Democrats: Drug prices could threaten NAFTA 2.0
WASHINGTON» The clash over free trade in North America has long been fought over familiar issues: Low-paid Mexican workers. U.S. factories that move jobs south of the border. Canada’s high taxes on imported milk and cheese.
But as Democrats in Congress consider whether to back a revamped regional trade pact being pushed by President Donald Trump, they’re zeroing in on a new point of conflict: Drug prices. They contend that the new pact would force Americans to pay more for prescription drugs, and their argument has dimmed the outlook for one of Trump’s signature causes.
The president’s proposed replacement for the 25-year-old North American Free Trade Agreement is meant to win over Democrats by incentivizing factories to hire and expand in the United States. Yet the pact would also give pharmaceutical companies 10 years’ protection from cheaper competition in a category of ultraexpensive drugs called biologics, which are made from living cells.
Shielded from competition, critics warn, the drug companies could charge exorbitant prices for biologics.
“This is an outrageous giveaway to Big Pharma,” Rep. Rosa DeLauro, a Connecticut Democrat, said in an interview. “The government guarantees at least 10 years of market exclusivity for biologic medicine. It’s a monopoly. It’s bad policy.”
The objections of DeLauro and other Democrats suddenly carry greater potency. The need to curb high drug prices has become a rallying cry for voters of all political stripes. Trump himself has joined the outcry. The revamped North America trade deal must be approved by both chambers of Congress, and Democrats have just regained control of the House.
Rep. Earl Blumenauer of Oregon, the new chairman of the House Ways and Means subcommittee on trade, told The Associated Press that “I don’t think candidly that it passes out of my trade subcommittee” with the biologics provision intact.
“The biologics are some of the most expensive drugs on the planet,” Blumenauer said.
Still, the politics of NAFTA 2.0 are tricky for Democrats and not necessarily a surefire winner for them.
The original NAFTA, which took effect
in 1994, tore down most trade barriers separating the United States, Canada and Mexico. Like Trump, many Democrats blamed NAFTA for encouraging American factories to abandon the United States to capitalize on lower-wage Mexican labor and then to ship goods back into the U.S., duty-free.
Having long vilified NAFTA, Trump demanded a new deal — one far more favorable to the United States and its workers. For more than a year, his top negotiator, Robert Lighthizer, held talks with Canada and Mexico. Lighthizer managed to insert into the new pact provisions designed to appeal to Democrats and their allies in organized labor. For example, 40 percent of cars would eventually have to be made in countries that pay autoworkers at least $16 an hour — that is, in the U.S. and Canada and not in Mexico — to qualify for duty-free treatment.
The new deal also requires Mexico to encourage independent unions that will bargain for higher wages and better working conditions.
Late last year, the three countries signed their revamped deal, the U.S.-Mexico-Canada Agreement. But it wouldn’t take effect until their three legislatures all approved it. In the meantime, the old NAFTA remains in place.
The question now is: Are Democrats prepared to support a deal that addresses some of their key objections to NAFTA and thereby hand Trump a political victory? Some Democrats have praised the new provisions that address auto wages, though many say they must be strengthened before they’d vote for the USMCA.
Protection for drug companies is another matter. Many Democrats had protested even when the Obama administration negotiated eight years of protection for biologics— from cheap-copycat competitors called “biosimilars” — in a 12-country Pacific Rim trade pact called the TransPacific Partnership, or TPP.
Trump abandoned the TPP in his first week in office. But the pharmaceutical industry is a potent lobby in Washington, and Trump’s negotiators pressed for protection for U.S. biologics in the new North American free trade deal. They ended up granting the drug companies two additional years of protection in the pact.