Agricultural Compounds and Veterinary Medicines Amendment Bill

Members, when we were last debating the second reading of the Agricultural Compounds and Veterinary Medicines Amendment Bill, Eugenie Sage had the call. She has 4 minutes remaining—[Interruption] She does not wish to take those. I call the Hon David Cunliffe—5 minutes.

It is a pleasure to take a brief call in support of the Agricultural Compounds and Veterinary Medicines Amendment Bill. Labour does support this bill, representing as it does a balance between two important objectives in fostering innovation around our primary industries. In my brief remarks, I am just going to describe the balance that it seeks to find, note why that is so important to the New Zealand economy, and note a couple of issues that follow from it.

The balance is designed to foster innovation and to allow our producers to extract competitive advantage by gaining a return on the investment that they have made in agricultural compounds. It might seem a technical part of our economy, but this is important legislation because some 57 percent of all research and development undertaken in the New Zealand economy is undertaken in or around the primary sector. It is in agribusiness—broadly defined, from the pasture to the farm gate to the factories that process and then market our protein stream and our fibre stream—that we believe New Zealand has a potential global competitive advantage.

But we on this side of the House also recognise the challenges. New Zealand invests around about 1.27 percent of its GDP in research and development. The average across the OECD is 2.5 percent, almost exactly double what New Zealand invests—and we have a smaller GDP to start with. The average for the “small smart countries club”—the so-called small advanced economies—is closer to 3 percent, nearer to triple what New Zealand invests. When you break that problem down, it is not primarily a Government problem; there is a lot of bipartisanship around science and innovation policy. The previous Labour Government, I think members opposite would agree, did a very good job under Pete Hodgson. Much of what the current Government is doing we support, but we would like to take it further.

The issue that both sides would recognise is that although the Governments have been doing a reasonably average job at this, private sector investment in research and development in New Zealand has been desultory—around about a third to a quarter of the OECD average, putting us at the back of the pack. Neither Government has really truly cracked that problem. The current Government set up Callaghan Innovation to look at manufacturers and services, and it has taken an end-to-end view of the value chain. That is not a bad thing, in principle. It has not worked. Business research and development has not increased as a share of GDP.

It is in this field of primary industry—in agriculture and, in this case, in respect of agricultural chemicals—that we in this House are collectively trying to seek, therefore, a balance between two, essentially, opposing forces. On the one hand, for a new-entrant company or a new developer, it can be an advantage to have short periods of intellectual property protection—short-life patents. What this bill does is it provides longer periods of protection for new information that is used to develop or market new agricultural or veterinary compounds. The reason it does that—and it is quite right and we support it—is that that period of protection allows an economic return to be earned from the investment that has been made in the development of those compounds, and thus provides incentives for further private sector research and development.

Bayer testified to the Primary Production Committee that it costs around about a million dollars to develop a new compound, and around a half a million dollars to develop a derivative or an additive compound off that base. Any investor is entitled to a period of time where they can extract a return from that investment without knock-offs eating their margin. The question is: how long is enough? We think this bill strikes a reasonably fair balance, which is why we are supporting it. The point of difference between the two sides of the House is how far we should go in stimulating research and development and innovation.

We think that the dairy crisis—Mr Assistant Speaker, I know it is close to your heart as the member for the Waikato—has given everybody a wake-up call around diversification. We are fortunate that we have had growth in tourism, construction, and other sectors to offset the dairy downturn. This bill is a small step towards further supporting the diversification of our economy, and, in that regard, the Labour Opposition supports it.

It is a pleasure to take a call on the Agricultural Compounds and Veterinary Medicines Amendment Bill in its second reading. As the previous speaker, David Cunliffe, talked about tonight, those who spend the research money get the ability to get a return, and they get a better chance of that with the proposals that are put forward under this piece of legislation. We in New Zealand, particularly in our agricultural industries, want to encourage innovation, and the way this is set up now, it is actually starting to stifle innovation. So this bill strikes the right balance between incentivising the registration of products in the primary sector and encouraging competition in the agricultural market space.

