Trade & Pharmaceutical Policy Update:
USTR Continuing to Use Trade Policy to Restrict Drug Pricing Regulations

Recent Free Trade Agreements include pharmaceutical pricing chapters

Two recent Free Trade Agreements – with Australia and Korea – include chapters that impose restrictions on pharmaceutical pricing programs. Each gives pharmaceutical companies rights to appeal decisions of governments to list drugs in their reimbursement formularies and requires governments to “appropriately recognize the value of patented pharmaceutical products in the amount of reimbursement it provides.” [Korea-US FTA, Art 5.2(b)(i)]. Although State Medicaid programs were carved out of the Korea agreement, the NLARx Working Group on Trade has continued to express concern to USTR (9/15/09) about the inappropriate “use of trade policy to create a new set of international norms” on pharmaceutical pricing.

The last Trade Promotion Act included a mandate that USTR negotiate restrictions to “reference pricing”

The last Trade Promotion Authority Act, authorizing the USTR to negotiate trade agreements with “fast track” procedures, instructed USTR to “achieve the elimination of government measures such as price controls and reference pricing.” [19 USC 3802(b)(8)(D) ] This Act has since expired. There is likely to be new pressure to include a similar provision in a new Trade Promotion Authority bill in the near future.

The USTR uses the “Special 301” program to pressure countries to restrict drug pricing programs

Each year, the United States Trade Representative (USTR) publishes a “Special 301 Report” identifying countries that have weak intellectual property protection or that “deny fair and equitable market access to United States persons that rely upon intellectual property protection.” [19 USC 2242(a)(1)(B)] In recent years, the Special 301 report has identified pharmaceutical pricing programs it opposes. The 2009 report singles out Japan, Canada, France, Germany, New Zealand, Taiwan and Poland for administering “unreasonable . . . reference pricing or other potentially unfair reimbursement policies.”

USTR Kirk supports Barton-Pfizer proposal to “discipline” U.S. and foreign pricing programs

Pfizer and the late Stanford Professor John Barton recently proposed to Senator Max Baucus that “the United States should consider as a trade goal the achievement of a sector-specific trade agreement . . . to ensure that pricing and reimbursement policies recognize and reward innovation, and to set disciplines on government practices that undermine incentives for innovation.” On September 30, 2009, Ambassador Kirk embraced this vision, stating that USTR should “seek to broaden the constructive conversation Professor Barton helped to start” and “I offer my support to . . . help carry that effort forward.”

Taken together, it is disturbingly clear that the USTR, including the present office holder, is intent on using trade negotiations to limit foreign and U.S. drug pricing programs.

What states should do

States should take actions to oppose the use of trade agreements and negotiations to restrict drug pricing programs. The USTR is not a health regulatory authority, has no expertise in public health matters and is taking action that threatens best practices in other countries and ultimately program in the U.S. States should:

• Oppose inclusion of pharmaceutical chapters in FTAs.
• Oppose targeting of “reference pricing” programs in any new Trade Promotion Authority Act.
• Participate in the Special 301 comment process. Each January, USTR solicits comments for the 301 Report from all “interested parties.” States should submit comments opposing the use of Special 301 to restrict foreign pharmaceutical pricing programs.