Sending Office: Honorable Sean P. Duffy
Please join me in sending a letter to President Trump urging action to protect innovative U.S. pharmaceutical companies from unfair “free riding” by our foreign trading partners. It’s time for other countries to pay their fair share for the groundbreaking
treatments and cures developed with U.S. taxpayer dollars.
As you may know, developed countries like Germany, France, Japan, and Canada consistently undermine U.S. companies through market-manipulating policies like price controls, access barriers, and intellectual property (IP) theft. These practices and others
force patients in the U.S. to bear the high cost of innovation and research, while patients abroad reap the rewards of our investments.
The average drug takes 10 years and $2.5 billion to bring to market. The clinical trials process is burdensome and expensive, and the patent clock starts the moment a New Drug Application (NDA) is filed (before clinical trials begin). At the same time, the
pharmaceutical industry faces a roughly 90 percent clinical failure rate, while more complicated diseases like Alzheimer’s face failure rates in excess of 99.6 percent. Moreover, investments in research for Orphan Drugs (those affecting fewer than 200,000
patients in the U.S.) have limited markets to justify the high cost of research, further reinforcing the need for fair market practices abroad.
The risks of health innovation investments in the U.S. demand robust protections abroad. Pharmaceutical cost increases in the United States have outpaced other countries significantly due to weak trade agreements of the past. Free riding is an ongoing drain
on the innovation economy, and U.S. patients are taking the hit.
Please join me in sending this letter to President Trump. If you have any questions or would like to sign on, please contact Sam Watters at Sam.Watters@mail.house.gov.
Member of Congress
President Donald J. Trump
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
Dear Mr. President:
I am writing to express my strong concerns in regard to the “free riding” of our trading partners on U.S. innovative pharmaceuticals. Among these issues include foreign government price controls, market access barriers, and intellectual property (IP) theft.
Developed countries like Germany, France, Japan, and Australia consistently undermine American companies through longstanding, impermissible practices that place an unfair burden on U.S. patients, cost our economy jobs, and rob us of new treatments and cures.
“Free riding” creates a difficult choice for the U.S. pharmaceutical industry. Innovative companies can either accept a very low reimbursement rate for cutting-edge medicines (which then ripples through the rest of the global pricing system, as developing
nations peg their own reimbursements to Europe, Japan, Korea or Australia), or face the very real threat of a compulsory license. Once the drug has lost its patent, generic companies move into these countries and undercut in price the original innovative drug.
Perhaps the most effective way to prevent free riding is through trade enforcement and strong trade disciplines in our new free trade agreements (FTAs). You have already shown tremendous leadership on trade, demonstrating through the renegotiated U.S. Korea
FTA (KORUS) that strong trade policy can create a level playing field for U.S. innovators. By negotiating with Korean officials to provide full access to the government reimbursement system previously reserved for Korean companies, U.S. innovators can now
compete fairly in the Korean market, enabling them to invest more in R&D and jobs here in the U.S.
Over the past few months, a number of U.S. companies have met with Commerce Secretary Ross, USTR Lighthizer, and other members of your senior staff to discuss similar solutions to the free-riding issue. Foreign systems are frequently government-controlled,
over-regulated, and contrary to international conventions like the World Trade Organization’s (WTO) GATT and TRIPS Agreements, as well as numerous bilateral obligations. This requires a strong U.S. government response.
Ongoing trade talks with Canada and Mexico related to NAFTA and use of trade tools like Special 301 and Section 301 can hold the worst actors accountable (Canada’s Patented Medicine Prices Review Board is one of the worst government price control bodies
among developed economies). These opportunities can serve as a vehicle for aggressive Administrative action to eliminate practices that undervalue U.S. innovation.
Most notably, Canada continues to propose and implement pricing and reimbursement policies that do not value innovation, leaving the U.S. to shoulder a disproportionate burden of global R&D. Canada is currently proposing to remove the U.S. and Switzerland
from the basket of comparator countries for price determinations using international reference pricing, while also considering disclosure of confidential rebates that do not justify the intended policy objective. The U.S. government should begin to address
the free-riding issue in Canada via a two-pronged approach, and then branch out to the EU and other countries:
- Trade Negotiation Strategy– To date, Canada has refused to include pricing and reimbursement issues in NAFTA negotiations. However, building off the recent success of the KORUS agreement, we believe that USTR should require that this issue
be resolved as part of a modernized NAFTA agreement.
- Special 301 Process to lower Medicare beneficiary out-of-pocket costs. Another approach is to work through the U.S. Trade Representative’s Special 301 Process. This approach would utilize U.S. tariffs as a penalty if the foreign
government’s pricing and reimbursement regime leads to prices below an adjusted range of U.S. prices, depending on a foreign country’s per capita GDP or other benchmarks. Revenues from these tariffs could then be appropriated by Congress to support Medicare
As you’ve noted in the past, the free-riding issue is an ongoing drain on the U.S. innovation economy, threatening thousands of high-paying jobs across the country. I extend my congratulations to you and Ambassador Lighthizer on your handling of the KORUS
renegotiations, and stand ready to support your efforts to negotiate fair trade agreements for the United States. More wins like KORUS can help us bring an end to this vexing issue.
Member of Congress
e-Dear Colleague version 2.0