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The TPP’s Healthcare Transparency Annex

Commentary* on the Leaked TPP Transparency Chapter Annex on Transparency

and Procedural Fairness for Pharmaceutical Products and Medical Devices dated

December 17, 2014 and released by Wikileaks in June 2015

Dr Deborah Gleeson

School of Psychology and Public Health

La Trobe University, Australia

Email: d.gleeson@latrobe.edu.au

Phone: +61 3 9479 3262

*This commentary builds on analysis of the previous 2011 leaked text undertaken with Ruth Lopert,

and draws extensively on a draft manuscript prepared by Deborah Gleeson together with Zaheer

Babar, Paparangi Reid and Pat Neuwelt, entitled ‘The Trans Pacific Partnership Agreement and the

expected impact of AUSFTA Annex 2-C style provisions on access to medicines and PHARMAC in New

Zealand’.

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Executive summary

This commentary provides a preliminary analysis of the leaked draft of the Trans Pacific Partnership

Agreement’s Transparency Chapter Annex on Transparency and Procedural Fairness for Pharmaceutical

Products and Medical Devices (hereafter named the “Healthcare Transparency Annex” or “the Annex”),

dated December 17 2014 and released by Wikileaks in June 2015. The draft is analysed in comparison

with the previous US proposal leaked in 20111 and with Annex 2-C of the Australia-US Free Trade

Agreement (AUSFTA),2 which it closely resembles. The discussion focuses particularly on the implications

of the Healthcare Transparency Annex for Australia and New Zealand, which both have national

pharmaceutical pricing and reimbursement schemes.

The document is a late stage draft in which little remains to be agreed between the TPP Parties. It is

much changed from the previous US proposal, which was based largely on Chapter 5 of the Korea-US

Free Trade Agreement (KORUS). The initial very onerous US proposal seems to have been essentially

abandoned in the face of opposition from the other TPP Parties, and the 2014 leaked negotiating draft

now appears closely modeled on AUSFTA Annex 2-C. Its scope is broader than AUSFTA Annex 2-C,

however, because it covers medical devices as well as pharmaceuticals.

The purported aim of the Annex is to facilitate ‘high-quality healthcare’ but the Annex does nothing to

achieve this. It is clearly intended to cater to the interests of the pharmaceutical industry. Nor does this

do anything to promote “free trade”: rather it tightly specifies the operation of countries’ schemes for

subsidizing pharmaceuticals and medical devices with the aim of providing greater disclosure, more

avenues for pharmaceutical industry influence and greater opportunities for industry contestation of

pharmaceutical decision making.

The inclusion of the Healthcare Transparency Annex in the TPP serves no useful public interest purpose.

It sets a terrible precedent for using regional trade deals to tamper with other countries’ health systems

and could circumscribe the options available to developing countries seeking to introduce

pharmaceutical coverage programs in future.

The Annex is clearly intended to target New Zealand’s Pharmaceutical Management Agency (PHARMAC)

and some of its provisions will result in new obligations for PHARMAC that will involve transaction costs

and could impinge on its flexibility and autonomy. This is particularly worrying given that PHARMAC

provides a model pharmaceutical coverage program that is suitable for adoption by developing

countries.

1 Trans Pacific Partnership (2011). Transparency Chapter Annex on Transparency and Procedural Fairness for

Healthcare Technologies. Leaked draft dated June 22, 2011. Retrieved June 2015 from http://www.citizenstrade.org/ctc/wp-content/uploads/2011/10/TransPacificTransparency.pdf 2 See Annex 2-C of Chapter 2 (National Treatment and Market Access for Goods) of the Australia-US Free Trade

Agreement, available at http://dfat.gov.au/trade/agreements/ausfta/official-documents/Pages/official-documents.aspx

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Nevertheless, the revised draft is significantly watered down from the original US proposal. The Annex

no longer targets pricing of pharmaceuticals (a key problematic issue in the previous draft)3,4 but instead

focuses only on processes regarding the listing of pharmaceuticals for reimbursement. The equally

problematic independent appeal process also sought by the US has been dropped, to be replaced by a

more limited review mechanism (the nature of which appears to still be under debate). The clause

mandating countries to allow direct-to-consumer advertising (DTCA) in the previous draft now includes a

sub-clause specifying that this is subject to ‘the Party’s laws, regulations, and procedures’ – this should

allow countries that currently prohibit DTCA to continue doing so.

Major problems remaining with the 2014 leaked draft of the Annex, which should be of concern to all

countries including Australia, include:

Apparently minor alterations to the language of AUSFTA Annex 2-C may circumscribe countries’

autonomy considerably;

While two alternative options for a review process are proposed in Article X.2(f) (one of which

appears to reflect the current Australian review process), the second of these requires “at a

minimum, a substantive reconsideration of the application” - this potentially allows for listing

recommendations or decisions to be re-made;

Paragraph X.4 includes a consultation mechanism which could be used to apply ongoing

pressure to countries to make changes to their pharmaceutical programs in the interests of the

US-based pharmaceutical and medical device industries;

While Paragraph X.7 states that the TPP’s state-to-state dispute settlement procedures will not

apply to the Annex, pharmaceutical and medical device companies will have access to the

investor-state dispute settlement mechanism to sue countries over their pharmaceutical

policies.

Particular problems for PHARMAC (and other countries that may wish to implement the PHARMAC

model in future) remaining in the 2014 draft Annex include provisions that require:

Consideration of proposals for listing to be completed within a specified period of time (Article

X.2(a));

Disclosure of procedural rules, methodologies, principles, and guidelines used to assess a

proposal5 (Article X.2(b));

Providing applicants and the public with opportunities to provide comments at relevant points

in the decision-making process (Article X.2(c));

3 Lopert R and Gleeson D (2013) The high price of “free” trade: U.S. trade agreements and access to medicines.

Journal of Law, Medicine and Ethics, 41 (1), 199-223. http://onlinelibrary.wiley.com/doi/10.1111/jlme.12014/abstract 4 Gleeson D (2012) Analysis of the June 2011 leaked TPP Transparency Chapter Annex (Annex on Transparency and

Procedural Fairness for HealthCare Technologies): A comparison with the text of Annex 2-C of the Australia-US Free Trade Agreement and Chapter 5 of the Korea-US Free Trade Agreement. Submission to the Department of Foreign Affairs and Trade, 7 September 2012. Retrieved June, 2015 from http://dfat.gov.au/trade/agreements/tpp/submissions/Documents/tpp_sub_gleeson_120911.pdf 5 Assuming proposed wording is agreed

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Opportunities for the public to provide comments at relevant points in the decision-making

process (Article X.2(c)), which may facilitate pharmaceutical industry-sponsored lobbying by

patient groups;

Provision of written information to applicants regarding the basis for recommendations or

determinations for listing (Article X.2(e)); and

Direct-to-consumer advertising: while Paragraph X.3 appears to allow countries that currently

prohibit direct-to-consumer advertising (DTCA) of pharmaceuticals to continue to do so, it may

lock in current settings in New Zealand that permit DTCA.

