The Korus FTA Will Lead to Higher Drug Prices in Korea

1. The Korus FTA Will Lead to Higher Drug Prices in Korea Mike Palmedo, Research Coordinator Program on Information Justice and Intellectual Property American University, Washington College of Law June 3, 2007 - Seoul, Republic of Korea

2. IPR Chapter of the New Trade Policy for America • Though portrayed in the media as a compromise, language on access to medicines still TRIPS-Plus. • The intellectual property section is meant to increase access to medicines in “developing countries.” It is meant for the FTAs with Peru, Panama, and Colombia.

3. Korus FTA & New Trade Policy for America’s IP Guidelines • “Most of the IP provisions do not apply to the Korus FTA. The one provision that would apply is point 3(d).” • Ways and Means Staff May 29, 2007

4. New Trade Policy Five year period of data exclusivity for New Chemical Entities. Concurrent periods of exclusivity if approval in one nation is based on approval in another Korus FTA Five year period of data exclusivity for New Chemical Entities. Three year period of data exclusivity for drugs that are not NCEs, but required clinical testing for approval. Non-concurrent periods of exclusivity if approval in one nation is based on approval in another Data Exclusivity

5. New Trade Policy “No requirement that the drug regulatory agency withhold approval of a generic until it can certify that no patent would be violated if the generic were marketed.” Korus FTA Parties must “implement measures in its marketing approval process to prevent… other persons from marketing a product without the consent or acquiescence of the patent owner during the term of a patent.” “Linkage”

6. New Trade Policy Parties “may” include patent extensions to make up for delays in the granting of either a patent or marketing approval. Korus FTA Parties “shall” include patent extensions to make up for delays in the granting of either a patent or marketing approval. Patent Extensions

7. New Trade Policy Second use patents not covered. Korus FTA Second use patents mandatory. Second Use Patents

8. Pharmaceuticals and Medical Devices Chapter Attacks the Negotiations for Reimbursement Rates

9. US-Australia FTA “Annex 2(c): Pharmaceuticals” Korus FTA “Chapter 5: Pharmaceuticals and Medical Devices Scope of Medicines Section

10. US-Australia FTA Parties committed to “the need to promote timely and affordable access to innovative pharmaceuticals." Korus FTA Parties committed to “access to high-quality patented and generic pharmaceutical products and medical devices.” When determining reimbursement for a specific product, parties shall "appropriately recognize the value of patented pharmaceutical products and medical devices in the amount of reimbursement it provides." “Innovative” or “Patented”

11. US-Australia FTA Ensure decisions within a specified period of time Disclose "procedural“ rules and guidelines used to assess a proposed listing Make available an “independent review process” Korus FTA Includes all of the mandates found in the US-Australia FTA Obstacles to any future reform of reimbursement system. Make available an “independent review body” Transparency

12. The Pharmaceuticals and Medical Devices Chapter Will Affect Korea, But U.S. Drug Price Negotiations Are Largely Unaffected

13. Footnote 1 - Excluding Military Healthcare in U.S. Pharmaceutical formulary development and management shall be considered to be an aspect of government procurement of pharmaceutical products for healthcare agencies that engage in government procurement. Chapter Seventeen (Government Procurement) and not the provisions of this Chapter shall govern government procurement of pharmaceutical products.

14. State Governments in the U.S. Negotiate Reimbursement Rates for Pharmaceuticals for Poor and Disabled Patients through Medicaid

15. State Senators Warn USTR About US-Australia FTA Threat to Medicaid • “The AUFTA undercuts the ability of states to consider cost effectiveness as a factor when deciding to grant preferred status to a drug. California's preferred drug list (PDL) promotes the most cost-effective and therapeutically advantageous products, while discouraging more expensive alternatives that are found to have no real benefit in regard to patient care. Any loss in bargaining power on behalf of the State will increase costs, thus limiting the overall effectiveness of California programs.” • California State Senators • Liz Figueroa and Sheila Kuehl

16. USTR Attacks Health Reforms During Korus FTA Negotiations “…the decision to proceed with this plan is inconsistent with both the mandate of the pharmaceuticals working group and the market opening spirit of the KORUS FTA… …The positive list system as explained to our delegation by the Ministry of Health would discriminate against innovative drugs which are the types of drugs that are mainly supplied by U.S. and other foreign companies.” -Assistant US Trade Representative Wendy Cutler Chief US Negotiator for the US-Korea FTA

17. Carve-Out for State Medicaid Programs health care program operated by a Party’s central level of government means a health care program in which the health care authorities of a Party's central level of government make the decisions regarding matters to which this Chapter applies;[3] FOOTNOTE 3: For greater certainty, Medicaid is a regional level of government health care program in the United States, not a central level of government program.

18. Three Things to Remember • The Korus FTA intellectual property chapter will delay generic competition. • The New Trade Policy for America does not apply to the intellectual property chapter of the Korus FTA. • The Pharmaceuticals and Medical Devices Chapter will encourage the Korean National Health Insurance to favor expensive, brand-name drugs.

19. wcl.american.edu/pijip