January 31, 2020

What Trump's new NAFTA means for health care

Daily Briefing

    President Trump on Wednesday signed the U.S.-Mexico-Canada trade agreement (USMCA), a renegotiated version of the North American Free Trade Agreement (NAFTA) that includes new rules on patent protections for pharmaceuticals and excludes a 10-year exclusivity period for biologic drugs.

    Your cheat sheets for understanding health care's legal landscape

    While the Trump administration has approved the deal, it's not in effect just yet. Mexico has ratified the deal, but it still needs approval from Canada. Canada is expected to ratify the agreement in a few weeks, meaning the rules will go into effect in a few months, according to the Wall Street Journal.

    What's in the trade deal

    The USMCA would update NAFTA for the first time in more than two decades. The agreement includes several provisions that would affect the health care industry.

    For instance, regarding drug pricing the final version of the deal does not include a provision in an earlier iteration of the deal that would grant a 10-year exclusivity period for biologics.

    When President Trump in 2018 announced a version of the agreement, initially included a provision to offer 10 years of exclusivity for biologics—such as injected drugs used to treat cancer and immune disorders—in Canada, Mexico, and the United States.

    However, the provision was ultimately dropped in a deal between the Trump administration and Democratic lawmakers who said it would not do enough to address concerns about drug prices. Drugmakers currently receive 12 years of exclusivity in the United States for biologic drugs, while drugmakers receive eight years of in Canada. In Mexico, drugmakers receive five years of exclusivity for their products, but Mexico's regulations do not explicitly state whether the five-year exclusivity period applies to biologic drugs.

    Further, the approved version of the USMCA also excludes provisions that were included in the 2018 version of the deal that would have required the United States, Canada, and Mexico to:

    • Provide patents for new uses of prescription drugs that already have been approved, which lawmakers said could have allowed drugmakers to avoid generic competition by securing additional patents for their products; and
    • Provide an additional three years of exclusivity for clinical information submitted in connection with new uses of prescription drugs that already have been approved, which lawmakers said could have allowed drugmakers to further delay competition to the products.

    In addition, under lawmakers' December 2019 agreement with the administration, they revised a:

    • Data protection provision to establish limitations that "foster generic competition";
    • Patent linkage provision to eliminate the link between regulatory approval and patent status by adding language to allow incentives for generic competition and bolster transparency;
    • Regulatory review provision to clarify the instances in which generic and biosimilar drugmakers can use a patented invention to receive marketing approval on the first day a product's patents expire; and
    • Patent-term adjustment provision to provide examples of limitations on changes to patent terms for regulatory delays.

    Moreover, the agreement would expand protections for other intellectual property rights, according to the New York Times. The new deal, for instance would extend protection for copyrights from 50 years to 70 years. The measure also includes new criminal penalties for theft of trade secret.

    Reaction

    According to the Journal, some big drugmakers are disappointed that the deal won't include the 10-year exclusivity period that would protect biologics from generic competition in Mexico and Canada. According to Associated Press, drugmakers argued that biologics manufacturers need years of protection to profit from their drugs before generic competition is introduced, saying that drug companies that rely on money from venture capital firms would not be incentivized to invest in developing new drugs.

    Pharmaceutical Research and Manufacturers of America in a statement last year said, "Eliminating the biologics provision in the USMCA removes vital protections for innovators while doing nothing to help U.S. patients afford their medicines or access future treatments and cures."

    Separately, U.S. Trade Representative Robert Lighthizer when the updated deal was announced last year said, "Clearly, getting rid of the biologic provision was a step backwards…that was a compromise" (Wiseman, Associated Press, 12/19/19; Lawder et al., Reuters, 1/29; Swanson/Tankersley, New York Times, 1/29; Mauldin/Leary, Wall Street Journal, 1/29).

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