Alexandra Beier / REUTERS Lining up pills for an art installation in Munich, May 2009.

The TPP and Drug Prices

Not a Settled Matter

One of the most contentious issues in the debate over the Trans-Pacific Partnership concerns the agreement’s implications for drug prices in developing countries. Will the TPP’s intellectual property provisions lead to price hikes, rendering lifesaving medicines inaccessible to many of the world’s poor? Or have the deal’s critics inflated its risks?

In March, Thomas J. Bollyky argued in Foreign Affairs that, in a sign of what observers should expect from the TPP, previous U.S. trade agreements have not raised drug prices in the countries those agreements affect ("A Dose of the TPP's Medicine," March 23, 2016). As a result, Bollyky suggested, it is time to “move beyond” the debate over patents and drug pricing.

Those arguments are misleading, both in what they claim about the effects of previous trade agreements on drug prices and in what they imply about the TPP’s possible consequences. 

Performing surgery in Hanoi, November 2014.

Performing surgery in Hanoi, November 2014.

MAKING THE MEDICINE GO DOWN

Bollyky’s main analyses use data on 15 countries that have ratified trade agreements with the United States. He finds that spending on drugs as a percentage of total health expenditures has remained mostly constant in recent years, despite the introduction of trade deals with provisions expanding patent and related protections for medicines. The implication is that these trade agreements have not produced the surges in drug prices that many observers feared and predicted.

This is an imprecise way to assess the impact of trade deals on drug prices. The ratio of drug spending to overall health-care expenditures depends on many factors besides patents, from the introduction of new medicines to broader changes in health-care systems and economic conditions. As a point of comparison, in the United States, where Bollyky concedes that patents have had an effect on drug prices, drug spending as a share of health expenditures does not seem to have been correlated with changes in patent protections over the past four decades. In theory, using this ratio to compare a single

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