations Review Committee had some very pertinent remarks to make. Those were mentioned by Labour member Steve Chadwick in her first speech. She thanked the Regulations Review Committee for the report and the work it had done, but I believe that the points it raised are still very pertinent.

There were two main issues that the committee felt needed to be addressed. The first was that some of the matters proposed to be dealt with in the rules were matters of policy and principle that ought to be in primary legislation. The second was that there were significant differences in the disallowance of regulations in New Zealand compared with Australia, and that rules and orders made by the agency needed to be subject to the same requirements for scrutiny and disallowance that applied to all other delegated legislation in New Zealand. The committee members were concerned that the treaty did not deal with that matter adequately.

We outlined in the report the disadvantages to the treaty, and I want to mention those briefly. The first is a reduced ability to regulate according to the specific conditions and preferences of New Zealand. New Zealand will lose its sovereignty and identity in relation to the registration of medications.

The second disadvantage is the reinforcement of the existing trend for pharmaceutical firms to shift their regulatory activities to Australia as they rationalise those activities. There are probably many members on the other side of the House who think that that is a good thing. There is a very anti - pharmaceutical firm attitude in this country, and we are seeing the repercussions of that now with the mass exodus of such firms. In particular, the Government should be worried about the loss of tax revenue that will result from that exodus.

The third point is that regulation may well lead to higher prices for consumers, and to higher compliance costs falling on manufacturers and suppliers, especially among smaller New Zealand - based companies that supply only the domestic market. Again, what we will see in this country is a loss of innovation—something we have greatly prized in years gone by. But with heavy regulation in place, as we see under the Therapeutic Goods Administration regime in Australia, many of the smaller companies will just not be able to afford, or will lose the time and energy they presently have, to cope with that.

I make, too, a brief mention of medical devices. Similarly, there may be an increase in the price and a reduction in the choice of medical devices, due to those becoming the subject of regulatory controls.

To sum up, I tell members that ACT does not agree that the Government should have ratified the treaty. We feel that the concerns raised by the Health Committee during the inquiry into therapeutic goods, and its subsequent recommendations, were not adequately addressed by the New Zealand Government when it formulated the treaty. We are particularly concerned that a thriving local industry will be harmed and disadvantaged with the imposition of a very heavily regulated and bureaucratic Australian regime, when other more appropriate options are available. I have mentioned what I feel those are. We believe that ratification of the treaty will result in increased compliance costs to those in the industry, and will particularly affect small business. As a smaller partner in the treaty, we also fear that New Zealand interests will be significantly under-represented, and that increased costs and loss of choice for products will be the consequences for New Zealanders. It will be a very sad day for New Zealand.

I thank the Health Committee for its examination of the treaty and for its comments on the important issues of sovereignty, accountability, and the impact of the joint scheme on New Zealand industry and on the health and safety of all New Zealanders. The proposal to establish a joint trans-Tasman therapeutic products agency and regulatory scheme has been developed over a number of years through successive Governments. In fact, when I became the Minister, the joint regulator had already been agreed to in principle by the previous National Government. I looked at the work that had been done by the previous Government and agreed that we should proceed with the agreement that it had made in principle. In fact, this Government announced some time before the select committee inquiry that we would be proceeding.

The proposal had been carefully crafted to provide New Zealand with a new, world-class, sustainable regulatory system through an arrangement of equal partnership with Australia. In fact, it is seen by the Australians and by New Zealand as an extension of CER. When I recently met with the Leader of the Opposition, Don Brash, he gave a commitment that the National Party would work to ensure that the joint regulator became a reality. He said that it was a good deal for New Zealand. It is an innovative arrangement that will preserve and grow New Zealand’s—

💬 Dr Paul Hutchison: You weren’t at the meeting.

I was at the meeting. It is an innovative arrangement that will preserve and grow New Zealand’s influence over the regulation of therapeutic products, and sustain our capability to make sound regulatory decisions that protect public health, at a lower cost to industry than other options. It also has a fair and secure arrangement that will safeguard New Zealand’s sovereignty, and will ensure proper accountability and parliamentary oversight of the agency.

It is important to recognise that maintaining the status quo is not a viable option for the future regulation of therapeutic products in New Zealand. The existing medicine legislation is 20 years old. It is outdated, and no longer provides an appropriate framework for managing the risks associated with the full range of therapeutic products now available. New Zealand’s regulatory scheme is unsustainable in the medium to long term. For example, under existing legislation—and I do not know whether Heather Roy is aware of this—pre-market approval is not required for medical devices in New Zealand, regardless of the level of risk associated with their use. I think New Zealanders would be shocked to know that. Thus, there is no assessment of the safety, quality, or performance of devices such as heart valves or pacemakers before they are placed on the New Zealand market. In contrast, pre-market approval is required for lower-risk products such as anti-dandruff shampoos and fluoride toothpaste. That situation is untenable and cannot be left to continue. The public health and safety of all New Zealanders is far too important for us to ignore that situation any longer.

