Goff knows you don’t do unilateral bottom lines in trade
May 31st, 2011 at 11:51 am by David FarrarPhil Goff was Foreign and Trade Minister for many years, and most would say he was a very good trade minister. The China FTA is a huge credit to him (and Clark).
He also knows that one rule to trade negotiations is that the parties do not publicly lay out bottom lines, or rule things out. The reason for this is simple – doing so destorys negotiations. The moment one country says publicly “we will never ever agree to this”, it means all the other countries will do the same. And then you have nothing to negotiate.
So reading the Andrea Vance story:
New Zealand’s drug-buying agency should not be sacrificed for a trade deal with the United States, Labour leader Phil Goff says. …
But Mr Goff said yesterday: “We should not be trading Pharmac off for a free trade agreement with the US.” The agency was an “absolute bottom line and we should not be trading it away”.
You need to understand Goff is saying something in Opposition, he would never ever say in Government.,
For the record as a fiscal conservative, I think Pharmac is great and keeps the cost of drugs down for the NZ taxpayer. I find it hard to imagine that the US could offer us something so good that the Government would consider major changes to Pharmac. But again to have negotiations proceed in good faith, you can’t lay down unilateral bottom lines in public.
Personally I’m sceptical that the US will offer anything greatly worthwhile in terms of trade access. Their rhetoric is much stronger than their commitment to free trade. However there are strategic advantages to the US in concluding an agreement, so maybe they will actually offer something decent.
May 31st, 2011 at 12:02 pm
Dumb prick.
Vote:May 31st, 2011 at 12:42 pm
Aside: yes, Pharmac is great, if a bit ideological in its greatest-good-for-the-greatest-number approach. There are several groups of vulnerable patients – the terminally ill, arthritis patients including children with severe inflammatory arthritis, for example – for whom effective suitable second-line drugs are unavailable because of Pharmac’s concern with keeping costs down.
The problem for those who can afford to pay for such drugs is that drug companies don’t bother importing unsubsidized drugs. And of course, those who can’t afford to pay have to suck it up and suffer, often severely, because they can’t access drugs that will help them.
These aren’t drugs like herceptin where the benefits are marginal and the risks considerable, and which were demanded by a patient population who believed they would be more useful than they are, but drugs specialist medical practitioners would like to access for patients for whom other treatments have failed.
Vote:May 31st, 2011 at 12:49 pm
Hmm, no free trade deal with the US. Buys us nothing.
Vote:May 31st, 2011 at 12:50 pm
I used to think a FTA agreement with the USA was a good idea, until Australia got one. Now I think it would be beyond foolish, you’d never get access to USA agricultural markets & even if you could, Pharmac & Copyright costs would outweigh that access.
Vote:Far better to concentrate on Asia’s booming middle class & wait for the USA to negotiate regional agreements.
May 31st, 2011 at 1:15 pm
Oh dear DPF not one of your greatest posts.
Let’s set aside the political hit on Phil Goff – we should expect dopey stuff from Labour.
Let’s instead focus on principle and the basic economics of the pharmaceutical industry.
The “Pharmac model” is a single purchaser model. If it catches on in the Western World it will result in a wholesale consolidation of drug companies to match it surely? This is basic economics – as certain as day follows night.
I assume DPF would jump up and down if the drug companies incorporated a “New Zealand Drugs Ltd” withdrew from our market in their own right – and created a monopoly supplier for a monopoly purchaser. I am sure he would be cheering on the Commerce Commission to go them for anti competitive behaviour.
What New Zealand is really saying is that it does not want to share the financial costs of developing new drugs or provide significant returns on the investment sunk into drugs that work really well. At the same time as we consumers demand more efficacious drugs with less side affects. The costs of development of an existing drug and new ones is most of the difference between “brand name” drugs and “generic” drugs. The rest is profit – this profit drives this model forward.
Essentially the brand name drug sellers are research companies – the costs of this research is rising as we expect drugs to do more, be safer, treat more illnesses at lower costs all with less side affects.
So the Pharmac model is a “freeloader model” it is essentially a statement that research costs (which turn into development costs if a drug is produced) will fall on drug consumers where there isn’t a single government purchaser – principally Americans and Europeans i.e. their drug costs rise.
Setting aside the fundamental problem with the single purchaser model, overtime a monopoly purchaser results in a poorer range of drugs available here. That is already happening.
The real problem with drug affordability is that New Zealand is slowly but surely getting poorer relative to most of the nations we like to compare ourselves with.
This decline isn’t addressed by a single government purchaser of pharmaceuticals but reversing the long term economic tread.
The Americans are right to squeeze New Zealand on the “Pharmac model” – its both bad economics and bad medicine.
