Has New Zealand Fast-Tracked Itself into Violation of an International Trade Agreement?

Recent reforms to streamline New Zealand’s medicines approval process may have inadvertently undermined its compliance with an international trade agreement, the CPTPP.

Medicines approval reforms

In July 2026, New Zealand implemented a new, fast-track pathway for the approval of pharmaceuticals under sections 22A to 22F of the Medicines Act 1981.  The new pathway is formally named “Consent by Verification” but is colloquially known as the “Rule of Two”.  It enables a drug to be consented for marketing in New Zealand on the basis that it has already received marketing approval from two foreign “recognised regulatory authorities.”  The initial “recognised regulatory authorities” are:

• Australian Therapeutic Goods Administration (TGA)
• Health Canada
• European Medicines Agency (EMA)
• Singapore Health Sciences Authority (HSA)
• Swiss Agency for Therapeutic Products (Swissmedic)
• UK Medicines and Healthcare products Regulatory Agency (MHRA)
• United States Food and Drug Administration (FDA

A principal purpose of this reform was to speed up approval times for new pharmaceuticals in New Zealand, which have historically been slow.  The legislative Rules governing Consent by Verification require a decision on consent to be made within only 30 working days of an application.

The new pathway also lowers the cost to a sponsor drug company of making an application.  The official fees are considerably lower than for the two other available pathways (the standard New Medicines Application process and the Abbreviated Evaluation process), and as foreign dossiers can be relied on there is no need to compile a full dossier for New Zealand.  Lowering the barriers to compliance was expected to improve access to medicines as high costs were thought to reduce the attractiveness to suppliers of New Zealand’s relatively small pharmaceutical market.

This legislative reform was undertaken to honour a political commitment in the coalition agreement underpinning New Zealand’s current three-party coalition government.  The reform process itself was undertaken relatively quickly with the amendment Bill being introduced to Parliament in March 2025 and passed into law by November 2025.  The implementing Rules and guidelines were then developed and consulted upon by medicines regulator Medsafe.  The new pathway came into operation in July 2026, with general support from the industry and health sector.

Trade Agreement implications

Although the benefits of the Rule of Two are self-evident, it may yet cause an issue for New Zealand’s trade relations.

New Zealand is a signatory to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a multi-lateral free trade agreement with 12 current member states and 11 others at various stages of negotiating accession.  As is common in free trade agreements, the CPTPP includes commitments aimed at harmonising intellectual property laws.  These include a commitment to implement a form of patent linkage.

Patent linkage refers to systems whereby applications for approval of generic or biosimilar medicines are linked to patents covering those medicines.  These patents are usually owned by the developer of the innovative product used as a reference for the competing generic or biosimilar.  The purpose of patent linkage is to allow patent holders an opportunity to enforce their patent rights to prevent or delay the marketing approval of a generic or biosimilar competitor.

In particular, Article 18.53 of the CPTPP requires member states to, in summary:

• Provide a system allowing notification to a pharmaceutical patent holder that a generic version of its patented product is the subject of an application for marketing approval; and
• Ensure that there is adequate time and opportunity for such a patent holder to seek, prior to the marketing of the allegedly infringing product, available remedies such as preliminary injunctions.

Despite Article 18.53, New Zealand has never implemented any legislative or regulatory patent linkage system.  New Zealand’s official position on compliance with the requirements of Article 18.53 has always been:

New Zealand’s current law and practice already satisfies these requirements through the information Medsafe publishes on its website, the availability of injunctive relief and the time it takes Medsafe to process applications.

Medsafe has an historic practice of promptly publishing searchable details of all new applications for marketing approval, including for generic and biosimilar products.  New Zealand’s purported compliance with Article 18.53 rests expressly on this practice and Medsafe’s historically slow medicines approval processes.  It also implicitly relies on patent holders keeping an active watch on Medsafe’s publication of applications.

Under the existing standard and abbreviated pathway timeframes, there was little question that a reasonably prudent patent-holder would have had time to detect an application for approval of a generic version of its product and to take appropriate court action if required.  The position is much less certain under the 30-working day time frame introduced by the Consent by Verification pathway.  Assessing likely timeframes for determination of a preliminary injunction application is an inexact science given the lack of recent precedent and recent reforms to New Zealand’s civil procedure.  The authors’ view is that the New Zealand courts do have the ability and the available procedures necessary to issue an urgent preliminary injunction decision within 30-working days or fewer.  The patent holder will need to have very promptly identified the application for approval of the potentially infringing product, and made the necessary arrangements to launch court proceedings.  It may be that an initial decision would be made either ex parte, on a Pickwick basis, or otherwise on a temporary basis with a more detailed hearing scheduled to hear fuller argument and evidence on the matter.

In any event, other CPTPP member states might reasonably question whether New Zealand can continue to reply on Medsafe’s historic practices and timelines as demonstrating proper compliance with the patent linkage requirements of the CPTPP.

The future

This may be an issue that could be dealt with in the pending reform of the Medicines Act 1981.  The Ministry of Health is currently working on a comprehensive Bill to replace that Act.

The problem may become more acute if a patent holder from another member state finds that it suffers serious loss because it had no opportunity to obtain a preliminary injunction to prevent a generic competitor from being marketed in New Zealand.

In practice, this is a relatively remote possibility due to New Zealand’s unique drug-funding model which imposes a further barrier to market entry for generic and biosimilar products.  Even if a generic competitor to a patented product obtained Medsafe approval, for most medicines it would be unlikely to quickly capture a significant part of the market.  New Zealand’s government medicines funding body, Pharmac, has an almost universal practice of only funding a single brand of any particular medicine.  Pharmac also has a policy of taking patent rights into account when considering which brands to fund, ostensibly to avoid problems with continuity of supply.  Consequently, potentially infringing generic products are very unlikely to be subsidised.  The time taken by Pharmac to notify and consult on any proposal to switch from funding an innovative medicine to funding a generic or biosimilar alternative would provide ample notice and time for a patent holder to take steps to enforce its rights.

Practical implications

The current circumstances make it even more important for innovator drug manufacturers to maintain a frequent and careful watch on Medsafe applications.  Pearce IP reviews new applications on a weekly basis and can provide general or tailored reports.

If the Consent by Verification pathway becomes frequently used by generic and biosimilar manufacturers, innovator companies from other CPTPP members may consider raising the issue directly with New Zealand’s government, or lobbying their own governments to put pressure on New Zealand to more explicitly comply with Article 18.53 of the CPTPP.

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