[Ip-health] The Trump Executive Order on drug prices: not what was promised nor needed, and contrary to US self interest
james.love at keionline.org
Mon Jun 19 08:34:43 PDT 2017
This is the text of my June 17 Medium article on the proposed Trump
executive order. It's about 1800 words, and to cover the topics adequately
it could have been 18,000 words. Jamie
The Trump Executive Order on drug prices: not what was promised nor needed,
and contrary to US self interest
Jun 17, 2017
Emily Kopp has a big scoop for Kaiser Health News. She has obtained a six
page document outlining the draft provisions or objectives of a proposed
Presidential Executive Order (EO) on drug prices. She has shared some of
the details, but only a few highlights, so the public still has limited
The first of the “principles” and “talking points” she reported is as
Extending the patent life of drugs in foreign markets to “provide for
protection and enforcement of intellectual property rights.” This will
ensure “that American consumers do not unfairly subsidize research and
development for people throughout the globe.”
We don’t know which foreign markets this involves, but one can guess.
Who does not already have patent extensions in national law?
If the EO is aiming only at promoting US style patent extensions, it will
have to aim pretty low, since virtually all higher income industrialized
countries already are granting them or plan to do so.
The European Union has a directive on “supplementary protection
certificates” (SPCs), which extend patent exclusivity for up to 5 years.
This is codified as REGULATION (EC) No 469/2009 of 6 May 2009 concerning
the supplementary protection certificate for medicinal products, and
applies to 28 countries in the European Union, and similar provisions have
been effectively exported by the EU to Switzerland, Macedonia, Albania,
Norway and other countries.
Canada, which recently negotiated a trade agreement with the EU, adopted a
SPC regime in 2016. Australia, Japan and Korea have adopted laws providing
for patent extensions up to five years. Article 18.46 of the Trans Pacific
Partnership Agreement (TPP) requires patent extensions as well.
The United States has negotiated a large number of bilateral agreements,
such as the CAFTA-DR agreement with the Dominican Republic, or the US
Morocco agreement, and nearly all of these include patent extension
Korea and Japan are seeking patent extensions in the Regional Comprehensive
Economic Partnership (RCEP), a trade agreement being negotiated between 16
members in the Asia Pacific region, including for example, Japan, Korea,
Australia, New Zealand, China, India, Indonesia, the Philippines, Thailand,
and Malaysia, as well as very poor countries like Vietnam, Myanmar and Laos.
The are handful of middle income developing countries, like Brazil,
Argentina, Turkey, and many low income countries, particularly in Africa
and Central America, which don’t grant patent extensions, and these are
likely to be targets.
But the Trump EO will probably not stop at patent extensions, and will also
continue to press countries to lower standards for granting patents (so
more patents can be granted on the same drug), restrict the use of
compulsory licenses, press for extended test data protection, including 12
years for biologic drugs, and attack the efforts of countries to negotiate
In fairness to Trump, all of these measures were pursued vigorously,
originally to a somewhat lesser extent, but ratcheted up every year by
every U.S. President since Ronald Reagan, including Presidents Clinton and
Obama, as documented by the USTR in its annual Special 301 Report (A
complete set is available here: https://www.keionline.org/ustr/special301).
What’s wrong with this picture?
Anything that expands or extends monopolies on drugs and vaccines makes
access more unequal. Let’s start with low income countries. From 2010 to
2016, the US FDA approved 56 novel cancer drugs, an astonishing wave of
innovation, including game changing drugs like T-DM1, for HER2+ breast
cancer and radically better treatments for melanoma and many other cancers.
Of these, ZERO are included in the WHO list of essential medicines, because
they are too expensive for countries with limited resources.
Now consider Europe. A recent study by EY Poland of 30 important cancer
drugs found that only 2 of the 30 were routinely available for
reimbursement in Poland and the Czech Republic, while 30 of 30 were
routinely reimbursed in the Netherlands, and 28 of 30 were reimbursed in
Switzerland. In the UK, just half were routinely reimbursed. The 2016 ESMO
European Consortium Study on the availability, out-of-pocket costs and
accessibility of antineoplastic medicines in Europe provides additional
evidence of the vast disparities in access among 48 countries in greater
Europe and Central Asia.
These disparities of access (which are no fault of the patients) are the
predictable consequence of policies that deliberately raise drug prices and
strengthen monopolies, to the point where health programs let people die or
suffer, in order to save enough money to fund other health program needs.
Where is the United States’ self interest?
Okay, suppose you think unfairness and unnecessary suffering and death is
not a problem when it happens to foreigners. (This is the apparent mindset
of people like Trump and drug company adviser Robert Shapiro).
