Brand Rx Makers Push Trade Deal That Restricts U.S. Ability To Curb Rx Spending

Just as the country is on the verge of a significant increase in drug spending, brand-drug makers are lobbying for a trade deal that could severely constrain the ability of Medicare to curb drug prices, consumer groups warn. Early this year, the Obama administration backed off some of its proposals in the pharmaceutical annex of the Trans-Pacific Partnership to appease consumer groups, but those groups say the deal would still constrain drug price controls in Part B (medical), which mostly covers the biologics that are predominant in the specialty drug category, and other portions of the deal could let drug companies sue state Medicaid programs for policies that hurt company profits.

“While this dialogue has clarified a number of issues where we had questions, we continue to have substantive concerns that the TPP proposal, as we understand it, contains ill-advised provisions that could adversely affect U.S. prescription drug programs,” a group of 11 consumer groups, including AARP and the AFL-CIO, wrote in an April 30 letter to the U.S. Trade Representative.

Consumer advocates found out about the trade measures last fall. Since then, the hepatitis C drug Sovaldi has come on the market at $84,000 per course, and state Medicaid plans and private insurers complain the cost of the drug will break state budgets and cause premiums and cost-sharing to rise. CMS recently projected that Medicare Part D premiums, however, will be stable next year. Also, Sovaldi is expected to be the first of many drugs that are expensive and treat large populations of patients.

“[Sovaldi] is a poster child in our lobbying,” said Barbara Coufal, assistant director of legislation at the American Federation of State, County and Municipal Employees

The letter from consumer groups states that the trade representatives told them the current U.S. position is to exclude most U.S. public prescription drug programs from the the pharmaceutical annex, including state Medicaid prescription drug programs, the Medicare Part D prescription drug program and public health programs that use price negotiation, such as the Department of Veterans Affairs health program.

The groups are pleased that the government changed its position to exclude those programs, but K. J. Hertz, senior legislative representative for AARP's Federal Health & Family Team, said that despite the trade representatives' reassurances, he still worries that Part D and Medicaid could be affected.

Consumer advocates' concerns stem in part from what they don't know. They complain that trade deals are negotiated in private so the information they receive is based solely on leaked drafts and what the administration tells them, yet more than 500 official U.S. trade advisers, most of which represent large corporations, have access to the deals.

A spokesman for the Pharmaceutical Research and Manufacturers of America said the pharmaceutical annex seeks to prohibit governments from arbitrarily setting drug reimbursement in private and it does not make fundamental changes to their systems.

“U.S. programs such as Medicare are clearly excepted out of the agreement with a footnote so there is no risk to the U.S. systems,” the PhRMA spokesman said in an email.

However, even if the pharmaceutical annex excludes Medicare Part D, Medicaid and Veterans Affairs, consumer advocates say a U.S. Trade Representative official told them the trade deal applies to Part B drugs.

“As an area where the U.S. government establishes pricing decisions, we are very concerned the current TPP proposal could be used by pharmaceutical companies to challenge the current Medicare B payment methodology, or its application in specific cases, which has had a measure of success in slowing spending growth.,” the April 30 letter from consumer advocates states.

Also, the pharmaceutical annex is but one of three sections of the deal that could affect the U.S. government's ability to control drug spending, Coufal and Hertz said.

They oppose the U.S. proposal to give 12 years of exclusivity to brand biologics. That's the exclusivity period under current U.S. law, but many Democrats want to cut that back to around seven years. Once that exclusivity period is included in a trade deal, the U.S. Congress will no longer be able to change it, they said. Hertz also pointed out that the president's budget proposal for this year called for cutting biologics exclusivity. However, Hertz also said that other countries are strongly opposed to giving 12 years of exclusivity so that measure may not get much traction.

The third section that worries consumer advocates is the investor-to-state dispute mechanism. The measure would let companies sue governments over changes to laws or regulations that affect companies' ability to make previously anticipated profits, Coufal said.

The chapter does not apply to drugs alone, and it would not be the first time a trade agreement included that measure, Coufal and Hertz said. However, it's troubling because companies are getting increasingly aggressive and including the measure in a multilateral deal like the Trans-Pacific Partnership would expand the principle to more countries, which could further entice drug makers to sue over drug-pricing policies. Coufal said the lawsuits are not heard in the courts of countries that are sued. Rather, they're heard by trade tribunasl that are solely obligated to consider trade agreements and not the laws of the country being sued so there is no balance of interests between companies and countries.

Coufal and Hertz both pointed to Eli Lilly and Company's lawsuit against Canada under the North American Free Trade Agreement. The drug maker is suing Canada for not granting patents for two of its drugs. Were the U.S. government required to sue on behalf of Eli Lilly, it might seek a different route than taking Canada to court because the close relationship between the United States and Canada would temper the United States’ actions, Coufal said. However, Eli Lilly has only investors to worry about, she added, so it is more likely to be aggressive.--John Wilkerson (jwilkerson@iwpnews.com)