US Trying To Force Governments To Pay Much Higher Prices For Needed Drugs Through Secretive TPP

from the the-opposite-of-free-trade dept

Mon, Oct 24th 2011 10:00am — Mike Masnick

With ACTA now signed, and the US also pushing through a few more anti-free trade protectionist agreements with a few countries, the big focus is on the Trans Pacific Partnership (TPP) agreement, which Hollywood and the USTR are betting will allow them to sneak through everything they couldn't get into ACTA. That's why the negotiators for the TPP are trying to keep it even more secretive than ACTA. Of course, as with ACTA, you can expect some leaks.

And... one of the recent leaks was the section concerning pharmaceutical pricing, which pretty clearly demonstrates why this is an anti-free trade bill, rather than a free trade bill. That's because it not only looks to prop up monopolies (such as patents), but it even argues for blatant price fixing to avoid market pricing when governments are buying. That is, this section -- which is being pushed by the USTR -- basically takes the big pharmaceutical's position that foreign governments should not be allowed to bargain for discounts on drugs to keep their own citizens healthy. It mandates, instead, that governments have to buy at a much higher fixed prices, and actually is even more pro-big pharma than the previous administration, which sought to make it easier for developing nations to access necessary drugs.

Sean Flynn from American University has a detailed and useful critique showing how this plan, pitched by the Obama administration, only serves to help big pharmaceutical companies, while putting lives at risk in an extremely anti-free market way:

Although the provisions are styled as �transparency� provisions, in fact they regulate the substance of drug pricing programs. The heart of the proposal would require that countries establish new administrative and judicial appeal systems to contest whether public drug reimbursement rates �appropriately recognize the value� of pharmaceutical patents. Similar provisions have led to higher drug prices and more challenges by pharmaceutical companies in the one country to implement similar provisions � Australia.

At the core of this proposal is a false distinction between government reimbursement prices and �market� prices. Government reimbursement prices ARE market prices. Suppliers can refuse to supply to governments, just as they can with any private purchaser demanding a better deal. The fact that governments obtain better prices than atomized consumers does not make their roles as purchasers anti-market. Drug price restraint is a natural, inevitable and beneficial result of public health expenditure or any other form of pooled purchasing. Large purchasers in free markets obtain better prices; governments obtain better prices when they pool consumers and negotiate as a volume purchaser.

Furthermore, Flynn points out that this kind of backroom secret agreement, which is clearly a huge gift to the big pharmaceutical firms, should be much more open and transparent. He points out that pharmaceutical price fixing "is an inappropriate subject for closed door trade negotiations" since it's not so much a trade issue, as it is a public health policy. Furthermore, he notes that it would be contrary to current best practices within the US itself:

Ironically and ominously, US drug pricing programs do not comply with the standards that the US is proposing. In particular, the operation of preferred drug lists by the Federal Medicaid program would violate the terms of the agreement, including because they do not provide appeals for pharmaceutical companies on whether the prices achieved adequately value patents. Previous FTAs with Australia and Korea carefully exempted all U.S. programs from their coverage, including through a footnote defining the federal Medicaid program as a �regional,� rather than �central,� level government program. That footnote has been removed from the draft TPP proposal. This may indicate that the US has not decided whether to propose exempting Medicaid from the TPP requirements or to give in to demands of other countries for full reciprocity in the agreement.

No matter how you look at it, this is clearly the US government looking out for the best interests of the big pharmaceutical companies over pretty much all else. Well, perhaps not their own political careers.

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Filed Under: acta, free trade, pharma, tpp

43 Comments

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Anonymous Coward, 24 Oct 2011 @ 10:11am

wait, what are people protesting again?
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Anonymous Coward, 24 Oct 2011 @ 10:15am

The U.S. government is already not allowed to price bargain whenever purchasing drugs for those who are covered under various federal programs. That's why the U.S. spends so much money on such things.
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Anonymous Coward, 24 Oct 2011 @ 10:16am

Re:
In response to

"Furthermore, he notes that it would be contrary to current best practices within the US itself: "

It's already the case.
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iamtheky (profile), 24 Oct 2011 @ 10:18am

whether the prices achieved adequately value patents

How about right after we create an appeals process for whether the patent and price achieved adequately value the taxpayer funding?
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Paul (profile), 24 Oct 2011 @ 10:29am

Obama and the OWS
So.... The general spirit of the OWS is that Big Business and Government have conspired to extract money from the public and concentrate it in the hands of a few. Okay, that's my take, but I think it is close.

