Thursday, 26 May 2016


Most of the reaction to the 2016 Budget has been predictable. Government supporters laud it as one of the greatest things since sliced bread, while the Opposition bemoans it as do-nothing, and as always the interest groups lament that there is not enough in it for their particular constituency. The racist xenophobes continue to ignorantly insist it is all the fault of rampant immigration. All so predictable, all so tedious, and ultimately all so pointless.

Any Budget by any government, left or right, is a balancing act between what Ministers would like to do in  their own portfolios; their parties’ priorities; and, what the Minister of Finance thinks he can pay for. Every now and then, a budget provides scope for standing back a little and looking at overall policy requirements in a particular area.

There is such an issue in the 2016 Budget. In recent years, successive governments have struggled with how to fund new innovative medicines that are expensive and may not be able to be funded within PHARMAC’s existing budget and criteria. The debate over the breast cancer drug Herceptin in 2007-09 was one such example. The upshot was that the government made specific funding available for Herceptin in 2009. That intervention was not seen as especially successful, and so, when the issue of the melanoma drug Keytruda arose earlier this year, the government took a slightly different approach, confirmed in the Budget, of providing more funding to PHARMAC which was then able to fund the similar medicine, Opdivo.

However, both these examples raise a broader issue in the context of the new and innovative biologic medicines likely to become available in the next few years, that will not only have a profound effect on the treatment of many currently life-threatening conditions, but will be extremely expensive. As things stand at the moment, PHARMAC would be forced to play another game of catch-up, harnessing its resources as best it can, and hoping for more funding from the government to enable the medicines to be made available to New Zealand patients. And, in all probability, it will continue that way until the next such case arises, and so on. It is neither satisfactory, nor sustainable.

We need to be developing a strategic overview of what medicines are likely to be becoming available in the years to come; what is a reasonable expectation of which of these medicines New Zealanders might expect to have access to; and, how that might be funded. In some cases, there may be other medicines available that could be cheaper and just as effective, while in other cases it might be that the particular medicines are not of as much value here as might be claimed elsewhere. And we also need to be brave enough to determine the point at which long standing medicines should be moved on, either to a part-charge regime, or to no subsidy at all, because they have been replaced by newer products.

At the present time, we have no such overview, and, as the Herceptin and Keytruda debates show painfully, governments have been left to react, when it is often too late. A more proactive approach focused on what are reasonable expectations for New Zealanders to have of the national medicines system would enable governments and PHARMAC to prioritise spending better, and would give patients a certainty they lack presently.

The limitations of the current system have been clearly exposed and when in government both the major parties have struggled to accommodate the demands being made. (Part of the problem is that when in Opposition both parties have promised everything to everybody on the medicines front and then become hoist by the own foolish petard when elected to office. As recent events show, that puerile pattern seems likely to continue.)

A more strategic approach would prevent repetitions of that hypocritical tomfoolery, but, more importantly, would give New Zealanders a greater level of certainty than they enjoy now.

 

    

   

  

 

 

 

 

Wednesday, 18 May 2016


New Zealand’s more than half-century of muddle on housing policy is finally catching up with us. Since the 1950s, successive governments have viewed housing through a very basic lens: maintaining a supply of public housing stock to meet the needs of low income families, and, until the 1990s, using government institutions like the old Post Office and the Housing Corporation (and its predecessor the State Advances Corporation) to finance low interest loans for young couples to buy their first homes.

The two were a simple policy that ensured a steady stock of basic style largely conformist homes would be available in the burgeoning suburbs. They all looked pretty much the same, and were designed to cater for the standard New Zealand family of the time. However, as the dynamics of what National in the 1950s and 1960s used to call our property-owning democracy began to change in terms of family structure, urban development, and lifestyle demands, the political parties were slow to adapt. For National, housing was still about the pursuit of the property-owning democracy, even if rising inflation in the 1970s and the boom in property prices since meant the dream was able to be shared by fewer and fewer people. For its part, Labour has remained trapped in the time warp of Michael Joseph Savage and colleagues shifting furniture into the first state house in 1937. State housing is still a badge of honour for Labour politicians – I recall feeling distinctly uncomfortable when I was a Labour MP that I could not join the boast of having been brought up in a state house!

