New Trade Deal Blocks Prescription Drug Imports to US

Despite making the reduction of prescription drug prices a top priority for his administration, President Donald Trump said on Monday that the new North American trade agreement will prevent drugs from being imported to the U.S. at a reduced price.

The new trade deal – titled United States-Mexico-Canada Agreement – includes new intellectual property protections for American drug manufacturers that will shield them from foreign competition.  

“We want our drugs to be made here,” Trump said during remarks after the U.S. and Canada agreed to terms on the new trade deal. “When you talk prescription drugs, we don’t like getting them from foreign countries. We don’t know what’s happening with those drugs – how they’re being made.”

Under prior agreements, American pharmaceutical companies could exclusively market patented drugs in the U.S. for five years before domestic and foreign competitors could offer cheaper generic versions to patients. Under USMCA, the exclusivity window has been extended to 10 years – a “great thing” for drug companies, a senior administration official told reporters Monday.

Americans pay the highest prices for prescription drugs in the world. In 2016, U.S. spending on pharmaceuticals totaled more than $450 billion – a rate that’s two to six times higher than the world average.

The Congressional Budget Office (CBO) has estimated that a proposal to allow drug imports from Australia, Canada, Japan and several European countries could save patients $40 billion over ten years. Savings from allowing imports only from Canada would total about $7 billion over the same time period, the CBO said.

In 2017, 12 Republican Senators voted in favor of an amendment introduced by Senator Bernie Sanders that would have allowed pharmaceutical imports from Canadian manufacturers that are certified by the U.S. Secretary of Health and Human Services.

An analysis done by the Center for Responsive Politics showed that candidates from both parties who voted against the amendment had received significantly more campaign contributions from people and organizations linked to the American pharmaceutical industry.

Democratic Senators who voted against the measure received an average of nearly $200,000 in contributions from the industry between 2009 and 2016. Democrats who supported it received an average of only about $68,000.

The same trend held true for Republicans. Those who supported the measure received an average of about $66,000 in pharmaceutical contributions. Those who opposed it received an average of nearly $150,000.

Prime Minister Justin Trudeau describes the moment he realized the U.S. and Canada could reach a deal. Watch more here: https://t.co/XyjDpqkxYV #USMCA pic.twitter.com/O2rRwrKCMN

— CTV News (@CTVNews) October 1, 2018

USMCA replaces the 24-year-old North American Free Trade Agreement, dubbed by Trump as “the worst deal ever.” 

Canada agreed to join the U.S. and Mexico in the deal late Sunday night following intense negotiations and a war-of-words between Trump and Canadian Prime Minister Justin Trudeau.

Trudeau praised the deal Monday, saying it will be “profoundly beneficial for our economy, for Canadian families and for the middle class.”

USMCA leaves much of NAFTA in place but alters some provisions in several industries.

“The agreement – being hailed as a triumph for President Trump – is a good thing, but it needs to be seen not as a major departure, but as a modest revision that largely preserves the core of the original,” Frederick Mayer, a professor at Duke University’s Sanford School of Public Policy, said Monday.

U.S. dairy manufacturers will get slightly greater access to Canada’s dairy market, an issue Trump said was decisive in closing the deal. Dairy makes up about 0.06 percent of overall trade with Canada.

The deal also requires that 75 percent of auto-industry parts be made in North America – an increase from 62.5 percent – and that 40 to 45 percent be made by workers earning at least $16 an hour.

If an agreement had not been reached, the continent’s closely-integrated auto supply chain would have been disrupted. Trump also threatened Ottawa with new auto tariffs and other trade barriers if they did not meet U.S. demands.  

Speaking just hours after the agreement was reached, International Monetary Fund Director Christine Lagarde said that the rise in trade barriers “is hurting not only trade itself, but also investment and manufacturing as uncertainty continues to rise.”

She signaled that the IMF would downgrade its global growth forecast next week, and urged governments to de-escalate trade disputes.

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