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Facing resistance from its Pacific trading partners, the Obama administration is no longer demanding protection for pharmaceutical prices under the 12-nation Trans-Pacific Partnership, according to a newly leaked "transparency" annex of the proposed trade accord.
But American negotiators are still pressing participating governments to open the process that sets reimbursement rates for drugs and medical devices. Public health professionals, generic drugmakers and activists opposed to the trade deal, which is still being negotiated, contend that it will empower big pharmaceutical firms to command higher reimbursement rates in the United States and abroad, at the expense of consumers.
They also say it could expose international markets to the direct consumer appeals that Americans have experienced. "It was very clear to everyone except the US that the initial proposal wasn't about transparency; it was about getting market access for the pharmaceutical industry by giving them greater access to and influence over decision-making processes around pricing and reimbursement," said Deborah Gleeson, a lecturer at the School of Psychology and Public Health at La Trobe University in Australia, who has seen the leaked document. And even though it has been toned down, she said, "I think it's a shame that the annex is still being considered at all for the Trans-Pacific Partnership."
The pharmaceutical and medical device annex is the latest document obtained by The New York Times in collaboration with the watchdog group WikiLeaks, and it was released ahead of the House vote on whether to give President Obama expanded powers to complete the Trans-Pacific Partnership. The Senate has already approved legislation giving the president "trade promotion authority," or fast-track power to complete trade deals that cannot be amended or filibustered by Congress. A House vote on final passage of the bill, which could come as early as Friday, appears extremely close.
The Pacific accord, the largest since the North American Free Trade Agreement two decades ago, would link countries stretching from Canada and Chile to Japan and Australia into a new regimen of trade rules that would cover 40 per cent of the global economy.
Opponents of both the Pacific deal and the legislation to grant trade promotion authority have long targeted the pharmaceutical issue. Foreign governments and health care activists have accused pharmaceutical giants, mostly based in the United States, of protecting profits over public health, especially in poor countries where neither the government nor consumers can afford to pay rates anywhere close to those charged in the West.
That fight re-emerged in the Pacific trade negotiations, which involve countries with strong cost-containment policies, like New Zealand, as well as poor countries like Peru and Vietnam.
The agreement "will increase the cost of medicines worldwide, starting with the 12 countries that are negotiating the Trans-Pacific Partnership," said Judit Rius Sanjuan, a lawyer at Doctors Without Borders, a humanitarian organization that provides medical care in more than 60 countries. Drug companies, however, say they need to be able to charge fair prices to compensate for the billions of dollars and decades of research that go into their medicines.
Jay Taylor, vice-president for international affairs for the Pharmaceutical Research and Manufacturers of America, said penetrating the opaque process for getting a drug considered for a national health system, listed as available and properly priced is central to free trade for drug makers. "It is market access," he said.
That is particularly true for the Pacific accord, he said, because one of the countries, New Zealand, has a powerful system for holding down drug costs - and keeping drug makers in the dark. New Zealand's health system has been held up as a model for the Pacific region, a prospect the pharmaceutical industry does not relish.
"There are no clear timelines for review, no sense of what a complete dossier is to get a fair review," Taylor said. "It's a question of basic due process."
Negotiators from the US appear to be pushing a similar agenda in separate negotiations with the European Union, according to a copy of an internal European report viewed on Wednesday by The New York Times.
"The US reiterated its interest to include transparency provisions on pricing and reimbursement within the Transatlantic Trade and Investment Partnership (TTIP) similar to the ones European Union and US have with Korea," said the report, dated May 8 and written by the European Commission (EU), on the status of talks with the United States on a planned TTIP.
The report was made available by a person who shared the information on the condition of anonymity because of the sensitivity of the document.
That leak, and others, had made threat of higher drug prices a major concern for some European critics of a trade deal with the United States, said John Hilary, the executive director of War on Want, a group based in Britain that fights global poverty.
The European Commission has said that the pharmaceutical aspects of trade talks with the United States mostly focus on simplifying inspections of manufacturing plans and on exchanging information to make it easier to approve medicines and to develop new ones.
In a public fact-sheet, the commission has acknowledged that some citizens "fear EU governments would lose their right to decide" drug costs. But it said that fear was unfounded.
Pharmaceutical firms and their trade associations have filed by far more lobbying disclosure forms on the Pacific trade negotiations than any other industry, according to the watchdog Sunlight Foundation. More broadly, the pharmaceutical and health product industries have been active political players in the United States for decades. They have been the biggest spenders on lobbying, and drug company deal-making with the Obama administration and in Congress was instrumental in securing passage of the Affordable Care Act.