Vote:May 31st, 2011 at 1:25 pm
Chris Diack
Vote:great post.NZ through pharmac is seen as freeloading as you say,this model surely can not last forever.
May 31st, 2011 at 1:38 pm
I agree – not David Farrer’s smartest post.
Phil Goff, like a broken clock, gets to be right sometimes. (well — maybe not twice a day)
Pharmac is so good for us. Why should it not a bottom line.
And a bottom line is more useful here especially as the USA is offering is so much nothing.
………… # Chris Diack @ 1.15. The actual point is that the drug companies do so little original helpful research. Surely you are aware of all the material about how their expenditure is in replicating other peoples drugs in some way that they can obtain a new intellectual property. And doing so with a marketing approach that is to maximise income.
Because of that, You can describe their behaviour as limiting research, and denying people access to advancing technology.
So what then are New Zealanders supposed to be freeloading on ???
Vote:May 31st, 2011 at 1:50 pm
So, KH, your contention is that without drug companies there’d be more R&D into drugs? Or are you saying that in a hypothetical world, drug companies could be organised so as to do more R&D?
If the first…then that’s counter intuitive…..care to explain in a little more detail? If the second….then it doesn’t change the argument that NZ are free loading on that research, even if there is a theoretical different ordering of the world that created more R&D for us to free load on.
Vote:May 31st, 2011 at 2:44 pm
KH:
You display your ignorance.
Your claim that drug companies produce no original research (or rip off the intellectual property of others) isn’t supported by the evidence. A really good new drug can make or break these companies; companies that also carry the risk that their research ends in no usable product after a spend of hundreds of millions.
As I said if the western world adopts a sole purchaser model you will merely drive the consolidation that is already occurring on even faster.
The fact is the cost of bringing new drugs on to the market is rising sharply. As a result there is already considerable consolidation in the global pharmaceutical industry.
The reason for it is simple. We as drug consumers are expecting better and better drugs. The regulatory costs of bring a new drug to market are rising too as regulators (principally American) demand better evidence as to efficacy.
The New Zealand response to this is to opt out of this system that is producing better drugs overtime but at increased cost.
Frankly I do not think it’s the sole purchaser for 4.4million souls that is the big issue (although drug users here a loosing access to the best available drugs) it’s the principle and the risk that this cubanistic approach spreads.
Reverse our decline into relative poverty and drug affordability won’t be an issue.
Vote:May 31st, 2011 at 3:06 pm
you lost me after “Goff knows..”
Vote:May 31st, 2011 at 4:44 pm
Chris Diack, good post.
Vote:May 31st, 2011 at 5:43 pm
……….. # Chris Diack @ 2.44. (and your abusive first line was uneccessary.)
We simply disagree on the basis of the drug companies expenditure on the new drugs.
My reading it that they don’t spend a big proportion. You can disagree, but not dismiss that view with abuse.
There is not a single purchaser in New Zealand. You can pull out your cheque book anytime. Or hop on a plane. Don’t fall into the trap that if the Government can’t or won’t do it for you. Then you can’t for yourself.
Where we do agree that there is an expectation amongst consumers (the not producers) that we can have a first class health system, without any attention to national productivty.
My view also is that it is a hard cold world out there. You have to be real. And if somebody managed to patent say “the X Ray idea” ( a ridiculous example but useful) and then wanted to charge several thousand dollars for every use of their intellectual property. As a nation I hope we would simply not have that in our law. Screw them.
Which takes us around again to the USA so called free trade agreement. There are issues on which we need to say “no” to the USA.
Vote:May 31st, 2011 at 8:58 pm
Historically FTAs with the US only ever serve US interests, unless they have a strategic advantage which means they will actually negogiate fairly. China is different as it has strategic interests in luring traditional US allies, and accordingly negotiated fairly.
Accordingly Goff’s comments were not out of order, and were a good strategic move. Attacks against it are just a smokescreen as it something National could actually bit hit hard about, as giving up Pharmac would have a significant adverse affect on many NZers.
Vote:May 31st, 2011 at 9:34 pm
Sorry, but there’s the usual load of nonsense about free trade being spouted here.
It is in the interests of New Zealand to unilaterally drop all protectionist tariffs and restrictions, so that we can benefit from cheap imports.
To do otherwise – to insist that we can’t benefit from imports so long as other governments prevent their citizens from benefiting from imports – is economic madness. It’s like saying we’ll only stop banging our head against the wall if others stop at the same time.
Vote:May 31st, 2011 at 11:43 pm
Yup. And we’ve already done most of that. But it is also to our advantage to negotiate a reduction in US trade barriers towards NZ products. And we should do that too, so long as we don’t have to give up too much to get it.
Vote: