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Experts say Obama’s Asian trade deal could drive up the cost of medicine

President Barack Obama.
President Barack Obama.
Pool/Getty Images

Since 2010, the US and 11 other countries bordering the Pacific Ocean have been negotiating the Trans-Pacific Partnership, a major trade deal that involves nearly half of world GDP.

The agreement is expected to be completed in the coming weeks, encouraging trade among member countries, lowering tariffs, and opening up new pathways for the movement of goods among the United States, Japan, Vietnam, Australia, Chile, and other countries.

But leaked drafts from the highly secretive negotiations have attracted criticism from the public heath community.

This week, Yale law professor and global health researcher Amy Kapczynski summarized some of the concerns about how the TPP will impact health in the New England Journal of Medicine. I asked her to walk me through the top three:

1) The TPP could delay cheaper, generic versions of drugs

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Countries expected to join the TPP and the volume of US trade with each. (Congressional Research Service)

Every country has systems for granting patents and legal privileges to the first company to invent a drug — a reward for innovation. After these expire, other companies can apply to get their cheaper "generic" copies of these drugs on the market.

"We know from experience that more expansive patent laws end up reducing the availability of generic medicines," Kapczynski explained. "And it's very clear from the leaked draft that the TPP contemplates expanding countries' obligations to grant patents to pharmaceutical companies."

Almost every profitable drug today has several associated patents, and right now it's up to countries to decide whether things like a small change in a drug molecule should warrant a patent extension.

To put it simply, the TPP would directly target a country's ability to define its own patent law and put a high standard on when generics can become available.

"When you start mucking around in the precise ways countries can define your patent laws," Kapczynski said, "you limit everyone’s policy flexibility."

2) The TPP could drive up costs for some of the most expensive drugs on the market

Biologic drugs are treatments made from a biological source, including vaccines, anti-toxins, proteins, and monoclonal antibodies. The Brookings Institution has a good explanation about what makes them special — and very expensive:

Because they are typically much larger and more structurally complex than traditional ‘small-molecule’ drugs, they are also more difficult — and much more costly — to develop and manufacture. Biologics are also among the most expensive drugs on the market, costing an average of 22 times more than nonbiologic drugs. Avastin, a cancer drug, can cost more than $50,000 a year, while the rheumatoid arthritis drug Remicade can cost up to $2,500 per injection.

Because of these drugs' high prices, companies are very interested in developing "biosimilars" — cheaper copies of the original drugs. (These are basically the equivalent of a generic drug for this particular pharmaceutical category.)

When biosimilars are submitted to health regulators for approval, they usually rely on the data from the clinical trials submitted by the maker of the original drug. Right now in the US, biologic drugs are granted 12 years of data exclusivity after their approval. This means the Food and Drug Administration cannot approve a similar drug that relies on that original data. Theoretically, other companies could run their own trials to get approval sooner, but they usually don't because of the cost.

Outside the US, other countries have much lower bars to entry for biosimilars. The data exclusivity protections range from zero years in Brunei to eight years in Japan, according to Brookings. But the TPP is expected to increase the period of data exclusivity to 12 years for all countries involved, blocking more affordable biosimilars from entering the market for longer periods of time.

The weird thing about this is that while this provision came from the US, it directly opposes part of Obama's proposed 2016 budget, in which he recommended reducing the period for biologics' data exclusivity to seven years.

As Kapczynski put it in her NEJM article, "Such a requirement would lock the United States into a policy that many observers, including, apparently, the President himself, believe inflates the cost of medicines unjustifiably. Even if the number of years required by the TPP is negotiated downward, the lock-in effect remains a concern, because trade agreements can be extremely difficult to amend."

So this part of the trade deal would drive up the cost of important medicines in the US and in other countries, potentially making them more difficult to access. "It's very clear that this agreement is what pharma wants," said Kapczynski. "But it's far from clear that it's a good policy for the US public."

3) The TPP could make it easier for drug companies to fight domestic regulation

International agreements decades ago created quasi court systems that let foreign companies push back when they felt their investments in countries were being undermined.

In March this year, a chapter of the TPP about "investor-state dispute settlement" was leaked. It would make it easier for foreign companies to challenge laws in member countries that might cut into their profits.

"These investor-state dispute settlement provisions have very broad definitions about the kinds of things investors can object to — not just expropriation but regulations of all kinds," Kapczynski said.

In her NEJM piece, Kapczynski explains that there's precedent for this already. In the past, companies have drawn on similar provisions to challenge a variety of policies "from minimum-wage laws in Egypt, to tobacco regulations in Uruguay and Australia, to core aspects of patent law as they apply to medicines in Canada."

Under the new provisions, companies could more easily fight policies about everything from food and tobacco labeling to pharmaceutical patent law and drug pricing rules.