This Administration is then pushing TPP that would (assuming we comply) would boost payments to Big Pharma for drugs covered by Medicare and Medicaid ... to Benefit Big Pharma?

Because their patents are not properly respected?!?

What, we don't have money for services (so we are cutting services) but we have *EXTRA* money to give Big Pharma? And not just us, but the rest of the world?

If anyone had any doubts, this should put a nail in the coffin of the idea that Obama (or Democrats in general) have any sympathy whatsoever for the issues OWS is pushing.
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Paul (profile), 24 Oct 2011 @ 10:44am

Un, not so.
No, there are limits to what we will pay for drugs in the U.S:

Effective October 1, 2010, the Social Security Act was revised to require that the Secretary calculate FULs as no less than 175 percent of the weighted average (determined on the basis of manufacturer utilization) of the most recently reported monthly average manufacturer prices (AMP).

https://www.cms.gov/reimbursement/05_federalupperlimits.asp

So in other words, Federal Programs cannot be charged more than 175 percent of the average price of a drug....

Wait...

Did I read that right? Ah yes, this was the reform we got when we passed the "Affordable Care Act". Prior to that, the government could limit reimbursement to the lower market rates for drugs, as offered by at least three sources. (my rough interpretation of the regs...)

Gosh, you gotta love a congress that can label a bill the "Affordable Care Act" when they really mean "Roll all the Cash Possible into Big Pharma's Coffers Act" !!!!
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RD, 24 Oct 2011 @ 11:07am

Re: Obama and the OWS
"If anyone had any doubts, this should put a nail in the coffin of the idea that Obama (or Democrats in general) have any sympathy whatsoever for the issues OWS is pushing."

Oh for God's sake, when will people that say stuff like this wake up? This is NOT a partisan issue. You can't possibly think that stuff like this ONLY started with Obama, or is ONLY a Democrat maneuver. This has been going on for a LONG time now, and has only gotten worse and intensified in recent years. But to lay this all at the feet of the Dems, and as if none of this nonsense was going on before Jan 20, 2009, is just willful blindness and ignorance.

I agree with the rest of your post however, spot-on.
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Anonymous Coward, 24 Oct 2011 @ 11:12am

The problem I have with pharmacuetical pricing is that a drug made in American costs an American more than it costs someone living in Mexico. I think the drug companies should take a fixed price stance, everyone pays the same amount regardless of where you live, what type of administration is running the show, the wealth of the people there, the number of units purchased, etc... If you don't like our price, do without or find some other drug.

Of course, I am sure the TechDirt pirate community thinks someone should steal the formula and manufacture it in Asia using child labor at 1/10 the cost. Why value patents for drugs? You don't value any other intellectual property.
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Anonymous Coward, 24 Oct 2011 @ 11:20am

Re:
"You don't value any other intellectual property."

Citation needed.
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Anonymous Coward, 24 Oct 2011 @ 11:32am

Re: Obama and the OWS
The Obama administration has been far more cozy with the corporations than any previous administration before it. That's why it pisses me off when Obama supports OWS publicly. He simply realizes that he of the 38% approval rating has to galvanize some support if he is to avoid his fate as a one term president. He is trying to co-opt the OWS in his favor when he is the very reason OWS has sprang up. The man loves talking out both sides of his mouth at the same time. He will promise all sorts of bullshit this campaign and then execute on none of it like he did the first time around. Mark these words and mark them clearly: if Obama gets re-elected, he will raise taxes on the middle class...because he will no longer require those votes in 2016. Do not listen to his lies. Vote for anyone instead of him please. The history books will not be kind to him.
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iamtheky (profile), 24 Oct 2011 @ 11:37am

Re:
Why bother having any values at all if you consider life saving medications Intellectual Property?
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Anonymous Coward, 24 Oct 2011 @ 11:49am

Re: Re: Obama and the OWS
I think his point being that historically Dems have been for the little people and Repubs for the rich and corporations. Obviously that is no longer the case because as you say, it has gotten worse in the past few years...on Obama's watch. Now no one gives a shit about the little people. The United Corporations of America.
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Anonymous Coward, 24 Oct 2011 @ 11:54am

Response to: Anonymous Coward on Oct 24th, 2011 @ 11:12am
How can any one respect any intellectual property that is designed to maximize pharm profits while dying people in third world countries have to spend a year's salary on due to the monetary value difference?
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Anonymous Coward, 24 Oct 2011 @ 12:14pm

This is just a backdoor way for the big pharma companies to stop Americans from reimporting cheaper prescription drugs from Canada because big pharma companies charge Americans more for those same drugs.

