[Ip-health] Rep. Treat Presentation Sept. 10 TPPA Stakeholder Mtg

Sharon Treat streat at reducedrugprices.org
Mon Sep 12 06:00:55 PDT 2011

Rep. Sharon Anglin Treat
The impact of pricing provisions on U.S. Medicaid and other health access

One of the central challenges of our time is assuring access to affordable
health care.  As a state legislator in a rural US state, a board member of
an NGO dedicated to finding solutions to poverty and improving the lives of
low income people, and as the director of an organization of state
legislators working together to reduce prescription drug costs, it is one of
my highest priorities.

The impact of trade policies on medicines affordability and availability is
a key concern of state officials.  The board of the National Legislative
Association on Prescription Drug Prices voted in January to oppose including
pharmaceutical pricing and transparency provisions in the TPPA; the Governor
of Vermont has written to President Obama opposing these provisions; and
state trade advisory commissions have raised similar concerns as well as
testified before USTR on related issues in the 301 hearings.   Why?

·      Because we know that Medicaid and other state-federal drug access
programs in the US currently do not meet the transparency standards in the
Australia and Korea FTAs ­ standards we know are the starting point for TPPA


·      At least 40 states negotiate prices in the state-federal Medicaid
program based on an open formulary known as a preferred drug list (PDL).
They compare evidence on the safety, efficacy, and cost-effectiveness of new
drugs and existing drugs in the same therapeutic class, not unlike private
insurance companies or governments such as Canada, New Zealand and
Australia. In my own state of Maine the PDL-based rebates have reduced the
average cost to the state for pharmaceuticals purchased through public
programs by 50% off list price.


Like Maine, most US states do not now comply with the procedural provisions
and appeal rights in KORUS, and applying these standards could interfere
with the effective management of our programs.  States revise drug lists on
a regular basis and at times, on short notice, to take advantage of market
changes and the availability of new generics, or to promptly reassess
efficacy and safety based on new evidence. Most do not allow the drug
manufacturers to sit on the committees deciding which drugs are on the
lists, rejecting this as a major conflict of interest, yet KORUS Article
5.3.5(f) requires it.

·      With the passage of the Affordable Care Act, the drug pricing
provisions in Medicaid are changing from state-level rebate negotiations to
a national pricing list that will look remarkably similar to the New
Zealand¹s Pharmac and Australian Pharmaceutical Benefits Scheme or PBS -
programs criticized by some US trade officials and pharmaceutical companies
and targeted by trade provisions.


·      Indeed, many state legislators have worked for years to transform US
access to medicines programs to be more like the effective cost-containing
programs in Australia and New Zealand, not less.  Millions of people in the
US do not have regular affordable access to medicines. A study released just
this week by the Commonwealth Fund found the number of ³underinsured² adults
rose by 80 percent between 2003 and 2010, from 16 to 29 million. Nearly half
(44%) of adults in the US -- 81 million people -- were either underinsured
(generally paying high premiums for private insurance with high deductibles
and inadequate coverage) or without any insurance in 2010.  Among adults
with at least one chronic health condition, nearly four in ten uninsured
adults and one-quarter of underinsured adults reported skipping doses or not
filling a prescription for their condition because of cost.


·      Any language restricting drug pricing mechanisms in TPP countries
would appear to directly challenge the new US Medicaid drug pricing system.
State legislators are particularly worried about the KORUS  text requiring
governments to ³appropriately recognize the value of the patented
pharmaceutical product or medical device in the amount of reimbursement it
provides² ­ text that could get even worse in TPPA.  We know from public
statements of the pharmaceutical industry that they want to define
³appropriately value² in a way that limits prices to in-country competitive


Such language applied to the United States, with some of the highest market
prices for patented drugs anywhere, would simply lock in those high prices
in perpetuity at a time when we are working hard to implement President
Obama¹s vision of expanding affordable health care for everyone.

It would be a tragedy if the pharmaceutical provisions in the TPPA were to
render our existing public health programs and the Affordable Care Act
unaffordable by keeping US drug prices high, delaying the addition of
generic versions of drugs to PDLs or the timely removal of drugs with
emerging efficacy and safety concerns, or providing grounds for overturning
legitimate evidence-based reimbursement decisions.

            I know that, especially recently, there has been a good-faith
effort by US trade negotiators to respond to these concerns. In response to
the states¹ lobbying, the text of the KORUS agreement carves out Medicaid in
a footnote.  While this is helpful, it does not address the scope of our
problems with the KORUS pharmaceutical provisions nor assuage our worries
about the future in TPPA.  Why not?

