Pharmaceuticals are at the center of the debate over the Trans-Pacific Partnership (TPP), as they have been for every recent U.S. trade deal. Health activists argue U.S. trade deals raise drug prices and restrict access to cheaper generic medicines, “literally kill[ing] people” by ensuring the other countries in those deals cannot provide lifesaving medicines to all their people who need them. Industry representatives insist that greater rewards for innovative drugs spur more R&D and that weakening the pharmaceutical rules in U.S. trade deals would “chill global investment and slow development of new breakthrough treatments for suffering patients."
Underlying this long fight is an assumption that both sides of the debate share: that the drug patents and other guarantees of exclusivity in recent U.S. trade deals will operate in practice as those rules do in the United States. If so, one would expect to see higher prices and more spending on patented and newly-approved medicines, resulting from delayed competition with low-cost generics. In short, the drug markets in countries with recent U.S. trade deals should become more like the United States.
To date, this has not proven to be the case. IMS Institute for Healthcare Informatics, the leading source for pharmaceutical sales data worldwide, has data on fifteen of the seventeen countries with recent U.S. trade deals that include pharmaceutical terms that go beyond World Trade Organization (WTO) requirements. Some of these U.S. trade deals are more than a decade old.
This data shows national drug spending has remained flat as a share of overall health expenditure in the countries with recent U.S. trade agreements. The growth in per capita pharmaceutical spending in these countries is in line with nations of similar income that have not entered into U.S. trade deals and have no market exclusivity requirements, such as Brazil, Thailand, and South Africa. The volume of pharmaceuticals consumed has increased. There has been no discernable trend toward more expensive original or branded versions of medicines and away from cheap unbranded generic drugs, either as a matter of volume or spending.
Those results do not change when focusing just on the medicines most likely to be affected by U.S. trade deals. U.S. trade deals require countries to grant exclusivity to newly approved medicines and their uses, delaying otherwise off-patent “originator” drugs from having to compete with low-cost generics. For four of the countries with recent U.S. trade deals, IMS Health has data on the off-patent, originator medicines launched before and after those agreements. This data shows no upward trend in the prices of drugs launched in the three years after these agreements entered into force. Different results might emerge with larger sample sizes and data from more countries with recent U.S. trade deals.
There is no obvious correlation in these data with the length of time in which the U.S. trade deals have been in force or the stringency of their provisions on pharmaceutical patents or exclusivity. For countries with older trade deals, a greater share of drugs on that market will have been launched after that agreement entered into force and should show more of the effects of its terms. Trade deals with more expansive patent and exclusivity provisions should result in more originator medicines with higher prices from having delayed lower-cost generic competition.
It must be emphasized that the absence of evidence is not necessarily evidence of absence. There are circumstances when patents have enabled inflexibly high pricing and reduced patient access to much-needed medicines, most notably in the HIV/AIDS treatment access crisis soon after the advent of the WTO. The full effects of expanded pharmaceutical patents or exclusivity in more recent U.S. trade deals may take longer than a decade to manifest. Aggregate pharmaceutical sales measures might not capture the disproportionate impact that these deals have on certain drugs or classes of medicines. This is especially true for the six Central American countries for which IMS Health only has combined sales data.The IMS Health data do not necessarily have comprehensive coverage of all drug distribution channels, particularly in low- and middle-income countries, but it is the same dataset Oxfam used to study drug prices after Jordan’s trade deal with the United States.
Still, if the concern is drug prices and spending, the current evidence suggests that the pharmaceutical provisions in U.S. trade deals may not justify the large claims made for or against their inclusion. An explanation of the potential reasons for the (as of yet) limited effects of recent U.S. trade deals on medicines and its implications for the TPP appears in Foreign Affairs. The methodology annex for this analysis and its data sources is posted below.