INTERNATIONAL BUSINESS

U.S. Shifts Stance on Drug Pricing in Pacific Trade Pact Talks, Document Reveals

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WASHINGTON — Facing resistance from Pacific trading partners, the Obama administration is no longer demanding protection for pharmaceutical prices under the 12-nation Trans-Pacific Partnership, according to a newly leaked section of the proposed trade accord.
But American negotiators are still pressing participating governments to open the process that sets reimbursement rates for drugs and medical devices. Public health professionals, generic-drug makers and activists opposed to the trade deal, which is still being negotiated, contend that it will empower big pharmaceutical firms to command higher reimbursement rates in the United States and abroad, at the expense of consumers.
“It was very clear to everyone except the U.S. that the initial proposal wasn’t about transparency. It was about getting market access for the pharmaceutical industry by giving them greater access to and influence over decision-making processes around pricing and reimbursement,” saidDeborah Gleeson, a lecturer at the School of Psychology and Public Health at La Trobe University in Australia. And even though the section, known as the transparency annex, has been toned down, she said, “I think it’s a shame that the annex is still being considered at all for the T.P.P.”
The annex, which covers pharmaceutical and medical devices, is the latest document obtained by The New York Times in collaboration with the watchdog group WikiLeaks, and it was released before the House vote on whether to give President Obama expanded powers to complete the Trans-Pacific Partnership. The Senate has already approved legislation giving the president trade promotion authority, or fast-track power that would allow him to complete trade deals without the threat of amendments or afilibuster in Congress. A House vote on final passage of the bill, now expected on Friday, appears extremely close.
The Pacific accord, would link countries stretching from Canada and Chile to Japan and Australia in a new set of trade rules that would cover 40 percent of the global economy.

Trans-Pacific Partnership Countries

Canada
$658
United States
Japan
$201
Mexico
Vietnam $36
$534
Brunei $0.6
Malaysia $44
Singapore
$47
Peru
$16
Australia
$37
Chile
$26
Total goods traded with the United States in 2014
New Zealand
$8
Imports plus exports, not including services, in billions of dollars
Census Bureau
By The New York Times
Opponents of both the Pacific deal and the legislation to grant trade promotion authority have long targeted the pharmaceutical issue. Foreign governments and health care activists have accused pharmaceutical giants, mostly based in the United States, of protecting profits over public health, especially in poor countries where neither the government nor consumers can afford to pay rates anywhere close to those charged in wealthier nations.
That fight re-emerged in the Pacific trade negotiations, which involve countries with strong cost-containment policies, like New Zealand, as well as poor countries like Peru and Vietnam.
The agreement “will increase the cost of medicines worldwide, starting with the 12 countries that are negotiating the Trans-Pacific Partnership,” said Judit Rius Sanjuan, a lawyer at Doctors Without Borders, a humanitarian organization that provides medical care in more than 60 countries.
Drug companies, however, say they need to be able to charge fair prices to compensate for the billions of dollars and decades of research that go into their medicines.
Jay Taylor, vice president for international affairs for Pharmaceutical Research and Manufacturers of America, said penetrating the opaque process for getting a drug considered for a national health system, then listed as available and properly priced, is central to free trade for drug makers. “It is market access,” he said.
That is particularly true for the Pacific accord, he said, because one of the countries, New Zealand, has a powerful system for holding down drug costs — and keeping drug makers in the dark. New Zealand’s health system has been held up as a model for the Pacific region, a prospect the pharmaceutical industry does not relish.
“There are no clear timelines for review, no sense of what a complete dossier is to get a fair review,” Mr. Taylor said. “It’s a question of basic due process.”
Negotiators from the United States appear to be pushing a similar agenda in separate negotiations with the European Union, according to a copy of an internal European report viewed on Wednesday by The New York Times.
The report, dated May 8 and written by the European Commission, said of the status of talks with the United States on a planned Transatlantic Trade and Investment Partnership, also known as T.T.I.P., “The U.S. reiterated its interest to include transparency provisions on pricing and reimbursement within the T.T.I.P. similar to the ones E.U. and U.S. have with Korea.”

