Evaluating the Impact of Data Exclusivity on the Price per Kilogram of Pharmaceutical Imports

All of the US Free Trade Agreements (FTAs) signed in the past 20 years have required trading partners to enact stronger intellectual property (IP) laws than those stipulated by the World Trade Organization’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement), provisions commonly referred to as “TRIPS-Plus.” This includes trade agreements made with low- and middle-income countries where individuals and health systems cannot afford higher prices. In pharmaceutical markets, stronger IP enhances the monopoly power of branded pharmaceutical producers, extending time on exclusive markets, free from generic competition. The European Commission and the European Free Trade Association have required also required TRIPS-Plus provisions in many of their agreements as well.

In a new working paper, Michael Palmedo focuses on a key TRIPS-plus provision required by all US FTAs – data exclusivity. Palmedo demonstrates that the provision has been associated with faster inflation of imported pharmaceutical import prices in a set of 42 countries and that the price of drug imports rose on average between 2.4 and 4.5 percentage points faster in the countries that had implemented data exclusivity than in those without it. This finding clearly links American trade policy to higher medicine prices abroad.

The US has begun FTA negotiations with Kenya, a country with a GDP per capita of $1,856. While as Palmedo notes it is clearly not in Kenya’s best interest to pay more for drug imports, US industry groups are already advocating for the inclusion of rules requiring stronger patent and test data protection in the FTA.

Michael Palmedo directs interdisciplinary research on intellectual property at American University (AU) Washington College of Law’s Program on Information Justice and Intellectual Property. His research focuses on the empirical evaluation of the impact of changes to patent and copyright laws. He recently completed the Shamnad Basheer IP/ Trade Fellowship at Texas A&M University, where he researched pharmaceutical industry influence into the US government’s Special 301 Review.