We are in the middle of an unprecedented national debate on the cost of prescription drugs. Republicans and Democrats are working together toward a shared goal of making medicines more affordable for America’s patients. And despite some vocal and predictable opposition, we may see real change. That is why it is so striking that Congress is on the precipice of approving a trade agreement that goes against this national priority.
The U.S.-Mexico-Canada Agreement (USMCA), the update to the North America Free Trade Agreement (NAFTA), contains provisions that will increase the cost of medicines in the United States, extend monopolies for the most expensive drugs in the market, and disincentivize the development of less expensive generic and biologic drugs that are the key to driving down drug costs.
Keeps Prices High
The United States currently provides producers of biologics 12 years of market exclusivity, during which a competitor biosimilar cannot be introduced and monopoly prices stay high. This period of exclusivity was legislated in 2009 based on the belief that 12 years was needed to compensate for the time and cost it takes to bring a drug to market. But that cost and time estimate are less fact than supposition and continue to be arduously debated. And as scientific understanding and technology advances it will take less time in the future to develop a drug than it did in 2010. Yet USMCA will keep that from happening--even if the drug development process becomes twice as efficient and/or if the pricing debate in the United States demands that pharmaceutical monopolies be lessened. USMCA creates a 10-year floor for market exclusivity and Congress won’t be able to pass legislation that reduces the monopoly period to fewer than 10 years.
Strengthens Pharmaceutical Monopolies
USMCA will also expand drugs that use the 12-year exclusivity to keep prices high. When defining a biologic, U.S. law1 exempts medicines containing chemically synthesized polypeptides. Therapeutic polypeptides are a unique and growing category of pharmaceuticals used to treat patients with cancer, diabetes, heart failure and osteoporosis. More than 60 peptide drugs are currently approved in the U.S., Europe and Japan; more than 150 are in active clinical development; and an additional 260 are, as of June 2018, being tested in human clinical trials. If the text of USMCA is passed as is, patients who rely on these peptides will face longer periods of exclusivity (moving from 5 to 12 years), resulting in less competition and higher prices.
By increasing the period of biologic exclusivity from 5 years to 10 years in Mexico and from 8 to 10 years in Canada, USMCA impedes the ability of U.S. biologic manufactures to sell into those markets. Biosimilar entry into the U.S. is already exceptionally complicated and fraught with uncertainties due to the patenting strategies of the branded biologics producers. Expanding exclusivity in other countries creates a further disincentive for biosimilar producers for the U.S. market and will likely result in less biosimilar competition and higher biologic prices being in place in the U.S. for a longer period of time.
If these issues are addressed, Congress and the Administration can both tackle the high cost of drugs and pass a USMCA that will help grow the U.S. economy without impeding the development of a health care system that effectively addresses the high cost of medicine.
1 Section 351(i)(1) of the Public Health Service Act
By Jonathan Kimball, AAM Vice President, Trade and International Affairs
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