Can Trump make us pay more?
The rhetoric is as dramatic as we’ve come to expect as the United States president tries to compel drug agency Pharmac to bow to his will and world view. Cate Broughton explains.
In a speech announcing ‘‘the most sweeping action in history to lower prices for prescription drugs for the American people’’, United States President Donald Trump said he wants to support US drug companies to get more money from ‘‘freeloading’’ foreign countries – including New Zealand.
But is New Zealand really ‘‘freeloading’’, and will Trump’s plans affect our access to highpriced medicines in future?
Why is Trump upset?
Trump says ‘‘other countries use socialised healthcare to command unfairly low prices’’ from US drug makers.
‘‘This places the burden of financing drug development largely on American patients and taxpayers, subsidises foreign consumers, and reduces innovation and the development of new treatments,’’ he said.
In New Zealand, he would be talking about Pharmac – a government agency that negotiates with pharmaceutical companies and decides what medicines will be publicly funded based on the best price and within a limited, or capped, budget.
In 2017, the total Pharmac budget was increased to $870m.
Why do we have Pharmac?
In the 1980s, the cost of medicines exploded with growth in some years over 20 per cent. Pharmac was set up in 1993 to counter this.
The agency began negotiating with drug companies and encouraged competition through a tendering process in an effort to lower prices and get the best deal. Many other countries adopted the same strategy.
Including the US?
No. America’s national health insurance agency, Medicare, is prohibited by law from negotiating with drug companies to bring prices down. America has the highest drug prices in the world.
In the 2016 American presidential election, candidates Hillary Clinton and Bernie Sanders both promised to allow Medicare to negotiate. During his campaign, Donald Trump said allowing negotiation would save the US $300 billion – a claim that was heavily disputed.
So Trump has a fair point?
Well, Trump doesn’t address the high prices charged for drugs by the companies – especially while under a patent – and whether they can be justified.
Former medical director of Pharmac Dr Peter Moodie said the profits made by drug companies are ‘‘absolutely huge’’ and much of what they call ‘‘research’’ is actually marketing.
‘‘Trump’s argument that foreign countries have been ripping off drug companies is an argument that drug companies have been using for 20 years.’’
For example?
Hepatitis C patient and advocate Heather Heal says the company that patented the drug cure for Hepatitis C, Gilead, charged US$100,000 for a course of the treatment.
It could not justify the high price by the spend on research and development (R&D) alone.
US economist Jeffrey Sachs said Gilead recouped its US$11 billion investment in R&D, marketing and legal costs for the drugs, and had a US$6b profit in the first 15 months of sales. ‘‘Gilead is making a fortune through astronomical pricing of Sofosbuvir that keeps the drug out of reach for the vast majority of those who need it.’’
What about patents?
Under intellectual property law, drug companies that get a patent for a new medicine can have a period of 20 years in which no other company can sell a copycat, or generic, version.
This gives the company a monopoly, or exclusive right, to market and sell the highly prized drug – enabling it to charge high prices.
The justification for the high prices is that the drug company needs time to recoup the large investment made in research and development.
Once a patent period ends, generic versions of the drug can be produced and this often drops the price by 90 to 95 per cent.
About 80 per cent of medicines worldwide are under a patent, according to Christchurch forensic psychologist and Doctors For Healthy Trade spokesman Erik Monasterio.
Can Pharmac do anything about that?
Often drugs companies that want to sell patented drugs in New Zealand also want to sell non-patented drugs, so Pharmac seeks to negotiate to get the best deal.
However, in some cases, this means medicines remain out of reach for New Zealanders for some time until the drug companies are able to drop the price to an acceptable level.
Can the US really make a difference to our prices?
Yes, if New Zealand signed a trade deal with the US which allowed its drug companies to extend the patent period.
Auckland University professor of law Jane Kelsey said if the US re-entered the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) deal it would demand extensions on patent periods.
The US is currently doing this in the North American Free Trade Agreement (NAFTA) with Mexico and Canada, adding an extra 12 years.
When America was part of the TPPA, it wanted an additional patent period of five to eight years.
What about older drugs?
Trump would struggle to do anything to push up prices of drugs which are already out of their patent period.
His administration has said that it plans to work with several federal agencies to address the ‘‘unfair disparity’’ between American and global prices.
But experts in the US are sceptical that Trump could really pressure foreign governments to pay more.
‘‘It’s hard to know why Germany or France or Australia would agree to something like that,’’ said Professor Jack Hoadley, of Georgetown University.
Are all our drugs from the US?
More than 50 per cent of drug companies are based in the US, with others from Germany and Japan, Monasterio estimates .
Generics – and brand-name pharmaceuticals – are manufactured in factories worldwide.
‘‘Trump’s argument that foreign countries have been ripping off drug companies is an argument that drug companies have been using for 20 years.’’ Former Pharmac medical director Dr Peter Moodie