So both main parties are hostage to their history when it comes to modern housing policy, as the current debate painfully shows. Spurious arguments between the two about whether people with foreign sounding names are to blame, or whether government agencies are up to the mark in meeting the needs of the genuinely homeless are just fiddling at the margins, and continually miss the fundamental point. Their past gives little confidence in their ability to develop the solutions we so desperately require.

Yet the problem is a simple one. We are not building enough houses to meet the needs of our growing population, be they immigrants, New Zealanders returning home, or whatever. And the shortage of available houses is pushing up their price, first and most dramatically in Auckland because that is where the biggest group of our population lives, but more latterly in other parts of the country as well. Nor is it restricted to buyers alone. Many people are discovering that as the equity in their home increases, it is increasingly attractive for them to leverage off that to acquire investment property, and the cost of servicing mortgages on those properties is in turn affecting the level of rents being charged. The consequent spiral seems upward and accelerating.

Some have proposed a capital gains tax as the silver bullet to resolve this logjam, but, in fact, such a measure would be likely to have precisely the opposite effect. It would slow up the property market to the point of gridlock, because no-one would be prepared to sell a property for fear of incurring the tax. No wonder both the major parties have now ruled out the idea.

So the only credible policy response is the simple but obvious one of building more houses. That means central and local government working more closely together to ensure more affordable and accessible land is freed up for development; it means more collaboration with the building industry and the banking sector to ensure house construction programmes are well-managed and that a boom-bust mentality does not take hold, and that young families can be financed into them. Part of that may include income related lending ratios overseen by the Reserve Bank. But the bottom line is pretty clear – we cannot go on with the muddle in housing policy we have now. The paradigms of the last 50 years have to change and rapidly. And if that means a few shibboleths have to be overturned, so be it.

However, that would remove the bones of sniping political contention and establish instead a focus on achieving real solutions. Unfortunately, based on the past 50 years, neither of the two main parties is likely to be that bold, or constructive.

 

 

Wednesday, 11 May 2016


The revelations from the Panama Papers have dominated the news this week. As a result, the foreign trust tax regime has been placed under intense scrutiny, and while no king-hits have yet occurred in respect of New Zealand, it is a virtual certainty that there will be changes to the disclosure rules for such trusts listed here, and more active oversight by the Inland Revenue Department than has been the case previously.

But the Panama Papers release raises another and potentially far more significant issue than their particular content. In recent years, the world has seen the Wikileaks revelations orchestrated by Julian Assange, and more recently the massive security leaks from Edward Snowden. The Panama Papers add an additional element, not seen in the earlier cases. Rather than just one crusading journalist (Snowden’s Greenwald, for example) being the vehicle by which the information becomes public, investigative journalists from hitherto competing media are now combining to produce a coherent and thorough narrative and analysis of the welter of material they have sifted through. (The release this week was the result of work by the international body representing investigative reporters, a German newspaper, and television, radio and newspaper journalists locally.)  We can expect the pattern of these types of revelations to intensify, and with it, the level of media co-operation we saw in this instance to become the norm in the future.

(This is not to encourage the proposed APN/Fairfax merger in the least – the risks of news being channelled through a single source are a major threat to freedom of expression in an open society.)

Rather, the issue now splits into two distinct aspects. First, how do governments deal with the likely new normal of the mass release of data they may be simply unaware of, and certainly not expecting, in a way that is credible and gives citizens an assurance that they are on top of the issues being disclosed? No doubt around the world this issue is front of mind for many governments right now. One part of the solution is likely to be more global co-operation, both in resolving issues that emerge, but also in terms of trying to get on top of, or at best perhaps stay abreast of, the next round of mass revelations.

And that raises the next (and arguably most important) issue thrown up the Panama Papers. How is the protection of individual privacy fitted into all this? On the one hand, it is reasonable that no-one, or no organisation, or government, that has behaved illegally  should be protected from disclosures of this type. Indeed, they should be exposed and held accountable. But equally, individuals who have done nothing wrong have a right to expect their privacy to be protected. And that is increasingly a far more difficult, yet pressing proposition. As it happens, this week is Privacy Week, and, as the author of the Private Member’s Bill some 25 years ago that became the Privacy Act, I have a special interest in this. The digital world has introduced challenges to individual privacy that were inconceivable in the early 1990s and public concern about the protection of its privacy is as high as ever.

