President Trump has suggested a possible executive order to lower drug prices, which is to establish new trade policies that would strengthen intellectual property rights (IPR) in other countries markets. IPR refers to legal rights given to inventors or innovators of new products or technologies to protect their inventions for certain statutory time periods.
In the US, we have strong IPR protections including our 20-year patent exclusivity right for new inventions. Additionally, the US is part of an international trade agreement, Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which imposes obligations on its participating countries to assist in protecting other members’ intellectual property rights. TRIPS requires that once a drug patent is awarded, the patent is protected internationally for 20 years. However, while most countries are part of the TRIPS agreement, some countries lack adequate enforcement measures.
Lower costs of drugs in non-US markets
In countries that are not part of the TRIPS agreement or lack proper TRIPS enforcement a drug introduced by a US company is threatened be counterfeiters in that foreign market. Generic versions of the drug can be quickly introduced, increasing competition between manufacturers and eroding the value of the patent and the TRIPS Agreement, by creating downward price pressure in that market. Further, low costs in other countries drive US customers to foreign pharmacies, which damages the value of US IPR protections.
President Trump’s proposal to increase IPR protections and enforcement in foreign countries would help US drug manufacturers maintain the value of their inventions and incentives to continue additional research and development. However, certain countries not only do not enforce the TRIPS agreement but also have government-controlled prices for drugs. As a result, the United States patient has been subsidizing the government mandated fixed drug pricing schemes in foreign countries. The foreign market receives cheaper prices for the same drugs while the huge investments of time and money involved in the US drug-approval process are borne by US consumers.
As former-FDA official, William Nychis, with FDAImports.com explains, “Trade policy negotiators would not only have to seek increased enforcement of intellectual property rights, but also negotiate with countries to stop (or mitigate the effects of) fixed drug pricing.”
“Unless the US negotiates with countries to stop fixing rates, drug prices will not change because the American market essentially is subsidizing the fixed pricing policies in foreign countries,” commented Attorney Ben England. Convincing foreign countries to relax their fixed fee policies and go against their own interests – protecting low drug prices and encouraging their domestic pharmaceutical industry – will be nigh impossible.
Mr. England and Mr. Nychis agree that there is no real silver bullet to fix this problem. The answer is likely a combination of strategies, which may include increasing the ability of states to negotiate prices with manufacturers, shortening the exclusivity period for patents, removing the re-importation prohibition, which protects foreign drug price fixing by other countries, coupled with increased security requirements for drug packaging and products that reduces the risk of counterfeiting in the supply chain.
- Editor’s note: This is part 2 of a multi-part series on drugs and drug pricing. See also Reducing Prescription Drug Costs: The Solution Hiding in Plain Sight and The Current “State” of Drug Pricing: How States are Stepping in to Relieve Prescription Costs