Even if one was completely indifferent to the plight of patients in foreign
countries, the United States suffers when it promotes strong drug
monopolies. Here is why:
1. Trade policies that promote strong monopolies in foreign markets also
lock-in strong monopolies in the U.S. market. It’s not impossible, but it’s
hard to have it both ways. If the U.S. puts 12 years of monopoly rights in
biologic drug test data in a trade agreement, with no exceptions, then it’s
harder for the U.S. Congress to change our law. PhRMA knows that. We know
2. Countries that are asked to provide broader, stronger and extended
monopolies on drugs will ask for something in return. This is a trade. We
ask a country to let their breast cancer patients suffer and have premature
deaths, and they may say yes, but also ask the United States for market
access agreements that will hurt businesses and workers in the United
States. When you ask for something very painful, you will end up with some
pain in return. Quid pro quo means, something for something, so its
important to ask, what’s that something we give up on our end, and what is
the effective exchange rate in terms of good jobs?
3. U.S. patients won’t have the option of traveling abroad to get an
affordable treatment, such as for hepatitis c drugs, if the foreign markets
for affordable drugs, including but not limited to India, are all shut
down. Given the prospect of less and less insurance coverage, this isn’t a
trivial issue. Note that today high income countries like Italy and
Switzerland are encouraging patients to obtain cheaper generic drugs from
abroad, when prices are excessive at home. This won’t work when prices are
4. The White House has to realize that many drugs are owned by foreign
companies, like Roche, Novartis, GSK, AstraZeneca, Bayer, Astellas, and
Sanofi -- companies heavily subsidized by the NIH, BARDA, CDC, WRAIR, the
Department of Veterans Affairs and other US taxpayer supported agencies,
that often charge US residents more than patients in their home countries.
In the process of fattening the wallets of foreign owned companies, higher
prices will lead to U.S. residents sending more money out of the country.
Do high prices in foreign countries lead to lower prices in the United
On the contrary, every time the global, regional or bilateral norms for IPR
protection on drugs goes up, so have drug prices. And, why would drug
companies lower them? There are fewer places to obtain cheaper versions of
drugs. The VA reference pricing schemes are undermined. As the monopolies
get stronger internationally, they get stronger here too.
What is the better way?
The Trump administration should distance themselves from the crowd of big
pharma lobbyists and enablers, stop trying to copy or extend the Obama
Administration policies on trade, and try something new, something that
would actually benefit the people living in the United States.
The focus on global negotiations should be to get foreign governments to do
more to fund R&D, not just via high drug prices, which is an incredibly
inefficient mechanism when you compare global R&D outlays to global
revenues (even less efficient when you adjust declared R&D outlays for such
items as asset acquisition costs, which are themselves inflated by expected
prices for products).
There are many areas of low hanging fruit to address the free riding issue.
Let’s start with the Orphan Drug Tax Credit, a 50 percent subsidy for
75 percent of the 56 new cancer drugs approved by the FDA from 2010 to 2016
qualified as Orphan products. Only the United States incurs the cost of
this tax credit. Germany pays nothings. Japan pays nothing. Canada pays
nothing. China pays nothing. Why not expand the tax credit to a wide class
of qualifying trials, but also have other countries share in the cost? If
trials were subsidized more widely, then company net R&D costs would be
lower, and countries could actually lower drug prices without hurting
What about engaging in negotiations for R&D funding agreements, and
leverage our investments in public goods through the NIH, with more public
goods spending in foreign countries? The United States is paying for the
R&D and training the workforce for all of Europe and Japan’s leading pharma
companies. Why not insist on more public sector funding of R&D from our
trading partners? Obama opposed these negotiations because he was in the
pocket of big pharma. Be different from Obama on this, don’t copy him.
How about going further, and exploring the feasibility of progressively
de-linking R&D funding, including incentives, from drug prices, so everyone
can get access to the drugs that are medically effective and appropriate
for them? (more here: http://delinkage.org) Why not embrace the ideas of
the future instead of doubling down on the drug company lobby wish lists
that have created a dysfunctional and health threatening business model
that pits innovation and access against each other?
Finally, look ahead, and in particular, look at the demographic changes
facing the United States and other countries. This is a recent estimate by
the United States Administration on Aging (AoA).
The older population -- persons 65 years or older -- numbered 46.2 million
in 2014 (the latest year for which data is available). They represented
14.5% of the U.S. population, about one in every seven Americans. By 2060,
there will be about 98 million older persons, more than twice their number
in 2014. People 65+ represented 14.5% of the population in the year 2014
but are expected to grow to be 21.7% of the population by 2040.
Cancer and many other illnesses are correlated with age, and older people
often don’t participate in the workforce. Other countries are confronting
the same demographic shifts, due in part of the benefits of better health
care and diet, and a safer world. However problematic high drug prices are
today, they are becoming even less acceptable and sustainable.
James Love. Knowledge Ecology International
KEI DC tel: +1.202.332.2670, US Mobile: +1.202.361.3040, Geneva Mobile:
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