Introduction and background

This commentary provides a preliminary analysis of the leaked draft of the Trans Pacific Partnership

Agreement’s Transparency Chapter Annex on Transparency and Procedural Fairness for Pharmaceutical

Products and Medical Devices (hereafter named the “Healthcare Transparency Annex” or “the Annex”),

dated December 17 2014 and released by Wikileaks in June 2015. The draft is analysed in comparison

with the previous US proposal leaked in 20111and with Annex 2-C of the Australia-US Free Trade

Agreement (AUSFTA),2 which it closely resembles. The discussion focuses particularly on the implications

of the Healthcare Transparency Annex for Australia and New Zealand, which both have national

pharmaceutical pricing and reimbursement schemes.

The 2014 leaked Annex is a late stage draft in which little remains to be agreed between the TPP Parties.

There is some bracketing remaining indicating disagreement over specific words and phrases, but this is

minimal. However, the countries do not seem to have yet agreed which healthcare programs will be

covered by the obligations in the Annex.

This is the second leaked draft of the Healthcare Transparency Annex. The first was a proposal prepared

by the United States, dated June 22, 2011.1 The 2011 draft was closely modeled on the provisions of

Chapter 5 of KORUS and was heavily criticized for the intrusive nature of its provisions.3,4 These included

provisions that would have:

Precluded assessments of innovation based on therapeutic significance (essentially ruling out

therapeutic reference pricing);

Imposed onerous obligations to publish regulations (facilitating pharmaceutical industry

influence);

Extended opportunities for manufacturers of pharmaceuticals and medical devices to

participate in decision making regarding listing, pricing and reimbursement;

Mandated a review or appeals process able to overturn listing and pricing decisions made by

expert bodies;

Legalized direct-to-consumer advertising via the internet (which is currently prohibited in all

industrialized countries except for the US and New Zealand); and

Established cooperative mechanisms for ongoing engagement with ongoing capacity to

influence formulary decision making.

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The 2014 leaked text is much changed from the previous US proposal. The initial very onerous US

proposal seems to have been essentially abandoned in the face of opposition from the other TPP

Parties, and the 2014 leaked negotiating draft appears closely modeled on AUSFTA Annex 2-C. This

confirms previous reports that initial proposal was completely rejected by the other countries and that

the US, Australia and Japan subsequently collaborated on a revised proposal.

During the TPP ministers’ meeting in Singapore in December 2013, two documents prepared by one of

the TPP negotiating countries were leaked simultaneously to Huffington Post and Wikileaks. These

include a chart showing each country’s position on key outstanding issues across the TPP6 and an

internal memorandum summarising the state of play at the Salt Lake City negotiating round in

November 2013.7 The chart shows that Australia and Japan had agreed to negotiate the “medicines

annex”. The memorandum6 includes the following (p. 2):

[Transparency annex on medicines]:

...Some bad news was that the US revived the Transparency Annex on Medicines now in a

revised version that it had worked on with Australia and Japan. Some countries expressed

annoyance for the way that they resubmitted a text that had been strongly rejected in the

past… The U.S. reiterated that it does not apply to all countries and was asked to put in a

footnote that says that. That’s where it was left…

An article in Inside U.S. Trade in January 20148 also suggested that the revised version was modelled on

provisions in AUSFTA. Its scope is broader than AUSFTA Annex 2-C, however, because it covers medical

devices as well as pharmaceuticals.

The decision of the Australian negotiators to work with the US and Japan on revising the proposal was

probably taken in order to ensure that Australia had a say in developing a proposal that would be

acceptable in the Australian context. In taking this action, Australia appears to have attenuated much of

the risk for Australia, but in doing so, splintered the unanimous opposition to the inclusion of the Annex

in the TPP, and sold out other countries, particularly New Zealand.

The Annex is clearly intended to target New Zealand’s Pharmaceutical Management Agency (PHARMAC)

and some of its provisions will result in new obligations for PHARMAC that will involve transaction costs

and could impinge on its flexibility and autonomy. This is particularly worrying given that PHARMAC

provides a model pharmaceutical coverage program that is suitable for adoption by developing

countries.9 PHARMAC has been targeted in successive Special 301 Watch reports by the United States

Trade Representative for its supposedly unfair pricing and reimbursement regime.9

6 Trans Pacific Partnership (2013) TPP Country Positions (6 November 2013).

7 Trans Pacific Partnership (2013) TPP State of Play After Salt Lake City 19-24 November Round of Negotiations.

Leaked negotiating document. Retrieved from: https://wikileaks.org/IMG/pdf/tpp-salt-lake-extracts-.pdf on 20 December, 2013. 8 Inside U.S. Trade (2014) US Poised to scale back TPP proposal on drug reimbursement rules. 17 January, 2014.

9 Gleeson D, Lopert R, Reid P. (2013) How the Trans Pacific Partnership Agreement could undermine PHARMAC and

threaten access to affordable medicines and health equity in New Zealand. Health Policy, 112(3): 227-233.

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Comparative analysis of the leaked 2014 draft Healthcare Transparency Annex

This section of the paper presents an analysis of the 2014 draft Annex in comparison with the previous

leaked draft and Annex 2-C of the Australia-US Free Trade Agreement. The table on pages 13-25

provides the more detailed provision-by-provision analysis which underpins this commentary.

Paragraph X.1: PRINCIPLES

The scope of the TPP Annex (both 2011 and 2014 texts) is broader than AUSFTA: the TPP Annex includes

medical devices whereas AUSFTA Annex 2-C only applied to pharmaceuticals. Apart from this important

distinction, the wording of the 2014 TPP draft principles is closely modeled on AUSFTA Annex 2-C.

Overall, the Annex 2-C wording provides a better model than the original TPP wording.

It is encouraging that the TPP countries have included specific wording about protecting and promoting

public health in the principles, although this is not treaty-level language and confers no specific

obligations, so it may not have the desired protective effect. Problematic language regarding patented

and generic products in the earlier text has also been removed from the 2014 draft. Even with these

changes, the language of these principles is weighted more towards the interests of the industry than

those of the public.

Apparently minor changes to the Annex 2-C wording (e.g. “impartial” and “without prejudice to”) are

worrisome as they may limit decision making autonomy (see table for further details).

Paragraph X.2: PROCEDURAL FAIRNESS

The opening clause states that provisions in this paragraph apply to national health care programs

operated by the national health care authorities. The word “shall” means that the requirements of this

paragraph are binding treaty-level obligations.

