Drugs Down Under

Although Australia exports few drugs, a pending free trade agreement between the United States and its 13th largest trading partner would set a pricey precedent that runs counter to efforts to legalize prescription-drug imports.

The agreement, approved by the Senate’s Finance Committee yesterday with Sen. Olympia Snowe voting against it, takes the novel step of giving U.S. pharmaceutical companies a voice in determining how Australia operates its national health program. It would also broaden existing bans on drug imports from the country. Congress, which must ratify the pact for it to become effective, should put it on hold so the provisions regarding drug imports can be removed or reworked.

Drug companies have long objected to Australia’s Pharmaceutical Benefits Scheme that gives government officials the authority to decide what drugs will be covered and how much they will pay for them. Before a drug is included in the PBS, its clinical benefits, safety and cost-effectiveness are compared with other treatments.

This sort of government oversight seems odd here, but would strike those in other developed countries as normal. Countries with national health care plans typically pay half as much as the United States does for medical care, including drugs. But rather than move to such a proven system, the United States is virtually alone in putting the profits of drug companies ahead of the wider availability of affordable drugs and, now, is trying to force other countries such as Australia to do so as well.

Representatives of the Pharmaceutical Research and Manufacturers of America, the industry’s trade group, have long contended that price controls in other countries unfairly force Americans to pay most of the cost of pharmaceutical research and development. The solution they have hit upon is to force other countries to stop controlling prices. The Australia trade agreement, which includes language about the “need to recognize the value of innovative pharmaceuticals through the operation of competitive markets” and allows U.S. drug companies to appeal a determination by the PBS, is the first step.

Because the trade agreement is voluminous, includes at least two side agreements and deals with many issues, the prescription drug provision did not get much attention until this month. Now, both here and in Australia, lawmakers are calling for removal of much of the prescriptive language on drugs.

“I am greatly concerned by any free trade agreement that could establish a dangerous precedent that would impede drug importation from other nations with equivalent drug safety regimes,” said Sen. Snowe, co-sponsor of a bill that will allow drug importation from several countries.

If lawmakers are serious about controlling drug prices here they will have to negotiate prices. Importing lower-cost drugs from countries that have already done this is a good interim step. The Australian free trade agreement should not stand in the way.