WashU Expert: Trump’s new NAFTA won’t lower domestic drug prices

But it theoretically boosts U.S. drugmakers' profits

pills and bottles on a table

President Donald Trump has touted his new United States-Mexico-Canada Agreement (USMCA) as a way to boost the American economy. It may not, however, have any impact on one of his other campaign promises: reducing prescription costs for U.S. consumers, says a drug pricing expert at Washington University in St. Louis.

Buried in the draft of the new pact is a provision that would give pharmaceutical companies a minimum of 10 years to exclusively market biologic drugs, a set of complex medications made from living cells.

The Trump administration claims the USMCA would protect their profits.

Rachel Sachs
Sachs

“In the U.S., we give innovator pharmaceutical companies some period of exclusivity after their product comes to market, before which a biosimilar drug can be approved on the strength of the innovator drugs application in the first instance,” said Rachel Sachs, associate professor of law in the School of Law and an expert on drug policy and pricing.

“The new USMCA agreement would extend the exclusivity period that we apply in the U.S. to Canada and Mexico. This means that biosimilar drug companies may have to wait longer in those countries to bring their products to market, thus theoretically boosting profits of U.S. drug manufacturers,” Sachs said.

We distinguish biologics from small molecule drugs such as aspirin, which are made through standard chemical synthesis techniques, she said.

“Biologics are much more complex molecules,” Sachs said. “They are more difficult to make, and it’s much harder to make follow-on versions of them. A small molecule follow-on drug is quite easy and cheap to make, but a biosimilar product — so-called because we can’t even show it to be identical to the biologic — often is far more expensive to make.”

What impact does this ultimately have on prices in America?

None at all, Sachs said.

“There is no relationship between rising prices on drugs abroad and lowering prices in the United States,” she said. “The Trump Administration has on occasion tried to draw this link, but it is not correct.

“If the Trump administration thinks that pharmaceutical companies need to be rewarded a certain amount for their products in order for them to keep making more products, and if it would like to lower drug prices in the U.S., it can make sure that companies have sufficient incentive by increasing prices abroad,” Sachs said.

“This is, perhaps, one step of a strategy to lower drug prices in the United States,” she said, “but there is no reason why USMCA as drafted would have an impact on domestic pricing.”

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