NY Magazine | 29 March 2019
Trump’s NAFTA 2.0 puts big pharma first, America second
By Eric Levitz
If there’s anything Donald Trump hates more than globalist trade deals that restrict U.S. sovereignty, it’s the exorbitant cost of pharmaceuticals in this country.
“The next major priority for me, and for all of us, should be to lower the cost of health care and prescription drugs,” the president said in his most recent State of the Union Address. “It is unacceptable that Americans pay vastly more than people in other countries for the exact same drugs, often made in the exact same place.”
And yet, the president’s new version of NAFTA — the uncreatively named United States-Mexico-Canada Agreement (USMCA) — actually forbids the U.S. Congress from curtailing Big Pharma’s patent monopolies on some of the world’s most expensive drugs. In other words: Trump’s “America First” trade deal restricts U.S. sovereignty, for the sake of locking in high drug prices.
In the U.S. today, drug companies that produce new “biologics” — specialty drugs made with living cells — are provided 12 years of immunity from generic competition. This awards such firms monopolistic pricing power over their (often life-saving) medicines for more than a decade after their wares hit the market. The rationale for this policy is that companies will not invest in high-cost biologic research if they aren’t guaranteed windfall profits for their innovations. But even if one accepts this (tendentious) premise, a 12-year monopoly appears both arbitrary and excessive. In Mexico, biologic makers are only immunized against competition from so-called “biosimilars” for five years; in Canada, such protections last eight. Congressional Democrats have drafted legislation that would cut the duration of biologic monopolies down to seven years.
But if Trump’s revised version of NAFTA takes effect, Democrats will not have the legal authority to advance that legislation — because the USMCA guarantees biologic makers at least a ten-year monopoly on their new drugs across all three of North America’s major economies.
House Democrats say that’s unacceptable. As the administration pushes to get its trade deal through Congress, Nancy Pelosi’s caucus has made striking the provision on biologics one of it top demands.
If the rule isn’t rolled back, “I don’t think candidly that it passes out of my trade subcommittee,” Earl Blumenauer of Oregon told the Associated Press in February. “The biologics are some of the most expensive drugs on the planet.” Even staunchly pro-trade border-state Democrats are drawing a red line on the rule, with Texas’s Lloyd Doggett calling it “totally contrary to Trump’s professed interest in lower drug prices.”
It isn’t hard to see why Democrats are picking this fight. Few issues are more salient to a broader, more bipartisan swath of voters than the rising cost of prescription drugs. In January, a Politico-Harvard poll found 80 percent of Americans saying that congressional “action to lower prescription medicine prices is extremely important,” making it the top issue for voters in both parties. Meanwhile, in recent focus groups with soft Trump supporters, Democratic operatives say that the biologics issue has proven explosively potent. As USA Today reports:
“In December, Stanley Greenberg, a leading Democratic pollster and strategist, conducted focus groups in Michigan and Wisconsin with Trump voters who weren’t affiliated with the Republican Party. Some had previously voted for Barack Obama. Others called themselves political independents. They’re the kinds of voters Democrats hope to attract in 2020.
Greenberg said he was “shocked” by the intensity of their hostility to drug companies — and to the idea that a trade pact would shield those companies from competition.
“It was like throwing a bomb into the focus group,” said Greenberg … He said the voters’ consensus view was essentially: “The president was supposed to go and renegotiate (NAFTA) so that it worked for American workers. But it must be that these lobbyists are working behind the scenes” to sneak in special-interest provisions.
Trump hasn’t been feigning concern about the cost of prescription drugs for his health. Outrage at Big Pharma is prevalent throughout the electorate, but it may be even more acute among the Republican Party’s graying base, whose dependence on pharmaceuticals leaves them especially vulnerable to price shocks.”
What’s more, unlike most of Congress’s complaints about drafted trade agreements, Democrats’ opposition to exporting decade-long biologic monopolies is shared by America’s trade partners. When Congress demands further concessions from foreign countries before ratifying a trade deal, the White House can insist that they simply lack the power to force such changes. But in this case, Canada and Mexico have no interest in increasing drug costs for their citizens. The entity foisting the biologics rule on the U.S. isn’t a foreign government, but a (widely reviled) domestic interest group. Democrats can therefore stand their ground while credibly claiming that they aren’t mere obstructionists.
Finally, Nancy Pelosi’s caucus simply has more leverage in the broader ratification fight than the White House does. True, domestic industries will place great pressure on Democratic representatives to ratify the deal. And the agreement isn’t without its substantive virtues: Trump’s updated NAFTA would curb the undemocratic investor-state dispute settlement (ISDS) process, which allows foreign corporations to sue national governments when they enact regulations that reduce their firms’ profits. And it also raises wage standards for auto workers across North America, and encourages Mexico to expand collective bargaining rights (although these provisions lack adequate enforcement mechanisms, a detail that Nancy Pelosi has described as a dealbreaker).
Nevertheless, awarding Donald Trump a bipartisan victory on trade policy on the eve of the 2020 campaign simply isn’t in the Democratic Party’s best interests. The president has a lot to gain from returning to Wisconsin next year with a new, more worker-friendly NAFTA in tow. Team Blue has much to lose by helping him do that. Thus, if Democrats are going to put their substantive goals above their electoral interests — and approve the USMCA — then that agreement can’t very well prohibit them from achieving their substantive goal on the most salient issue in American politics.
Or, at least, it can’t do that unless Big Pharma has way more clout on the left side of the aisle than the Democratic leadership would like us to believe.