U.S. Drug Companies’ Concerns About Prices, Patents Holding Up Implementation of Australian Trade Agreement
A "landmark" free-trade agreement between the United States and Australia scheduled to take effect Jan. 1, 2005, "has been dogged" by U.S. pharmaceutical industry concerns over Australian prescription drug patent laws and "the ability of American pharmaceutical companies to challenge decisions about which drugs will be covered and at what prices, under Australia's national health insurance program," the New York Times reports (Becker/Pear, New York Times, 11/17). The agreement, signed into law by President Bush in August, would ban the reimportation of prescription drugs covered by the Australian pharmacy benefits scheme. In addition, Australia would establish a consultation process under which the U.S. government could object to decisions made by the Australian government on whether to list new medications on the benefits scheme. However, the agreement does not include more U.S. demands to revise the process used by the Australian government to determine the price of medications on the benefits scheme, which prompted the United States to seek the reimportation ban. The agreement also includes a U.S. provision that provides patent holders with the authority to control sales of their products in the United States (Kaiser Daily Health Policy Report, 8/6).
Australian 'Outcry'
According to the Times, some in Australia have raised a "loud outcry" that the trade agreement "could undermine the popular government program that makes prescription drugs available to all citizens at subsidized prices," as Australian prices for new medications are "among the lowest in the developed world." Peter Drahos, a law professor at the Australian National University, said, "The large pharmaceutical industry has had the program in its sights for a long time." According to Rep. Tom Allen (D-Maine), the agreement could indicate that the U.S. pharmaceutical industry has "undue influence over trade negotiations" and seeks to increase prices abroad. "The risk is that the brand-name pharmaceutical industry will be able to write international trade rules that overrule domestic law," Allen said.
Australian Amendments
In response to such concerns, the Australian Parliament in August passed amendments to the trade agreement "aimed at ensuring the availability of inexpensive generic drugs," which "infuriated" U.S. pharmaceutical companies and "helped force trade negotiators back to the table," the Times reports. U.S. pharmaceutical industry officials have said that the amendments would affect their ability to enforce their patent rights in Australia. Under Australian law, brand-name pharmaceutical companies can ask a court to block the market entry of generic medications that allegedly infringe on their patents, but such companies can face fines of as much as $7.6 million if a court finds that the allegations are "vexatious."
Trade Officials Remain Optimistic
U.S. and Australian trade officials said that they remain optimistic about the trade agreement, but the agreement cannot take effect unless the United States accepts the Australian amendments or Australia agrees to make revisions. An unnamed senior U.S. trade official said that although she opposes the amendments, she remains "very confident we can work this out." Mark Vaile, the Australian trade minister, said, "There is nothing in the free-trade agreement that would increase drug prices in Australia or change the way the pharmaceutical benefits scheme operates." Eric Noehrenberg, a trade specialist at the International Federation of Pharmaceutical Manufacturers and Associations, said that the Australian amendments would violate international trade agreements and discourage the introduction of new medications in the nation. Frank Vargo, vice president of the National Association of Manufacturers, a U.S. trade group, said, "It's unfortunate that the Australian Parliament chose to change the terms after the agreement was signed. We are urging all parties to be as flexible as possible and to move as quickly as possible to resolve these issues" (New York Times, 11/17).
Time Examines Reimportation
The Nov. 22 issue of Time examined the reimportation of lower-cost medications from Canadian pharmacies, a practice that might provide "a seductive image for Americans struggling with ever more expensive prescription drugs" but likely cannot help the United States find "its way out of high drug prices" (Thottam, Time, 11/22).