Submission: COVID-19 Public Health Response Amendment Bill (No 2)

Dr Eric Crampton
11 October, 2021

The Initiative has followed Covid policy closely since early 2020. We have published several reports and briefing notes on Covid policy; that work has included discussion of Covid testing and policy related to it.

The Bill includes provision, at the proposed Section 11(1)(d), for the Government to take substantial control of Covid testing companies and labs. It allows the Government to set quality standards, to require that test results be reported, to manage supplies of materials used by testing labs, and to provide differently for different classes of testing laboratories. The Bill also allows, at the proposed Section 11(1)(e), the Government to requisition testing consumables, and to requisition tests. It provides, at proposed Section 11A, compensation for requisitioned materials and tests at a market rate, with disputes to be determined by the District Court.

Our submission is restricted to matters covered in proposed Section 11 and proposed Section 11A.

We urge the Government to substantially reconsider its approach. We expect that these sections are motivated by a laudable desire to strengthen testing capabilities and improve testing capacity. The proposed measures risk working against those ends.

The International Organization for Standardization already provides the appropriate quality standard for medical laboratories at ISO 15189. Regulatory moves by New Zealand to supplant or undermine ISO standards would risk making New Zealand tests less reliable. Procurement for Covid testing is best handled through normal commercial negotiation rather than through requisitioning. Deemed market rate compensation risks being substantially short of the losses that requisitioning could impose. And acquiring tests through requisition undermines incentives to provide testing capacity.

If the Government will not abandon provisions in proposed Sections 11 and 11A, we urge regular internationally credible review of standards adopted in place of ISO 15189, to ensure they have not denigrated test reliability. We also urge that companies subject to requisition orders be provided not only compensation at a market rate, but also compensation for costs affected companies endure consequent to those orders. Requisitioning of tests and materials could easily force test providers to breach existing contracts. Indemnification is appropriate.

We also view it as strongly contrary to procedural fairness that a prominent testing laboratory was only informed about the existence of this legislation less than a week before the closing date on submissions. In the limit, the Bill provides the Minister or Director-General of Health the authority to impose new standards on labs; to requisition the lab’s necessary supplies and potentially render them unable to fulfil critical private contracts while compensating only at the market rate for the requisitioned supplies; and, to requisition lab testing capacity at a market price while again ignoring the consequence for existing contracted clients.

Promises to compensate any affected laboratory at either the market rate for requisitioned consumables, or for requisitioned tests do not begin to compensate the affected laboratories for the harm these measures will impose even if they are never invoked. The measures substantially denigrate private labs’ ability to credibly promise surety of continued test supply to contracted clients at the exact time when those tests will be most valuable to those clients. These measures must be withdrawn. Failing that, compensation should be substantially strengthened.

To put it even more clearly: the proposed measures here intended to improve the security of supply of testing material, and of tests, for the public health response will threaten security of supply. We are more likely to encounter shortages of consumables and of testing capacity because of the measures here proposed.

Finally, while we can understand a potential motivation for backstop requisitioning capability, the conditions under which it might be justifiable also introduce severe risk for anyone who might consider investing in capacity upgrades in other critical areas.

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