A footnote indicates that where formulary development and management directly relates to

government procurement (ie where a government directly purchases pharmaceuticals or medical

devices), the Annex will not apply. Presumably government procurement of pharmaceuticals is covered

in the Government Procurement chapter of the TPP. Since there have been no leaks to date, the

contents of this chapter and their implications for public hospital purchasing in Australia, for example,

are unknown.

Article X.2(a) requires Parties to “ensure that consideration of all formal and duly formulated proposals

for such listing of pharmaceutical products or medical devices is completed within a specified period of

time”. The 2011 US proposal applied to both pricing and listing, but the 2014 text is more limited in

scope and only applies to listing. The revised provision is consistent with the obligations of AUSFTA

Annex 2-C, but is highly problematic for New Zealand as it would require PHARMAC to adhere to

specified timeframes for considering proposals for listing. PHARMAC is not currently bound by statutory

timeframes and has considerable flexibility to prioritise and re-prioritise applications according to its

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own assessment of the needs of the New Zealand population.10 The industry has been lobbying for

shorter timeframes for listing.11

Article X.2(b), which requires disclosure about rules, guidelines and other information used to assess

proposals, clearly remains very contentious among the Parties. This provision is also highly problematic

for New Zealand’s PHARMAC and the specific wording negotiated will be crucial in determining the

outcome. While PHARMAC already discloses information about its decision making process overall and

the guidelines it uses, it is very important that it does not need to publish information about how rules,

methodologies, principles and guidelines are used to assess particular applications – and particularly

how decision rules are applied.10 Footnote 6 appears to be intended to limit the scope of this clause to

the general application rather than to specific decisions, however the status of this footnote is unclear.

The current wording of the footnote may also be broader in scope than the text of X.2(b) depending on

the wording that is negotiated.

Article X.2(c) requires countries to “afford applicants, and where appropriate, the public, timely

opportunities to provide comments at relevant points in the decision-making process”. AUSFTA Annex 2-

C contained a similar clause providing applicants with opportunities to comment. New Zealand’s

PHARMAC is not currently required to do this. While pharmaceutical companies can provide data on

cost-utility analysis (and any updated data),12 they currently have no rights to provide comments on

PHARMAC’s step by step process.10 Implementing this provision would at least involve administrative

overheads for PHARMAC, although it does not appear to oblige the healthcare authority to take any

action as a result of comments provided by the pharmaceutical industry.

The requirement to allow the public opportunities to comment may also be problematic for New

Zealand, although Australia already allows consumers to submit comments for PBAC consideration when

a submission is considered (see

http://www.health.gov.au/internet/main/publishing.nsf/Content/PBAC_online_submission_form ).

PHARMAC has a Consumer Advisory Committee in place

(https://www.pharmac.health.nz/about/committees/consumer-advisory-committee-cac/) to provide

consumer input but this committee has no role in assessing applications for listing. New Zealand could

be subject to pressure to provide opportunities for input in support of particular applications for listing.

The pharmaceutical industry is well known for encouraging, and in some cases funding, patient groups

to lobby for listing of medicines. This could politicize the process of pharmaceutical decision making in

New Zealand.

Article X.2(e) requires the provision of written information to applicants regarding the basis for

recommendations or determinations for listing. This obligation was already introduced in Australia with

AUSFTA, but it would be a significant new obligation for PHARMAC. While PHARMAC is subject to the

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Gleeson D, Babar Z, Reid P and Neuwelt P. Draft manuscript: The Trans Pacific Partnership Agreement and the expected impact of AUSFTA Annex 2-C style provisions on access to medicines and PHARMAC in New Zealand. 11

Barber JM and Sheehy K. (2015) Uptake of new medicines in New Zealand: Evidence of a waiting list. New Zealand Medical Journal 128 (1412): 1-11. 12

PHARMAC (2012) Prescription for Pharmacoeconomic Analysis: Methods for Cost-Utility Analysis. Version 2.1.

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Official Information Act and has an obligation to act in good faith with regard to releasing information,13

it is able to withhold certain information. PHARMAC’s Pharmacology and Therapeutics Advisory

Committee (PTAC), whose role is to provide objective clinical advice to the board, is not currently

required to publish its assessments of evidence or the basis for its recommendations in particular

cases.10

The proposed phrase “sufficient to comprehend” in Article X.2(e)is concerning as this could be a matter

for dispute.

Article X.2(f) provides two alternative options for a review process for listing recommendations or

determinations. Here the US seems to have dropped the independent appeal process it was previously

seeking. This requirement for an independent appeals process was criticized on the grounds that it

would have enabled “challenges to formulary decision making, particularly if a decision to decline listing

were made on the grounds of inadequate cost-effectiveness or lack of evidence of value for money.”3

The first part of X.2(f) reflects the independent review process introduced in Australia as a result of the

AUSFTA. This process is limited in scope and essentially a quality assurance mechanism rather than an

appeal mechanism.3 The independent review outcome cannot re-make a determination of the

Pharmaceutical Benefits Advisory Committee (PBAC) but can only recommend that a determination be

reviewed. 3 The scope of the independent review process was narrowed by the side letter to negative

listing recommendations (it was subsequently extended to negative decisions regarding new indications

for drugs already listed).10 It is not available for the review of pricing decisions. It appears that Australia

would be unlikely to need to make any changes to its current independent review process as a result of

this clause.

The alternative process outlined in X.2(f) would at least provide for the review to be conducted by the

same expert or group who made the initial recommendation or determination, however it is unclear

what a “substantive reconsideration” would mean and the interpretation of this clause may provide

grounds for disputes.

PHARMAC does not currently have an administrative review process, and implementing either

alternative would involve transaction costs, unless these are passed on to the industry. A review process

is unlikely to hold any benefits for PHARMAC or for New Zealanders to outweigh the diversion of public

resources.

Article X.2(g) requires Parties to “provide written information to the public regarding such

recommendations or determinations, while protecting information considered to be confidential under

the Party’s law”. This was the one positive change in the public interest that was introduced in Australia

as a result of Annex 2-C.3 PHARMAC is arguably already compliant with this clause as it provides a

significant amount of information to the public. For example, its decision criteria are published, and

minutes of PTAC meetings are published on its websites. Where PTAC or one of its subcommittees uses

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PHARMAC (2006) Operating Policies and Procedures of the Pharmaceutical Management Agency (“PHARMAC”) Third Edition, January 2006.

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additional decision criteria to the listed decision criteria, according to its Terms of Reference, it must

document the criteria used and the reasons for using them in its minutes, in keeping with PHARMAC’s

Terms of Reference.10

Paragraph X.3: DISSEMINATION OF INFORMATION TO HEALTH PROFESSIONALS AND CONSUMERS

Paragraph X.3 appears to legalise direct-to-consumer advertising (DTCA) of pharmaceuticals, and the

wording in the 2011 draft would have achieved this effect. However, the 2014 draft borrows critical

wording from Article 5 in AUSFTA Annex 2-C (“as is permitted to be disseminated under the Party’s laws,

regulations and procedures”) that allowed Australia to continue to prohibit DTCA via the internet.

