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Trade Deal May Undercut Efforts to Control Drug Prices

A House committee trained bipartisan outrage last week against two pharmaceutical companies that raised drug prices by as much as 5,000 percent.

The companies, Turing Pharmaceuticals and Valeant Pharmaceuticals, calculated they could raise the prices because the medications, although no longer under exclusive patent, were critical drugs in limited supply for hospital use in treating cancer and complications from HIV/AIDS.

The House Oversight and Government Reform hearing made for riveting broadcast drama but opponents of the Trans-Pacific Partnership say members of Congress and lawmakers should be just as concerned about pharmaceutical provisions in the 12-nation trade agreement.

They say the provisions could block efforts to control prescription drug prices in the United States and put life-saving drugs out of reach for poorer TPP members. In addition to the United States, the TPP nations are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

Robert A. Freeman, vice chair for research and pharmacy practice professor at the University of Maryland-Eastern Shore, said the critics could be right about the long-term effects, but added that trade agreements generally don’t focus on public health policy.

“You do need pricing flexibility, which means higher prices, to generate cash flow and operating margins to sustain and fund new research. I think it is a fair question to ask, what value are we getting?” said Freeman, who worked in the pharmaceutical industry for 22 years.

Freeman said he does no consulting for the drug industry or opponents of the Trans-Pacific Partnership.

“U.S. citizens are paying for lower prices in other countries,” he said. “The argument the drug industry makes is we’re willing and able to pay for it to have early access to these drugs. That’s something to be looked at.”

Most of the alarm over TPP drug provisions has been raised by pharmaceutical companies and congressional allies such as Senate Finance Chairman Orrin G. Hatch. They are unhappy that U.S. negotiators couldn’t get TPP nations to agree to 12 years of data exclusivity for next-generation treatments known as biologics made from living organisms. The United States would keep its current 12-year grant to biologics makers of exclusive rights to make the products. The other 11 members, whose laws ranged from no exclusivity to 8 years, will have to provide five to eight years of data protection.

“Rather than promoting new investment and expansion from this critical industry, the agreement will likely limit the ability of American innovators to recoup the costs of their investments,” Hatch told the U.S. Chamber of Commerce last year.

“As a result we’ll see less investment in research and development, fewer new products coming to the market, fewer innovative cures and treatments for diseases, and, of course, more costs shifted to U.S. consumers in order to make up for losses incurred overseas,” he said.

U.S. pharmaceutical companies say they need the marketing time that data exclusivity would provide to offset costs. They are pressing for adjustments to the trade agreement before Congress votes on the bill. Hatch and other key Republicans in the Senate and House also have warned the administration that the Obama administration must address it.

TPP opponents and two U.S. cancer patients protested last week at the offices of the Pharmaceutical Research and Manufacturers Association, the trade group for major drug companies. The pharmaceutical organization is leading the drive for greater TPP protections.

A PhRMA spokesman said the organization had no comment on the protests or the arguments they raised against the trade agreement’s drug provisions. The organization is working on comments to submit to the U.S. International Trade Commission on TPP’s potential effects on the industry, he said.

The commission is required under fast-track authority (PL 114-26) to send a report to Congress on the trade agreement’s likely impact on the U.S. economy and selected industries.

PhRMA underscored its objections to the trade pact’s provisions on Feb. 4, when Trade Representative Michael Froman joined trade officials from the other 11 TPP member nations to sign the agreement. Lawmakers must approve TPP for it to take effect.

PhRMA said the U.S. intellectual property law “for innovative biopharmaceuticals works. It is why the U.S. leads the world in medicines in development, and it illustrates why the U.S. model should have been the standard set in the TPP in order for the agreement to foster more new cures and treatments for patients around the world.”

It is unclear if President Barack Obama will send implementing legislation to Congress for a vote in 2016 or whether the task of winning approval for the massive agreement will fall to his successor.

Public Citizen, which opposes TPP, says the 12 years of biologics exclusivity is just one concern.

Peter Maybarduk, director of Public Citizen’s Access to Medicine project, said he is concerned that TPP provisions require member nations to provide secondary patents to existing drug patents.

This could lead to companies getting a patent benefit on conventional pharmaceuticals for tweaks such as producing a new form of a drug.

Maybarduk argued this would allow companies to maintain exclusive production and pricing rights to drugs for years beyond the basic 20-year drug patent TPP countries are already required to provide as members of the World Trade Organization. Critics say drug companies frequently use the tactic in the United States, but other nations generally don’t allow the practice.

“The question is whether it prevents us from making reforms we might make otherwise make that would reduce costs in the future for Americans. We’re locking in a bad model at home and shipping it abroad where it will lead to preventable deaths,” Maybarduk said. “PhRMA is upset they didn’t get their full 12 years because they want to change every other countries’ law to guarantee them a minimum 12-year monopoly on those products.”

He said the trade agreement could put a long-sought change by groups like his and many Democrats to allow the federal government to negotiate drug prices for Medicare Part D. The Veterans Affairs Department has that power.

If the U.S. government allowed Medicare to negotiate drug prices, Maybarduk said makers of conventional medicines and biologics could challenge U.S. justification for drug pricing and reimbursements under the investor-state dispute settlement process, a private arbitration process. The companies could not change law, but they could receive a large settlement.

Freeman, at the University of Maryland-Eastern Shore, said no one knows if that is a likely scenario.

“This partnership is open to interpretation. At this point we don’t have any research evidence to model what has happened and what will happen under this partnership,” Freeman said.

Zahara Heckscher, who is being treated for advanced breast cancer with the biologic Ibrance by Bristol-Myers Squibb in a clinical trial, said a ratified TPP could threaten her access to treatments. Without the clinical trial, Ibrance would cost about $118,000 for a year of treatment. Heckscher, 51, was arrested at a Feb. 4 protest at the PhRMA offices.

She is concerned the trade agreement could result “in locking in problematic policies, probably for decades to come. It’s extremely hard to change these trade agreements.”

“Just as we get these exciting new medicines we’ll be locked into policies that keep prices high,” Heckscher said. The former University of Maryland lecturer on writing says she has a safety net for now with access to drugs through the clinical trial and her husband’s health insurance. Other cancer patients are not so fortunate.

“Hopefully, my luck doesn’t run out. Medicine prices equal access equal life and death,” Heckscher said.

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