Trade Barriers Kill Innovation
Creating medicine is a complex and expensive business. While U.S. biopharmaceutical companies lead the world in drug development, international trade practices can stem the flow of innovation to new markets, depriving patients in need. Limited market penetration also means fewer resources to re-invest in the most successful engine for life-saving advancements on Earth.
Threats to U.S.-led innovation, therefore, should be a global concern: trade barriers, misguided regulations and trade restrictions, discriminatory measures, and the all-too-common failure to comply with agreed international legal norms, including intellectual property and patent rights.
- One cautionary example of negative impacts on both innovation and patient welfare is Canada, which uses government price-setting methods that don’t recognize the value of biopharmaceutical drugs or incentivize new development. The country’s Patented Medicine Prices Review Board, which has authority over drug prices across its public and private markets, recently unveiled new pricing policies that would set drug prices at levels paid by low- and middle-income countries (hardly a fit for Canada). A recent piece in The Hill notes that, “After 30 years of price controls, Canada ranks 17 of 19 OECD countries in terms of access to medication. The only ones suffering are patients: They wait, their symptoms worsen, they receive older generic drugs and some prematurely die.”
- Japan has also overhauled its pricing policies, jeopardizing financial support for global research and development and favoring Japanese companies at the expense of foreign competitors. One of the biggest threats comes from revisions to eligibility criteria for Japan’s Price Maintenance Premium program, a bureaucratic sleight-of-hand which will result in some of the most important new medicines from U.S. drug companies being dramatically undervalued in the Japanese market. This diminishes American manufacturers’ opportunity to recoup develop costs, develop new products, or make the medicines available at a discount in low- and middle-income countries.
- Trade agreements are often signed — and ignored. Despite signing a free trade deal with the U.S., Korea refused to shoulder important obligations established in the KORUS FTA. Korea’s use of health technology assessments, for example, set unrealistic thresholds for cost-effectiveness. And its international reference pricing system makes false equivalences between innovative medicines and their off-patent and generic competitors, creating barriers for legitimately researched and developed pharmaceuticals.
- Another threat to innovation is unfolding in Malaysia, in the form of compulsory licenses – a measure intended for public health emergencies, where a patent can be infringed to enable quick, generic drug production. In practice, compulsory licenses are often abused to prop up domestic generic drug industries. Far from giving up compulsory licensing, the Malaysian government is said to be considering legislation to renew the assault on patent protections.
America’s biopharmaceutical industry expounds on these trade problems and recommends solutions to the Office of the U.S. Trade Representative here.