Basically, big pharma is forced to sell drugs for less to Canada, because Canada's government acts as an insurance company for all canadians. This gives it a LOT of muscle to get lower cost drugs at the bargaining table, compared to America where people are covered by hundreds of different and much smaller and weaker insurance companies that can't negotiate such great deals.

If big pharma can force Canada and other such countries into signing this 'trade agreement' then Canada loses all it's muscle to get lower price prescription drugs for their people, and Americans can't buy those drugs from them at such cheap prices anymore either.

The US government should wake up and realize that unless they repeal the law banning medicare from negotiating lower cost prescription drugs from big pharma that Medicare will go bankrupt in a few years (2017 according to government estimates). That would leave millions of seniors very angry and wanting the heads of politicians who bankrupted medicare.

Still, big pharma also ought to know better and think long term. A bunch of governments going bankrupt over high prescription drug costs could cause those governments to just illegally start making those prescription drugs and selling them for much less, meaning big pharma makes zero dollars off of them. Or worse yet, those governments could change patent laws and make it illegal to patent/copyright/trademark/whatever any kind of prescription drug, which means all of big pharma's competitors can make big pharma's newest prescription drugs legally and sell them for way less right away.
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The eejit (profile), 24 Oct 2011 @ 12:15pm

Re: Re: Re: Obama and the OWS
Shgadowrun and V for Vendetta are scathingly dystopian satire, not a manual.
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Anonymous Coward, 24 Oct 2011 @ 12:38pm

Re: Un, not so.
What they mean is that it's affordable, just not affordable to you.
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hothmonster, 24 Oct 2011 @ 12:51pm

Re:
"If you don't like our price, just die slowly and horribly."

ftfy
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MrWilson, 24 Oct 2011 @ 12:52pm

Re:
How about valuing the property (as in state or condition) of people being alive? Big Pharma cares about its extremely high profits over the value it could provide in low cost life-saving drugs for the masses.

If you think intellectual property or profit are more important than human life, you deserve neither intellectual profit nor profit.
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Paul (profile), 24 Oct 2011 @ 12:52pm

Re: Re: Obama and the OWS
No, this is a joint D&R maneuver. I agree completely that this has gone on for 30 years or more, and has intensified in recent years.

Forgive me if I sounded like I blame anyone in the D&R more than anyone else. When I wrote this, I was thinking how the D&r (of the D&R) are showing signs of trying to pretend they care about the issues of the OWS
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Anonymous Coward, 24 Oct 2011 @ 12:53pm

Re: Response to: Anonymous Coward on Oct 24th, 2011 @ 11:12am
People in poor third world countries need to consider the quality of life their potential children will be born into before they procreate. It is not the responsibility of a pharmacuetical company in the industrialized world to provide pro bono Rx therapy to poor third world children.

I am sure there is some potion maker or faith based healing method they can rely on. Though, I hear the Asian apothecaries are very expensive, and many faith based healers want all of your worldly possessions.

But I guess you are against commerce, so it's ok for individuals to screw each other over, but as soon as someone forms a company you expect them to give everything away for free.

Typical Freetardian!!
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Paul (profile), 24 Oct 2011 @ 1:15pm

Re: Re: Response to: Anonymous Coward on Oct 24th, 2011 @ 11:12am
People in poor third world countries need to consider the quality of life their potential children will be born into before they procreate. It is not the responsibility of a pharmacuetical company in the industrialized world to provide pro bono Rx therapy to poor third world children.

And guess what. It isn't my responsibility to protect their market through force. If they want to produce a product and sell that product at a price and quality that competes in the market place, then they don't need government help.

If they want to take government funded research, patent it, then gouge people for many times their piddly investment, and have that market protected by Government Force, I say screw 'em.

I am SO totally for commerce and competition. I am so against government regulated markets which (BTW) prevent people from forming a company to compete against established companies by letting Big Companies blast the little guys out of the water with Government Enforced Patent suits.