New Zealand and the United States are the only industrialized countries that allow direct-to-consumer

advertising of prescription medicines (DTCA). DTCA is currently allowable under the New Zealands’

Medicines Act 1981 and Medicines Regulations Act 1984.10 This legislation prohibits false or misleading

claims or branding. However, evidence is mounting to suggest that DTCA can have a deleterious effect

on prescribing and pharmaceutical expenditure, by increasing demand for pharmaceuticals,

undermining rational prescribing, and increasing healthcare expenditure. 3 New Zealand should take

care to avoid ‘locking in’ DTCA through a trade agreement in order that domestic policy changes can be

made if this evidence grows.10

Paragraph X.4: CONSULTATION

AUSFTA Annex 2-C required the establishment of a Medicines Working Group, but the mandate and

membership of this group was tightly circumscribed by its Terms of Reference. The group was chaired by

health officials and was essentially only a discussion group as it had no decision making mandate.3

The 2014 Annex does not include such a working group, but instead a requirement to provide an

opportunity for consultation on matters related to the Annex. This consultation process may provide an

avenue for US officials to pressure other countries regarding their pharmaceutical policies and their

implementation of the annex.

Any such consultation process – which is inadvisable - should be limited to discussion between health

officials and have its scope tightly circumscribed to discussion only. A footnote seeks to clarify that

“Nothing in this paragraph shall be construed as requiring a Party to review or change decisions

regarding specific applications” and it is clear that one Party is seeking to add “or any aspect of national

health care or healthcare subsidy programmes”. If the countries agree to a consultation mechanism, it

will be important for the full text of the footnote to be adopted.

Paragraph X.6: DEFINITIONS

Paragraph X.6 defines the terms ‘national health care authority’ and ‘national health care program’.

There is clearly still some disagreement amongst the Parties here about specifically what is covered by

the Annex.

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Paragraph X.7: DISPUTES

This provision has newly appeared in the 2014 draft. While it is a positive development that the

countries have agreed that the TPP’s state to state dispute settlement provisions will not apply to the

obligations of the Annex, pharmaceutical companies will be able to access the investor-state dispute

settlement clause to contest pharmaceutical policy decisions.

The recent leak of the TPP Investment Chapter14 shows that the Australian Government is seeking to

carve out the Pharmaceutical Benefits Scheme from ISDS (along with the Medicare Benefits Scheme, the

Therapeutic Goods Administration and the Office of the Gene Technology Regulator). However, the

carveout appears in brackets indicating that other countries have not yet agreed.

Schedule to Annex

It appears that each country is seeking to specify which of its programs are covered. The schedule is

heavily bracketed indicating that there is significant disagreement.

Australia appears to be seeking to limit the scope of the annex to the Pharmaceutical Benefits Advisory

Committee (PBAC), which means that medical devices will not be in scope if other countries agree with

this. New Zealand is unlikely to have this option given that PHARMAC is responsible for subsidizing

medical devices.

Australia’s efforts to carve out medical devices may not be fully effective. While Paragraph X.6 limits the

definition of a national health care authority to an entity specified in the schedule, certain paragraphs in

the Annex may be interpreted to apply to medical devices because these paragraphs do not specifically

refer to a national health care authority or program. These include Paragraph X.1 (Principles) and

Paragraph 4 (Consultation). Thus Australia could still be subject to pressure from the US regarding its

medical devices programs.

Discussion and conclusions

The revised draft is certainly less intrusive than the original US proposal. Some of the worst elements of

the 2011 draft have been abandoned altogether. These include:

Previous Paragraph X.3(d) – which would have precluded therapeutic reference pricing;

Previous Paragraph X.2 – containing onerous requirements for publishing regulations; and

Previous Paragraph X.3(k) – requiring parties to make public membership lists of committees

involved in pharmaceutical reimbursement decisions.

The highly problematic independent appeals process previously sought by the US, which would have

applied to both listing and pricing recommendations/decisions, has also been replaced with a process

for reviewing listing recommendations or determinations (the nature of which is still under debate).

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https://wikileaks.org/tpp-investment/press.html

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Major problems remaining with the 2014 leaked draft of the Annex, which should be of concern to all

countries including Australia, include:

Apparently minor alterations to the language of AUSFTA Annex 2-C may circumscribe countries’

autonomy considerably;

While two alternative options for a review process are proposed in Article X.2(f) (one of which

appears to reflect the current Australian review process), the second of these requires “at a

minimum, a substantive reconsideration of the application” - this potentially allows for listing

recommendations or decisions to be re-made;

Paragraph X.4 includes a consultation mechanism which could be used to apply ongoing

pressure to countries to make changes to their pharmaceutical programs in the interests of the

US-based pharmaceutical and medical device industries;

While Paragraph X.7 states that the TPP’s state-to-state dispute settlement procedures will not

apply to the Annex, pharmaceutical and medical device companies will have access to the

investor-state dispute settlement mechanism to sue countries over their pharmaceutical

policies.

Particular problems for PHARMAC (and other countries that may wish to implement the PHARMAC

model in future) remaining in the 2014 draft Annex include provisions that require:

Consideration of proposals for listing to be completed within a specified period of time (Article

X.2(a));

Disclosure of procedural rules, methodologies, principles, and guidelines used to assess a

proposal5 (Article X.2(b));

Providing applicants and the public with opportunities to provide comments at relevant points

in the decision-making process (Article X.2(c));

Opportunities for the public to provide comments at relevant points in the decision-making

process (Article X.2(c)), which may facilitate pharmaceutical industry-sponsored lobbying by

patient groups;

Provision of written information to applicants regarding the basis for recommendations or

determinations for listing (Article X.2(e)); and

Direct-to-consumer advertising: while Paragraph X.3 appears to allow countries that currently

prohibit direct-to-consumer advertising (DTCA) of pharmaceuticals to continue to do so, it may

lock in current settings in New Zealand that permit DTCA.

Furthermore, the US process of certification could provide another avenue for the US to provide

pressure to countries to implement the obligations of the annex in a particular way. South Korea was

put under considerable pressure prior to ratification of KORUS over its implementation of the

pharmaceutical provisions.15

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Inside US Trade (2012) PhRMA charges Korea out of compliance with FTA drug provisions.

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The impact of the 2014 Annex provisions in their current form would be felt most by New Zealand.

There are several provisions that could have detrimental effects on PHARMAC, adding new transaction

costs and significantly reducing its flexibility and autonomy. This is particularly important in the context

that PHARMAC currently has significant flexibility in decision making regarding prioritising applications,

which decision criteria to use and how to apply them, which pricing strategy to use, and how to consult

and inform applicants and the public.