Public health professionals say pharmaceutical industry lobbying is meant to diminish the power of government health programs that trim reimbursement rates to the global pharmaceutical giants. The newly leaked annex, dated December 17, 2014, explicitly lists Medicare and the Centers for Medicare and Medicaid Services as falling under its strictures.
That may embolden critics.
"The leak is just the latest glaring example of why fast-tracking the T.P.P. would undermine the health of Americans and the other countries and cost our government more, all to the benefit of pharma's profits," said Lori Wallach, director of Public Citizen's Global Trade Watch and one of the most prominent voices in the coalition working to scuttle trade promotion authority.
Officials at the United States trade representative's office, while declining to comment on a leak they would not acknowledge, say rules in the Pacific accord would have no impact on the United States because Medicare and Medicaid already adhere to them. The trade representative's office worked with the Centers for Medicare and Medicaid Services and the Health and Human Services Department to develop the proposals.
"Already, transparency and procedural fairness are integral parts of the U.S. legal system and as such are principles reflected in U.S. trade agreements," the representative's office said in a statement.
While the leaked annex may fall short of what pharmaceutical companies wanted, it also offers them new opportunities to challenge the decisions of trading partners on which drugs they will offer their citizens through government health care programs and the rates at which they will reimburse drug sellers.
A version of the Trans-Pacific Partnership annex that leaked in 2011 made explicit reference to "competitive market-derived prices," promising drug companies the chance to appeal rates deemed insufficient. Those are gone, "a victory for the non-U.S. partners to some extent," Ms. Gleeson, the Australian expert, said.
But Pacific accord negotiators do appear ready to grant pharmaceutical and medical device makers more power to influence participating governments. The 12 countries involved, and any others that might join later, would have to disclose rules and guidelines for deciding which medical products would be made available through government programs and at what rate providers would be reimbursed.
Drug companies and medical device makers would have to be given "timely opportunities to provide comments at relevant points in the decision-making process." And governments would have to offer a review process "that may be invoked at the request of an applicant directly affected" by the decisions of national health care authorities.
In the United States, pharmaceutical companies and Medicare have fought for years over which drugs are listed for reimbursement, especially when Medicare lists generic drugs over name brands. While advocates of the trade deal, including President Obama, say opening markets to competition should lower prices for consumers, generic drug makers say the Trans-Pacific Trade Partnership could raise costs instead.
Heather Bresch, the chief executive of Mylan, one of the largest generic-drug makers, said the brand-name pharmaceutical industry was "establishing, through U.S. trade policy, an international system designed to maximize its monopolies."
The annex also tackles restrictions in many countries on direct marketing to consumers, mandating that drug companies be allowed to "disseminate to health professionals and consumers through the manufacturer's Internet site" in each country "truthful and not misleading information" on products approved for sale in that country. It does, however, say such dissemination must reflect each country's "laws, regulations, and procedures."
By explicitly listing the Centers for Medicare and Medicaid Services, the annex makes it clear the United States is not immune to Trans-Pacific Partnership rules. Japan, Australia and New Zealand may not have pharmaceutical companies as powerful as the United States' but under the accord, United States subsidiaries located in Pacific trade partners could use the accord's dispute resolution process to tackle perceived violations by Medicare officials.
The annex makes clear that disputes over pharmaceutical listing procedures would not be subject to government-to-government dispute resolution, the World Trade Organization and retaliatory tariffs.
Instead, disputes would be resolved through the Investor-State Dispute Settlement process, which involves three-lawyer extrajudicial tribunals organized under rules set by the United Nations or World Bank.
That could be significant, both for current Medicare practices and future efforts to lower cost, said Peter Maybarduk of Public Citizen's Global Access to Medicines project. Drug makers have limited access to Centers for Medicare and Medicaid Services policy makers as they decide which drugs to list and how much to reimburse. The Trans-Pacific Partnership could change that.
It could also hinder efforts by many Democrats to change federal law precluding the government from negotiating drug prices directly with pharmaceutical makers. To make that work, the Centers for Medicare and Medicaid Services would need a "national formulary" - a government list of accepted medications. But each decision is subject to review and appeal, which would make it far more difficult, Mr. Maybarduk said.
©2015 The New York Times News Service
