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The U.S.-South Korea Trade Agreement:: Affordable Medicines and Tobacco Control Under Fire
San Francisco, CA
Tuesday, April 03, 2007
The proposed U.S. trade agreement with Korea violates every objective for trade widely supported by major public health organizations. In particular, the agreement would prop up high drug prices at home and abroad, and undermine Korea's extensive tobacco control measures.
Propping up high drug prices
Life-saving medicines are too often unaffordable in both the U.S. and Korea. In the face of massive public opposition, the transnational pharmaceutical industry acknowledges that it has turned to trade negotiations to tuck away rules that extend and enforce their monopoly control on drug prices and that delay fair competition from generic companies.
Korea's universal National Health Insurance system relies on generic medicines to control drug costs. Drugs already account for 30% of Korea's health expenditures, more than other OECD countries. Korea's average income is $16,000 a year.
Echoing controversial provisions of the Australia trade agreement, KORUS calls for an independent review board that can give drug companies an avenue to interfere in cost-effective government pricing and drug selection decisions. This provision would subject several U.S. programs to trade challenges because they use formularies and reference pricing (negotiated rates for a limited number of drugs in each therapeutic category). These programs include Medicare hospital drug purchases, Medicaid, Department of Defense, Veterans Affairs, and other federally authorized drug discount programs. An investor-state provision gives foreign corporations greater rights than domestic ones to challenge US domestic measures. The agreement also imposes a five year additional data exclusivity right in Korea for brand-name companies, which will delay marketing rights for generic companies.
Stronger intellectual property rules have coincided with diminished innovation, and reduced access to needed drugs. Drug company rights should be fairly balanced against people's human right to medical care. The Korea agreement does not meet this test.
Tobacco Control
Rep. Earl Blumenauer (D-OR), a member of the Ways and Means Trade Subcommittee, wrote to the USTR on March 22 specifically asking the U.S. to "ensure that there are broad exemptions for tobacco products, and that the proposed FTA do nothing to limit the ability of either party to discourage or regulate tobacco use for reasons of public health" However, the U.S Trade Representative has indicated that KORUS will include provisions intended to increase consumption of tobacco products, which are lethal. Reducing tobacco consumption is a key public health goal of particular consequence for South Korea, where 67% of males smoke presently. Korea currently attributes the majority of its deaths to cancer.
KORUS will reduce both tariff and nontariff barriers to trade in tobacco products. Korea had import tariffs on foreign cigarettes, until the 1980s, when the US exerted pressure to liberalize the tobacco industry under Special 301 provisions. In 1988 smoking rates among male Korean teens rose from 18.4% to 29.8% in a single year. These rises were due to decreased prices and increased advertising.
Tobacco control measures appear to be achieving a slow decline in tobacco consumption in South Korea. In 1995, Korea passed the National Health Promotion Act (NHPA), which states that all public areas and facilities must assign smoking and non-smoking areas. The NHPA also restricts cigarette vending machines and selling to those under the age of 19. It requires health warnings on tobacco packaging and advertising. Annual per capita consumption declined from 130 in 1990 to 116 in 2000. Korea reinstituted a 40% tariff on imported tobacco products in 2004.
The proposed liberalization of tobacco markets under the KORUS would significantly hinder this progress.
CPATH urges Congress to enforce the Public Health Objectives for Global Trade http://www.cpath.org/id29.html):
1. To assure democratic participation by public health and transparency in trade policy.
2. To develop mutually beneficial trade relationships that create sustainable economic development for the U.S. and our trade partners in an increasingly interdependent world.
3. To recognize the legitimate exercise of national, regional and local government sovereignty to protect population health, and to ensure that countries do not weaken or reduce, as an encouragement for trade, sound policies that contribute to health and well being, including laws on public health, the environment and labor.
4. To exclude tariff and nontariff provisions in trade agreements that address vital human services such as health care, water supply and sanitation, food safety and supply, and education, including licensing and cross-border movement of personnel in these fields.
5. To exclude tobacco and tobacco products, which are lethal, and for which the public health goal is to reduce consumption, from tariff and nontariff provisions of trade agreements, including advertising, labeling, product regulation and distribution.
6. To exclude alcohol products, which present serious hazards to public health. Policies designed to reduce the harm caused by alcohol products should not be subject to compromise in exchange for other trade benefits.
7. To eliminate intellectual property provisions related to pharmaceuticals from bilateral agreements, and promote trade provisions which enable countries to exercise all flexibilities provided by the Doha Declaration on Public Health, including issuing compulsory licenses for patented pharmaceuticals, parallel importation, and other measures that address high prices and promote access to affordable medicines.