It is highly inappropriate for the United States to apply highly prescriptive settings to pharmaceutical

access programs in other countries. The Annex serves no public interest purpose and provides a

negative precedent for future regional trade agreements. It could also constrain the options of

developing countries in introducing pharmaceutical coverage programs in future. The negotiating

countries should not agree to its inclusion in the TPP.

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2011 US TPP proposal AUSFTA Annex 2-C TPP 2014 draft Annex Comment

PARAGRAPH X.1: AGREED PRINCIPLES

The Parties share a commitment to promoting the development of and facilitating access to high quality patented and generic pharmaceutical products and medical devices, as a means of continuing to improve the health of their nationals. In pursuing these objectives, the Parties affirm the importance of:

(a) adequate access to high-quality pharmaceutical products and medical devices in providing high-quality health care;

(b) high-quality patented and generic pharmaceutical products and medical devices in reducing other more costly medical expenditures;

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

(d) promoting innovation and timely and affordable access to safe and effective pharmaceutical products and medical devices through transparent, expeditious and accountable procedures, without impeding a Party’s ability to apply appropriate standards of quality, safety, and efficacy;

(e) ethical practices by manufacturers and suppliers of pharmaceutical products and medical devices and by health care

1. Agreed Principles

The Parties are committed to facilitating high quality health care and continued improvements in public health for their nationals. In pursuing these objectives, the Parties are committed to the following principles:

(a) the important role played by innovative pharmaceutical products in delivering high quality health care;

(b) the importance of research and development in the pharmaceutical industry and of appropriate government support, including through intellectual property protection and other policies;

(c) the need to promote timely and affordable access to innovative pharmaceuticals through transparent, expeditious, and accountable procedures, without impeding a Party’s ability to apply appropriate standards of quality, safety, and efficacy; and

(d) the need to recognize the value of innovative pharmaceuticals through the operation of competitive markets or by adopting or maintaining procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical.

PARAGRAPH X.1: PRINCIPLES

The Parties are committed to facilitating high-quality healthcare and continued improvements in public health for their nationals including patients and the public. In pursuing these objectives, the Parties acknowledge the importance of the following principles:

(a) the importance of protecting and promoting public health and the important role played by pharmaceutical products and medical devices

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delivering high quality health care;

(b) the importance of research and development, including associated innovation, related to pharmaceutical products and medical devices;

(c) the need to promote timely and affordable access to pharmaceutical products and medical devices, through transparent, [xx oppose: impartial,] expeditious, and accountable procedures, without prejudice to a Party’s right to apply appropriate standards of quality, safety, and efficacy; and

(d) the need to recognize the value of pharmaceutical products and medical devices through the operation of competitive markets or by adopting or maintaining procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical product or medical device.

Footnotes

1 For greater certainty, the Parties confirm that the purpose of this Annex is to ensure transparency and procedural

The scope of the TPP Annex (both 2011 and 2014 texts) is broader than AUSFTA: the TPP Annex includes medical devices whereas AUSFTA Annex 2-C only applied to pharmaceuticals.

Apart from this important distinction, the wording of the 2014 TPP draft principles is closely modeled on AUSFTA Annex 2-C. Overall, the Annex 2-C wording provides a better model than the original TPP wording.

It is encouraging that the TPP countries have included specific wording about protecting and promoting public health in the principles, although this is not treaty-level language and confers no specific obligations, so it may not have the intended protective effect. Problematic language regarding patented and generic products in the earlier text has also been removed from the 2014 draft.

The phrase “adopting or maintaining procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical” in AUSFTA Annex 2-C was intended to reflect the use of comparative cost effectiveness analysis (and therefore therapeutic reference pricing) in the Australian context.

Problematic issues with the wording of the principles:

The addition of the word “impartial” to the Annex 2-C language in X.1(c) – which is opposed by only one country – is concerning. This may be taken to mean that every decision needs

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providers on a global basis in order to achieve open, transparent, accountable, and reasonable health care decision-making; and

(f) cooperation among the Parties to improve the availability of safe, effective, high-quality pharmaceutical products and medical devices through transparent, expeditious and accountable procedures, without regard to the origin of the products or devices.

fairness of relevant aspects of Parties’ [xx propose: applicable] systems relating to pharmaceutical products and medical devices as specified herein, [xx propose: if any,] without prejudice to the obligations in Chapter [ZZ (Transparency)], and not to modify a Party’s system of health care in any other respects or a Party’s rights to determine health expenditure priorities. [xx comment: We will drop ‘if any’ if other Parties accept ‘applicable’.]

2 For purposes of this Annex, each Party shall define the scope of the products subject to its statutes and regulations for pharmaceutical products and medical devices in its territory and make such information publicly available.

to be made on its merits without any type of prejudgment; that review must be independent; or that criteria used in decision making are not seen to disadvantage the applicant.

The replacement of the Annex 2-C term “without impeding” with the term “without prejudice to” in X.1(c) is also worrying. “Without impeding” provides stronger protection for the autonomy of the decision maker.

PARAGRAPH X.2: TRANSPARENCY RELATED TO HEALTHCARE TECHNOLOGIES

1. Each Party shall comply with Articles [XX.2.] (Transparency-Publication) with respect to any matter related to the reimbursement for pharmaceutical products or medical devices.

2. To the extent possible, each Party shall allow reasonable time between publication of final regulations of general application at the central level of government respecting any matter related to the reimbursement for pharmaceutical products or medical devices and the effective date of such regulations.

3. Each Party shall ensure that all measures of general application at the central level of government respecting any matter related to reimbursement for pharmaceutical products or medical devices are administered in a reasonable,

No equivalent No equivalent This troublesome paragraph from the earlier draft of the TPP Annex has been removed.

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objective, consistent, non-discriminatory, and impartial manner.

PARAGRAPH X.3: PROCEDURAL FAIRNESS RELATED TO HEALTHCARE TECHNOLOGIES

To the extent that health care authorities of a Party’s central level of government maintain procedures for listing pharmaceutical products, medical devices, or indications for reimbursement, or for setting the amount of reimbursement for pharmaceutical products or medical devices, under health care programs operated by its central level of government

1, a Party shall:

2. Transparency

To the extent that a Party’s federal healthcare authorities operate or maintain procedures for listing new pharmaceuticals or indications for reimbursement purposes, or for setting the amount of reimbursement for pharmaceuticals, under its federal healthcare programs, it shall:

PARAGRAPH X.2: PROCEDURAL FAIRNESS

To the extent that a Party’s national health care authorities operate or maintain procedures for listing new pharmaceutical products or medical devices for reimbursement purposes, or setting the amount of such reimbursement, under national health care programs operated by the national health care authorities,

3 4 the Party shall:

[xx comment: On the understanding that this Annex does not apply to procedures undertaken for the purpose of post-market subsidization of pharmaceutical products or medical devices procured by public healthcare entities where the pharmaceutical products or medical devices eligible for consideration are based on the products or devices that are procured by public healthcare entities, Singapore is prepared to accept the language contained in this provision (except as specifically indicated below), provided that this understanding is shared and confirmed by Parties as set out in footnote 4 (as currently numbered in the clean version).]

