Risks to UK pharmaceutical spending from a US-UK free trade deal

A leaked document about UK-US free trade deal discussions back in 2017 has dominated UK media coverage over the past few days and may yet affect the outcome of the 12 December parliamentary elections. The issue that has captured the media attention is the potential for UK drugs prices to rise dramatically if the country enters a free trade agreement with the US. The risk has been seized upon by opposition politicians claiming that the incumbent Conservative government is willing to "sell" the National Health Service (NHS) in exchange for a post-Brexit trade deal with the US.

Privatisation plans for the NHS have been repeatedly denied by Prime Minister Boris Johnson, but the focus of news coverage since the papers leak has shifted from outright privatisation concerns to the risk of price rises for medicines. Specifically, language in the leaked papers related to intellectual property protection and providing US companies full access to the UK market has been interpreted as a clear indication that the NHS would have to purchase US-made medicines at higher prices following a free trade deal.

The language in the leaked document is suitably vague, as would be expected from a country setting out its opening gambit in, what is likely to be, a lengthy negotiation process. However, a look at other US trade deals may provide some indication of the risk to UK pharmaceutical prices.

Pharma-related provisions in US free trade deals

The North American Free Trade Agreement (NAFTA) between the US, Canada and Mexico in 1994 was the first to include specific rules for IP protection. Since then, the US has signed trade deals with Jordan (2001), Chile (2004), Singapore (2004), the CAFTA-DR deal (2006-2009), Australia (2005), Morocco (2006), Bahrain (2006), Oman (2009), Peru (2009), Colombia (2012), Panama (2012) and South Korea (2012) - in all of which there were specific provisions for pharmaceuticals. A recent review of pharma protection by Bollyky and Kesselheim, published in the New England Journal of Medicine, shows that patent term extensions and patent linkage (which stops approval of a generics until the originator's patent has expired) were included in all deals except NAFTA and data protection requirements were included in all deals except the 2001 agreement with Jordan. Data protection regulations - which prevent producers of copy products from relying on the originator drug's clinical trial data for a certain period of time after approval - provide an even stronger protection for the originator company than the patent because data protection cannot be challenged and invalidated in court.

The newly-negotiated free trade deal with Canada and Mexico - known as the United States -Mexico-Canada Agreement (USMCA), which is set to replace NAFTA, goes a step further by providing data exclusivity specifically for biologics. Under the USMCA, the period of data exclusivity for biologics (during which no biosimilar versions can come to market) is set at 10 years. This is five years longer than the current protection term in Mexico and two years longer than in Canada. While it is two years shorter than the current data exclusivity for biologics in the US, signing the USMCA will halt in their tracks US domestic attempts to shorten the exclusivity period for biologics to seven years, as Bollyky and Kesselheim point out. Thus, the USMCA may result in higher spending on biologics in Mexico and Canada as a result of the delayed entry of cheaper biosimilar versions. At the same time it would perversely - in light of the great emphasis on reducing high US pharmaceutical prices - lead to lost savings in the US itself from delayed introduction of biosimilars. In the US, biologics account for 30% of pharmaceutical spending, despite making just 1% of prescriptions, according to Bollyky and Kesselheim.

Potential impact on UK pharmaceutical spending

Herein lies the greatest danger to UK pharmaceutical spending following a US-UK free trade deal! The UK already has 20 years pharmaceutical patent protection, and its 8+2 years of data protection for originator drugs matches the 10 year period of data protection in the USMCA deal. However, the UK, in line with other EU countries, does not offer additional data exclusivity to biologics, meaning that its data exclusivity protection is shorter that the 12 years the US currently provides. There is also a real possibility that the US requests longer data exclusivity in a trade deal with a weakened, internationally-isolated UK post-Brexit than what has been negotiated under the USMCA.

To recap, the clear and present danger for UK healthcare spending, may not be from rising drugs prices or from reducing the ability of the NHS to negotiate drug prices, but from the lost savings as competition from cheaper medicines, particularly biosimilar versions of originator biologics, is delayed.

Posted 02 December 2019 by Milena Izmirlieva, Director, Life Sciences Research, IHS Markit