How a US-UK trade agreement could affect NHS drug prices
BMJ 2020; 369 doi: https://doi.org/10.1136/bmj.m1332 (Published 01 June 2020) Cite this as: BMJ 2020;369:m1332
All rapid responses
Dear Editor
We thank Ruth Lopert and Craig Welch for their thoughtful engagement with our piece (Lopert R, Welch C. A US-UK trade agreement negotation needn't be a laydown misère. 01 June 2020. https://www.bmj.com/content/369/bmj.m1332/rr).
Lopert and Welch argue that part of a sentence in our article – “legislation was subsequently changed to limit reference pricing of originator medicines" – incorrectly implies these changes were due to the AUSFTA. Indeed, Lopert and others have persuasively argued in the literature that these changes in reference pricing were not due to the AUSFTA (1,2). However, other experts have argued that these legislative changes may have been due to the AUSFTA (3,4). The full sentence in our article acknowledges the debate around this point: “Although the extent to which the trade agreement directly affected Australian law is debated, legislation was subsequently changed to limit reference pricing of originator medicines.” We are not experts on the Australian pharmaceutical reimbursement system and do not take a side in the discussion on whether or not the PBS reference pricing changes were “due” to the AUSFTA, but we simply point out that it is a contested question.
Lopert and Welch also claim that we overlooked the importance of a firm’s presence in the US in the context of ISDS suits. On the contrary, we devote a paragraph to this point in the article: “The ability to sue the UK government under ISDS would presumably be limited to companies registered in the US. However, the effects of ISDS suits brought by US companies would be likely to affect all new medicines (eg, a suit challenging NICE processes leading to a change in national legislation). In addition, many drug companies that may not be considered American nevertheless have a legal presence in the US.”
We agree with Lopert and Welch that what is considered an ‘investment’ in the context of ISDS will be key in determining whether any ISDS suits (if included in a US-UK trade agreement) are successful and what effect they have on UK drug pricing – in particular, whether simply holding IP (e.g. a patent) in the UK qualifies as an ‘investment’(5). To date, there are not many (known) cases of ISDS suits concerning pharmaceuticals, though Lopert and Welch helpfully point to a recent relevant case (Apotex). At the same time, the act of bringing ISDS suits, even if they are ultimately decided in favour of the state, could in itself discourage public health-oriented measures (1,6).
Lopert and Welch argue that certain safeguards could be successfully included in a US-UK trade agreement to protect NHS expenditures and the NICE process. We agree that it may be possible to achieve a ‘carveout’ for pharmaceuticals (and perhaps the NHS more broadly) in the trade agreement. As we argue in the article, continuous transparency will be necessary for stakeholders to ensure that such carveouts are included and are effective.
We agree that the impending trade deal may not be a “laydown misère” (i.e. an inevitably losing hand) – we hope that public engagement with the importance of these issues and ultimately, political courage by leadership, will result in a trade deal that does not jeopardize health.
1. Lopert R, Gleeson D. The High Price of “Free” Trade: U.S. Trade Agreements and Access to Medicines. The Journal of Law, Medicine & Ethics 2013; 41: 199–223.
2. Mercurio, Bryan Christopher, The Impact of the Australia-United States Free Trade Agreement on the Provision of Health Services in Australia. Whittier Law Review, Vol. 26, p. 1051, 2005. Available at SSRN: https://ssrn.com/abstract=731003
3. Faunce T, Bai J, Nguyen D. Impact of the Australia–US Free Trade Agreement on Australian medicines regulation and prices. Journal of Generic Medicines 2010; 7: 18–29.
4. Faunce T. How the Australia-US free trade agreement compromised the pharmaceutical benefits scheme. Australian Journal of International Affairs 2015; 69: 473–8.
5. Baker BK. Trans-Pacific Partnership Provisions in Intellectual Property, Transparency, and Investment Chapters Threaten Access to Medicines in the US and Elsewhere. PLOS Medicine 2016; 13: e1001970.