Through the joint agency, we will build a strong and confident arrangement that is respected internationally. New legislation is therefore required to modernise New Zealand’s regulatory scheme and bring it into line with international norms for the regulation of therapeutic products. On its own, New Zealand will struggle to maintain the capacity and capability to regulate therapeutic products into the future. It will become increasingly difficult for New Zealand to recruit staff with the knowledge and expertise needed to evaluate the increasingly complex and sophisticated therapeutic products now being developed. There is already a worldwide shortage of such expertise. Gaps that exist in New Zealand’s expertise will increasingly diminish the regulator’s ability to adequately assess and manage the risk to public safety arising from the use of medicines and medical devices. There will inevitably be delays in approving products under the status quo system, so that New Zealanders will be denied timely access to new products that are available in other countries.

If New Zealand were to have its own stand-alone regulatory scheme for therapeutic products, it would first be necessary to develop new legislation to address the current anomalies in regulatory coverage, and to bring New Zealand’s—

💬 Dr Paul Hutchison: I raise a point of order, Madam Speaker. I want to make the point that the Minister is speaking outside the lines of the report. The chairman of the Health Committee made it clear that the debate should be about the report, and not the Government’s agenda. I am deeply concerned that the Hon Annette King is using this debate purely as a vehicle to talk about the Government’s agenda, and not the report. I would ask you to ensure that she sticks to the report.

Speaking to the point of order, I have listened to the whole debate. Members ranged widely over every issue that they wanted to cover, and I think that it is important that I get the opportunity to range over similar issues myself.

💬 Madam DEPUTY SPEAKER: Ruling on the point of order, the Minister was speaking about the report and the matters in the report, and there was nothing that was different from what the last six or seven members have spoken about.

If New Zealand were to have its own stand-alone regulatory scheme for therapeutic products, it would first be necessary to develop new legislation in order to address the current anomalies in the regulatory coverage, and to bring New Zealand’s regulation into line with international best practice in therapeutic product regulation. In order to administer the regulatory scheme, it would be necessary to significantly increase the regulatory capacity and expertise, and to maintain that expertise in therapeutic products as they grow in complexity and sophistication. Even if it were possible to recruit the staff for such a regulator, the cost of regulation would be unacceptably high, given New Zealand’s small population and market size. Going it alone was not a viable option. For the reasons I have given, the current Government and past Governments have recognised that New Zealand’s system for the regulation of therapeutic products is not sustainable, and that the best way to ensure sustainable regulatory capacity and appropriate protection of public safely in the future would be through collaboration with another regulator.

Three possible models of collaboration were considered.

💬 Hon Murray McCully: Stop reading it. She’s reading it.

What is the problem with Murray McCully? I think he is somewhat distressed and upset. I would just like him to listen; this is a serious debate. Three models of collaboration were considered. First, there was the model of unilateral recognition, which meant that New Zealand would have to accept the regulatory decisions of other regulators, which would be regulators outside New Zealand. That would have meant that we would not be able to respond to safety issues, but would be reliant on other regulators’ decisions. Second, there was the model of mutual recognition. If we wanted to have mutual recognition, the New Zealand regulator would have to have another regulator that had confidence in New Zealand’s own decisions. I am afraid to say that New Zealand does not have a lot of legislation in place, and we could not compare ourselves with another regulator. Mutual recognition was declined as an option before we became the Government—not since we became the Government. The third model was the development of a joint therapeutic products regulatory agency, which will retain New Zealand’s voice in decision making. It will allow the pooling of resources with Australia in order to overcome the deficiency in regulatory capacity. It will share the regulatory costs, which will reduce the impact on New Zealand industry, and it will create a single CER market for therapeutic products, and a one-stop shop for those wishing to market products in both countries. It was for those reasons that the previous Government and this Government agreed that a joint regulator, under the expansion of CER, was the best way to go.

We also looked at compliance costs, and I think they are an important consideration in moving towards the arrangements that we want to have, for the joint-agency cost recovery will be on the same basis as in other industries, and best-practice guidelines for cost recovery will apply. The cost to New Zealand businesses will actually be lower than for a stand-alone agency, because regulatory costs are shared across the larger New Zealand - Australia market. However, in order to protect small businesses, it is intended that under the fees and charges rules that will be developed for the joint scheme, a form of fees relief will be available for small businesses with low sales volumes.

The Health Committee noted—and I would like to read this to the House, because this has been misinterpreted all evening—that: “the Australian Regulatory Impact Statement states that Australian firms may have an early competitive advantage over New Zealand firms seeking approval for new products under the new system.” The committee mistakenly interpreted that statement as support for the view that New Zealand companies would be at a disadvantage under the joint regulatory scheme. In actual fact, that statement was taken out of context. It related to permanently exempting therapeutic goods from the Trans-Tasman Mutual Recognition Arrangement, not from the joint scheme. I ask the members who have raised that point to go back to the agreement between the Governments of Australia and New Zealand, and to read page 11 of the impact statement. When they have read it, I want them to tell me they got it wrong, because they have got it wrong. On governance and sovereignty New Zealand will have an equal voice with Australia. It will become very clear, very soon, that New Zealand’s voice is equal with Australia’s in all respects. It will be equal in terms of what is accountable in this Parliament, and it will be equal in terms of legislation. [Interruption] I am listening to the members of the Opposition because I know that behind the scenes they have also been talking to the Australians about the agency, about CER, about how important the relationship with Australia is, and about how important it is to have a joint regulator. I find it interesting that they are denying that this evening.

