What Past Trade Deals Reveal About Drug Pricing

The TPP's Good Medicine?

At a pharmacy in Toronto, May 2010. Mark Blinch / Files / REUTERS

Fifteen years ago, the United States entered into its first trade deal with pharmaceutical rules exceeding those required by the World Trade Organization (WTO). A debate over the potential consequences of such deals for medicine has raged ever since. Activists have argued these U.S. trade deals raise the prices of lifesaving drugs and limit access to cheap generic medicines for millions of people outside of the United States, effectively acting as a high tariff on medicines and killing patients. Industry supporters insist that the provisions of trade deal allow for greater rewards for innovative drugs and spur research and development, and they argue that weakening the pharmaceutical rules in U.S. trade deals would chill global investment, slow the development of breakthrough treatments for suffering patients, and force drug companies out of business.  

The only way to evaluate the large claims about the pharmaceutical terms in U.S. trade agreements, such as those in the proposed Trans-Pacific Partnership (TPP), is to examine the effects of previous deals. Until this spring, however, only two small studies on that subject had been completed. In March, I published a study in Foreign Affairs (“A Dose of the TPP’s Medicine,” March 23, 2016), presenting more than a decade’s worth of pharmaceutical sales data from the IMS Institute for Healthcare Informatics on 15 of the 17 countries with recent U.S. trade deals with drug terms that go beyond WTO requirements. The study also presented data for four comparator nations of similar income but with no U.S. trade deals or no exclusivity requirements.  The results suggested that the terms of U.S. trade deals have not led to large increases in drug prices or shifts away from lower-cost generic drugs in the countries that have agreed to them, although more substantial effects might appear over longer periods and for particular classes of medicines. (An interactive feature on the website of the Council on Foreign Relations (CFR) outlines the study's data, sources, and methodology.)

Amy Kapczynski, Bhaven

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