[Ip-health] Korea Herald: Pharmaceuticals Contentious Issue in FTA

[Mike Palmedo]

http://www.koreaherald.co.kr/SITE/data/html_dir/2006/07/13/200607130018.asp

Pharmaceuticals contentious issue in FTA

The Korea Herald
Mathew Maavak
July 12, 2006

One contentious issue surrounding the ongoing Korea-U.S. FTA
negotiations concerns the pharmaceutical industry.

Washington had already pulled one tactical coup by announcing that it
had no intentions of "running local facilities;" a concession Seoul was
ready to make. One of the most niggling questions, however, remain.

Will the cost of pharmaceuticals increase once the FTA is clinched?
Apart from drugs, there is also the question of generic drugs which are
currently manufactured for the local market under license.

"Through an FTA with the United States, we worry about the lengthening
of the duration of licensing rights and that the costs of generic drugs
might rise," said Kim Sun-ho, spokesman for the Korea Pharmaceutical
Manufacturers Association.

"We hope the Korean government will not give up on making the best
decision for our pharmaceutical industry."

The U.S. pharmaceutical industry has been having major, long-running
issues over drugs produced through an arduous - and expensive - research
and development process. This cost is passed on to American citizens,
who have to depend on various insurance schemes to cover medical expenses.

For a comparative glimpse, the cost of the latest heart drug
manufactured in India will be a fraction of that in the United States.
One could literally add two or three zeroes for these latest cures
unless they are subsidized someway, through insurance or a national
health-care plan.

Sometimes, these medications are produced through a process of reverse
engineering by foreign firms to avoid patent infringement. Often, they
are produced under license abroad. But licenses are usually only granted
for generic drugs, not the latest range.

If the latest drugs were to be sold abroad, the costs would have to be
borne by the respective governments.

The pharmaceutical industry claims that most of the research and
development costs are recouped within the United States and the
developed world, where heavy taxation keep their national health-care
plans afloat.

Most economies just can?t afford such subsidies, unless they are
produced through the reverse engineering process. This is called the
"free rider" problem in economics, where end-users abroad contribute
little or nothing to firms that originally develop products.

The free rider problem, though, throws up its own woes. The latest
antibiotic developed by a U.S. pharmaceutical firm can be subjected to a
dual pricing system. The label meant for humans are far costlier than
ones meant for pet markets.

Often, U.S. doctors prescribe such medication to poor patients bereft of
an insurance plan. It is generally the same stuff, of the same quality
but sold under a different name. It seems like the farming lobby is
getting some subsidy here and it is no wonder that many Americans
routinely get caught for sneaking in medications from Mexico and Canada.

Is there a solution? Various avenues have to be explored. One avenue
would be a joint R&D development in exchange for cheaper drugs and
health-care services. It must be a two-way flow, beneficial to both
parties. That way, the core U.S. contention that Seoul needs the latest
health-care benefits and practices can be met, without burdening the
local health-care system and people in general.

But the instrument for working out a win-win formula in this area is
going to be highly tortuous.

Yoo Soh-jung contributed to this report.

(maavak@heraldm.com)

By Mathew Maavak