Healthy Skepticism Library item: 14961

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Publication type: news

Palmedo M, Flynn S.
Pfizer CEO and Stanford Professor Propose Pharma Reimbursement Treaty
Washington College of Law 2009 Jan 22
http://www.wcl.american.edu/pijip/go/blog01222009

Full text:

Pfizer CEO Jeff Kindler and Stanford University Professor John Barton
have written Senator Baucus announcing their intention to bring together
stakeholders to begin work on a new international treaty framework to
“discipline” pharmaceutical reimbursement practices around the globe.

In their letter to the senator
http://www.wcl.american.edu/pijip/download.cfm?downloadfile=FF21C24F-DC2C-67
17-6D862CFDD8A24930&typename=dmFile&fieldname=filename,
Kindler and Barton state:

…we believe that the United States should consider as a trade goal
the achievement of a sector-specific trade agreement among developed
countries (e.g., under the aegis of the WTO, or perhaps the OECD) to
ensure that pricing and reimbursement policies recognize and reward
innovation and *to set disciplines on government practices that
undermine incentives for innovation*… We would be happy to attempt
to propose language defining this goal for a new trade-promotion
authority bill should you wish.

On February 20, Pfizer and Stanford are holding a closed, off-the-record
meeting for industry, government, and civil society on incentives for
R&D and access to medicines. Part of the agenda will cover obligations
for developed nations, and “possible new trade negotiation goals, such
as a WTO sectoral.”

This new proposal is likely to draw intense scrutiny from U.S. state
health officials who have been active in opposing previous efforts by
the US Trade Representative to include restrictions on government
pharmaceutical reimbursement policies in trade deals.

Like most other large purchasers of pharmaceuticals, state Medicaid
programs negotiate drug prices through evidence-based reference pricing.
The safety, efficacy and cost-effectiveness of new medicines are
compared to existing ones in the same therapeutic class to create a
preferred drug list (PDL). Federal law ensures that the Medicaid PDLs
are open formularies, meaning that patients can access unlisted drugs
after obtaining prior approval. Because drug makers desire their
products to be able to be prescribed without prior approval, the PDLs
have been a key mechanism for restraining drug costs for Medicaid
programs. In an era of otherwise skyrocketing prices, Medicaid drug
expenditures have remained flat in recent years.

A multilateral trade agreement that would “set disciplines” on
reimbursement policies may seriously undermine states’ ability to win
discounts from drugmakers in return for placement on a PDL.

This initiative is the latest of many efforts by the pharmaceutical
industry to attack systems of reference pricing. Domestically, the
industry launched lawsuits challenging PDLs in Maine, Michigan, and
Florida, but failed all three times. Internationally, PhRMA and
individual companies have urged the US Trade Representative (USTR) in
numerous submissions to take action against other developed countries
that set formularies based on cost effectiveness. The industry’s goals
include inclusion on the bodies that construct the formularies, appeals
processes for companies with unlisted products, and higher prices or
reimbursements for newer, more ‘innovative’ products.

US trade officials have been responsive to the industry’s requests for
action. The Free Trade Agreements negotiated with Australia and Korea
both contain sections designed regulate systems of reference pricing.
The Australia FTA commits that parties to recognize the value of
‘innovation,’ and the Korea FTA more specifically requires parties to
“appropriately recognize the value of the patented pharmaceutical
product or medical device in the amount of reimbursement it provides.”
Both trade agreements include provisions to ensure greater industry
input and appeals mechanisms. Outside of formal (and relatively
transparent) FTA negotiations, US government officials from USTR and
Departments of Commerce, State, and Health and Human Services have
formed a task force that meets with other developed nations to lobby for
changes to their pricing and reimbursement systems. This task force has
advocated policy changes in Japan, Germany, and elsewhere that reflect
the US pharmaceutical industry’s goals.

For an example of what the language may resemble, see Chapter Five of
the Korea-US Free Trade Agreement
http://www.ustr.gov/Trade_Agreements/Bilateral/Republic_of_Korea_FTA/Final_T
ext/Section_Index.html.^1
Additionally, the USTR’s 2008 National Trade Estimate Report on Foreign
Trade Barriers
http://www.ustr.gov/Document_Library/Reports_Publications/2008/2008_NTE_Repo
rt/Section_Index.html
describes the US government’s positions in pharmaceutical negotiations
with Germany, Japan, and other developed nations.

————————————————————————————————————

1. The pharmaceutical chapter of the Korea-US Free Trade Agreement
includes a footnote that exempts Medicaid from the terms of the chapter.
This footnote resulted from advocacy by state leaders to protect
Medicaid and other state government programs from the terms of the
Agreement. Despite similar efforts by state leaders, a similar carve-out
for Medicaid was not included in the US-Australia FTA. There is no
guarantee that future trade deals will include similar protections for
states.