Trade Agreement Threatens to Increase Drug Prices

The Trans-Pacific Partnership (TPP) — a trade agreement that the United States and 11 other Pacific-rim countries are negotiating — could raise the cost of prescription drugs and increase health-care spending by governments and private payers.

TPP negotiations are largely secret.  Although the Office of the U.S. Trade Representative (USTR) consults with representatives of the drug and medical device industries, it does not do so with health care experts or the public.  This week, a group of more than 130 House members urged USTR to adopt a more open negotiating process.

Despite the secrecy, some negotiating texts have become public — and the newly leaked intellectual property chapter reveals sharp disagreements over access to generic medicines.

The United States has advanced provisions to protect manufacturers of brand-name drugs. They reflect the highly profitable pharmaceutical industry’s efforts to boost profits by extending market exclusivity on their brand-name drugs beyond the normal protections offered by the patent system.  In contrast, New Zealand and other countries would encourage the introduction of generics.

A U.S.-proposed draft of part of the transparency chapter would restrict governments’ ability to limit the prices they pay for drugs and medical devices.  This provision appears aimed at other countries, but it may hit existing or proposed U.S. policies as well.

AARP, AFSCME, and a dozen other health-policy organizations wrote to the Obama Administration last week expressing “deep concern” that the TPP may limit “the ability of states and the federal government to moderate escalating prescription drug, biologic drug and medical device costs in public programs.”  They listed many provisions that the TPP might jeopardize, including drug discounts that help close the “donut hole” in the Medicare Part D drug benefit, the Administration’s proposal to require minimum drug rebates for low-income beneficiaries under Part D, reduced drug prices for safety-net providers under section 340B of the Public Health Service Act, the Administration’s proposal to reduce the market exclusivity period for brand-name biologic drugs, and potentially, rebates under Medicaid.

These concerns about the TPP merit a thorough review, and U.S. trade negotiators should not uncritically accept industry arguments for higher drug prices.  The pursuit of expanded trade must not undercut efforts to slow the growth of health care costs.