In the last several years, the pharmaceutical industry has lost several important court cases in which the industry trade organization PhRMA (or its member companies) sought to tie the hands of states in managing drug prices. As a consequence, PhRMA and the biotech industry are now moving aggressively to embed provisions in international trade agreements that will allow for federal preemption of state innovation. For example, language included in regional and bilateral trade agreements signed by the United States in recent years goes well beyond World Trade Organization (WTO) rules on pharmaceutical patents - and in some cases even beyond what’s been decided as a matter of U.S. law.

• Two provisions in the trade agreement with Australia sought to tie the hands of states, and Congress, regarding prescription drug cost management.
• Trade agreements signed with developing countries include language that will delay the introduction of generics and push affordable medicines out of the reach of broad swathes of the population in Central America and elsewhere. This is a public health disaster waiting to happen.
• Although Congress instructed the Office of the United States Trade Representative (USTR) to observe the letter and spirit of the “Doha Declaration on TRIPS (trade related to intellectual property) and Public Health,” issued in 2001 as part of WTO talks, this Congressional mandate has been ignored.
• USTR is being sued over its refusal to put public health advocates on the Advisory Committees that Congress mandated as part of the 1974 Trade Act. Although in December 2005 it announced it would appoint public health representatives to two of these committees (on intellectual property and on chemicals, which includes pharmaceuticals) no appointments had been made as of late 2006. NLARx applied for appointment in January 2006 but no action has been taken on our application.
• PhRMA has formally opposed U.S. ally Israel’s entry into the OECD (Organization for Economic Cooperation and Development) because of its unhappiness about Israel’s domestic patent laws directly which affect the availability of generic versions of prescription drugs.

Importation. States and municipalities have the statutory right under federal law to pursue reimportation of prescription drugs - subject to granting of approval by the federal Food and Drug Administration (FDA). The FDA has never granted this approval, thus rendering the right essentially meaningless.

The agreement with Australia. The free trade agreement (FTA) signed with Australia includes numerous restrictive provisions on pharmaceuticals, and represents the first time that the United States has ever negotiated an FTA with an Annex specific to pharmaceuticals. Perhaps not coincidentally, Australia is seen as a global model for controlling drug costs. Through its federal “Prescription Benefit Scheme,” Australia aggressively negotiates bulk discounts on all drugs, both prescription and generic. PhRMA has challenged Australia’s listing procedures and requirements, just as here at home it challenged state administration of Preferred Drug Lists. Included in Annex 2-C is a provision stating that the Annex applies to “federal health care programs.” USTR has stated that, in their opinion, Medicaid is not a federal health care program, and thus isn’t covered by the agreement. But USTR has been unwilling to issue an interpretive opinion stating definitively that state administration of Medicaid programs are not covered by the U.S.-Australia agreement. Note that Australia is home to subsidiaries of all major U.S. drug companies, and they can push Australia to file complaints with the United States on any state cost-control measures

Intellectual property and public health. Recently-concluded regional and bilateral trade agreements have provisions on intellectual property (patents) and prescription drugs that go way beyond what was agreed as part of WTO negotiations. Congress ordered USTR to comply with the “Doha Declaration on TRIPS (trade related to intellectual property) and Public Health” in all of its regional and bilateral negotiations. Judging from the number of agreements with provisions that allow for “evergreening” (second-use) of patents, lengthening patent periods, data exclusivity, and other measures designed to lengthen the period of time in which drug makers can sell their products under the higher, patent prices, it seems quite clear that USTR is not complying with Congressional instructions.

Public health representation on trade advisory committees. In the 1974 Trade Act, Congress instructed USTR to consult with International Trade Advisory Committees (ITACs), set up with experts in particular industries. Congress expected that public health and consumer protection advocates would be included in these committees to achieve a fair balance of views as input into USTR’s negotiating practices. In practice, all of the ITACs are totally dominated by industry representatives, and there is almost no consumer or public health representation relevant to health and prescription drug matters. USTR is being sued by public health groups over its refusal to put public health advocates on the advisory committees. Although in December 2005 it announced it would appoint public health representatives to two of these committees (on intellectual property and on chemicals, which includes pharmaceuticals) no appointments had been made as of late 2006. NLARx applied for appointment in January 2006 but no action has been taken on its application. Then-trade representative Rob Portman was grilled at Congressional hearings in February 2006 regarding the need for public health and consumer representation on the ITACs, and he promised to quickly remedy the situation. But since then - nothing.

State actions. NLARx and its member states have passed resolutions calling on Congress and the U.S. Trade Representative to avoid preempting state laws and programs through international treaties, and to preserve access to affordable medicines through reasonable patent policies. NLARx has also worked with states to establish advisory committees to oversee state involvement in trade agreements and policy, and has applied to the USTR to directly participate in relevant advisory committees.