North American Free Trade Agreement (NAFTA)
NAFTA is a trilateral trade agreement between Canada, Mexico, and the United States that came into force on January 1, 1994. The Trump administration renamed the updated NAFTA the U.S. Mexico Canada Agreement (USMCA).
On May 18, 2017, the Trump administration notified Congress that it would renegotiate the North American Free Trade Agreement (NAFTA).
NAFTA was the first international trade agreement to include standards for enforcing intellectual property rights, including patent rights for pharmaceuticals. This agreement mandates minimum standards of intellectual property protection but does not prevent countries from establishing even higher standards. NAFTA provides for “national treatment,” meaning that intellectual property belonging to a U.S. national and distributed in Mexico and Canada will receive at least the same intellectual property protection as those afforded Mexican and Canadian products. In practice, robust patent protections for drug manufacturers drive up drug prices leading to higher out-of-pocket costs for seniors and burdening Medicare’s financing.
Since NAFTA, successive trade agreements have included expansive intellectual property protections for pharmaceuticals and other provisions that have favored industry over consumers including:
- Forcing countries to extend lengthy patent protections for pharmaceuticals. As long as a patent is protected, a generic cannot be sold. The patent holder is the only one allowed to sell a drug and can therefore demand a monopoly price for it. Lengthy patents drive up the cost of prescription drugs unnecessarily.
- Forcing countries to provide lengthy monopolies for biologics when they are approved to be marketed domestically.
- Establishing “investor-to-state dispute settlement” (ISDS) tribunals to allow investors to challenge laws and regulations which they allege will hurt their profits. Drug companies could use ISDS to challenge formularies and preferred drug lists, discounts, rebates and other policies in public programs that pay drug companies less than the price they demand.
- Requiring countries to adopt pricing and coverage transparency provisions for their national health care systems that require justification of their pricing and reimbursement decisions. These provisions could provide ammunition for drug companies to sue governments in international tribunals under ISDS systems.
After public pressure from the National Committee and other advocates, and members of Congress, the Trump administration agreed to take out many of these harmful provisions from USMCA. Specifically, USMCA:
- No longer contains a 10-year right to exclusively market a biologic after it is approved by the FDA.
- Doesn’t require that patents be available for new uses of known products, which would have led to patent evergreening, which protects products from competition from generics.
- Limited the availability of ISDS to corporations to narrow circumstances.
NATIONAL COMMITTEE POSITION
Trade agreements bind participating governments to their provisions. Many of the provisions that the U.S. Trade Representative has pursued in recent trade agreements would not only drive up costs of drugs in countries that didn’t already have these provisions in place, they would tie the hands of Congress to make changes in the future that could bring down the cost of drugs. The National Committee urges Congress to oppose provisions in USMCA and other trade agreements that would put Medicaid, Medicare and the affordability of medicines and medical devices at risk.