DOCUMENT

Annex of Proposed Pacific Trade Accord

The Obama Administration is shifting its stance on drug pricing in the Trans-Pacific Partnership talks, according to a newly leaked “transparency” annex of the proposed trade accord.
 OPEN DOCUMENT
The report was made available by a person who shared the information on the condition of anonymity.
The European Commission has said that the pharmaceutical aspects of trade talks with the United States focus mostly on simplifying inspections and making it easier to approve and develop new medicines, insisting that the “fear E.U. governments would lose their right to decide” drug costs was unfounded.
Pharmaceutical firms and their trade associations have filed by far more lobbying disclosure forms on the Pacific trade negotiations than any other industry, according to the watchdog Sunlight Foundation. More broadly, the pharmaceutical and health product industries have been the biggest spenders on lobbying, and drug company deal-making with the Obama administration and in Congress was instrumental in securing passage of the Affordable Care Act.
Public health professionals say pharmaceutical industry lobbying is meant to diminish the power of government health programs that trim reimbursement rates to global pharmaceutical giants. The newly leaked annex, dated Dec. 17, 2014, lists Medicare and the Centers for Medicare and Medicaid Services as falling under its strictures.
That may embolden critics.
“The leak is just the latest glaring example of why fast-tracking the T.P.P. would undermine the health of Americans and the other countries and cost our government more, all to the benefit of pharma’s profits,” said Lori Wallach, director of Public Citizen’s Global Trade Watch and one of the most prominent voices in the coalition working to scuttle trade promotion authority.
Officials at the United States trade representative’s office, while declining to comment on a leak they would not acknowledge, said rules in the Pacific accord would have no impact on the United States because Medicarealready adhered to them. The trade representative’s office helped develop the proposals.
“Already, transparency and procedural fairness are integral parts of the U.S. legal system and as such are principles reflected in U.S. trade agreements,” the representative’s office said in a statement.
While the current draft may fall short of what pharmaceutical companies wanted, it also offers them new opportunities to challenge the decisions of trading partners on which drugs they will offer their citizens through government health care programs and the rates at which they will reimburse drug sellers.
Heather Bresch, chief executive of the generic-drug maker Mylan, said that the current deal was a way for the brand-name drug industry to “maximize its monopolies.”Jeff Swensen for The New York Times
A version of the Trans-Pacific Partnership annex that was leaked in 2011 made explicit reference to “competitive market-derived prices,” promising drug companies the chance to appeal rates they deemed insufficient. Those are gone, “a victory for the non-U.S. partners to some extent,” Ms. Gleeson said.
But Pacific accord negotiators appear ready to grant pharmaceutical and medical device makers more power to influence participating governments. The 12 countries involved, and any others that might join later, would have to disclose rules and guidelines for deciding which medical products would be made available through government programs and at what rate providers would be reimbursed.
In the United States, pharmaceutical companies and Medicare have fought for years over which drugs are listed for reimbursement, especially when Medicare lists generic drugs over name brands. While advocates of the trade deal, including Mr. Obama, say opening markets to competition should lower prices for consumers, generic-drug makers say the Trans-Pacific Trade Partnership could raise costs instead.
Heather Bresch, the chief executive of Mylan, one of the largest generic-drug makers, said the brand-name pharmaceutical industry was “establishing, through U.S. trade policy, an international system designed to maximize its monopolies.”
By listing the Centers for Medicare and Medicaid Services, the annex makes it clear the United States would not be immune to T.P.P. rules. Japan, Australia and New Zealand may not have drug companies as powerful as those in the United States, but under the accord, American subsidiaries in Pacific trade partners could use the accord’s dispute-resolution process against perceived violations by Medicare.
It also suggests that disputes over pharmaceutical listing would not be subject to government-to-government dispute resolution, the World Trade Organization and retaliatory tariffs.
Instead, trade lawyers say, disputes would most likely be resolved through the Investor-State Dispute Settlement process, which involves three-lawyer extrajudicial tribunals organized under rules set by the United Nations or the World Bank.
That could be significant for current Medicare practices, said Peter Maybarduk of Public Citizen’s Global Access to Medicines project, and also could hinder efforts to lower costs by changing federal law to allow the government to negotiate prices directly with drug makers.
Officials at the trade representative’s office say those concerns are unfounded.
“The transparency annex in T.P.P. is not subject to Investor-State Dispute Settlement, and nothing in its provisions will undermine our ability to pursue the best health care policy for Americans, including any future action on health care expenditures and cost containment,” a trade representative spokesman said.
Robert Pear contributed reporting from Washington and James Kanter from Strasbourg, France.