Copyright 2003 The International Herald Tribune |

U.S. is battling for higher drug prices overseas
Elizabeth Becker/NYT
Friday, November 28, 2003
WASHINGTON Having beaten back price controls on prescription drugs in the United States, the U.S. pharmaceutical industry is trying to roll them back overseas, with help from the Bush administration and Congress.

In talks over a free-trade agreement with Australia, U.S. officials are pressing the Australian government to water down its system for negotiating the prices it pays for prescription drugs, Mark Vaile, the Australian minister for trade, said here on Wednesday.

If successful, the United States could use this agreement as a benchmark for future trade deals with other rich nations. Loosening price controls is a top priority for the industry, which makes most of its profit in the United States and argues that prices in America could be lower if other countries paid their share of the cost of developing drugs.

Vaile said on Thursday that Australia would not change its policy of providing cheaper drugs to consumers through a $3 billion a year program that subsidizes the cost of medicines through its Pharmaceutical Benefits Scheme.

"The criteria and the measures in place to provide affordable medicines to all Australians through the PBS is not trade distorting," Vaile said, Bloomberg News reported from Canberra. "We've told them we're not prepared to adjust our policy."

He met this week with Robert Zoellick, the U.S. trade representative, and confirmed that the issue would be on the agenda for formal talks between the two countries in Washington next week. The negotiators have set a Dec. 31 deadline for completing an agreement.

Analysts say that the drug issue could be part of the bargaining over Australia's desire to export more agricultural products to the United States and Washington's push to ease access to Australian markets for the U.S. entertainment and service industries.

The legislation passed by Congress this week to establish a prescription drug benefit in the Medicare program specifically forbids the United States to use its power to negotiate lower drug prices - a top goal of the industry. The bill also requires the White House to update Congress on progress toward opening Australia's drug-pricing system.

That provision is a sign, drug industry executives said, of how much their supporters in Congress want to see trade agreements used to challenge price controls internationally, especially with Americans now flocking to Canadian merchants to buy relatively inexpensive medicines.

In the free-trade talks, drug industry executives said, the United States is asking that Australia agree for its Pharmaceutical Benefits System to pay higher prices for new medicines and make other changes in the way it sets prices of prescription drugs.

"This is all going on in this larger context of growing unrest in the United States that other countries are not paying their share of the cost of pharmaceutical research," said Ian Spatz, vice president for public policy at Merck.

"What we are looking at are ways to reward innovative medicine and to promote transparency," a senior U.S. trade official said.

Mark McClellan, the commissioner of the Food and Drug Administration, said in a speech in September that because the benefits of U.S. drug innovations are global, the cost of research and development should be shared globally as well.

"The United States is now covering most of these costs of developing a new drug to the point where it can be used by the population of the world," McClellan said. "But it is clear to me that we cannot carry the lion's share of this burden for much longer."

As an example, a month's supply of Lipitor, a cholesterol-reducing drug, that costs about $120 in the United States costs about half as much at drugstores in Canada and Italy - countries that, like Australia, have government price controls. The price difference is even bigger for Prevacid, a heartburn drug, and Paxil, an antidepressant, a survey of drugstores in the three countries showed.

But rather than demand an increase in spending on research and development abroad, the Bush administration is asking that other countries simply agree to pay more for medicines they buy for their health programs from U.S.-based drug companies.

Mark Weisbrot, co-director of the Center for Economic and Policy Research, a liberal research center in Washington, criticized the U.S. strategy. "This is a terrible extension of the inefficiency and inequity of our own system," Weisbrot said. "The administration is right that something has to change. But it should be here, not in countries with an effective method to finance pharmaceuticals for their citizens." The pharmaceutical industry disagrees. The World Trade Organization now enforces intellectual property rights, including drug patents, in large part because of industry pressure. And though the United States, under pressure, agreed to help poor nations buy generic medicines through exemptions from trade rules, the drugmakers contend that wealthy nations use the negotiating power of their national health systems to demand unfair, arbitrary prices.

Vaile, however, said that the issue had no place in trade talks dedicated to opening up markets, because U.S. pharmaceutical companies face no trade barriers in Australia.

The New York Times

Copyright 2003 The International Herald Tribune