Strong IP protections do not raise drug prices, writes Charles Boustany in the Detroit News.
By Charles Boustany, March 13, 2018
American, Canadian, and Mexican trade negotiators just concluded a round of negotiations in Mexico City to hash out a new North American Free Trade Agreement. This was the seventh round of talks since August. Several contentious issues remain unresolved. One of the biggest sticking points is the strength of intellectual property protections, such as patents and copyrights.
The Canadians and Mexicans oppose strong intellectual property rights. They claim that such protections inflate the price of drugs, thereby restricting patients’ access to medicines.
They’re wrong. Strong IP protections do not raise drug prices. But they do encourage research and development, which leads to more lifesaving medicines. By weakening IP rights, these groups would harm the very patients they want to help.
Developing new pharmaceuticals is difficult and expensive. On average, it takes more than a decade and costs more than $2.6 billion to bring just one drug to market. The results are worth it. Pharmaceutical discoveries save and improve people’s lives.
Research companies would never invest billions of dollars to create drugs without IP protections. Patents grant developers market exclusivity for a set amount of time. This exclusivity enables researchers to recoup their investments and fund future development projects.
IP protections are especially important for advanced pharmaceuticals like “biologics,” which are complex molecule drugs made from living organisms. These drugs are extremely difficult and expensive to develop. That’s why U.S. trade negotiators ought to push for 12 years of regulatory data protection for biologics.
That would stop rival companies from using an inventor’s clinical trial data for 12 years, giving innovators a chance to recoup their development costs.
Data protection won’t undermine access to medicine by driving up prices. In recent years, both Canada and Japan have increased the period of regulatory data protection — but government spending on drugs as a share of GDP remained virtually unchanged.
In fact, governments undermine access to medicines by not lengthening regulatory data protection periods. Investors will only fund future biologic development projects if they have a chance to recoup their investment. Twelve years of regulatory data protection would give them that opportunity.
When governments don’t offer adequate, predictable, and reliable protections — or pay value-based prices for innovative pharmaceuticals — patients suffer.
Consider Canada. Our northern neighbor imposes strict price controls on drugs. This scheme has reduced Canadians’ access to new medicines — the average pharmaceutical reaches American patients seven months sooner than Canadian patients.
Or consider South Korea, which blatantly undervalues medical technology and violates IP protections in the U.S.-Korea Free Trade Agreement. South Korea pledged to pay a fair price for innovative pharmaceuticals. But the South Koreans have reneged on their promise.
They’re tying reimbursements for innovative drugs to the average price of a “basket” of drugs. That basket includes old generic drugs. Valuing cutting-edge medicines as if they were 20-year-old generics is unfair.
The underpayments have discouraged drug companies from expanding into South Korea. Price controls have the same effect on patients’ access to medicines around the world. A nearly 20-year study of 76 countries by the National Bureau of Economic Research found that price controls delay the launch of medicines. Stronger intellectual property protections, on the other hand, sped them up.
American trade negotiators must preserve IP protections for drugs. Patients and researchers deserve nothing less.
Charles Boustany is a retired physician, former congressman from Louisiana, and a panelist at the Macdonald-Laurier Institute's Promoting Creativity and Innovation in NAFTA Negotiations.