by Mike Masnick

Filed Under:
acta, free trade, pharma, tpp

US Trying To Force Governments To Pay Much Higher Prices For Needed Drugs Through Secretive TPP

from the the-opposite-of-free-trade dept

With ACTA now signed, and the US also pushing through a few more anti-free trade protectionist agreements with a few countries, the big focus is on the Trans Pacific Partnership (TPP) agreement, which Hollywood and the USTR are betting will allow them to sneak through everything they couldn't get into ACTA. That's why the negotiators for the TPP are trying to keep it even more secretive than ACTA. Of course, as with ACTA, you can expect some leaks.

And... one of the recent leaks was the section concerning pharmaceutical pricing, which pretty clearly demonstrates why this is an anti-free trade bill, rather than a free trade bill. That's because it not only looks to prop up monopolies (such as patents), but it even argues for blatant price fixing to avoid market pricing when governments are buying. That is, this section -- which is being pushed by the USTR -- basically takes the big pharmaceutical's position that foreign governments should not be allowed to bargain for discounts on drugs to keep their own citizens healthy. It mandates, instead, that governments have to buy at a much higher fixed prices, and actually is even more pro-big pharma than the previous administration, which sought to make it easier for developing nations to access necessary drugs.

Sean Flynn from American University has a detailed and useful critique showing how this plan, pitched by the Obama administration, only serves to help big pharmaceutical companies, while putting lives at risk in an extremely anti-free market way:
Although the provisions are styled as “transparency” provisions, in fact they regulate the substance of drug pricing programs. The heart of the proposal would require that countries establish new administrative and judicial appeal systems to contest whether public drug reimbursement rates “appropriately recognize the value” of pharmaceutical patents. Similar provisions have led to higher drug prices and more challenges by pharmaceutical companies in the one country to implement similar provisions – Australia.

At the core of this proposal is a false distinction between government reimbursement prices and “market” prices. Government reimbursement prices ARE market prices. Suppliers can refuse to supply to governments, just as they can with any private purchaser demanding a better deal. The fact that governments obtain better prices than atomized consumers does not make their roles as purchasers anti-market. Drug price restraint is a natural, inevitable and beneficial result of public health expenditure or any other form of pooled purchasing. Large purchasers in free markets obtain better prices; governments obtain better prices when they pool consumers and negotiate as a volume purchaser.
Furthermore, Flynn points out that this kind of backroom secret agreement, which is clearly a huge gift to the big pharmaceutical firms, should be much more open and transparent. He points out that pharmaceutical price fixing "is an inappropriate subject for closed door trade negotiations" since it's not so much a trade issue, as it is a public health policy. Furthermore, he notes that it would be contrary to current best practices within the US itself:
Ironically and ominously, US drug pricing programs do not comply with the standards that the US is proposing. In particular, the operation of preferred drug lists by the Federal Medicaid program would violate the terms of the agreement, including because they do not provide appeals for pharmaceutical companies on whether the prices achieved adequately value patents. Previous FTAs with Australia and Korea carefully exempted all U.S. programs from their coverage, including through a footnote defining the federal Medicaid program as a “regional,” rather than “central,” level government program. That footnote has been removed from the draft TPP proposal. This may indicate that the US has not decided whether to propose exempting Medicaid from the TPP requirements or to give in to demands of other countries for full reciprocity in the agreement.
No matter how you look at it, this is clearly the US government looking out for the best interests of the big pharmaceutical companies over pretty much all else. Well, perhaps not their own political careers.

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  1. icon
    Paul (profile), 24 Oct 2011 @ 1:15pm

    Re: Re: Response to: Anonymous Coward on Oct 24th, 2011 @ 11:12am

    People in poor third world countries need to consider the quality of life their potential children will be born into before they procreate. It is not the responsibility of a pharmacuetical company in the industrialized world to provide pro bono Rx therapy to poor third world children.

    And guess what. It isn't my responsibility to protect their market through force. If they want to produce a product and sell that product at a price and quality that competes in the market place, then they don't need government help.

    If they want to take government funded research, patent it, then gouge people for many times their piddly investment, and have that market protected by Government Force, I say screw 'em.

    I am SO totally for commerce and competition. I am so against government regulated markets which (BTW) prevent people from forming a company to compete against established companies by letting Big Companies blast the little guys out of the water with Government Enforced Patent suits.

    Are you trying to tell me that government regulated and government enforced markets are the way to go? Really?

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