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[e-drug] Australia: FTA and PBS now!

E-drug: Australia: FTA and PBS now!

{Cross posted from Public Health Association of Australia list. With
thanks. BS]

Drug Industry Seeks to Sway Prices Overseas
By Elizabeth Becker, 27 November 2003, NYT

Washington, Nov. 26 - Having beaten back price controls on
prescription drugs in the United States, the American pharmaceutical
industry is trying to roll them back overseas, with help from the
administration and Congress.

In talks over a free trade agreement with Australia, American officials
are pressing to water down the system under which the Australian
government negotiates the prices it pays for prescription drugs, Mark
Vaile, the Australian minister for trade, said here Wednesday. Mr.
Vaile said that the American negotiators had raised this "in amongst a
range of issues, not as a core issue."

If successful, the United States could use this agreement as a
benchmark for trade deals with other rich nations. Loosening price
controls is a priority for the drug industry, which gets most of its
profits in the United States and argues that prices here could be lower
if other nations paid their share of the cost of developing drugs.

Mr. Vaile, in a briefing for reporters, said that his government would
stand firm against any terms that would affect "the ability of the
Australian government to provide inexpensive medicine to its

He met here this week with Robert B. Zoellick, the United States
trade representative, and confirmed that the issue would be on the
agenda for formal talks between the countries in Washington next
week. The negotiators have set a Dec. 31 deadline for completing an

Analysts say that the drug issue could be part of the horse trading
over Australia's desire to export more agricultural products to the
United States and Washington's push to ease access to Australian
markets for the American entertainment and service industries.

The legislation passed by Congress this week to establish a
prescription drug benefit in the Medicare program specifically forbids
the government to use its influence to negotiate lower drug prices.
That provision was a top goal of the drug industry in its lobbying on
the measure.

The Medicare bill also requires the Bush administration to apprise
Congress on progress toward opening Australia's drug pricing
system. Drug industry executives said that provision was a sign of
how badly their backers on Capitol Hill want to see trade agreements
used to challenge foreign government's price-control systems,
especially when Americans are flocking to Canada to buy inexpensive

In the free trade talks, drug industry executives said, the United
States is asking that Australia agree that its Pharmaceutical Benefits
System pay higher prices for new medicines and make other changes
in how it sets the prices of prescription drugs.

"This is all going on in this larger context of growing unrest in the
United States that other countries are not paying their share of the
cost of pharmaceutical research," said Ian Spatz, vice president for
public policy at Merck & Company.

Officials in Mr. Zoellick's office said that no formal proposal had been
put in writing. "What we are looking at are ways to reward innovative
medicine and to promote transparency," said a senior American trade

Dr. Mark B. McClellan, the commissioner of the Food and Drug
Administration, said in a speech in September that since the benefits
of American drug innovations are global, the costs of the research
and development of the drugs should be global as well.

"The United States is now covering most of these costs of developing
a new drug to the point where it can be used by the population of the
world," Dr. McClellan said. "But it is clear to me that we cannot carry
the lion's share of this burden for much longer."

A month's supply of Lipitor, a cholesterol-lowering drug, that costs
about $120 in the United States costs about half as much at
drugstores in Canada and Italy ? two nations that, like Australia, have
government price controls. The price difference is even bigger for
Prevacid, a heartburn drug, and Paxil, an antidepressant, according
to a recent informal survey of drugstores in the three countries.

But rather than demand an increase in foreign spending on research
and development, as some specialists have suggested, the
administration is asking that countries agree to pay American drug
companies more for medicines they buy for their government health

Mark Weisbrot, co-director of the Center for Economic and Policy
Research, a research center in Washington, criticized the American

"This is a terrible extension of the inefficiency and inequity of our own
system," Mr. Weisbrot said.

"The administration is right that something has to change," he said.
"But it should be here, not in countries with an effective method to
finance pharmaceuticals for their citizens."

The pharmaceutical industry disagrees. The World Trade
Organization now enforces intellectual property rights, including drug
patents, in large part because of industry pressure.

And though the United States bowed to pressure and agreed to help
poor nations buy generic medicines through exemptions from trade
rules, the drug companies contend that wealthy nations use the
negotiating power of their national health systems to demand unfair,
arbitrary prices.

Mr. Vaile, however, said that the issue had no place in trade talks
dedicated to opening markets, because American pharmaceutical
firms face no trade barriers in Australia. 

"Any American drug company can sell in Australia, and they can sell
to the P.B.S. scheme," said Mr. Vaile, referring the Australian drug
benefit program.

Like Americans, Australians will go to the polls next year, and any
serious tampering with the health benefit system could be a liability to
the Liberal Party of Prime Minister John Howard.

Tony Abbott, the minister of health, said on Australia's Channel 7
television this month that "the American drug companies don't like the
P.B.S. because the government uses its position as a massive
purchaser of drugs to keep prices down ? and that's the way it should

Mr. Vaile disputed contentions by the American pharmaceutical
industry that Australians do not pay their fair share of research costs
or that Australia can provide low-cost medicines to its citizens only by
taking advantage of American consumers.

"The Australian taxpayer also pays for research and development,"
he said, noting that the government has a $500 million medical
research budget. "But it is different in Australia. We are a differently
structured society."

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