Footnotes 3 and 4:

3 This Annex shall not apply to government procurement of pharmaceutical products and medical devices. Where {a public entity providing healthcare services} a {national} healthcare authority} engages in government procurement for pharmaceutical products or medical devices, formulary development and management with respect to such activity

Footnote 3 indicates that where formulary development and management directly relates to government procurement (ie where a government directly purchases pharmaceuticals or medical devices), the Annex will not apply.

Presumably government procurement of pharmaceuticals is covered in the Government Procurement chapter of the TPP. Since there have been no leaks to date, the contents of this chapter and their implications for public hospital purchasing in Australia, for example, are unknown.

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by the {national} healthcare authority shall be considered an aspect of such government procurement.

4 [xx propose: This Annex shall not apply to procedures undertaken for the purpose of post-market subsidization of pharmaceutical products or medical devices procured by public healthcare entities where the pharmaceutical products or medical devices eligible for consideration are based on the products or devices that are procured by public healthcare entities.] [xx comment: xx’s comment appended to the chapeau of X.2 is to be read in conjunction with this footnote.]

(a) ensure that consideration of all formal applications for the approval of pharmaceutical products or medical devices for reimbursement or for setting the amount of reimbursement for such products is completed within a reasonable, specified period;

(a) ensure that consideration of all formal proposals for listing are completed within a specified time;

(a) ensure that consideration of all formal and duly formulated proposals for such listing of pharmaceutical products or medical devices for reimbursement is completed within a specified period of time

5;

Footnote 5

5 In those cases in which a Party’s national healthcare authority is unable to complete consideration of a proposal within {the} {a} specified period of time, the Party shall disclose the reason for the delay to the applicant and shall provide for another specified period of time for completing consideration of the proposal.} {Placeholder for negotiators note.}

The 2011 US proposal applied to both pricing and listing, but the 2014 text is more limited in scope and only applies to listing.

X.2(a), while consistent with current arrangements in Australia, is highly problematic for New Zealand as it would require PHARMAC to adhere to specified timeframes for considering proposals for listing. PHARMAC is not currently bound by statutory timeframes and has considerable flexibility to prioritise and re-prioritise applications according to its own assessment of the needs of the New Zealand population.

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

(b) disclose procedural rules, methodologies, principles, and guidelines used to assess a proposal;

(b) disclose procedural rules, [xx propose; xx considering: methodologies, principles, and [xx oppose; xx propose: where relevant,] guidelines used to assess such proposals

6;

Footnote 6:

6 {Negotiators’ Note: For greater certainty,

X.2(b) clearly remains very contentious among the Parties. This provision is also highly problematic for New Zealand’s PHARMAC and the specific wording negotiated will be crucial in determining the outcome. While PHARMAC already discloses information about its decision making process overall and the guidelines

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products or medical devices; it is understood that subparagraph (b) refers to procedural rules, methodologies, principles and guidelines of general application.}

it uses, it is very important that it does not need to publish information about how rules, methodologies, principles and guidelines are used to assess particular applications – and particularly how decision rules are applied. Footnote 6 appears to be intended to limit the scope of this clause to the general application rather than to specific decisions, however the status of this footnote is unclear. The current wording of the footnote may also be broader in scope than the text of X.2(b) depending on the wording that is negotiated.

(c) afford applicants timely and meaningful opportunities to provide comments at relevant points in the decision-making process related to reimbursement for pharmaceutical products or medical devices;

(c) afford applicants timely opportunities to provide comments at relevant points in the process;

(c) afford applicants7, and where

appropriate, the public, timely opportunities to provide comments at relevant points in the decision-making process;

Footnote 7 (presumably – does not have a number in the text):

For greater certainty, each Party may define the persons or entities that qualify as an “applicant” under its laws, regulations, and procedures

AUSFTA Annex 2-C required Australia to provide applicants with opportunities to provide comments at relevant points in the process. New Zealand’s PHARMAC is not currently required to do this. While pharmaceutical companies can provide data on cost-utility analysis (and any updated data), they currently have no rights to provide comments on PHARMAC’s step by step process. Implementing this provision would at least involve administrative overheads for PHARMAC, although it does not appear to oblige the healthcare authority to take any action as a result of comments provided by the pharmaceutical industry.

The requirement to allow the public opportunities to comment may also be problematic for New Zealand, although Australia already allows consumers to submit comments for PBAC consideration when a submission is considered (see http://www.health.gov.au/internet/main/publishing.nsf/Content/PBAC_online_submission_form). PHARMAC has a Consumer Advisory Committee in place (https://www.pharmac.health.nz/about/c

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ommittees/consumer-advisory-committee-cac/ ) to provide consumer input but this committee has no role in assessing applications for listing. New Zealand could be subject to pressure to provide opportunities for input in support of particular applications for listing. The pharmaceutical industry is well known for encouraging, and in some cases funding, patient groups to lobby for listing of medicines. This could politicize the process of pharmaceutical decision making in New Zealand.

g) within a reasonable, specified period, provide detailed written information to applicants regarding the basis for recommendation or determination relating to their applications for reimbursement of pharmaceutical products or medical devices, including citations to any expert opinions or academic studies upon which the Party has relied;

(d) provide applicants with detailed written information regarding the basis for recommendations or determinations regarding the listing of new pharmaceuticals or for setting the amount of reimbursement by federal healthcare authorities;

(e) provide applicants with [xx propose: detailed] written information [xx propose: sufficient to comprehend] [xx oppose: regarding] the basis for recommendations or determinations regarding the listing of new pharmaceutical products or medical devices for reimbursement by national healthcare authorities;

This obligation was already introduced in Australia with AUSFTA, but it would be a significant new obligation for PHARMAC. While PHARMAC is subject to the Official Information Act and has an obligation to act in good faith with regard to releasing information, it is able to withhold certain information. PHARMAC’s Pharmacology and Therapeutics Advisory Committee (PTAC), whose role is to provide objective clinical advice to the board, is not currently required to publish its assessments of evidence or the basis for its recommendations in particular cases.

The proposed phrase “sufficient to comprehend” is concerning as this could be a matter for dispute.

(h) make available to the public written information regarding its recommendations and determinations relating to the reimbursement of pharmaceutical products or medical devices, subject to any requirements under the Party’s law to protect information considered to be confidential;

e) provide written information to the public regarding its recommendations or determinations, while protecting information considered to be confidential under the Party’s law;

g) provide written information to the public regarding such recommendations or determinations, while protecting information considered to be confidential under the Party’s law.