·      The carve-out doesn¹t exempt non-Medicaid programs heavily relied on
to provide access to pharmaceuticals including the clinic-based 340B program
of the Federal Public Health Act and the hospital-based Medicare Part B for


·      The carve-out doesn¹t cover any new programs and thus locks the US in
perpetuity to the ineffective, expensive pricing systems we have today.  For
example, could Medicare Part D be changed from a private insurance-based
program to a centrally negotiated drug pricing program like Medicaid without
triggering the pricing restraints in trade agreements?  I wonder.


·      What about the heavily subsidized insurance soon to be provided
through the new Affordable Care Act, which is intended to fill the huge gaps
in health coverage in the US?  Pharmaceutical companies lobbied successfully
to avoid price restraints in this program. Will Congress be allowed to
change this law in the future as pharmaceutical market prices go ever
higher?  Will the US government have the money to pay for these subsidies in
perpetuity if the sky is the limit?


I doubt it; look at the deficit reduction and debt-ceiling mess that
Congress is currently tangled up in. Or look at the cutbacks to health care
and pharmaceuticals programs we are already experiencing even without these
new trade provisions.
Most U.S. states have faced budget cuts since at least 2008 caused by the
ongoing worldwide recession.  This year, many states ended or cut back
prescription drug assistance programs and Medicaid eligibility.  Maine¹s
Governor proposed eliminating the MaineRx discount drug program and the
state-funded Drugs for the Elderly Program, dropping Medicaid eligibility
for childless adults, and reducing or eliminating the Medicare Savings
Program assisting 40,000 seniors and some disabled Mainers with prescription
drug payments, and cutting health insurance entirely for 30,000 low-income
people. Through cost-shifting copayment increases and more fees, most of
these cuts were prevented, but he has announced similar plans for 2012.

Or look at the number of patients sitting on AIDS Drug Assistance Program
(ADAP) wait lists, denied the life-saving treatment they need.  Wait lists
rose dramatically in the past two years, from 361 people in January 2010, to
9,217 individuals on wait lists in 12 states in August 2011.  In addition,
six states have limited eligibility - some by more than 50% - as a
cost-containment measure, and seventeen states and the territory of Puerto
Rico have cut program costs by reducing access through reduced formularies,
capped enrollment, monthly or annual expenditure caps, disenrolling clients
not accessing ADAP for 90-days, discontinuing reimbursement of laboratory
assays, instituting client cost sharing, or restricting eligibility

In sum, should negotiators include language similar to the KORUS
pharmaceutical pricing and transparency provisions in the TPPA, even with
the Medicaid carve-out, those provisions could cripple our ability going
forward to provide access to pharmaceuticals and medical devices to low
income and middle class Americans, and populations with special health

While one approach might be to expand the scope of the Medicaid carve-out in
future TPAs, a better response would be to reconsider including the
problematic provisions in the first place.  We question the value of
including such provisions in reciprocal trade agreements where key
provisions supposedly do not apply to most of the existing and planned U.S.
and state pharmaceutical and medical device reimbursement programs.
Moreover, the very existence of these provisions inevitably will add to
pressure from the pharmaceutical and medical device industry ­ which is
already great - to replace current U.S. pricing and reimbursement provisions
that are protected by specific carve outs, with programs that are not so
protected.  Indeed, trade agreements may simply be an alternative method for
the pharmaceutical industry to suppress pricing policies it has
unsuccessfully and repeatedly challenged in the US courts.

If new US health care programs must conform to pricing and procedural
disciplines in TPPA and other TPAs, the US will NEVER solve its health
access problems, just as developing countries and other trading partners
will be pressured to move closer to our own broken system.  Assuring access
to health care to all should be among the highest priorities of those of us
in government service.

Our goal must be to insure access to all people to essential medicines at
prices that are affordable.  The pharmaceutical pricing and transparency
text in past FTAs does not advance this goal, and I urge all negotiators to
move beyond these FTAs and reject these provisions as you negotiate what
could be a new and better TPPA.  Thank you.

Rep. Sharon Treat
Maine House District 79
22 Page St., Hallowell, ME 04347
Legislature: 207-287-1400
Home office: 207-623-7161
repsharon.treat at legislature.maine.gov
satreat at gmail.com
Website: www.sharontreat.org
Twitter: @sharontreat

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