Advances in Health Care: New Trade Pact Strengthens Incentives for Drug Companies

Peter Pitts, former associate commissioner with the FDA and president of the Center for Medicine in the Public Interest, discusses recent agreements finalized by the White House, United States, Mexico, and Canada, and he explains why this new trade pact strengthens the economic incentives for American drug companies to develop new cures that are crucial.

Podcast Transcript:

Hello. My name is Peter Pitts. I'm a former associate commissioner with the FDA. I'm currently president of the Center for Medicine in the Public Interest. What I'd like to talk to you about today is some very good news, when it comes to new drugs coming to market in the US.

The White House recently finalized the United States, Mexico, Canada agreements. This is the deal that replaces NAFTA. There's a lot of good news because there's really great news for patients. This new trade pact strengthens the economic incentives for American drug companies, to develop new cures that's crucial.

Congress can strike a blow against, for example, cancer, or Alzheimer's disease, and other diseases, by approving this deal. It's very important that it move forward. The American biopharmaceutical industry, as you know, has already saved countless lives, and breakthroughs in cancer treatments and help drive down death rates from cancer by 26 percent since the 1990s.

There has been a lot of news on this lately. It's largely driven through breakthroughs in pharmaceuticals. Advances in antiretroviral therapies, for example for HIV/AIDS, has also turned a death sentence into manageable health conditions for millions of Americans.

Everybody's benefiting from the advances. Advances are being driven, again, largely through protections of intellectual property, and patterns. I'll get to that in a minute. About half of American adults battle a chronic disease, and about 25 percent of the US population has at least two chronic diseases.

This is not an issue that is of interest in only a few people. It's really of interest to all Americans. Thanks to this new trade pact, the prospects for future medical discovery looks, in my opinion, much brighter.

This new deal enhances intellectual property protection for biologic drugs, which are the sophisticated new medicines made from living organisms, that are among the most effective treatments ever devised for conditions like treatment for cancer, and rheumatoid arthritis, and hopefully Alzheimer's disease on the horizon.

Creating new cures is expensive and it's risky. Bringing one drug to market costs about $2.6 billion. Of those drugs that actually reach patients that are approved by the FDA, only about one in five, or 20 percent, earn back their development costs. It's a high-risk proposition, which is why intellectual property protection is so crucial. It makes these financial risks worthwhile for investors.

Here in the US, drug companies that create new biologics enjoy a 12-year window, during which their research is protected from use by competing firms. This is called data exclusivity. It gives these drug companies the ability to recoup their initial investment in a biologic before rival firms flood the market with copycat products that are lower costs.

On the front end we win because these new drugs come to market, and in the back end, we win because generics and biosimilars can be introduced to market safely and effectively at far lower costs. However, Canada and Mexico have a less aggressive intellectual property protection.

Under this new trade pact, both countries are required to protect biologic drugs for a full decade. This increased protection really will encourage firms to invest in research projects, and bring in these new products to market. That's crucial. The deal also corrects down on foreign price controls, that we've heard so much about lately.

Currently, both Canada and Mexico artificially control the price of drugs, which erodes the incentive to develop new treatments, which is not surprisingly why these new products come not from Canada, or Mexico, or Europe, but from the United States.

When governments cap the price of medicines, innovators struggle to recoup development costs and become far less eager to fund research or bring their new drugs to new markets in new ways. Thanks to the US, again, this relatively free market, our market for medicines, allows us to have access to these new amazing discoveries.

In the US for example, patients have access to 192 of the 220 new drugs launched globally from 2011 to 2017. In Canada for example, they only got to 106. The USMCA new trade deal encourages both Canada and Mexico to value new medicines fairly, thereby fueling medical progress, and making sure that these new medicines reach patients who need them.

Breakthrough drugs have added years to the lives of American patients, With the. USMCA, American leaders have given our growth industry precisely what it needs to continue innovating, the protection, and the thumbs up that they're important.

That's why health care in the US is so far ahead of the rest of the world. However, this trade pact will help us advance even further. Thank you very much.

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