I think this issue is a good example of what is wrong with our whole treaty-making process. I had a member’s bill in this Parliament a couple of years ago, which was unfortunately defeated. I think the reasoning behind that bill has been shown to be correct in the debate we have had tonight. One of the problems when treaty making is done only by the executive is that the executive, particularly under our system of MMP Government—and this has happened since the beginning of MMP—represents the minority in Parliament. That is what we see here. The majority of Parliament is against this treaty and against any subsequent implementing legislation. Yet the minority of this Parliament, which constitutes the executive, is signing a treaty against the wishes of Parliament and of the people of this country. That is not democratic. That is why my International Treaties Bill should have been approved by Parliament, and is why the parties that did not support it, such as National, should now rethink their position. Surely we should move one step forward towards true parliamentary democracy in this country, and give treaty approval powers to Parliament.

I think the Health Committee has done very good work in this report. The whole point is that a regulatory situation has been proposed by the select committee. It is not as though anyone is saying we should let everything in on a wholesale basis. The select committee has proposed an appropriate regulatory system, but not one that is based in Australia and is under the control of another country. That is the difference between the two schemes.

I think one of the most telling points was made in Steve Chadwick’s speech. She said that she could not imagine how a future Minister of Health could betray the sovereignty of New Zealand. I do not have the same illusions that she has about future Governments of New Zealand, future Prime Ministers, and future Ministers of Health. We have had a variety of Governments in this country, and we have had people betray our sovereignty to one degree or another. Even the Labour Party has said that in the past, in relation to wars that New Zealand has gone into, such as the war in Vietnam, etc., Mr Simon Power of the National Party quite recently said, in effect, that where America goes, we go. A Labour member said that future New Zealand Governments can be trusted to be in control in the ministerial council. Surely that contradicts what Labour members say when they criticise National and other parties for going along with another country’s policies, without criticism of those policies.

I think it is very important that we have an appropriate regulatory structure, particularly in the areas of complementary medicine, diet pills, herbs, and all the rest of it. Research has shown that most of those remedies—certainly the overwhelming majority, though whether they have an effect we can debate in any individual case—do not have any serious downsides, compared with pharmaceuticals, in particular, many of which have side effects that we are still investigating. The arguments of the people involved in dietary supplements and those sorts of products are that they should be given the proof that their products cause a lot of harm, and need such strict regulatory control and all the compliance costs—and all that is to be done in Australia—and all the other disadvantages that the other speakers have referred to. That is just not good enough.

It is fortuitous, but very good, that we have had this debate, because it shows the contradiction between the MMP system we have developed in this Parliament and the old-style system of the executive signing treaties, which was appropriate to a pre-MMP era and must be changed.

This is a very interesting debate. The Government has moved against a select committee report, and, when we come to vote on it, what will happen? Will Government members be supporting a report from the Health Committee that shows quite clearly that the actions they have subsequently taken are incorrect and that the whole country is against exactly what they have done?

We are supporters of CER. We are quite happy to work alongside Australia and have closer economic relations with that country. There is no problem with that. But when we look at the first report that was done in December 2003, we see that it was to decide whether there was any merit whatsoever in having a trans-Tasman agreement. That is what the first report did. Before it was even out there in the marketplace, what did this Government do? It entered into an agreement with Australia before the inquiry into the proposal to establish a trans-Tasman agency to regulate was finalised. The Government moved to do that before this report was tabled. That is a complete abuse of the select committee process, and this Government will pay. When Government members vote on it, will they be voting for this report, which is absolutely damning of what they have done? [Interruption] Here we go. Let us get this one very straight.

Let us look at the next report, which is the one I have in my hand. We have entered into an international treaty. Let us look at one of its recommendations. On page 3, the report states: “We made 34 recommendations to the Government. Our main finding was that the proposal to regulate complementary healthcare products jointly with Australia should not proceed.” That is what it states. This report contains recommendations, on page 9, that throw this Government out to the wind. It is abusing the situation, and every person who takes vitamins is getting up and saying: “Look, this Government is abusing the process. It is abusing the select committee, and it will pay.” The Government will pay at the next election. By gee, it will pay, because I know in my heart of hearts that this report is correct.

Once again, all that Government members are trying to do is to defend themselves in a situation that they know is completely wrong. They will pay the price, because this is the report we will be voting on, next members’ day. It will not happen tonight, because I have a lot more to say yet. When I look at what Pharmac says, I can see that I will probably need more than half an hour on that one. On page 3, the report states: “Pharmac noted a number of concerns about the joint agency proposal, including possible increases in the costs of generic drugs, particularly for small market products …”. This is a nonsense. Government members will pay.

Debate interrupted.

The House adjourned at 10 p.m.