We have heard a few arguments, particularly from members of the Green Party, about corporates and having them taking over and all the rest of it, but, actually, I think this is more about smaller players than it is about bigger players, because if you are a smaller player and you have got a good idea, is it not just a better idea for us to hold on to their data for longer until they get to a point of getting an advantage out of the money that they have invested into the research and development of that product? It is designed to encourage businesses to register new products.

The current case at the moment is fairly marginal, under the legislation that we have. It impacts on the ability of Kiwi businesses to access the latest agricultural products available. I have to make mention of the fact that we talk about chemicals, and that sort of raises people’s heckles, but, actually, there are chemicals that are involved in organic farming as well. There may be some breakthroughs that we can find in technology in our future that can make a huge difference to the way we farm environmentally and that people might want to invest in now if they know that they can have a period of time where they can prove their data and make some money from it. So we would not want to stifle any investment that was coming our way in terms of environmental chemicals and products.

The other example is that if a new product is registered for use on species A and then it is registered for use on species B—so, for example, we find another use for it—then it will get an extra year of data protection, and then, again, if that new product is then registered for species C and species D, there will be another 2 years of data protection. During this new period, if another applicant tries to register a similar product, they will need to go and develop their own supporting data, which I think is fair. I have pleasure in commending this bill to the House. Thank you.

I rise to take a relatively crisp call on the Agricultural Compounds and Veterinary Medicines Amendment Bill. While researching this—I am not a member of the Primary Production Committee, so I have spent a little bit of time reading about the contents of the bill—I found it quite interesting to do a bit of a comparison on the bill as it was introduced and what came back to the House after the select committee made its deliberations.

I guess the first point to make is really about the difference between an innovative and a non-innovative product. Of course, the innovative product is one where the active ingredient has not previously been registered in New Zealand, and the non-innovative product is one where reformulations or other uses are found for active ingredients that have already been registered in New Zealand. The bill seeks to look at defining the data-protection period for these particular products, and the departmental briefing to the committee made the distinction between data protection and patent.

A patent confers certain market exclusivity, whereas data protection is really about how the original applicant can take time to recover the costs of developing the supporting data before suppliers of competing generic products can use that data to enter the market. But it does not stop other parties from generating their own data and registering competing products. So the bill as introduced extends the data-protection period by up to 3 years under certain circumstances. The departmental briefing made reference to the Trans-Pacific Partnership agreement. What it made specific reference to was the requirement for 10 years of data protection under that agreement, and that officials discussed the policy decisions that may align the timing issues of the Trans-Pacific Partnership agreement and what may come out of this legislation.

I had a look at a couple of submissions, firstly from Federated Farmers of New Zealand. They were supportive of the default periods for data protection for the innovative trade name products moving from 5 years to 10 years, and for data protection of the non-innovative trade products being moved from 3 years to 5 years. They also suggested that the select committee amend the bill to increase protection of data for innovative trade applications by 1 year for each new use subsequently approved, up to a maximum of 5 years.

The other submitter that I had a look at was Zoetis—I think it is called Zoetis—which was formerly Pfizer Animal Health. It was interested in looking at intellectual property and the distinction between patent protection and data protection. I just want to quote from its submission. It talks about a significant period of time and money being spent on further development “generating data from clinical activities, which must be completed before the product can be made available for use. It is this data that requires protection under the local legislation. In many cases the patent protection for an innovative product will be significantly eroded by the time a trade name product is registered, thereby putting the data at significant risk. It must therefore, be adequately protected by local legislation.”

So what did the committee make of this report and the submissions, and what came back to the House? The committee recommended that the provisions in clause 6 be amended and a new section 74B be included to extend the base level of data protection from 5 years to 10 years, but it did not recommend any extension beyond 10 years. It recommended, in clause 6, a new section 74D, which has a data protection period remaining at 10 years, or 5 years after new use applications—whichever was longer. So it was looking at data protection remaining at 10 years or 5 years if there were new use applications. Also, it recommended, in clause 6, the inclusion of new section 74E, which looked at data protection for 5 years after the application is decided. The committee did consider that 5 years would promote registration and encourage competition, and that any extension beyond the 5 years would adversely affect competition.

In summary, looking at the departmental briefing, the submissions, and what the committee recommended with regard to the data protection periods, I look forward to the Committee stage discussions. Labour will support the passage of the bill.