U.S.-South Korea Trade Pact May Affect Prescription Drug Prices in Both Countries

While some politicians and business leaders hailed the historic free-trade agreement (FTA) between the United States and South Korea, a host of consumer advocates are worried that the pact may lead to an increase in prescription-drug costs in both nations.

Writing in the online public affairs journal TomPaine.com, authors Sean Flynn and Sharon Treat note that the trade agreement “could jeopardize state programs that provide medicines for America’s poor and elderly.”

“Since negotiations began in June 2006,” Flynn and Treat write, “the United States Trade Representative has been doggedly attacking South Korea’s public drug reimbursement formulary as a potential barrier to trade. In December, the Korean universal health insurance program began requiring drug companies to negotiate with the government to be placed on a ‘positive list’ of preferred drugs for reimbursement. The list prefers generic and lower-priced medicines, raising the ire of the brand name pharmaceutical industry in the U.S.”

It is believed that South Korea was forced to change its prescription-drug policy as a prerequisite for the trade agreement. Under the new agreement, the South Korean government will be forced to buy brand-name prescription drugs from Big Pharma and will be limited in their ability to buy generic and low-cost drugs. That concession could come at an enormous cost to South Korea’s universal health-care system, since they will no longer have the right to choose what drugs their public health insurance will cover.

“Moreover,” the authors write, “the USTR’s latest demands won’t just raise prices in Korea they may raise prices in U.S. states. This is because Korea’s drug formulary is substantially similar to the ‘preferred drug lists’ used by at least 40 American states for Medicaid purchases. Adjusted for inflation, Medicaid spending on pharmaceuticals by state governments declined in 2005, while overall national drug spending increased at double the rate of inflation the same year, and by over five times since 1994. But the federal government can sue states to preempt laws and programs that conflict with FTAs. Thus, whatever is required of Korea in the FTA may apply to states as well.

“As a result, the pharmaceutical industry may achieve in stealthy trade negotiations what it has failed to do through millions of dollars spent opposing and challenging the country’s most effective drug spending control measures.”

Treat, who is a Maine state representative and the head of the Maine Citizen Trade Advisory Commission, said the deal could force Maine and 39 other states to pay more for prescription drugs.

“What we really should be doing now as a country in terms of our trade negotiations is focusing on how to reduce the cost of prescription drugs here in the Untied States not the other way around: increasing the cost in other countries,” she told the non-profit global advocacy group, OneWorld.net.