America’s biopharmaceutical companies lead the way in making the best medicines in the world. But our businesses can be undercut by weak or unenforced trade agreements that let other countries take advantage of our strong innovation.
When that happens, America needs to fight back – which is exactly what the Trump administration did recently when it highlighted the serious threats we face with countries around the world, including trading partners like Canada, Japan, and Colombia.
Foreign importers of American medicines enjoy the fruits of our discoveries, and they also enjoy an occasional free ride. Sometimes they replicate proprietary manufacturing information to copy our medicines, violating American intellectual property. Other times, U.S. businesses are left trying to compete with foreign firms that are subsidized by local governments, saddling us with a competitive disadvantage. And other governments have been known to change their policies, with little notice, about which medicines they’ll cover. All of these games create an uneven playing field that’s unfair to America.
These behaviors were discussed in the 2018 Special 301 Report from the Office of the U.S. Trade Representative.
South Korea, as one example, created an uneven playing field as it failed to live up to the 2012 free trade agreement known as KORUS. Despite the clear commitments it had made, South Korea refused to appropriately recognize the value of innovative U.S. pharmaceutical products. Instead, it implemented price controls that threatened access to medicines and took advantage of billions of dollars in U.S. investments.
As a result, the foundation of KORUS crumbled for the biopharmaceutical industry. South Korea depressed the price of innovative medicines well below their competitive market value, and those policies grew worse over time. The government arbitrarily set low prices for medicines without transparency and without engaging with U.S. companies and other key stakeholders. This plainly violated the agreement’s promise.
That’s why it is so encouraging the Trump administration has focused on improving and enforcing trade deals with countries like South Korea. Just last month, the U.S. secured a long-needed commitment under KORUS that South Korea will rein in some of their unfair pricing policies.
Led by United States Trade Representative Robert Lighthizer, the U.S. is combatting discrimination against American biopharmaceutical innovators. The secured commitment could finally end the unfair undervaluing of lifesaving medicines, close the disparities between the U.S. and Korean markets and boost exports in an industry that shipped more than $50 billion in products globally last year alone.
This commitment also could help spur innovation in South Korea’s biopharmaceutical industry. To date, South Korea’s price controls have chilled its own domestic investments in R&D, which harms Korean companies’ ability to invest in its own innovations. Compare this to the United States, where our competitive market means U.S. companies can do the R&D necessary to bring the latest treatments and cures to patients and strengthen our economy. That is why the U.S. is a world leader in the discovery and development of new medicines.
By securing a commitment from South Korea to honor the KORUS agreement, the Trump administration is helping level the playing field for American manufacturers. But there is more work to do. As USTR wrote in its recent Special 301 Report, Korea must address additional transparency concerns as well as “the need to appropriately recognize the value of innovative pharmaceuticals” in its pricing and reimbursement system. Next, in the North American Free Trade Agreement modernization, the U.S. government should enforce strong intellectual property protections and remove roadblocks to market like those imposed by Canada.
While the intense NAFTA negotiations continue, USTR last week noted its intent to deliver a strong agreement. It called out Canada for its “failure to resolve key longstanding deficiencies” in IP protection and raised concerns over proposed changes to its pricing review board. As the only G7 country identified in the Special 301 Report, Canada should take note.
Americans should not subsidize the medicine costs in other wealthy countries. President Trump’s administration has committed to a NAFTA that incentivizes innovation and contains strong intellectual property provisions. The biopharmaceutical sector looks forward to a modern agreement that acknowledges the vast potential of American innovation.
Tackling market disparities in countries like Korea, Canada and others will foster more research and development here at home and empower us to offer the world more innovative medicines. The result will be a more competitive marketplace for U.S. patients and American companies. Already, America’s biopharmaceutical sector invests about $75 billion annually in research and development while supporting more than 4.7 million U.S. jobs.
Global trade with the U.S. has helped more people all over the world get lifesaving medicines. But in return, other countries must play by the rules. We need to continue holding foreign governments accountable so that we can continue helping people everywhere live longer, healthier lives.
Stephen J. Ubl is president and chief executive officer of the Pharmaceutical Research and Manufacturers of America (PhRMA), which represents America’s leading biopharmaceutical research companies.
