The U.S. Congress is poised to give President Obama broad authority to conclude a binding international trade agreement known as the TransPacific Partnership (TPP); the latest and most important new trade agreement that seeks to create new standards for intellectual property that are more friendly to pharmaceutical companies and other industries.
Basically, the U.S. Trade Representative has proposed a series of measures, championed by PhRMA members, that lock-in the most pro-industry features of current law, and add some new things they want, some of them so complicated few members of Congress even understand what they do.
Among the controversial provisions are proposals to mandate extended patent terms, require a 12-year monopoly on the evidence used to register pricy biologic drugs, ramp up the enforcement of rights, make it more risky and costly to register generic drugs and limit the scope of exceptions to patent rights. The TPP would also give drug companies leverage to influence rules on drug prices atMedicare, as outlined in the most recent NYT/Wikileaks leak of a proposed Annex on Health Care.
The result is to lock the United States into the spiral of increasing prices and increased rationing for expensive drugs –putting patients are risk.
Today a number of new cancer drugs are entering the market with very high prices. For example, Bristol-Myer’s new drug for advanced melanoma, nivolumab (trade name Opdivo), can cost from $2,500 to $3,700 per week, depending upon the patient weight. The leading new hepatitis C treatments retails at $95,000. The newer chronic treatment regimens for HIV are close to $30,000, per year. Today several treatments for rare diseases are priced at more than $200,000 per year, some greater than $500,000 per year, and collectively their cost is significant.
Prices of drugs are escalating faster than the rate of inflation, and importantly, the U.S population is aging. According to the Bureau of the Census, by 2015, 14.9 percent of the population will be 65 or older. This will increase to more than 16.8 percent by 2020 and 20.6 percent by 2030. [Source here] The number of persons requiring treatments for cancer increase significantly with age.
Higher drug prices are defended on one ground and one ground only, that they stimulate more R&D. But high prices are certainly not the only or most efficient way to finance R&D. For the last three years for which we have data, less than 8 percent of global pharmaceutical sales has been reinvested in global private sector R&D. (Link here). Governments could embrace all sorts of ways to protect or enhance R&D outlays, without endorsing unsustainable $3,000 per week drug prices. For example, some years ago, the Department of Health and Human Services insisted that Bristol-Myers lower the price of cisplantin, a cancer drug developed on a government grant, by 30 percent, and at the same time, provide $40 million to fund independent research on cancer drugs. Funding R&D at any level the Congress or the Executive branch want could be made a requirement for selling drugs protected by monopolies, and, at the same time, the government can condition the existence of the monopoly on an obligation to charge a reasonable price.
Furthermore, we could also make R&D financing part of the trade negotiations. In 2010, the FDA approved 10 new cancer drugs — the largest set of approvals for cancer ever. The US also subsidized much of the R&D for new drugs. One of the subsidies was the Orphan Drug tax credit, which pays for 50 percent of the cost of qualifying clinical trials. Clinical trials are the most important expense in the development of new drugs. For the 2010 cancer drugs, 9 of the 10 products qualified for the 50 percent tax credit. That tax credit comes at the cost of lower US. tax revenue from the drug companies on their profits. Our trading partners contribute nothing to this subsidy.
Suppose the other TPP members matched the U.S. tax credit, and collectively, either lowered our costs, or increased the subsidy to a higher percentage of trial costs. Or funded more R&D grants, or innovation inducement prizes? Focusing trade agreements on R&D, rather than IPR, would give governments the flexibility to lower drug prices, while ensuring robust and sustainable sources of R&D, and targeting R&D funding where it does the most good.
We need trade agreements that allow innovation in the way we fund innovation, including approaches that completely de-link R&D costs from drug prices, so patients are no longer at risk to be the hostages in cost control efforts.
Loveis director of Knowledge Ecology International, a non-governmental organization focused on matters concerning knowledge management and governance, including intellectual property policy and innovation policy pertaining to healthcare. A two-page summary of the various ways the TPP will extend and expand drug monopolies and increase drug prices is available here (keionline.org/tpp-medicine-prices)