The TPP Can Promote Medical Innovation
This month, international trade representatives will head to Australia to continue negotiating the Trans-Pacific Partnership (TPP). Many believe this process is close to completion. A finalized TPP holds real hope for boosting global commerce and driving sustained economic growth for all countries involved.
It also has the potential to fuel medical innovation and bolster public health long into the future. But in order to realize that goal, some critical details need to be ironed out -- namely, the deal must ensure greater transparency and efficiency in how medicines make their way to patients in TPP markets. Strong provisions in the TPP will ensure that American companies are treated fairly when they sell their innovations abroad, and that patients in TPP countries have access to important medical treatments.
To their credit, U.S. negotiators seem keen to include these measures in the final deal. But they've recently come under attack from powerful U.S. interest groups that want to weaken protections for American companies. This would be a grave mistake.
The U.S. leads the world in the development of new drugs. We've produced more than 400 approved medicines since the turn of the century, and we've put another 5,000 medicines into clinical trials around the globe. These advances don't come easy. Our pharmaceutical industry invests more than $50 billion in research and development each year -- more than any other country by far -- to continue churning out medical advancements.
And of course, these breakthroughs aren't just reserved for American patients. They're used worldwide to improve -- and save -- countless lives. But when these treatments become available beyond our shores, they are often prevented from making their way to patients due to inefficient, slow, and complicated government approval, pricing, and reimbursement systems.
New Zealand is one of the major economies participating in the TPP, and it demonstrates the risks negotiators will be running if the proper protocols aren't required. The country's public-health system, PHARMAC, is charged with drug regulatory approvals and pricing and reimbursement policies. Because it was made an independent body in 2001, PHARMAC lacks basic transparency and accountability measures for its decisions.
It routinely denies foreign companies the most basic considerations -- such as guidelines for registering new drugs -- and reasonable timelines for approval or reimbursement decisions.
This has effectively denied patients and doctors the opportunity to weigh in on decisions that affect public health -- and as a result, these decisions tend to focus narrowly on cost at the expense of access to new medicines. One analysis found that of 83 prescription medicines registered with neighboring Australia between 2000 and 2006, only 22 were reimbursed in New Zealand. Overall, there is an average lapse of three years between the time a drug is approved in the first country and in New Zealand. This is surely part of the reason why New Zealand ranks a dismal 14th out of 19 OECD countries in terms of the annual number of patient deaths from treatable conditions.
The TPP must require that these decisions no longer be made in a vacuum. Governments' systems for pricing and reimbursing medicines for the purpose of public programs should be transparent, timely, and predictable. Drug makers should be allowed to appeal rate and approval decisions to an independent administrative body. And all decisions need to be substantiated by the latest science. Failing to provide these basic protections to drug companies severely limits their ability to research and develop drugs.
These are essentially the provisions enshrined in KORUS, America's landmark free-trade deal with South Korea, which came into force in 2012. This agreement was created with the goals of preventing arbitrary decisions, preserving patient access to a wide array of high-tech medicines, and retaining the incentives for future innovation.
A cadre of high-profile U.S. interest groups has mounted a concerted effort against including such strong provisions in the new TPP deal. This campaign includes the AARP, the public-employee union AFSCME, and the private-sector AFL-CIO and SEIU labor organizations. They've all repeatedly petitioned federal trade officials to back down from including these important protections in the deal.
They're worried that these provisions would somehow open the door for drug manufacturers here in America to challenge the payment policies of Medicare, Medicaid, and other public insurance programs. That fear is baseless.
In a letter reported by Inside U.S. Trade, the U.S. trade representative explicitly addressed these concerns: "These are straightforward provisions that will not require any changes to any U.S. healthcare laws nor will they affect the U.S. Government's ability to pursue the best healthcare policy for its citizens, including future reforms or decisions on healthcare expenditures."
Unlike many other nations, the U.S. government does not dictate drug prices through its government insurance programs. Reimbursement rates are, by design, largely tied to prices on the open market. In America, government health-care programs are intended for specific segments of the population, and the prices under those programs are tied to reported prices based on commercial sales in competitive markets.
In fact, Medicare Part D is a "best practice" example of this: It embraces private competition, not government price controls; it's completely delivered through private plans; and the government pays for plans based on competitive bids.
The TPP should include the same strong transparency provisions that were inscribed in the U.S. trade agreement with South Korea. This will not only ensure that citizens in TPP partner countries have timely access to safe, effective medicines, but also that U.S. companies can continue to produce them long into the future.
Eric V. Schlecht is a writer who has worked on budget and economic issues in Washington, D.C., for more than 20 years. He has served in leadership offices in both the U.S. Senate and House of Representatives.