[Ip-health] Stiglitz on IP provisions of TTIP and TPP

Dean Baker Dean.Baker1 at verizon.net
Fri Jan 30 09:14:42 PST 2015


      The Opinion Pages
      <http://www.nytimes.com/pages/opinion/index.html> | Op-Ed Contributor

  Don't Trade Away Our Health

By JOSEPH E. STIGLITZ. January 30, 2015

A secretive group met behind closed doors in New York this week. What 
they decided may lead to higher drug prices for you and hundreds of 
millions around the world.

Representatives from the United States and 11 other Pacific Rim 
countries convened to decide the future of their trade relations in the 
so-called Trans-Pacific Partnership (T.P.P.). Powerful companies appear 
to have been given influence over the proceedings, even as full access 
is withheld from many government officials from the partnership countries.

Among the topics negotiators have considered are some of the most 
contentious T.P.P. provisions — those relating to intellectual property 
rights. And we’re not talking just about music downloads and pirated 
DVDs. These rules could help big pharmaceutical companies maintain or 
increase their monopoly profits on brand-name drugs.

The secrecy of the T.P.P. negotiations makes them maddeningly opaque and 
hard to discuss. But we can get a pretty good idea of what’s happening, 
based on documents obtained by WikiLeaks from past meetings (they began 
in 2010), what we know of American influence in other trade agreements, 
and what others and myself have gleaned from talking to negotiators.

Trade agreements are negotiated by the office of the United States Trade 
Representative, supposedly on behalf of the American people. 
Historically, though, the trade representative’s office has aligned 
itself with corporate interests. If big pharmaceutical companies hold 
sway — as the leaked documents indicate they do — the T.P.P. could block 
cheaper generic drugs from the market. Big Pharma’s profits would rise, 
at the expense of the health of patients and the budgets of consumers 
and governments.

There are two ways the office of the trade representative can use the 
T.P.P. to maintain or raise drug prices and profits.

The first is to restrict competition from generics. It’s axiomatic that 
more competition means lower prices. When companies have to fight for 
customers, they end up cutting their prices. When a patent expires, any 
company can enter the market with a generic version of a drug. The 
differences in prices between brand-name and generic drugs are mind- and 
budget-blowing. Just the availability of generics drives prices down: In 
generics-friendly India, for example, Gilead Sciences, which makes an 
effective hepatitis-C drug, recently announced that it would sell the 
drug for a little more than 1 percent of the $84,000 it charges here.

That’s why, since the United States opened up its domestic market to 
generics in 1984, they have grown from 19 percent of prescriptions to 86 
percent, by some accounts saving the United States government, consumers 
and employers more than $100 billion a year. Drug companies stand to 
gain handsomely if the T.P.P. limits the sale of generics.

The second strategy is to undermine government regulation of drug 
prices. More competition is not the only way to keep down the prices of 
essential goods and services. Governments can also directly restrain 
prices through law, or effectively restrain them by denying 
reimbursement to patients for “overpriced” drugs — thus encouraging 
companies to bring down their prices to approved levels. These 
regulatory approaches are especially important in markets where 
competition is limited, as it is in the drug market. If the United 
States Trade Representative gets its way, the T.P.P. will limit the 
ability of partner countries to restrict prices. And the pharmaceutical 
companies surely hope the “standard” they help set in this agreement 
will become global — for example, by becoming the starting point for 
United States negotiations with the European Union over the same issues.

Americans might shrug at the prospect of soaring drug prices around the 
world. After all, the United States already allows drug companies to 
charge what they want. But that doesn’t mean we might not want to change 
things someday. Here again, the T.P.P. has us cornered: Trade 
agreements, and in particular individual provisions within them, are 
typically far more difficult to alter or repeal than domestic laws.

We can’t be sure which of these features have made it through this 
week’s negotiations. What’s clear is that the overall thrust of the 
intellectual property section of the T.P.P. is for less competition and 
higher drug prices. The effects will go beyond the 12 T.P.P. countries. 
Barriers to generics in the Pacific will put pressure on producers of 
such drugs in other countries, like India, as well.

Of course, pharmaceutical companies claim they need to charge high 
prices to fund their research and development. This just isn’t so. For 
one thing, drug companies spend more on marketing and advertising than 
on new ideas. Overly restrictive intellectual property rights actually 
slow new discoveries, by making it more difficult for scientists to 
build on the research of others and by choking off the exchange of ideas 
that is critical to innovation. As it is, most of the important 
innovations come out of our universities and research centers, like the 
National Institutes of Health, funded by government and foundations.

The efforts to raise drug prices in the T.P.P. take us in the wrong 
direction. The whole world may come to pay a price in the form of worse 
health and unnecessary deaths.

//Joseph E. Stiglitz, / a Nobel laureate in economics, a professor at 
Columbia and a former chairman of the Council of Economic Advisers, is 
the author of “The Price of Inequality.” /

Dean Baker (baker at cepr.net)
Center for Economic and Policy Research 1611 Connecticut Ave., NW
Washington, DC 20009
202-293-5380 (ext 114)
202-332-5218 (H)

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