6. Matthew Rimmer. The Chilling Effect: Investor-State Dispute Settlement, Graphic Health Warnings, the Plain Packaging of Tobacco Products, and the Trans-Pacific Partnership. Victoria University Law and Justice Journal 2017.
Competing interests: No competing interests
Dear Editor
That "US negotiators also targeted drug pricing mechanisms in the US-Australia trade agreement" is certainly true, but to assert that "legislation was subsequently changed to limit reference pricing of originator medicines" is an exaggeration, and to imply that this was a result of the AUSFTA is simply incorrect.
The changes to the PBS formulary referred to here were not, as has repeatedly been alleged, an outcome of the AUSFTA but were intended to facilitate reducing the relatively high prices of off-patent medicines - the result, ironically, of reference pricing which discourages competition in pricing to government - and to capture the benefit of discounting in the supply chain. The splitting of the formulary and the associated introduction of price disclosure arrangements led to massive reductions in prices of off-patent medicines and delivered more than A$20 billions in savings to government. The arrangements do not preclude the use of an off-patent comparator by the PBAC, and failure to demonstrate an incremental benefit still leads to cost minimisation - effectively reference pricing. The splitting of the formulary effectively serves to preclude second order effects. As for the risk of being locked into “market derived prices” the AUSFTA text provides an example of language (also appearing in the TPP and CP-TPP texts) that could be used to protect the integrity of the NICE processes. And this does not require the declaration of a cost-effectiveness threshold.
In our view there is a much greater risk of being corralled into higher levels of IP protection, particularly in relation to biologics, as the US continues its post-TRIPS attempt to create a new world order in IP. Now that the UK has Brexited, it is a pity it did not take the opportunity to reduce the extended periods of data and market exclusivity that prevail in Europe, if for no other reason than to have something to bargain with.
As for ISDS claims challenging NICE decisions, the authors overlook a couple of important points. Whether a firm could take advantage of the investment provisions of a UK-US agreement to bring a claim against the UK would depend first on the nature of its presence in the US. (Pfizer is, for example, now incorporated in Ireland). And for any firm to bring a claim would depend on the nature of its ‘investment’ in the UK. Simply supplying drugs to the NHS would not constitute an investment unless the agreement were exceptionally badly drafted. The Apotex NAFTA ISDS cases are illustrative in this context. Apotex, a Canadian generics manufacturer mounted three separate disputes over IP issues, refusal of marketing approval by the FDA and imposition of an FDA ‘import alert’ over alleged manufacturing defects. In each case, the arbitration tribunal ruled that, inter alia, Apotex’s business in the US did not constitute an ‘investment’ under the provisions of NAFTA.
Certainly, having the NHS or NICE on the table is unwelcome, but in a trade agreement negotiation it's usually the case that everything is on the table until it is taken off the table. While negotiating a complete carveout of the NHS and NICE would be ideal, it may not be possible, but as the AUSFTA outcomes showed, having an issue on the table need not mean a lay down misère.
Competing interests: RL is a former senior public servant who was involved in the AUSFTA pharmaceutical negotiations and their subsequent implementation
US-UK trade agreement - MPs not guaranteed a vote
Dear Editor
In this very helpful article about t, I just want to clarify one point. The authors note that:
"for trade agreements, democratic representatives can, in general, only vote on the final negotiated text, rather than having input on draft texts."
In fact, in the UK, MPs are not even guaranteed a vote on the final text.
The process in parliament is that the text must be 'laid before' parliament for 21 working days, but if there are no objections the agreement is simply passed. As a House of Commons briefing notes, "there is no statutory requirement for a debate or vote", and if parliamentarians wanted to object "there are limited options for how they can do so" ( https://commonslibrary.parliament.uk/research-briefings/sn05855/ ). Parliament's Constitution Committee notes the same, describing this as "anachronistic and inadequate" ( https://publications.parliament.uk/pa/ld201719/ldselect/ldconst/345/345.pdf ).
This article illustrates the kind of impact a trade agreement could have, and thus the need for more democratic scrutiny and accountability.
Competing interests: JB campaigns for greater democracy in trade.