Professor Brook K. Baker, Senior Policy Analyst
June 11 2015
A new WikiLeak release of the recent draft text of the US-led proposal for the Trans-Pacific Partnership annex on Pharmaceuticals and Medical Devices shows how the fig-leaf of “transparency” and “procedural fairness” is being used to allow transnational pharmaceutical companies to subvert countries’ ability to make decisions about which drugs and medical devices they can afford to cover, in order to expand access for monopoly-priced medicines.
The newly-leaked 2014 draft has facial improvements over an older 2011 draft that was universally panned by other Trans Pacific Partnership (TPP) countries. While the more recent draft no longer directly targets medicines pricing, it includes explicit provisions for Pharma’s direct involvement in government procedures and deliberations for deciding on and listing medicines and devices that will be reimbursed by government health programs, such as PHARMAC in New Zealand, the Pharmaceutical Benefits Advisory Committee in Australia, and Medicare in the United States. Pharma and device applicants will also have input of the level of reimbursement for their products. There are set timelines and requirements that the criteria used to decide which medicines will be included/excluded for reimbursement be fully disclosed and justified. These measures reduce the sovereign autonomy and flexibility of responsible agencies to make difficult assessments regarding value for money in health care. Although a separate appeals process will no longer be required, there are requirements that there be substantive reconsideration processes—appeals in another name. All of these transparency and procedural niceties can be used by pharmaceutical and medical device companies to bully government decision-makers into accepting higher-prices for medical technologies of dubious value.
Even more dangerously, the provisions included in the transparency chapter could give rise to investor claims directly against states, allowing foreign investors to bypass national courts and seek unlimited monetary damages in three-person private arbitration proceedings. For example, according to TPP Investment Chapter rules, if a pharmaceutical or medical device company was dissatisfied with a government decision, it could proceed directly to arbitration claiming that it had been subjected to unfair and inequitable treatment. Even worse, if a country with no existing system for medicine and device formularies adopts this rational system for trying to control medical costs and deter introduction of medicines and devices of dubious medical value, the pharmaceutical investor could claim that its expectations of the profits and of a stable regulatory environment has been unfairly disrupted.
The Annex on Pharmaceuticals and Medical Devices is an unveiled attempt to give drug and device companies access to government's sovereign decision-making on medicines and device formularies and price-setting policies. The provisions, as they stand, allow for endless opportunities for one-sided interventions, lobbying, and reconsideration appeals challenging lack of meaningful participation, failures of evidence-based decision-making, obstruction of introduction of medical innovations brought forward by self-interested companies (not patients). Big Pharma and medical device companies basically want to bully governments into succumbing to their excessive pricing demands for new products, regardless of medical merit or beneficial comparison to alternatives. If they lose in these deliberation, the adoption of this "transparency", fox-in-the-henhouse strategy would allow companies to pursue investor-state dispute resolution, convening biased private arbitration panels to review claims that expectations of profits have been thwarted by the adoption or implementation of formulary or health care coverage and pricing decisions.
This chapter continues to pose a threat to access to affordable medicines, potentially burdening patients, insurers, and governments with bloated prices for the medicines they need, as well as for inferior products they don’t need. It also ties governments' hands to take more serious steps to control these health care costs and to reject medicines and medical devices with marginal or no additional therapeutic benefits. Yesterday, the New York Times reported that the new draft no longer demanded protection for pharmaceutical prices. However, this is somewhat misleading. The truth is the changes are largely cosmetic. The TPP’s transparency chapter still opens the door to the pharmaceutical and device-manufacturing industries to use procedural wrecking balls to destroy the machinery of government that is created to make rational decisions on the medicines and devices that it will reimburse with its limited financial resources and on the level of that reimbursement. It will harm the health interests of patients, insurers, and governments in each and every country involved, all in the relentless drive for monopoly prices and monopoly profits.