USMCA Sets a New Standard for International Trade

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Jonathan Kimball of the Association for Accessible Medicines (AAM) in the USA outlines why the signing of the US-Mexico-Canada Agreement (USMCA) in January 2020 may mark a turning point for greater access to generic and biosimilar medicines globally.

 

US trading partners should take note. There is no longer a bipartisan consensus in Washington for granting endless pharmaceutical intellectual property (IP) provisions. Years of ever-increasing prices and extension after extension of monopoly rights have eroded support for the branded industry.

 

President Donald Trump’s signature on US-Mexico-Canada Agreement (USMCA) late last month is a case in point. The three nations have achieved a sustainable balance between innovation and access that should serve as a template for other such agreements in the future.

 

It didn’t start out that way. When the agreement was announced in October 2018, many observers dismissed it a relatively minor revision of the North American Free Trade Agreement (NAFTA). According to a Brookings Institution explainer, “After a year and a half of negotiations, the three parties are going to end up with a new trade deal that looks remarkably similar to the old NAFTA.”

 

There was, however, a jarring clause to be found within the 63 pages of chapter 20, which would have given brand-name manufacturers of biologic drugs 10 years of market exclusivity. That would have meant extending Canada’s eight-year period of exclusivity by two years and Mexico’s five-year period of exclusivity by five years. This shift would have amounted to a major disturbance in the status quo, to say the least.

 

Biosimilars, which treat cancer and other disorders, offer quality, safety and effectiveness that are comparable to expensive biologic medicines. These medicines cannot come to market until the patent and other exclusivities on the biologics are allowed to expire, which has been happening far more in Europe than in North America. Consequently, Americans, Canadians and Mexicans have been missing out on much of the savings.

 

The brand industry offered a number of defenses for the provision extending their monopolies—including that it was necessary to establish a robust biologic market in Mexico. However, that market has existed for decades. Pharmaceutical companies have been selling original biologics in Mexico since before 2001. All of the top 12 selling biologics in the United States—including Humira, Avastin and Lucentis—are available in Mexico.

 

The brand industry also asserted that extending their monopolies was essential for them to continue coming up with innovative medicines. However, this rationale also failed to persuade, given the fact that less than two percent of the USD 1.2 trillion global pharmaceutical market is based in the Mexican and Canadian markets. R&D decisions are instead based on market potential in the United States, China, Japan, or Germany.

 

The brand industry’s strategy, which was to set a precedent for future agreements guaranteeing at least 10 years of market exclusivity, did not make it into the version of USMCA signed by the President. This is good news. Lifesaving drugs will become more accessible faster and at a lower cost.

 

In promoting a competitive pharmaceutical market across the three countries, USMCA honors a commitment “to ensure that trade agreements foster innovation and promote access to medicines,” enshrined in 2015 Trade Promotion Authority legislation.

 

The balance between innovation and access, a hallmark of the standard-setting USMCA, also animates the Hatch-Waxman Act of 1984, the legislation that gave us the generic pharmaceutical industry we have today. Over the past 35 years, this arrangement has led to trillions of dollars in savings for patients and taxpayers.

 

Public sentiment has a greater impact on trade agreements than many realize, and access to medicines is an issue of great concern to the public. Clark Packard and Bill Watson describe USMCA against the background of the political landscape. “Given the rising price of prescrip­tion medicines and the long-term debt projections facing the United States,” they write, “a more balanced approach to IP and exclusiv­ity in trade agreements would augment ongoing bipartisan efforts to reduce healthcare costs through expanded access to generic pharmaceuticals and biosimilars.”

 

As Packard notes, the Trans-Pacific Partnership (TPP), which President Trump walked away from at the start of his administration, was shaping up to be a win for the brand-name manufacturers and a loss for access. “Not only were negotiations bogged down by the biologics provision,” he writes, “the United States spent enormous political capital to protect a tiny sliver of the US economy at the expense of further liberalization elsewhere in the negotiations.” In the end, the insistence by the Obama Administration and Republican leadership in the Senate that TPP contain 12 years of market exclusivity is what ensured that the deal was not enacted before President Trump took office. As the USMCA debate demonstrated, including a 10-year market exclusivity period in the initial agreement, threated to derail that USMCA, as well.

 

It may be just a coincidence that TPP, which would have slowed the uptake of biosimilars, did not get signed, while USMCA, which promises to expand access, did become law, but this fortunate alignment bodes well for future international trade agreements. Greater competition and improved cost savings in the health care systems of three nations are just the beginning.

 

Many observers find that the influence of the WTO has faded in recent years, with the proliferation of bilateral rather than multilateral trade agreements. This shift reflects President Trump’s preferred negotiating style, but it goes beyond Trump.

 

One such bilateral agreement is the recently announced phase one of a US-China trade agreement, which upholds what the administration calls “robust protection of intellectual property” but lacks the countervailing emphasis on access. This arrangement does not have to be approved by the US Congress, and therefore isn’t subject to similar pressure from labor and other advocates—a decisive factor in the USMCA negotiations.

 

If the imbalance between pharmaceutical IP and access in the phase one US-China becomes the starting point for future trade agreements between the United States and other partners (The United Kingdom, the European Union, Brazil, Japan and so on), the biosimilars industry’s prospects are grim. More importantly, the health and well being of patients around the world are in jeopardy.

 

If, on the other hand, USMCA serves as the model for international agreements, we will have a global health victory to celebrate.

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