This was the one positive change in the public interest that was introduced in Australia as a result of Annex 2-C. PHARMAC already provides a significant amount of information to the public. For example, its decision criteria are published, and minutes of PTAC meetings are published on its websites. Where PTAC or one of its subcommittees uses additional decision criteria to the listed

19

decision criteria, according to its Terms of Reference, it must document the criteria used and the reasons for using them in its minutes, in keeping with PHARMAC’s Terms of Reference.

(i) make available an opportunity for independent appeal or review of recommendations or determinations relating to reimbursement for pharmaceutical products or medical devices; and

(f) make available an independent review process that may be invoked at the request of an applicant directly affected by a recommendation or determination.

f) make available [xx propose: xx considering: an independent] review process [xx propose; xx oppose:8] that may be invoked at the request of an applicant directly affected by such a recommendation or determination by a Party’s national healthcare authorities not to list a pharmaceutical or medical device for reimbursement [xx propose: xx considering: or as an alternative, an internal review process, such as by the same expert or group of experts that made the recommendation or determination, provided that such a review process includes, at a minimum, a substantive reconsideration of the application and may be invoked at the request of an applicant directly affected by such recommendation or determination]

9; and

Footnotes 8 and 9:

8 [xx propose; xx oppose: For greater certainty, this does not affect the Parties’ right to determine, the timing of such review.]

9 {xx propose; xx considering: For greater certainty, subparagraph (f) does not require a Party to provide more than a single review process for a request regarding a specific proposal or to review, in conjunction with the request, other proposals or the {analysis} {assessment} related to such other proposals. Further, a Party may elect to provide the review process specified in subparagraph (f)

The US appears to have dropped the push for an independent appeal process. An independent appeals process would have enabled “challenges to formulary decision making, particularly if a decision to decline listing were made on the grounds of inadequate cost-effectiveness or lack of evidence of value for money.”

3

The first part of X.2(f) reflects the independent review process introduced in Australia as a result of the AUSFTA. This process is limited in scope and essentially a quality assurance mechanism rather than an appeal mechanism. The independent review outcome cannot re-make a determination of the Pharmaceutical Benefits Advisory Committee (PBAC) but can only recommend that a determination be reviewed. The scope of the independent review process was narrowed by the side letter to negative listing recommendations (it was subsequently extended to negative decisions regarding new indications for drugs already listed). It is not available for the review of pricing decisions.

It appears that Australia would be unlikely to need to make any changes to its current independent review process as a result of this clause.

The alternative process outlined would at least provide for the review to be conducted by the same expert or group who made the initial recommendation or determination, however it is unclear what

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either with respect to a draft final recommendation or determination, or with respect to a final recommendation or determination.}

a “substantive reconsideration” would mean and the interpretation of this clause may provide grounds for disputes.

PHARMAC does not currently have an administrative review process, and implementing either alternative would involve transaction costs. It is unlikely to have any benefits for PHARMAC or for New Zealanders.

(k) make publicly available the membership list of all committees involved in determinations related to the reimbursement of pharmaceutical products or medical devices.

No equivalent No equivalent This intrusive requirement has been removed from the 2014 draft.

PARAGRAPH X.4: DISSEMINATION OF INFORMATION TO HEALTH PROFESSIONALS AND CONSUMERS

Each Party shall permit a pharmaceutical product manufacturer to disseminate to health professionals and consumers through the manufacturer’s Internet site registered in the territory of the Party, and on other Internet sites registered in the territory of the Party linked to that site, information that is truthful and not misleading regarding its pharmaceutical products that are approved for sale in the Party’s territory, provided that the information includes a balance of risks and benefits and is limited to indications for which the Party’s competent regulatory authorities have approved the marketing of the pharmaceutical products.

5. Dissemination of Information Each Party shall permit a pharmaceutical manufacturer to disseminate to health professionals and consumers through the manufacturer’s Internet site registered in the territory of the Party, and on other Internet sites registered in the territory of the Party linked to that site, truthful and not misleading information regarding its pharmaceuticals that are approved for sale in the Party’s territory as is permitted to be disseminated under the Party’s laws, regulations, and procedures, provided that the information includes a balance of risks and benefits and encompasses all indications for which the Party’s competent regulatory authorities have approved the marketing of the pharmaceuticals.

PARAGRAPH X.3: DISSEMINATION OF INFORMATION TO HEALTH PROFESSIONALS AND CONSUMERS

Each Party shall permit a pharmaceutical product manufacturer to disseminate to health professionals and consumers through the manufacturer’s Internet site registered in the territory of the Party, and on other Internet sites registered in the territory of the Party linked to that site, truthful and not misleading information regarding its pharmaceutical products that are approved for marketing in the Party’s territory as is permitted to be disseminated under the Party’s laws, regulations, and procedures, provided that the information includes a balance of risks and benefits and encompasses all indications for which the Party’s competent regulatory authorities have approved the marketing of the pharmaceutical product.

New Zealand and the United States are the only industrialized countries that allow direct-to-consumer advertising of prescription medicines (DTCA).

Article 5 in AUSFTA Annex 2-C contains some critical wording (shown in bold) that allowed Australia to continue to prohibit DTCA via the internet. The 2014 TPP Annex preserves this clause.

DTCA is currently allowable under the New Zealands’ Medicines Act 1981 and Medicines Regulations Act 1984. This legislation prohibits false or misleading claims or branding. However, evidence is mounting to suggest that DTCA can have a deleterious effect on prescribing and pharmaceutical expenditure, by increasing demand for pharmaceuticals, undermining rational prescribing, and increasing healthcare expenditure. New Zealand should take care to avoid ‘locking in’ DTCA through a trade agreement in order that domestic policy changes can be made if this evidence grows.

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PARAGRAPH X.5: ETHICAL BUSINESS PRACTICES

[Placeholder for provisions on ethical business practices]

No equivalent No equivalent This placeholder has been removed from the 2014 draft.

PARAGRAPH X.6: COOPERATION

1. The Parties recognize that international cooperation is important to increasing the availability of pharmaceutical products and medical devices through transparent, expeditious and accountable procedures at the central level of government, and that such cooperation should be encouraged regardless of the origin of such products or devices.

2. [Placeholder for possible cooperative mechanisms]

3. Medicines Working Group

(a) The Parties hereby establish a Medicines Working Group.

(b) The objective of the Working Group shall be to promote discussion and mutual understanding of issues relating to this Annex (except those issues covered in paragraph 4), including the importance of pharmaceutical research and development to continued improvement of healthcare outcomes.

(c) The Working Group shall comprise officials of federal government agencies responsible for federal healthcare programs and other appropriate federal government officials.

4. Regulatory Cooperation

The Parties shall seek to advance the existing dialogue between the Australian Therapeutic Goods Administration and the U.S. Food and Drug Administration with a view to making innovative medical products more quickly available to their nationals.

