Allens Arthur Robinson: Biotech News

Allens Biotech News is a fortnightly news service to keep you on top of developments in this fast-moving industry.

Feature article: Two Australian states lift moratoria on GM canola
Company News
BioTip: IP portfolio management
Events

Feature article: Two Australian states lift moratoria on GM canola

In brief: Partner Dr Trevor Davies (view CV) and Law Student Elizabeth Sarofim report on the recent decisions of the New South Wales and Victorian governments to lift their four-year moratoria on the commercial cultivation of GM canola.

Background
Victoria
New South Wales
The reports
Resulting changes
Conclusion

Background

As reported previously in Biotech News – 6 July 2004, after Bayer CropScience's InVigor® and Monsanto Australia's Roundup Ready® GM Canola were approved for general commercial release at the Federal level by the Office of the Gene Technology Regulator (OGTR) in 2003, most Australian states invoked their powers under the Inter-Governmental Gene Technology Agreement 2001 (the IGTA) to impose moratoria on genetically modified (GM) canola. In imposing the moratoria in 2004, the respective State governments relied upon concerns of adverse trade implications for exporters due to potential physical and genetic contamination of non-GM canola apparently affecting the States' 'clean green' image and impeding access to GM sensitive end-user markets.

On 27 November 2007, the Victorian and NSW governments announced that the four year moratoria over the commercial release of GM canola (set to expire in those states on 29 February 2008 and 3 March 2008 respectively) would not be renewed. These latest moves to lift the bans are largely the result of independent panel reviews conducted by each state into the economic ramifications of their moratoria.

Return to top

Victoria

In May 2007, the Victorian Premier, Steve Bracks MP, established an independent review panel (the Victorian Panel) chaired by Victoria's Chief Scientist, Professor Sir Gustav Nossal. The terms of reference were to assess the economic impact of the moratorium on Victoria and make recommendations on the question of its retention or removal and complementary policies. The resulting report entitled Review of the moratorium on genetically modified canola in Victoria (the Victorian Report) was made publicly available in early December 2007. This report was preceded by an economic impact study conducted by ACIL Tasman Pty Ltd for the Victorian Government entitled The economic impact of the regulation of GM Canola in Victoria (the ACIL Tasman Study).

The ACIL Tasman Study adopted a cost-benefit analysis, where the 'total direct cost' of the moratorium was quantified as a function of the net costs weighed against the net benefits of the moratorium. It concluded that:

the economic loss stemming from a failure to take advantage of the direct benefits of cultivating GM canola, such as higher yield and weed management capacity, greatly exceeded the profits some interest groups argue will be made if the GM moratorium were to remain in place; and
the increasing market precedence of GM canola meant that profits arising from market premiums for certified non-GM canola would be increasingly small.

The total direct cost of the current moratorium for Victoria was reported to be between A$60-65 million, with any extension to 2016 estimated to cost between A$110-115 million. These figures do not include the indirect benefits of cultivating GM canola varieties, which include improvements to general farming practices. The ACIL Tasman Study also concluded that segregation and transport costs associated with the introduction of GM canola would be minimal.

In similar vein, the Victorian Panel noted that in contrast to GM canola-cultivating countries such as Canada, Australian canola production and average yield have declined. The Victorian Panel was unable to justify the continued existence of the moratorium by reference to potential export price advantages for Australian canola on the basis of its GM-free status. It found that local and international demand for GM canola products for food and other industrial uses such as biofuel has grown rapidly. It was noted that this growth was partly due to the relaxation of restrictions on GM food previously imposed by key overseas importing hubs including Japan and Europe.

The Victorian Panel also considered the effect that the release of GM canola would have on the canola supply chain and downstream industries by reference to the risk of contamination. It noted the confidence expressed by the dairy and grain industries of their ability to segregate GM from non-GM food crops, and concluded that there was no evidence of imminent market risks associated with the trade of conventionally bred non-GM canola and other agricultural commodities such as wheat and barley if GM canola was commercially cultivated. While noting the concerns of the organics industry, the Victorian Panel found that there was no apparent market failure by the grain supply chain participants to provide for adequate segregation measures. As a result, it recommended that the Victorian Government enable the market and industry to determine whether segregation is required, and if so, the nature of the measures to be adopted.

Return to top

New South Wales

In July 2007, the NSW Government established its own independent panel of experts (the NSW Panel) to review the New South Wales legislative framework which consists of the Gene Technology (New South Wales) Act 2003 and the Gene Technology (GM Crop Moratorium) Act 2003 (the NSW Act). The NSW Panel was requested to assess the economic effects of several policy options.

In making the announcement to lift the moratorium, the Minister for Natural Resources, Primary Industries and Mineral Resources, Ian Macdonald MP, announced that the NSW Panel recommended an amendment to the NSW Act and removal of the Moratorium Order process.