Are you trying to tell me that government regulated and government enforced markets are the way to go? Really?
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The Devil's Coachman (profile), 24 Oct 2011 @ 2:00pm

Re: Re: Response to: Anonymous Coward on Oct 24th, 2011 @ 11:12am
Your trolling style blows ponies! Thanks for playing. Now go away and mingle with all the other douche bags in your family and your very tiny circle of friends, if any at all. Have a nice day.
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Jebediah, 24 Oct 2011 @ 2:25pm

This is a good thing. Im tired of the US paying more for drugs because other countries cant afford to pay what we do so we take on the extra burden of paying their fair share too while they get cheap drugs. Maybe our cost will go down a little since we wouldnt be subsidizing the R&D through higher prices.

Just because some family in Nigeria can only afford $1 for a pill doesnt mean I should pay $20 to make up for what he cant pay. Either pay what its worth or dont get it.
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Paul (profile), 24 Oct 2011 @ 2:55pm

Re:
Oh, because you think Big Pharma is selling pills in Nigeria at a loss?

Let's examine that question, shall we? Here is the executive pay (from 2008) for the top 10 Pharma firms:

1. Miles White - Abbott - $33.4M
2. Fred Hassan - Schering-Plough - $30.1M
3. Bill Weldon - Johnson & Johnson - $25.1M
4. Bob Essner - Wyeth - $24.1M
5. Robert Parkinson - Baxter - $17.6M
6. Daniel Vasella - Novartis - $15.5M
7. Richard Clark - Merck - $14.5M
8. Frank Baldino - Cephalon - $13.5M
9. Sidney Taurel - Eli Lilly - $13M
10. Jeff Kindler - Pfizer - $12.6M

You get the idea? Your 20 bucks is going to pay off these big Corporations and to pad their profits. It isn't going into research, and it isn't paying for drug production. That stuff is cheap (one because the government funds most drug R&D anyway, and two, once you know how to produce a drug it is usually pretty easy to bang it out).

Let the market work. This isn't about someone in another country getting a free ride. This is about limiting competition so that we in the U.S. can get raked over the coals for corporate profit and executive pay.
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Anonymous Coward, 24 Oct 2011 @ 4:08pm

Re:
"someone should steal the formula"

It's not stealing (at least not the same meaning of the word that you are trying to dishonestly conflate it with, otherwise, why choose that word and not simply the word copying), it's copying, or independently inventing/discovering similar/identical formulas (and the sciences have a long history of independent discovery/invention). and there is nothing wrong with either.

"and manufacture it in Asia using child labor at 1/10 the cost."

Trying to use IP laws to reduce labor abuse is akin to trying to use anti-belt laws to reduce child abuse. It won't work. We have labor laws to reduce labor abuse.
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Anonymous Coward, 24 Oct 2011 @ 4:10pm

Re: Re:
(and labor laws are better at reducing labor abuse).
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Anonymous Coward, 24 Oct 2011 @ 4:12pm

Re: Re: Re:
and if we didn't have anti labor abuse laws, labor abuse would be far more common and severe in America too, regardless of the existence of IP. The reason why we have a lower incidence of labor abuse has nothing to do with IP laws and has more to do with the fact that we have ant-labor abuse laws.

But only an IP maximist would be dishonest enough to conflate the two.
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Anonymous Coward, 24 Oct 2011 @ 4:17pm

Re: Re: Re: Re:
Seriously, do you honestly believe that getting countries to pass stricter IP laws will somehow prevent them from hiring 12 year old labor? If we really wanted to prevent them from hiring twelve year old labor, wouldn't it make much more sense to focus on getting them to pass labor laws that prohibit such employment?

The poster I'm responding to must be a lawyer, because only lawyers (and maybe drug addicts) are this dumb.
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Anonymous Coward, 24 Oct 2011 @ 4:17pm

Re: Re: Re: Re: Re:
(oh, and maybe retarded people as well)
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Anonymous Coward, 24 Oct 2011 @ 4:18pm

Re: Re: Re: Re: Re:
to focus our efforts *
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Anonymous Coward, 24 Oct 2011 @ 4:27pm

Re:
Wait, you actually believe every number you see pasted onto a product? I can't tell if you're pathetically naive, or a shill...
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The Devil's Coachman (profile), 24 Oct 2011 @ 5:35pm

