President Bush has turned to international trade policy as he looks for ways to protect the U.S. pharmaceutical industry from cheaper prescription drugs imported from countries with price controls.
The president's approach is to stem the flow of prescription drugs from abroad while simultaneously encouraging higher prices overseas.
The provisions are contained in a free trade agreement with Australia that is expected to be debated in both the House and Senate this week.
The policy could have broad implications for foreign drug imports. It would enhance existing prohibitions in both countries on the unauthorized importation of pharmaceuticals from Australia to the United States. It would also allow U.S. drug companies to appeal prices and policies if they thought Australia's caps on drug prices were too low.
Some Democrats who support an effort to legalize imported drugs were highly critical yesterday of the proposed pact with Australia.
"It's a way to thwart efforts to put downward pressure on drug prices," Democratic Senator Byron L. Dorgan of North Dakota, sponsor of Senate legislation to legalize imports, said in a telephone interview. "It's anti-consumer," he said, accusing the Bush administration of "negotiating on behalf of the pharmaceutical industry."
Another Democratic opponent of the pact is Rep. Sherrod Brown of Ohio, who called it "outrageously arrogant" for pharmaceutical companies to seek ways to undermine foreign price controls.
"For U.S. drug companies to come in and tell Australians that `We don't like the way you price your drugs,' is obscene," Brown said.
The Bush administration said its policies have not taken a new direction. The trade agreement's implications for drug policy were first reported by The New York Times yesterday.
"Whether pharmaceuticals can be imported safely and patent rights [are protected] - are the same as previous administrations," said Neena Moorjani, a spokeswoman for U.S. Trade Representative Robert B. Zoellick.
The moves would have little immediate effect on Americans who are increasingly ordering low-cost drugs from countries with price controls.
Model for other pacts
The flow of drugs from Australia is a trickle compared with Canada, where Internet pharmacies are shipping at least $700 million a year in prescription medications to the United States. But the agreement could become a model for U.S. negotiations with other trading partners.
Large pharmaceutical companies dominate the marketplace for brand-name medicine throughout the Western world. But there are big disparities in price for the same medicines, which have attracted the attention of Americans, who have endured skyrocketing drug prices at home.
Identical drugs made by the same manufacturers can be 20 to 80 percent cheaper in Australia, Europe, Canada, and other countries with government price caps.
Some U.S. states and cities have adopted Canadian prescription buying programs to lower costs. A bipartisan group of U.S. senators is seeking to legalize consumer imports.
The Australian trade pact is the first concrete evidence of an economic idea voiced last year by Dr. Mark B. McClellan, former commissioner of the Food and Drug Administration and now in charge of Medicare and Medicaid. McClellan theorized that the way to stop the illegal flow of drugs into the United States was to raise prices overseas, reduce the disparities, and take away the incentive for American consumers.
The U.S. and Australian governments sought to downplay the significance of the pact's effects on prescription drugs. They said the pact reflects patent and intellectual property rules that are already in place in both countries. The drug industry, meanwhile, said it is trying to fight unfair pricing structures that have been imposed by foreign countries.
"No one accuses the computer industry or the software industry or the insurance industry, when they face trade barriers and unfair policies, of arrogance," said Geralyn Ritter, vice president for international affairs of Pharmaceutical Research and Manufacturers of America, a Washington lobbying group. "We just want to be treated like any other industry that creates a lot of jobs."
Bush and Republican leaders in Congress adopted the drug trade policy with the strong support of the pharmaceutical industry.
Republican House Speaker Dennis Hastert of Illinois urged the administration to follow this course and would like to see it expanded to trade pacts with other countries.