PHARMA/INTERNATIONAL: UPDATE ON Free trade pact with the Aussies may mess up reimportation

I promised yesterday to look at the NY Times article about the Australian free trade act which may undercut importation of inexpensive drugs, including those from Canada. I’ve written about this many times at TCHB but it looks like it’s coming down to the wire in both countries.

UPDATE: OK, this expanded piece didn’t make it in Monday’s blog but it’s worth looking at this a little more. The free trade pact is an attempt by the Aussies to get access for their agricultural goods to the US, and in return they are reducing tariffs on American manufactured goods. This article from The Melbourne Age in February gives a few more details. Of course the whole deal is payback from the Bush administration for the support that John Howard’s Liberal government (Liberals are right wingers in Australia BTW) gave to the Americans in Iraq–including a couple of thousand troops. While the Aussies were happy to get access to markets that they’ve been shut out of for a while, they were not particularly amused about the insistence by the US trade negotiators that they bascially dismantle their domestic prescription drug policy–the Pharmaceutical Benefits Scheme. For more about that look at this piece from January which quotes University of Newcastle (NSW) professor David Henry, an opponent of the pact. The article says:

    The 50-year-old PBS subsidy scheme guarantees drug companies access to a larger market — mostly poorer consumers — while allowing the government to negotiate ‘price-for-volume’ discounts on approved drugs. However, to the annoyance of the major U.S. drug companies, new drugs are only included in the subsidy scheme if they are found to deliver health advantages and are cost-effective compared to already listed drugs.

    In a December 2003 report on foreign trade barriers, the Pharmaceutical Research and Manufacturers of America (PhRMA), the peak U.S. drug industry association, complained that Australia’s requirement for a cost effectiveness analysis before a drug is listed on the PBS is part of a ”draconian regulatory and budgetary cost control” scheme.

But in a long interview back in November 2003 Tony Abbot the health minister (who’s sister is randomly a friend of mine) said to this question:

    INTERVIEWER”A quick final issue. The proposed free trade agreement with the US, which John Howard discussed with George Bush. Are you insisting that we tell the Americans hands-off the Pharmaceutical Benefits Scheme?” TONY ABBOTT: Indeed we are. The Pharmaceutical Benefits Scheme will not be a bargaining chip in these negotiations, and frankly, it shouldn’t be, because the Pharmaceutical Benefits Scheme does not discriminate between overseas and locally produced drugs. It is not a trade instrument. It is an instrument for ensuring that Australians get reasonable access to affordable drugs.

As you might imagine the left in Australia is not exactly trusting of the Howard government, and is virulent inoppositionn to changing the PBS–for example take a look at this speech from the President of the Australian Publichealthh Association. The Australian government is though swearing blind that there has been no change to the PBS. However, they do say that that there will be changes to the review process and that “the details of how the review process will operate are yet to be worked out, but stakeholders will be consulted as part of the process”. In other words there will continue to be subsidies for poor Australians and price controls on drugs, but the current demand that a drug be innovative while showing improved cost-benefit performance before it gets on the list probably goes away.

Of course, this is all wrapped up in Australian domestic politics, which is heading into an election sometime very soon–possibly as soon as August. And the Liberals fear being exposed by Labour as being opposed to national health care and favoring increasing drug prices by gutting the PBS, or it will have to see a lot more articles like this one suggesting that it favors the interest of American drug companies over poor Australians. Lahos and Henry in an opinion piece in the BMJ last month claim that the PBS will come under pressure as Australia tries to enforce other parts of the free-trade pact with the US.

Which brings us to yesterday’s NY Times article.which essentially says that not only will prices rise in Australia, but that stronger IP protection in the agreement will essentially ban drugs imported from Australia by protecting “the right of patent owners, like drug companies, to ‘prevent importation’ of products on which they own the patents”. The clear hint is that the Bush adminstration is going to pursue similar IP agreements with Canada and the EU, in the process squelching the ability to import cheaper drugs.

Realistically, I don’t think this will have much impact. Politically the Australians are not going to back down on price controls at home, especially if Labour wins the next election, and probably a Kerry Administration won’t pursue the matter with too much vigor. Furthermore, if they are to be a big deal, which right now they are not, far more imports are likely to come from Canada and southern Europe (where drugs are cheaper) than from the smaller Australian market. However, it’s all an interesting study in how much influence pharma companies are having in the current Adminstration and really how far they have averted their gaze from the real world of their unpopularity with the American public.

For far more, see here

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