If finalized, the current draft of the Trans-Pacific Partnership, or TPP, would be the largest-ever trade agreement, setting rules for trade and commerce between the United States and 11 other Pacific-Rim nations. Together, these nations’ economies account for 40 percent of the world’s gross domestic product.
The current draft includes sweeping protections for drug companies as part of the agreement’s intellectual property chapter. And unless negotiators agree to significant changes to the draft agreement, the TPP will raise drug prices and hinder access to critical medications—especially in developing countries. It’s not surprising that this area remains unresolved. Other TPP countries such as Australia and New Zealand recognize that these requirements would undermine critical public health efforts by keeping medicines out of reach, especially in less wealthy nations.
In those countries, drug companies are seeking to impose stringent patent rules, keeping drug prices high for as long as possible for the patent holders by delaying generic drug entry in those markets. Strict patent rules are already in place in the United States and are a key reason why drug prices are significantly higher here than in other TPP nations. For this reason alone, U.S. negotiators should advocate for pro-consumer policies and reject the pharmaceutical industry’s push for greater patent and other regulatory protections.
But for those who take a narrower view and believe that the TPP should only be assessed from a U.S. perspective, there is still reason for concern. The current draft also would tie the hands of policymakers who wish to address the skyrocketing prices of drugs in America.
Once the TPP is ratified, the federal government will not be able to enact laws that are inconsistent with the TPP without violating the treaty. Even if a future Congress and president agreed that these pro-industry laws should be reformed, a drug company could then sue the United States for billions of dollars using a dispute process also included in the current agreement. This scenario shows why the pharmaceutical industry has pushed so aggressively for certain policies to be included in the TPP.
For example, leaked versions of the TPP include a 12-year exclusivity period for expensive biologic drugs—drugs made from living cells. These medications are becoming more common and make up about 40 percent of all drugs currently under development. Today, a generic version of a biologic—called a biosimilar—can enter the market after the exclusivity period is over.
A growing number of consumer groups and policy experts, including the Center for American Progress, believe that this 12-year period is too long. Other prescription drugs have a five-year exclusivity period, and the difference in the time it takes to bring those drugs to market compared with a biologic is, on average, less than a year. For this reason, the Obama administration has proposed shortening the exclusivity period for biologics to seven years. The administration’s trade officials, however, seem to be following the industry’s lead by arguing for a 12-year rule in the TPP. If included in the final agreement, this policy would be off-limits to future U.S. lawmakers.
Restricting the policy options available to curb rising health care costs would be an enormous win for the drug industry and a massive loss for the rest of the nation. All parts of our health care system face increasing prices for specialty drugs, most of which are biologics. Last year alone, the Medicare program—whose beneficiaries are most likely to need these expensive drugs—saw its costs for these drugs increase by 45 percent. In the private sector, spending for these drugs increased by 30 percent.
These cost increases are not a one-time phenomenon. Without competition from generics, there is zero chance that these prices will level out. Instead, in the next five years, spending on these drugs could quadruple from its 2012 level, with federal health care programs, taxpayers, and patients paying even greater prices for necessary drugs.
A shorter exclusivity period for biologics is not a cure-all for our nation’s rapidly increasing drug prices, but it is essential to increasing competition for these products. Nor is the 12-year exclusivity period the only harmful policy that needs to be changed in the current draft agreement. It is, however, illustrative of how the pharmaceutical lobby is trying to use the TPP to both rewrite patent law overseas and shield pro-industry laws in the United States from public debate and legislative reform.
So far, these efforts seem to be working. But there is still time for U.S. negotiators to change course. Senior-level negotiations have resumed in Hawaii this week, and U.S. trade officials must stop ceding power to the drug lobby. Only if that happens will the largest trade agreement in history cease to be a monumental giveaway to Big Pharma.
Maura Calsyn is the Director of Health Policy at the Center for American Progress.