Issues & Insights

U.S./Mexico/Canada Free Trade Deal Will Be Good For Patients, Too

The U.S. Congress has yet to approve the new North American trade deal. The latest sticking point? The intellectual property provision governing advanced, “biologic” medicines.

Reps. Jan Schakowsky (D-Ill.) and Rosa DeLauro (D-Conn.) say they’ll vote against the United States-Mexico-Canada Agreement (USMCA) unless this section is scrapped. They believe that in its current form, the agreement will raise drug prices by stifling generic competition.

Such fears are unfounded.

Biologics represent some of the most effective treatments for debilitating illnesses and offer great hope for the future. Advances in gene therapy, the development of safer vaccines, precision medicine, and superior diagnostics stand to benefit millions.

Realizing this potential requires robust intellectual property rules that safeguard the clinical research data used to develop these medicines. Given the complexity of these medicines, patent protection isn’t enough.

The USMCA provides exactly this kind of protection. As currently written, the deal protects scientists’ biologic medicine research data against unfair commercial use for 10 years. This would give innovative manufacturers the chance to recoup research costs before competing companies enter the market with “biosimilar” versions.

The provision is hardly radical. In the United States, research companies receive 12 years of regulatory data protection for biologic medicines. But it will mark an improvement for Canada, which currently offers only eight years of protection, and Mexico, which provides no protection at all.

Some Democrats mistakenly believe the USMCA’s 10-year requirement will drive up the price of biologics by forcing patients to wait longer to access lower-cost biosimilars.

The evidence doesn’t support this claim.

First, the standard in the United States is 12 years rather than ten, so there will be no impact here.

Second, other countries have increased the term of protection in the past without any noticeable impacts on drug spending.

Canada increased its data-protection period to eight years in 2006. If the critics are right, Canada’s policy change should have sent drug spending soaring.

Yet in the years immediately following the change, the country’s drug spending as a percentage of overall health spending actually declined. The growth rate for drug spending in Canada slowed in the five years after the new data-protection rule took effect.

The price of patented medicines, meanwhile, grew slower than the rate of inflation.

In other words, increasing the data-protection period for medicines had little effect on existing trends in drug spending.

The same was true in Japan. The country extended data protection on all new medicines from six to eight years beginning in 2007, when drug spending accounted for 20% of overall health spending. By 2015, the most recent year for which data is available, drugs made up 19.7% of Japan’s total health spending.

It’s important to note that, compared with both of these examples, the provisions in the USMCA are relatively limited. That’s because the trade deal’s data-protection rule applies only to biologic drugs — not to all new medicines, as Canada’s and Japan’s reforms did.

All of which suggests that concerns about the USMCA are overblown.

Given the growing importance of biologic medicines, the protection of regulatory data is an essential intellectual property right, crucial to fostering innovation in healthcare.

Patent rights are not enough to protect research investments in these medicines, as they are granted for specific inventions and do not cover the variations that inevitably arise in the process of developing a biosimilar.

Creating higher standards for the protection of clinical trial data will ensure North America retains its lead in biotech innovation, and that new medicines can be made available throughout the region soon after launch.

Critics of the USMCA’s biologics provisions take a narrow view by focusing only on potential drug price rises. But experience shows there is little to fear. Lawmakers in Congress shouldn’t stand in the way of medical discovery.

Philip Stevens is founder and executive director of the Geneva Network, a public policy research and advocacy organization focusing on innovation, trade, and development issues.

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