A handful of states and groups concerned with containing healthcare costs are urging the Office of the U.S. Trade Representative to abandon plans to press trade partners to stop using price controls such as preferred-drug lists and reference pricing.
Drug pricing tussle
Some states oppose trade talks to end price controls
The plan, included in the agency’s 2009 report outlining trade-policy agenda for the following year, was cited as a means of increasing funding for drug research and development. In the report, USTR officials said price-capping policies used by countries such as Canada, France, Germany, Japan and Taiwan to control drug costs have suppressed pharmaceutical company earnings and made less money available for new drug development.
But critics say the proposed policy is a giveaway to the pharmaceutical industry, and that such a move would be detrimental to states that use similar cost-control mechanisms to make drugs affordable for Medicaid recipients and other low-income individuals. If the removal of cost controls is written into trade agreements with other countries, reciprocity requirements would force state and federal authorities here using similar drug-price controls to abandon those practices.
“The kind of policies that this report would like to restrict are the kind states engage in right now when they negotiate with drug companies to reduce costs,” said Sharon Treat, a Maine state representative and executive director of the National Legislative Association on Prescription Drug Prices. “Our Medicaid program, which relies on negotiating supplemental rebates and a very strict preferred-drug list, could be seriously compromised. I don’t know how much the cost of prescription drugs would go up, but let’s face it, they increase by the double digits annually.”
Maine legislators, along with lawmakers from Vermont and groups such as the Program on Information Justice and Intellectual Property at American University and the Center for Policy Analysis on Trade and Health, have submitted comments to the USTR protesting the proposed trade provision. Many said they will testify against adoption of the policy during a scheduled March 3 hearing.
Vermont state Sen. Virginia Lyons said her state vehemently opposes the measure. “We have the I-SaveRx program, which provides a Web site for consumers to purchase drugs through Canada and Ireland. We also have a Medicaid preferred-drug list, which allows us to negotiate bulk purchase rates and supplemental rebates.” But under the USTR’s proposed policy, Lyons said, Vermont would likely lose access to affordable drugs from foreign markets—which would have to lift their price controls—and would be forced to do away with its preferred-drug lists and price negotiation practices.
A USTR spokeswoman said she was not familiar enough with the proposed drug-pricing policy to comment on how it could affect states. “The basis for this policy is that it provides incentive for companies to do research and development,” said USTR spokeswoman Nefeterius McPherson.
But Treat said federal officials have no power to ensure that drug companies would direct additional earnings that result from a discontinuation of price controls to innovation. “There may be some of those dollars that go to R&D, but it’s not at all clear that by keeping prices high that we’re going to improve public health and access to care.”
Mark Grayson, a spokesman for the drug industry lobby group Pharmaceutical Research and Manufacturers of America, said the proposed trade provision seeks to ensure that other countries help foot the cost for new drug innovation. “The U.S. is paying for more of the drug research costs than other parts of the world,” said Grayson, who noted that the U.S. market’s higher prices help fund a disproportionate percentage of innovation. “We’re looking at people being able to take advantage of our research but not paying their fair share.”
Grayson declined to speculate, however, whether the lifting of cost controls elsewhere would help lower the cost of drugs in the U.S. and be useful to states in keeping drugs affordable. “I think all we would really say there is that market-access trade policy is designed to open markets and make a level playing field for U.S. companies. Our advocacy does not seek any other outcome than to stay consistent with U.S. laws.”
Send us a letter
Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.