A tale of two very different victories: In the High Court and in the political arena

One of the most important long-standing questions of public policy, and democratic governance, is about how corporate power operates, and what to do about it.

Large companies are geared to deliver dividends to shareholders. At any time, the actions of governments in regulating, taxing and negotiating with corporations can adversely affect these returns.

There are different views regarding whether or not this is a problem, or to what degree. For those who seek policies that promote health, however, there are many scenarios in which preferred policy solutions are threatening to corporate interests, and these companies and industries are hardwired to respond to such threats.

The first week of March threw up two seemingly quite different health policy stories that are both fundamentally about corporate power.

In the first, the Government announced its review of Pharmac in accordance with an election promise. In the second, three public health academics and activists – Boyd Swinburn, Doug Sellman and Shane Bradbrook – had their defamation case against public relations consultant Carrick Graham settled as the defendant withdrew his defence.

The first story can be read as a tactical victory for pharmaceutical companies. The second story could be interpreted as a defeat for the food, beverage and tobacco industries that paid for Graham’s services.

Both were notable in that they went against the general “run of play”. In the case of Pharmac, governments have successfully stared down the powerful international pharmaceutical industry since 1993. Over the same period, the same governments have averted their eyes and avoided any confrontation with the food, supermarket, beverage and alcohol industries.

If we can understand why these responses are so different, then we can get a clearer sense of how corporate power operates in New Zealand health policy, and what to do about it.

On the face of it, the difference between pharmaceutical policy and food regulation policy is counter-intuitive. After all, “Big Pharma” is far bigger, and has far more resources at its disposal, whereas the food and supermarket industries are more local and therefore seemingly less formidable.

But the key difference is the structural importance of each industry to New Zealand’s economy. Food and agriculture are central to our economy, pharmaceutical production is not. Where pharmaceuticals are developed (eg, Switzerland, Quebec, the US) you can be guaranteed that nothing like Pharmac will ever see the light of day. When industries are structurally important as sources of employment and taxation revenue, policy options that threaten interests rarely even make the policy agenda. Governments self-censor.

This can’t be the whole story, however. Large industries typically have well-resourced interest groups representing them (NZ Food & Grocery Council, for example), and these groups spend considerable resources, time and energy cultivating relationships with MPs, public officials and opinion leaders.

None of this would be necessary if industries were simply too structurally important for governments. All industry interest groups know the importance of relationships. Pharmaceutical companies know how important it is to cultivate relationships with medical professionals. With a broadly unsympathetic Pharmac, this is their best channel for influencing the Government that pays for 70 per cent of New Zealand’s pharmaceutical spend. Their other best bet is to develop relationships with patient advocacy groups, and there is no shortage of such groups willing to be cultivated.

New Zealand governments’ success in staring down the pharmaceutical industry has also come at a price. The political price is the constant skirmishes fought around access to medicines. Part of Pharmac’s current vulnerabili­ty is because the logic of its role in keeping the cost of pharmaceuticals down requires it to adopt a seige mentality – no one must know how its decisions are really made.

Transparency of decision-making in democratic societies is something generally to be valued. But make no mistake, transparency would undermine Pharmac’s model. At the first hint of publicly disclosing the cost/QALY threshold by which Pharmac makes its decisions, pharmaceutical companies, individually or collectively, will lawyer up and drive a truck through Pharmac’s processes. The downstream results of that are unlikely to be positive for most patients, most clinicians, and all taxpayers. In pharmaceutical funding policy, there is a stark trade-off between transparency and other policy objectives.

The other existential problem Pharmac faces is that it runs our country’s pharmaceutical budget on the smell of an oily rag (at least when compared internationally), while its own operations are run on even more pungent and greasier fabric. It has to prioritise its own resources, and its capacity to produce timely and robust analyses is often compromised. But the political optics of granting Pharmac more resources to do its job are tricky for any government, when critics would immediately ask why those resources don’t go directly to funding more pharmaceuticals.

In facing the food, beverage and alcohol industries, governments also face really tough choices. Despite the strong public support for restrictions on junk-food advertising and sugar taxes, governments know this support is soft, and the electoral risks are substantial.

Think back to the anti-obesity proposals doing the rounds in 2006–2008 and remember how these were key targets of an “anti-nanny state” media blitz. These industries have deep pockets for PR campaigns. What’s more, they have a long history of helping each other out when a particular industry is targeted.

This suggests the most feasible political strategy for any government contemplating taking on industry is to divide and conquer. This is easier said than done. Nevertheless, a key reason that a sugar tax was introduced in the UK was the industries affected were not united against one. This dynamic has also worked well for Pharmac, as it is able to pit pharmaceutical companies against each other when new contracts are negotiated. And when it comes to different industries teaming up against governments, they tend to think twice before inviting the pariah tobacco industry into the team.

All in all, political smarts will go much further than moral rectitude in combating industry influence over policy, which may help explain why Swinburn, Sellman and Bradbrook were Carrick Graham’s chief targets.

And finally, given ownership trends, corporate power will undoubtedly become part of the primary care policy landscape over the coming decade, and beyond, in New Zealand. At the first sign of divergence between govern­ment priorities and corporate interests, which way will the die be cast? 

Tim Tenbensel is associate professor, health policy, in the School of Population Health at the University of Auckland

Thanks to my colleague Richard Edlin for his role in contributing to some of the points made in this column regarding the Pharmac review

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