John Whelan: Ireland needs a EU-US trade deal to protect pharma

The US-UK trade deal gives the Irish government and EU negotiators some indication of the potential negotiating tactics to avoid tariffs
John Whelan: Ireland needs a EU-US trade deal to protect pharma

Pfizer is just one of the numerous US pharmaceutical firms with operations in Ireland who would be under threat from tariffs. 

The Donald Trump administration is caught on the razor’s edge of trying to bring home pharmaceutical manufacturing to the US by threatening tariffs on imports but in doing so he is risking increasing costs to US consumers which are already one of the highest internationally.

The recent rapid rise in US imports of pharmaceuticals from Ireland and across the EU has exacerbated the issue for Mr Trump. 

Combating big pharma has become a sort of personal mission for him, smarting from his failed attempt to curb what he perceived as price gouging during his first term as president.

In an attempt to get around the conundrum, Mr Trump last week vowed to force European countries to pay higher drug prices while squeezing pharmaceutical companies to cut prices for US consumers by up to 80%.

Ireland, which relies heavily on its pharmaceutical exports to the US, will be worried by his threat his administration would punish countries who refused to equalise their medicines with those in the US or extort US drug companies into lowering their charges in their own countries.

US policymakers have spent decades trying to lower drug prices. 

Most have sought incremental reforms that fail to address the root of the problem, which by an accident of history saw Americans get health insurance from their employers, not the government. 

US doesn't negotiate drug prices directly

As a result, the US is the only developed nation that doesn’t negotiate drug prices directly. 

Worried that a large government buyer would suppress innovation, in 2003 the US Congress banned Medicaid — the US government health insurance service — from bargaining over drug prices.

In Europe, including Ireland, as well as in most developed countries, governments are the main buyers and price negotiators with the pharmaceutical companies for their hospitals and healthcare services.

To be clear, the US administration concern is well-founded. 

A typical example is the price of Wegovy, Novo Nordisk’s blockbuster weight-loss drug, which sells at $1,349 (€1,237) for a monthly prescription in the US, whereas in Ireland it sells at €220 per monthly prescription, in the UK at £130 (€146), and in Germany €298.

The US pays three times more for branded prescription drugs, on average, than other rich countries, according to government research agencies. 

It certainly looks as though Americans are getting a bad deal, but the answer will not come from putting tariffs on imports, which undoubtedly will exacerbate the problem in the short term.

Barriers to cost and care in the US

If and when the US becomes self-sufficient in manufacturing all its own drugs, the local consumer high pricing issue will remain a problem until they sort out the web of “middlemen” or intermediaries like insurance companies, pharmacy benefit managers, and other providers. This system significantly impacts costs and access to care.

These “middlemen” which negotiate on behalf of employers with the pharma manufacturers, have created multiple discount prices, which are guarded as confidential.

Their fees and opaque practices have been found to massively inflate drug prices to consumers.

The recently signed trade deal between the US and the UK, gives the Irish government and EU negotiators some indication of the potential negotiating tactics to avoid tariffs being imposed on the pharma and medical devices industry here.

UK exporters of pharmaceuticals and pharmaceutical ingredients to the US are provided for under the deal, who expect “significantly preferential treatment outcomes” on their exports to the US. This is trade speak for “no” to “low” US tariffs.

In return the UK has agreed to “endeavour to improve the overall environment for pharmaceutical companies operating in the United Kingdom”. 

The industry understands this part of the US-UK deal will mean that the UK in any final agreement, will have to drop certain regulations which the US maintains are non-science-based standards and which severely restrict US exports of safe, high-quality beef and poultry products.

A similar EU-US deal is urgently needed to safeguard the EU pharmaceutical industry, even if it comes at the cost of exposing Ireland and the EU to imports of hormone treated beef and chlorine washed poultry.

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