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Defining 'innovation' through trade pressures

State governments succeeded in protecting Medicaid from the rules in the Korus FTA, but these trade agreement provisions are only part of a larger effort to attack reference pricing of pharmaceuticals around the world.  This effort stretches across agencies, and is carried out primarily through diplomacy with other wealthier countries, especially those in the OECD.  Seventeen European nations were criticized by the USTR in the 2007 National Trade Estimate of foreign trade barriers, as were other developed countries, like Japan, Canada and New Zealand.

The US effort to stop reference pricing abroad has not been as widely publicized as the dispute over intellectual property and access to medicines in poor countries, but it may be more relevant to US state governments, because they negotiate drug prices in ways very similar to the negotiations abroad that are opposed by our federal government.  The changes sought most often by PhRMA in specific countries' methods of reference pricing are

  • The removal of drugs found to be "innovative" or "novel" from the systems of reference pricing

  • The end of reference pricing based on comparisons of generic and patented medicines
  • Greater access by pharmaceutical companies to the decision makers who evaluate medicines for reference pricing
  • Creation of an appeals process for decisions unfavorable to industry.
State governments and advocates for affordable medicine in the United States should watch closely as US trade officials seek to establish international standards for the operation of drug price negotiations.  Many similarities between state (and private) systems of reference pricing may be at risk of running afoul of new standards meant to benefit the branded pharmaceutical industry at a cost to purchasers of medicines. 

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