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U.S.-Peru Trade Agreement Offers Access to Affordable Medicines

February 18, 2009

Kathleen Jaeger, President and CEO of the Generic Pharmaceutical Association

Next week, the U.S. Senate is poised to take an historic vote on the U.S.-Peru Free Trade Agreement. While much of the debate has centered on agricultural and labor concerns, there is a little noticed provision which will have a major impact on the lives of thousands of people. This provision will allow patients in need of affordable medicines to have access to generic drugs for the first time.

Until earlier this year, most U.S. bilateral free trade agreements afforded brand pharmaceutical companies greater intellectual property rights than they have under U.S. law. These pharmaceutical intellectual property provisions failed to acknowledge the legitimate role of access to medicine provisions, even when specific proposals being put forward by our trading partners had their origin in U.S. law.

This changed for the better in May. Under the bipartisan New Trade Policy for America agreement reached by the Bush Administration and the Democrat-controlled Congress, trade agreements will now foster pharmaceutical innovation as well as ensure that our nation’s free trade trading partners have access to safe and affordable medicines.

In particular, this policy makes free trade agreements in Peru, Colombia, and Panama consistent with U.S. law. Contrary to claims that the new policy harms brand pharmaceutical companies, the added flexibilities in the pending Latin free trade agreements do nothing to hinder innovation and, in fact, bring our trading partners more in line with the research and development incentives that these pharmaceutical companies currently enjoy in the United States.

In the United States, there is a virtuous circle: as competition from generic pharmaceutical companies has grown, so has investment by the brand industry in new drug development, with new blockbuster drugs regularly coming to market. Taken together, consumers benefit not only from the innovations, but from affordable generics as well. This is a concept that has worked well for more than 20 years in the United States, and now will be a key part of the U.S.-Peru Free Trade Agreement.

In addition to restoring balance to the pharmaceutical intellectual property provisions, the Peru agreement contains an explicit assurance that the intellectual property rights protections afforded pharmaceuticals do not conflict with the public health exceptions permitted by the World Trade Organization Declaration on the TRIPS Agreement and Public Health.

Moreover, several commercial provisions in the Peru trade agreement will provide U.S. exporters of pharmaceutical products with greater market opportunities in Peru, while providing Peruvian consumers with more choices, including lifesaving medicines, and lower-cost pharmaceuticals. Incredibly, given the need, the Peruvian government currently charges a 12 percent tax on U.S. pharmaceuticals shipped to Peru, which the agreement will eliminate. At the same time, U.S. pharmaceutical suppliers will get the right to bid on a non-discriminatory basis on contracts procured by Peru’s public health insurance agency. These measures will help ensure that the Peruvian consumer and taxpayer get the best value for the money spent on medicines in their health care system.

Thanks to provisions in the New Trade Policy for America, the U.S.-Peru Free Trade Agreement take significant steps to promote competition, which is good for consumers and good for a strong, vibrant pharmaceutical industry. This trade deal deserves Congress’ support.