The New Zealand Psychoactive Substances Act (PSA): a policy breakthrough or just a symbolic act?

Abstract

The Psychoactive Substances Act (PSA), about to be implemented in New Zealand, represents a new approach to drug control, as under its regulatory framework any new psychoactive substance (NPS) may be introduced to the market if scientifically (clinically?) demonstrated to pose ‘no more than a low risk’. Manufacturers will thus be allowed to produce and sell legally any NPS once they meet a set of requirements concerning health standards, product development and testing, etc. Wilkins raises several thoughtful objections to the new legislation 1. In particular, he points out that no clear definition of what constitutes a ‘low risk’ was provided under the PSA, and that the proposed testing requirements are more applicable for the medical, not recreational-use, drugs. Also, he anticipates practical enforcement difficulties, as many substances will remain illegal. There are, however, several additional points to consider. Most of the NPS manufacturers produce currently illicit goods. Presumably, at some point they have weighted the considerable risks of lawbreaking against the expected financial gains. Judging by the hidden ingredients in many NPS products, lack of consumer information, covert marketing strategies, etc. these producers appear to be solely profit-driven and not greatly concerned about their customers' safety or public health issues 2. How likely is it that these NPS producers will opt for a legal market? The implicit assumption here seems to be that, given a chance, they would. However, according to economic theory, they would do so only if the expected gains outweigh the costs. In this case, the costs under the proposed PSA appear substantial and not easily recovered. For instance, testing costs projections fall between 1 and 2 million $NZ per product—and these are probably underestimated, as the actual testing of an ‘inhalation product’ amounted to 6 million $NZ 1. Further, the application fee alone is set to 180 000 $NZ per product 1. These expenses are above and beyond other additional production costs associated with ‘playing by the rules’. Thus, any legal NPS production will most probably be considerably more costly than it is under its current illicit production mode. Can current NPS producers raise such large amounts simply to legalize their enterprises, and if so, how likely are they to undertake such high-risk moves (including alerting the authorities to their very existence and illicit businesses), as neither the testing outcome nor the product approval are guaranteed? Furthermore, even if approved, there is no guarantee that such products will be sold profitably through legal channels. Finally, given the remaining illicit competition and undercutting prices, the asking/retail price for any legally produced NPS will have to be limited, thus placing serious constraints and narrow margins on any future profits. Given this set of somewhat risky business circumstances, the significant costs of legal production within the proposed PSA can only be justified economically if there is an even larger expected return, or if the expected demand is correspondingly large. The existing evidence, such as sales reaching 200 000 BZP tablets per month when legally available 1, suggests that there may be a sizable demand and receptive NPS markets in New Zealand. Nevertheless, one may ask if such markets are sufficiently large to sustain several producers and/or a range of NPS products. Finally, the PSA requires that the producers assume a long-term business strategy, as it will take some time before the approval of legal sales can be granted, and even longer time still before these investments would yield profits. Is it likely that the current NPS producers possess sufficiently long-term vision, planning and discipline? The New Zealand government has undertaken a challenging task: to enact a regulatory regime that balances public health considerations with the sufficiently attractive incentives for the NPS producers to operate legitimately. I am not convinced they will succeed in this task, as the incentives structure remains too costly for the producer. I suspect that the current NPS manufacturers will find the risks of legal production to be too high and the potential future gains as both too low and too remote. However, even if the PSA should turn out to be just a symbolic action, credit is due for thinking ‘outside the box’ and for attempting alternative approaches to drug legislation and control. None.