PARAGRAPH X.4: CONSULTATION

1. To facilitate dialogue and mutual understanding of issues relating to this Annex, each Party shall give sympathetic consideration to [xx propose: and shall afford adequate opportunity for consultation regarding] a written request by another Party [xx oppose: to consult] on any matter related to this Annex. Such consultations shall take place within {3 months} of the delivery of the request, unless the consulting Parties otherwise agree.

10

2. Consultations shall involve officials from each Party responsible for {national} healthcare programs and other appropriate government officials.

Footnote 10:

10 Nothing in this paragraph shall be construed as requiring a Party to review or change decisions regarding specific applications [xx: or any aspect of national health care or healthcare subsidy programmes].

AUSFTA Annex 2-C required the establishment of a Medicines Working Group, but the mandate and membership of this group was tightly circumscribed by its Terms of Reference. The group was chaired by health officials and was essentially only a discussion group as it had no decision making mandate.

The 2014 Annex does not include such a working group, but a requirement to provide an opportunity for consultation on matters related to the Annex.

This consultation process may provide an avenue for US officials to pressure other countries regarding their pharmaceutical policies and their implementation of the annex.

Any such consultation process should be limited to discussion between health officials.

It will be important for the footnoted text to be adopted.

PARAGRAPH X.7: DEFINTIONS

For purpose of this Chapter:

health care authorities of a Party’s central level of government means entities that are part of or have been established by a Party’s central level of government to operate or administer its

6. Definitions

For the purposes of this Annex:

federal healthcare program means a health care program in which the Party’s federal health authorities make the decisions regarding matters to which this Annex applies.

PARAGRAPH X.6: DEFINITIONS

For purposes of this Annex-

national health care authority means, with respect to a Party listed in the schedule to this Annex, the relevant entity or entities specified therein, and with respect to any other Party, an entity that

Brackets indicate ongoing disagreement over exactly what is to be covered.

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health care programs;

health care programs operated by a Party’s central level of government means health care programs in which the health care authorities of a Party’s central level of government make the decisions regarding matters to which this Chapter applies;

2 and pharmaceutical product or

medical device means a pharmaceutical, biologic, medical device, or diagnostic product.

[Placeholder for additional definitions]

Footnote

2 [Negotiator’s Note: Clarifying footnote regarding scope of application, such as with respect to central versus regional level of government healthcare programs.]

is part of or has been established by a Party’s central level of government to operate a national health care program;

national health care program means a health care program in which a national health care authority makes the [xx propose: determinations or recommendations] [xx oppose: decisions] regarding the listing of pharmaceutical products or medical devices for reimbursement, or regarding the setting the amount of such reimbursement;

PARAGRAPH X.7: Disputes

The dispute settlement procedures provided for in Chapter BBB (Dispute Settlement) shall not apply to this Annex.

This provision has newly appeared in the 2014 draft. While it is a positive development that the countries have agreed that the TPP’s state to state dispute settlement provisions will not apply to the obligations of the Annex, pharmaceutical companies will be able to access the investor-state dispute settlement clause to contest pharmaceutical policy decisions.

The recent leak of the TPP Investment Chapter shows that the Australian Government is seeking to carve out the Pharmaceutical Benefits Scheme from ISDS (along with the Medicare Benefits Scheme, the Therapeutic Goods Administration and the Office of the Gene Technology Regulator). However, the carveout appears in brackets indicating that other countries have not yet agreed.

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SCHEDULE TO ANNEX

Further to the definition of national healthcare authorities in Paragraph X.6, national healthcare authorities shall mean:

(a) [xx propose: For Australia: the Pharmaceutical Benefits Advisory Committee (PBAC), with respect to PBAC’s role in making determinations in relation to the listing of pharmaceutical products for reimbursement under the Pharmaceutical Benefits Scheme;]

(b) [xx propose: For Japan: ______ w/r/t ______;]

[xx still considering: depending upon how Japan will define its national healthcare authority, Japan would propose a note to the effect that the review process under paragraph X.3.(f) means for it the review of initial recommendation]

(c) [xx propose: For the United States: The Centers for Medicare & Medicaid Services (CMS), with respect to CMS’s role in making Medicare national coverage determinations;]

(d) [xx propose: For Singapore: the Drug Advisory Committee (DAC) of the Ministry of Health with respect to the DAC’s role in the listing of pharmaceutical products. For greater certainty, Singapore does not currently operate a national healthcare programme within the scope of this Annex.]

{Note: xx may adjust the inscription in the Schedule pending further discussions as to the operation of the Schedule and its effect on Parties where there are no current applicable programme within the scope of the Annex.}

It appears that each country is specifying which of its programs are covered. The schedule is heavily bracketed indicating that there is significant disagreement.

Australia appears to be seeking to limit the scope of the annex to the Pharmaceutical Benefits Advisory Committee (PBAC), which means that medical devices will not be in scope if other countries agree with this.

New Zealand is unlikely to have this option given that PHARMAC is responsible for subsidizing medical devices.

Australia’s efforts to carve out medical devices may not be fully effective. While Paragraph X.6 limits the definition of a national health care authority to an entity specified in the schedule, certain paragraphs in the Annex may be interpreted to apply to medical devices because these paragraphs do not specifically refer to a national health care authority or program. These include Paragraph X.1 (Principles) and Paragraph 4 (Consultation). Thus Australia could still be subject to pressure from the US regarding its medical devices programs.

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Annex 2-C Side Letter

1. In order to enhance transparency, meaningful consultation, and accountability in the process of selecting, listing, and pricing of pharmaceuticals under its Pharmaceutical Benefits Scheme (PBS), Australia shall provide an applicant seeking to have a pharmaceutical listed on the PBS formulary:

(a) an opportunity to consult relevant officials prior to submission of an application for listing, including on the selection of a comparator pharmaceutical;

(b) an opportunity to respond fully to reports or evaluations relating to the applications that are prepared for the technical subcommittees of the Pharmaceutical Benefits Advisory Committee (PBAC);

(c) an opportunity for a hearing before PBAC while it is considering reports or advice from the technical subcommittees to the PBAC regarding applications; and

(d) sufficient information on the reasons for PBAC’s determination on an application, on an expeditious basis, to facilitate any application to the Pharmaceutical Benefits Pricing Authority.

2. Australia shall provide an

25

opportunity for independent review of PBAC determinations, where an application has not resulted in a PBAC recommendation to list.

3 In order to make its process of selection, listing, and pricing of pharmaceuticals and indications under its PBS more expeditious, Australia shall:

(a) reduce the time required to implement recommendations of the PBAC, where possible;

(b) introduce procedures for more frequent revisions and dissemination of the Schedule of Pharmaceutical Benefits, where possible; and

(c) make available expedited procedures for processing of applications not requiring an economic evaluation.

4. Australia shall provide opportunities to apply for an adjustment to the price of a pharmaceutical under the PBS.