While an official report is yet to be publicly released, Mr Macdonald has stated that GM canola now represents 70 per cent of the world's canola trade with the effect that NSW farmers would continue to be denied access to valuable export opportunities if the moratorium was not lifted. While submissions were made referring to the widespread contamination of non-GM food crops in the United States of America, the Minister stated that the NSW Panel had concluded that GM canola would have very little, if any, effect on the organic, livestock and other industries in NSW.

Return to top

The reports

A common theme of the Victorian Report and the NSW Report was that the international and domestic agricultural commodity markets for GM canola had changed since the imposition of the moratoria in 2004. As Australia is the second largest exporter of canola, with exports accounting for 19 per cent of world canola trade, it was concluded that NSW and Victoria would be at a competitive disadvantage if the existing moratoria were to remain in force.

These conclusions are consistent with earlier governmental reviews which were previously reported in Biotech News – 8 March 2006. This history of discontent with state moratoria included concerns raised by the Agricultural and Food Policy Reference Group Report that the moratoria were detrimental to Australia's economic development. Additionally, a panel conducting the official independent review of the Federal regulatory framework in 2005-06 noted that the state moratoria stifled rather than benefited Australia's market development.

Resulting changes

In Victoria, the Control of Genetically Modified Crops Act 2004 (Vic) (the Victorian Act) enables the Victorian Government to make orders regulating the commercialisation of GM crops on a case-by-case basis. The current moratorium order in respect of GM canola is the only order that has been made pursuant to Part 2, Section 4 of the Victorian Act. The Victorian Government has accepted in full the Victorian Panel's recommendations, and as a result, the moratorium Order in relation to GM Canola will be allowed to expire in February 2008.

In New South Wales, the government has taken the opportunity to provide a more methodical path for allowing GM food crops to enter the market by introducing the Gene Technology (GM Crop Moratorium) Amendment Bill 2007 (the NSW Bill). The changes introduced by the NSW Bill reflect a policy of 'informed choice', on the part of farmers and consumers to grow and buy food containing GM canola. Among other things, the effect of the NSW Bill will be to amend the NSW Act by inserting a new objects clause regarding regulating the commercial cultivation and experimentation of GM food plants, and repealing the current moratorium order process and replacing it with a blanket prohibition on the cultivation of GM crops.

Under the proposed scheme in NSW, approval to cultivate GM crops will require the industry seeking to grow a class of GM crop to satisfy the Minister for Primary Industries that it has the capacity to manage the commercial cultivation of the crop. The existing Advisory Council will be replaced with an expert committee that will advise the Minister as to whether the relevant industry is capable of meeting the scheme's criteria. The NSW Bill also proposes to take away the state government's power under the Gene Technology (New South Wales) Act 2003 to modify by regulation the application of the Federal regulatory framework.

Conclusion

Notwithstanding the assurances by the OGTR in 2003 that GM canola is unlikely to invade ecosystems through vertical or horizontal gene flow, most States placed moratoria on the commercial cultivation of GM canola. Following the lead of the Queensland and Northern Territory governments, New South Wales and Victoria now appear to be pursuing approaches that are directed at giving producers and consumers a choice between GM canola and non-GM canola.

Their respective approaches both seek to achieve this outcome, albeit in differing ways. For example, the default position in Victoria will now be that federally approved GM crops may be immediately, commercially released unless an order banning their cultivation in Victoria is made. In contrast, cultivation of federally approved GM crops will be banned in NSW unless an application is successfully made to the Minister. Additionally, Victoria has accepted the recommendations made by the Victorian Panel that segregation costs and measures ought to be determined by market and consumer requirements. New South Wales, however, will implement a system of ministerial approval and establish an Expert Committee, reflecting a more interventionist approach.

Although the other states retaining moratoria on commercial cultivation of GM canola, South Australia, Western Australia and Tasmania, are yet to review their bans, it remains to be seen whether a truly national and consistent regulatory framework, as envisaged by the IGTA, will eventuate in Australia.

Return to top

Company news

In brief: Regular news from the biotech industry.

GlaxoSmithKline buys specialty heart drug firm Reliant for US$1.65 billion
GSK to market Merck's cholesterol drug Mevacor 'overthecounter'
Novartis signs US$600 million deal with MorphoSys
Pfizer and Adolor to develop pain relief drugs
Pharmalab unveils new name, Phebra
Sanofi-Aventis opens development centre in Goa, India
Starpharma to collaborate with Stiefel Laboratories

GlaxoSmithKline buys specialty heart drug firm Reliant for US$1.65 billion

21 November – GlaxoSmithKline (GSK) has agreed to buy the US-based heart drug company Reliant for US$1.65 billion. The sale marks a change of tack for Reliant, which had been considering an initial public offering. Reliant recorded net sales of US$341 million in the nine months ending September 30 and GSK expects the transaction to be slightly accretive to earnings in 2008 and to create additional value in following years. Reliant has a portfolio of specialty drugs for heart disease, including Lovaza, an omega-3 treatment for patients with very high levels of triglycerides identified by GSK as its main interest. The acquisition is subject to approval by the US Federal Trade Commission and is expected to conclude before year-end.