Some may argue whether there is anything of value in the release of the Panama Papers. Of course there is. At its most basic, they prove again that no-one should presume to be above the law or legitimate scrutiny. Aside from that, and the prospect of change to the rules around foreign trusts in New Zealand as an immediate likely consequence, the release has also served to focus afresh on individual privacy and its legitimate protection in the age of mass data. Privacy is a fundamental right every citizen should be able to enjoy, yet it is not provided for in our Bill of Rights. And there are still those politicians threatening to “amend” the Privacy Act if it does not meet their needs for more data agglomeration. One way of giving citizens confidence about the protection of their privacy in an era of widespread (and often legitimate and beneficial) information sharing would be to include the right to privacy in the Bill of Rights.

That would not stop, nor should it, the whistleblowers, but it would certainly protect the innocent. And that is the balance we must strike.

                    

  

 

 

 

 

Wednesday, 4 May 2016


The debate about the melanoma drug Keytruda is an important one, with some very familiar elements to it.

At its most basic level, the question is should or should not Keytruda be funded by Pharmac so that affected patients can potentially benefit from it. So far, Keytruda has been registered by Medsafe, the medicines regulator, as a pharmaceutical product that can be legally prescribed in New Zealand. Its clinicial efficacy has been confirmed by PTAC, the pharmacology and therapeutics committee which advises Pharmac.

The problem is that Pharmac has declined to subsidise Keytruda as yet, partly because of its high cost, partly because the manufacturer has not sought to have it funded, and partly because it has apparently been keeping an eye on other new medicines that may become available in this space, and which may be as, or even more effective, as Keytruda is reported to be. Only this week Medsafe approved a second melanoma drug, Opvido, which, although very expensive, Pharmac has agreed to fund from July, presumably becasue it considers it likely to more effective than Keytruda.

But basically the issue is a funding one. If there was more funding available to Pharmac, the argument goes, it would be more likely to be able to fund drugs like Keytruda. While the government’s announced injection of $124 million into Pharmac’s budget over the next four years to fund new medicines will undoubtedly help in this regard, it is not necessarily the end of the argument. In one sense, it could be argued that more funding could make the circle a more vicious one and increase the intransigence of rapacious pharmaceutical companies to hold out for the best prices for their products before making them available. That is clearly unacceptable, but it is not something over which governments have much control.

All of this goes to the heart of why we have a medicines funding system like the Pharmac model. It used to be the case that the government simply paid whatever price the drug companies demanded for new and existing medicines, and was effectively held to ransom by them, in the interests of providing free low cost medicines to patients. The very notion of part-charges to help meet some of these costs was strongly resisted as not the way we did things in New Zealand, further increasing the power of the drug companies to demand the price they wanted. That was clearly unsustainable. Equally unsustainable was the proposition that governments should be left to decide what medicines should and should not be made available on the basis of what they could afford to pay. So the current medicines registration system, including the development of Pharmac, as the independent medicines purchaser and price negotiator, was established. This system has generally worked well over the years, and despite the specific noise from time to time about particular medicines, there is no general political appetite for fundament change to it.

While the system is largely free from political influences, which means medicines decisions are based primarily on medical efficacy, a fundamental problem still remains. The power of the international drug companies means they can still effectively hold countries over a barrel on the prices they will accept for their products, which means that some medicines are simply too expensive for countries like New Zealand to afford. The issue with drugs like Keytruda and Opvido, therefore, will often come down to the deal that Pharmac can negotiate.

However, the answer is not to meekly surrender to the drug companies’ demands and pay their prices, as all that will do is encourage them to become even more obstinate when it comes to new and more innovative medicines, with a potential for more patients to be denied access to them on affordability grounds. Rather, just as countries have grouped together to break down trade barriers through multilateral free trade agreements, like-minded countries should consider working in concert to break down the stranglehold of the international drug companies by an international pricing mechanism which ensures that potentially life-saving medicines are available to those that will benefit from them, not just those who can afford to pay for them.

Otherwise, the Keytruda debate is likely to be but one among many yet to come. Science is giving us the power to conquer illness and disease as never before. It is surely the responsibility of nations to ensure that power is captured for the good of their peoples, not just the profits of the multinational drug companies.