Re:
Pulling numbers out of your ass is not a way to make a cogent argument. Please try again. Or, just GTFOH.
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The Devil's Coachman (profile), 24 Oct 2011 @ 5:52pm

Re: Re:
Actually, the only research being done is the work being done on new hardon pills. Bettering human health is of no interest to them, but if they are forced to, then you can expect to pay a 10,000 percent markup over cost for it. If it can save you life, then expect a 100,000 percent markup. And yes, that cost includes the "R&D" as the execs snickeringly refer to it.
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MAC, 24 Oct 2011 @ 7:56pm

Oath...
For the corporation, by the corporation and of the corporation so help us almighty dollar....
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Michael, 24 Oct 2011 @ 8:33pm

Good news for me.
In Canada, there are laws that would make ACTA illegal if it had these provisions. The US pharma companies have been trying for years to stop us from keeping the drug prices affordable and failed. This will also fail. You see despite all the complaining, Canadians overwhelmingly support our healthcare system and see healthcare as a universal right.
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BeeAitch (profile), 24 Oct 2011 @ 9:02pm

Re: Obama and the OWS
What, we don't have money for services (so we are cutting services) but we have *EXTRA* money to give Big Pharma? And not just us, but the rest of the world?

Now, when you say it like that, it sounds all evil and slimy and shit. Much better when it's all sugarcoated...
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Anonymous Coward, 24 Oct 2011 @ 11:29pm

Re: Re: Response to: Anonymous Coward on Oct 24th, 2011 @ 11:12am
And other countries have no obligations to respect IP laws when their interests are on the line.

Do you believe others will not produce some drug to help their own because you don't want them to?

You may also believe that those same governments will never develop weapons because they are patented LoL
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Chargone (profile), 25 Oct 2011 @ 3:46am

Re: Obama and the OWS
it gets better:

the TPP forces this crap on everyone ELSE, too.
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Chargone (profile), 25 Oct 2011 @ 3:52am

Re:
not 'just' this.

apparently US interests have been pressuring NZ's government to change how it funds medications here to ensure they get more money, too.

(net result: medication prices going up through out the country.... and in a lot of cases the NZ government having to increase invalid or disability benefits/allowances. except the current government's trying to cut them to make people go out and work... while actively reducing the number of jobs available... ... ... yes, it's stupid. 'right wing' (by which i mean 'plutocrats, multinational corporations, and US interests) economic policies are like that.)
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Chargone (profile), 25 Oct 2011 @ 4:01am

Re: Good news for me.
wish i could be as confident about NZ.

much as the general public have similar sentiment, the government here has a long history of outright ignoring such things... and they bypass the risk of failing to get re-elected by convincing almost Every party with seats to vote for it.

(such strange things as: Major Party A proposes a bill. Major Party B, currently in opposition and Party A's traditional opponent refuses to support it unless certain changes are made. Party A refuses to make those changes. Party B votes for it Anyway. this kind of thing is business as usual.)

the current lot are also prone to announcing that they're looking into doing something, seeing what the public reaction is, if it's positive making a big deal of doing the thing, and if it's negative claiming that they've looked into it and decided not to. ... ... half the time in the latter case it gets passed, with all the most objectionable bits restored, the next time they can find an excuse to have parliament sit under urgency. (urgency means there is NO PUBLIC CONSULTATION. it's supposed to be for stuff that Must be finished before parliament is dissolved for elections, stops sitting for the year, or for actually urgent emergency stuff. ... yeah, current government did exactly this to pass copyright law that had spawned major protest the last time they tried... during an urgency session supposedly about dealing with the big earthquake here...)
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Rekrul, 25 Oct 2011 @ 10:40am

Re:
What is this "long term" you speak of? I've never heard of such a thing...
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Rekrul, 25 Oct 2011 @ 10:49am

Of course, as with ACTA, you can expect some leaks.

Of course, as with ACTA, you can expect this to be rammed through regardless of the opposition.
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Mindwafers, 25 Oct 2011 @ 2:45pm

Re: Obama and the OWS
It's amazing that the subject of drug pricing through medicare/medicaid never come out during the media orgy surrounding the healthcare law passed last year. All you hear is how much we spend on healthcare but no explanation as to what it's spent on. Somehow this is used as a rationale to cut services rather than look into the pricing schemes. Amazing what these think tanks can do these days.
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