POLITICS

Trade Deal Targets Medicare, New Leak Reveals

06/10/2015 04:08 pm ET | Updated Jun 11, 2015

For the second time in a week, Medicare is complicating an already fraught debate over the 12-nation Trans-Pacific Partnership trade deal.

A recent draft of the health care transparency section of TPP released by Wikileaks on Wednesday reveals the deal would make Medicare vulnerable to legal challenges from pharmaceutical companies and jeopardize future attempts by the insurer to negotiate lower drug prices.

In a modest victory for global health care advocates, however, the leaked draft does not contain previous language explicitly protecting prescription drug prices from being marked down by government insurers.

Although the TPP section requiring national-government health authorities to abide by “transparency and procedural fairness for pharmaceutical products and medical devices” was long suspected to apply to Medicare, the draft text released Wednesday, which dates to December 2014, marks the first explicit mention of Medicare. The new rules would not apply to state or provincial health authorities, which in the U.S. include Medicaid.

The TPP section requires countries to share decisions about pricing and regulation of drugs with pharmaceutical manufacturers, provide opportunity for comment on those decisions and create a process through which those decisions can be reviewed at the request of affected companies.

According to an analysis of the leaked document by Jane Kelsey, a law professor at the University of Auckland in New Zealand, these rules are enough to expose national health authorities to legal challenges under TPP’s investor-state dispute settlement process, or ISDS. ISDS empowers companies to challenge countries’ domestic laws before a tribunal of international judges if they believe the laws unfairly limit investment. The tribunals have the power to impose significant fines on countries if their laws are found responsible for the investment hardship in question. While pharmaceutical companies could not challenge national health programs’ policies through ISDS, their grievances would be eligible for ISDS if the companies claimed the policies hindered investment.

The clause removed from a leaked 2011 draft promises pharmaceutical companies the right to charge “competitive market-derived prices,” according to New York Times reporting on the TPP section released by Wikileaks.

Speaking to The New York Times, Deborah Gleeson, a public health lecturer at La Trobe University in Australia who examined the leaked section, called the absence of the language “a victory for the non-U.S. partners to some extent.”

Peter Maybarduk, director of Public Citizen’s Global Access to Medicines project, attributed the change to the “unanimous opposition” of non-U.S. TPP negotiating partners, and to U.S. groups like AARP and the labor union American Federation of State, County and Municipal Employees.

Maybarduk and other advocates argue that despite the lack of explicit price requirements in the new draft, the other TPP pharmaceutical and medical device transparency provisions still expose government drug purchasing programs to new legal challenges from pharmaceutical companies.

“The language previously was a little more specifically designed to attack the reimbursement rates” of government drug insurance programs, Maybarduk told The Huffington Post. “Now it is more about process rather than outcomes,” but the intent to undermine government drug price negotiation remains the same.

In an earlier statement, Maybarduk expressed concern that the rules would “limit Congress’ ability to enact policy reforms that would reduce prescription drug costs for Americans –- and might even open to challenge aspects of our health care system today.”

Officials at the office of the United States Trade Representative told The New York Times that the new rules would not affect Medicare, since they have verified that the Center for Medicare and Medicaid Services, which administers the program, already complies.

But Maybarduk worries that USTR’s assurance notwithstanding, the language of the deal is broad enough to leave open the possibility of challenges to current Medicare policy.

The likelihood that TPP would preclude future Medicare policies is even greater, Maybarduk said. He is concerned that enabling Medicare to negotiate bulk drug prices would not be allowed under TPP. Medicare Part D, the prescription drug program, is currently prohibited from negotiating drug prices, but many health policy experts have touted it as a way to lower costs for Medicare and its beneficiaries. A 2013 analysis by the Center for Economic and Policy Research found that if the United States negotiated drug prices as aggressively as Canada, which is still considerably less aggressive than other OECD countries, over a decade, the federal government would save $229.7 billion, state governments would save $30.8 billion and consumers would save $47.7 billion.

Among the United States’ TPP negotiating partners, pharmaceutical provisions have faced the greatest opposition from Australia and New Zealand, which have national health authorities that provide prescription drugs to their citizens at heavily discounted rates. The U.S. Trade Representative and U.S. pharmaceutical companies have targeted the cost containment measures in those countries’ prescription drug programs for years. Pharmaceutical companies also claim that New Zealand’s drug approval process is opaque and difficult to navigate.

Another provision of the deal requires that countries allow companies to “disseminate to health professionals and consumers through the manufacturer’s Internet site,” which may be used to challenge some countries’ restrictions on direct marketing to consumers.

Wednesday’s revelation marks the second time in a week that the implications of TPP for Medicare, whether direct or indirect, complicated efforts to pass fast-track authority that would speed up passage of the trade deal. On Tuesday, labor unions and seniors groups sent two letters to House members asking them to vote against a bill that accompanies fast-track authority legislation because it would cut Medicare reimbursements by $700 million to pay for a Trade Adjustment Assistance extension.

House leaders in both parties have suggested that the fast-track bill could come to the floor later this week, although a vote has still not been scheduled.

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