Last year’s trio of new bilateral U.S. trade pacts — with South Korea, Colombia and Panama — will boost U.S. export volume of high-value pharmaceutical shipments, often shipped by air, to those markets.
With the failure of the Doha Round of World Trade Organization-sponsored negotiations, U.S. pharmaceutical manufacturers are pinning their long-term hopes for improving access in emerging markets on bilateral trade agreements, on the one hand, and new initiatives such as the ambitious multilateral Trans-Pacific Partnership, on the other.
South Korea, the largest market outside North America ever to sign a free trade pact with the U.S., isn’t only the most important of those three new markets, but also a potential model for other agreements that will improve market access and enhance intellectual property protection for U.S. pharmaceutical exports elsewhere around the world.
U.S. pharmaceutical exports to Korea increased almost 35 percent in 2010 year-over-year to $781 million, according to the U.S. International Trade Commission Trade Dataweb. But with the implementation of the pact in 2012, U.S. pharmaceutical exporters expect significantly higher levels of exports in years to come. “By reducing and eliminating both tariff and non-tariff barriers to trade between Korea and the United States, the agreement will play a key role in strengthening the U.S. economy and increasing American jobs and exports,” said John Castellani, president and CEO of the Pharmaceutical Research and Manufacturers of America.
For U.S. makers of patented pharmaceutical products, the Korean pact is vital, Castellani said, because it “establishes basic rules and principles that will tear down some of the major obstacles to the Korean market. These rules include both strong protections of intellectual property rights and disciplines on the processes used by the Korean government to price and reimburse pharmaceutical products.”
U.S. exporters of pharmaceuticals to Korea have long been frustrated by such non-tariff barriers as the Korean government health insurance system, which is “overly focused on price-cutting and cost containment, and not sufficiently concerned with ensuring patient access to the newest medicines,” Castellani said.
He criticized Korean government for making “regulatory decisions regarding the listing of pharmaceutical products for reimbursement that are not science-based and do not reflect international norms and best practices,” and cited the “systematic use of questionable and unethical business practices by the local industry and large purchasers, such as illegal rebates.” Before the new pact, Korean government officials have shown little interest in listening to the views of pharmaceutical producers.
Provisions in the new trade pact now will require Korean regulators to abide by “fair, reasonable, non-discriminatory, market-based principles in deciding whether to list pharmaceutical products for reimbursement and in deciding appropriate levels of reimbursement,” Castellani said.
Other provisions in the new pact will require Korea to put in place strong protections for intellectual property rights — even beyond those required under the WTO. “Through ratification of KORUS (the pact with Korea), these enforceable commitments will help ensure that Korean patients have access to cutting-edge medicines, and the American workers who make up the U.S. biopharmaceutical industry have access to this ever important, growing market,” he said.
Rob Mulligan, senior vice president at the U.S. Council for International Business, calls the intellectual property provision in the new pact with Korea “one of the best ever negotiated.”
Korea is not the only major foreign market where U.S. pharmaceutical exporters expect to enjoy improved access in coming years.
In November, the Working Party on Russia’s Accession to the World Trade Organization reached an agreement after 18 years of negotiations, laying the groundwork for Russia’s long-delayed membership in the WTO.
“PhRMA and its members strongly support this initiative and are confident that Russian WTO accession will lead to a greatly improved business climate in that country,” Castellani said. “Unfortunately, to date, Russia’s intellectual property protection has been lacking,” he said.
After Russia joins the WTO, and enacts the necessary intellectual property provisions, Russian patients will be able to gain access to “new and innovative medicines.”
Contact Alan M. Field at firstname.lastname@example.org.