There are a lot of misconceptions and inaccuracies going around about the United States-Mexico-Canada Agreement (USMCA) and its implications for biopharmaceutical innovation and medicine prices. Some have claimed – incorrectly – that the USMCA will increase the prices that Americans pay for medicines. This claim is simply untrue. The facts concerning biologics, regulatory data protection, and how each is treated in the USMCA are discussed below.
What are biologics?
Innovative medicines have transformed the lives of patients around the world, and the pipeline of new therapies in development is robust. Among these innovations are biologics, medicines made using living cells that require complex manufacturing and special handling processes. Biologics can target molecular processes that other medicines cannot and are revolutionizing the treatment of many cancers, Crohn’s disease, multiple sclerosis and other diseases.
Developing innovative medicines requires substantial time, significant investment and years of scientific and regulatory uncertainty for biopharmaceutical innovators. Developing a new medicine takes an average of 10-15 years and costs approximately $2.6 billion. Less than 12 percent of medicines that enter lengthy and costly clinical trials are approved by the U.S. Food and Drug Administration and make it to patients.
What is regulatory data protection?
To receive government permission to market and sell a new medicine, an innovator manufacturer must demonstrate that the new medicine is safe and effective. Doing so requires generating and submitting new clinical trial and other data to government regulators. In contrast, a generic or biosimilar manufacturer seeking approval for a competing product submits an abbreviated application and can rely on the original inventor’s data after a certain period of time.
Regarding biologics and biosimilars in particular, the innovator manufacturer – and not the biosimilar manufacturer – has incurred the large and risky upfront investment expenses to research and develop the new medicine. To ensure that patients can continue to benefit from groundbreaking new treatments like biologics, the inventor is granted regulatory data protection (RDP) – a set period of time during which a biosimilar competitor cannot unfairly rely on the innovator’s regulatory data to obtain marketing approval for its biosimilar product.
Once the RDP period expires, however, the biosimilar manufacturer can use the original inventor’s data to support approval for a competing product. But it’s important to know that a biosimilar company can always develop and submit its own clinical trial and other data to regulators during the innovative manufacturer’s RDP period. As such, RDP does not block competition or provide market exclusivity. A biosimilar manufacturer simply cannot use the innovative manufacturer’s data during the RDP period to obtain approval for its biosimilar product.
To appropriately balance incentives for original inventors and competition from biosimilars in the United States, the Biologics Price Competition and Innovation Act established a 12-year period of RDP for biologics and created a clear process and timetable for biosimilar applications. The 12-year period was based on extensive analysis, was widely supported by Congressional Democrats and Republicans, and was signed into law by then-President Obama in 2010.
How is RDP treated in the United States-Mexico-Canada Agreement?
The United States has long recognized the important role that international trade agreements play in encouraging and valuing American innovation. That’s why Congress, in the Bipartisan Congressional Trade Priorities and Accountability Act (TPA), signed by then-President Obama in 2015, insisted that U.S. trade agreements contain high intellectual property protections – including for biologics. In fact, TPA specifically instructs the President to ensure that “the provisions of any trade agreement governing intellectual property rights that is entered into by the United States reflect a standard of protection similar to that found in United States law.”
The USMCA commits each country to provide at least 10 years of RDP for biologics, two years lower than the United States’ 12-year standard. As such, the USMCA does not require the United States to change any existing domestic laws concerning medicines and will not increase Americans’ medicine costs. Rather, the USMCA compels Canada and Mexico to raise their RDP periods to a level nearer to that which has existed in the United States for nearly a decade. In contrast, critics of this provision are arguing that Canada and Mexico should weaken their protection of American intellectual property.
Further, previous trade agreements have not led to higher drug prices – neither in the United States nor abroad. In fact, data compiled by the Council on Foreign Relations demonstrate that increases in RDP terms did not materially increase medicine costs relative to overall health care spending or hinder competition. In fact, more global competition leads to lower costs.
The USMCA’s provisions prioritize innovation and competition and do not increase medicine costs, despite what a few loud critics have said. PhRMA is committed to working with policymakers on both sides of the aisle to ratify the USMCA and push for solutions that will improve patient access and affordability. With the right policies and incentives in place – both here and abroad – innovative biopharmaceutical companies can continue to bring valuable new medicines to patients worldwide and contribute powerfully to the U.S. economy.
To learn more about the United States-Mexico-Canada Agreement, please click here.
Douglas Petersen Douglas Petersen is PhRMA’s deputy vice president for international trade. Previously, he was international trade counsel for the U.S. Senate Committee on Finance, an international trade attorney with White & Case LLP and a trade policy analyst at the Cato Institute. He received a law degree from New York University, a graduate degree from the London School of Economics, and undergraduate degrees from the University of Utah.