State Leaders Skeptical of Pfizer/Stanford Proposal for Developed-Country Commitments to High Drug Prices to Fund Pharmaceutical Innovation

Sean Flynn
March 4, 2009

Arizona State Senator Megan Cahill, chair of the State Legislators Working Group on Pharmaceuticals and Trade, and Maine Representative Sharon Treat, Executive Director of the National Legislative Association on Prescription Drug Prices, wrote Stanford professor John Barton opposing his proposal with Pfizer for a global trade framework to “discipline” pharmaceutical price negotiations, encouraging instead more efforts to develop and implement mechanisms “de-linking the cost of development and marketing of drugs from the price of the resulting products.”

The Barton proposal [described in his letter to Senate Finance Committee Chairman Max Baucus] has been described elsewhere on PIJIP’s blog, calls on developed countries to “pay an adequate price to encourage research” and to “ensure that pricing and reimbursement policies recognize and reward innovation and to set disciplines on government practices that undermine incentives for innovation.” The proposal appears to be the latest effort of the pharmaceutical industry to reinforce unrestrained monopoly pricing power as the key mechanism to reward and incentivize research and development in the face of increasingly vigorous calls for R&D alternatives that both fund research and development and increase access to medicines.

State governments, whose Medicaid programs fund medicine purchases for 58 million low-income Americans at much lower negotiated prices than most other U.S. buyers receive, have long opposed the mission creep of US Trade Policy into pharmaceutical reimbursement policies. The organizations of Treat and Cahill previously opposed pharmaceutical reimbursement provisions in the Australia and Korea FTAs, and were largely responsible for the inclusion of a Medicaid carve-out in the final language of the Korea agreement. Representative Sharon Treat explained at a recent PIJIP forum that the Barton-Pfizer proposal appears carefully tailored to backtrack on the achievements of states and threatens the viability of Medicaid programs around the country (see webcast).

The letter is especially notable for the endorsement by the two state organizations of the kind of “access
+innovation” R&D alternatives that have until now been mainly the focus on international treatment activists. The letter explains:

There is also a growing realization that we cannot continue to fund medical research and development through patent-based monopolies. Your proposal would perpetuate this funding model, which has resulted in unaffordable drugs, slowly-closing pipelines, insufficient research for orphan and neglected diseases, new products without significant health improvements over old ones and unsustainable price increases. Alternative models exist for R&D funding that could promote both innovation and access. In 2007, Senator Sanders introduced S.2210, the Medical Innovation Prize Fund Act, which would replace patent monopolies with prizes for innovators. Presidential candidate John Edwards supported medical innovation prizes and discussed them on the campaign trial. In 2004 Rep. Kucinich introduced H.R. 5155, the Free Market Drug Act, which would directly fund R&D and place government-funded research in the public domain. MIT professors Stan Finkelstein and Peter Temin advocate de-linking the cost of development and marketing of drugs from the price of the resulting products. These types of proposals are currently under debate internationally in fora such as the World Health Organization and the World Intellectual Property Organization, and any forward-looking discussion on new international frameworks for R&D funding should include them.

Will states now work more closely with international treatment activists to push forward a new mechanism that better incentivizes the next wave of research and development while pushing prices, including in the U.S., lower?


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