Propping up high drug prices
Life-saving medicines are too often unaffordable in both the U.S. and Korea. In the face of massive public opposition, the transnational pharmaceutical industry acknowledges that it has turned to trade negotiations to tuck away rules that extend and enforce their monopoly control on drug prices and that delay fair competition from generic companies.
Korea's universal National Health Insurance system relies on generic medicines to control drug costs. Drugs already account for 30% of Korea's health expenditures, more than other OECD countries. Korea's average income is $16,000 a year.
Echoing controversial provisions of the Australia trade agreement, KORUS calls for an independent review board that can give drug companies an avenue to interfere in cost-effective government pricing and drug selection decisions. This provision would subject several U.S. programs to trade challenges because they use formularies and reference pricing (negotiated rates for a limited number of drugs in each therapeutic category). These programs include Medicare hospital drug purchases, Medicaid, Department of Defense, Veterans Affairs, and other federally authorized drug discount programs. An investor-state provision gives foreign corporations greater rights than domestic ones to challenge US domestic measures. The agreement also imposes a five year additional data exclusivity right in Korea for brand-name companies, which will delay marketing rights for generic companies.
Stronger intellectual property rules have coincided with diminished innovation, and reduced access to needed drugs. Drug company rights should be fairly balanced against people's human right to medical care. The Korea agreement does not meet this test.
Tobacco Control
Rep. Earl Blumenauer (D-OR), a member of the Ways and Means Trade Subcommittee, wrote to the USTR on March 22 specifically asking the U.S. to "ensure that there are broad exemptions for tobacco products, and that the proposed FTA do nothing to limit the ability of either party to discourage or regulate tobacco use for reasons of public health" However, the U.S Trade Representative has indicated that KORUS will include provisions intended to increase consumption of tobacco products, which are lethal. Reducing tobacco consumption is a key public health goal of particular consequence for South Korea, where 67% of males smoke presently. Korea currently attributes the majority of its deaths to cancer.
KORUS will reduce both tariff and nontariff barriers to trade in tobacco products. Korea had import tariffs on foreign cigarettes, until the 1980s, when the US exerted pressure to liberalize the tobacco industry under Special 301 provisions. In 1988 smoking rates among male Korean teens rose from 18.4% to 29.8% in a single year. These rises were due to decreased prices and increased advertising.
Tobacco control measures appear to be achieving a slow decline in tobacco consumption in South Korea. In 1995, Korea passed the National Health Promotion Act (NHPA), which states that all public areas and facilities must assign smoking and non-smoking areas. The NHPA also restricts cigarette vending machines and selling to those under the age of 19. It requires health warnings on tobacco packaging and advertising. Annual per capita consumption declined from 130 in 1990 to 116 in 2000. Korea reinstituted a 40% tariff on imported tobacco products in 2004.
The proposed liberalization of tobacco markets under the KORUS would significantly hinder this progress.
CPATH urges Congress to enforce the Public Health Objectives for Global Trade http://www.cpath.org/id29.html):
1. To assure democratic participation by public health and transparency in trade policy.
2. To develop mutually beneficial trade relationships that create sustainable economic development for the U.S. and our trade partners in an increasingly interdependent world.
3. To recognize the legitimate exercise of national, regional and local government sovereignty to protect population health, and to ensure that countries do not weaken or reduce, as an encouragement for trade, sound policies that contribute to health and well being, including laws on public health, the environment and labor.
4. To exclude tariff and nontariff provisions in trade agreements that address vital human services such as health care, water supply and sanitation, food safety and supply, and education, including licensing and cross-border movement of personnel in these fields.
5. To exclude tobacco and tobacco products, which are lethal, and for which the public health goal is to reduce consumption, from tariff and nontariff provisions of trade agreements, including advertising, labeling, product regulation and distribution.
6. To exclude alcohol products, which present serious hazards to public health. Policies designed to reduce the harm caused by alcohol products should not be subject to compromise in exchange for other trade benefits.
7. To eliminate intellectual property provisions related to pharmaceuticals from bilateral agreements, and promote trade provisions which enable countries to exercise all flexibilities provided by the Doha Declaration on Public Health, including issuing compulsory licenses for patented pharmaceuticals, parallel importation, and other measures that address high prices and promote access to affordable medicines.
Ellen R. Shaffer
Co-Director
CPATH
San Francisco, CA
415-933-6204
415-831-4091
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