A Trans-Pacific Partnership reality check

[WASHINGTON] As the Obama administration and a Republican-majority Congress work toward eventual approval of the Trans-Pacific Partnership trade agreement between the United States and 11 Pacific Rim nations, opponents of the proposed pact are issuing increasingly shrill warnings.

The latest is that the deal will endanger not only US jobs but also US health care - and health care around the world.

According to the critics, US efforts to protect the pharmaceutical industry's intellectual-property rights and commercial interests could result in higher drug prices and lower access - not only along the Pacific Rim but also in the United States.

The TPP means "worse health and unnecessary deaths," Joseph Stiglitz, a Nobel laureate in economics, warns.

Well, don't believe the hype.

The United States already has free-trade agreements, including chapters on pharmaceuticals, with several of the TPP countries (Australia, Canada, New Zealand, Peru, Chile, Mexico and Singapore), so the additional integration under the new deal would not change the status quo dramatically.

It's true that, as critics say, President Obama's trade negotiators are shooting for the 12 years of data protection, and higher prices that come with it, that developers of cutting-edge biologic medicines enjoy under US law.

They're unlikely to get it, because the maximum term in the other TPP countries is eight years. A compromise is already under discussion that would finesse the issue while allowing the only truly poor TPP country, Vietnam, quicker access to cheaper "bio-similar" versions of the drugs.

The other accusation is that the United States is trying to use TPP as a battering ram to bring down the prevailing drug-price controls in countries with national health insurance, such as Australia.

It's true that the United States seeks due process and transparency for US drug makers that want inclusion in these countries' state-controlled systems, but this is a far cry from undermining those politically popular systems - which other TPP countries would never allow anyway. Still less plausible is that TPP rules in this regard could set a precedent to weaken the United States' own bulk-pricing schemes for drugs in Medicaid or the VA health-care system, as the opponents allege.

The United States, and the world, desperately needs medical innovation, but the difficult fact is that it costs money - billions of dollars sometimes - to develop effective new drugs. One way to incentivize that investment is to offer companies a temporary government-guaranteed monopoly on commercial exploitation of their discoveries. Obviously, there's a trade-off: Drug prices must be high enough to encourage risk-taking but not so high as to limit access or bankrupt insurance systems. The United States, which accounts for 4.5 per cent of the world's population but 39 per cent of global spending on pharmaceuticals, probably subsidizes health systems in Europe and elsewhere. The robust intellectual-property rights and relatively higher prices US drug firms enjoy in their domestic market enable them to sell medicine in price-controlled markets abroad. No doubt that system is imperfect, but the TPP is best understood as a realistic effort to make it work better.

WP