Eli Lilly Uses US/Australia Trade Pact to Push for Higher Prices on Osteoporosis Drug Forteo

The US government does not negotiate lower prices for drugs under Medicare Part D. But it negotiates higher prices for drugs in Australia and Korea, under two novel trade agreements.

This week the Australia press is reporting on a case just filed by Eli Lilly, the Indiana based pharmaceutical giant. This from one ABC radio report:

"It's just over a year since the Australia US Free Trade Agreement came into force, opening the door for US drug companies to force a review of decisions about which drugs are subsidised by the Australian Government. Now that power is being used by the US drug company Eli Lilly. . . .

"After having its application for Forteo to be included on the Pharmaceutical Benefits Scheme knocked back four times, American company Eli Lilly is making use of provisions under the US Free Trade Agreement.

The dispute is over where or not the Australia government can reject insurance for a drug on the grounds that it is not "cost effective," given the high price. In effect, Lilly is seeking to use the US trade agreement to force the Australian government to pay most of the $850 per month that Lilly want to charge for the drug, despite weak clinical evidence the drug actually works.

The US/Australia FTA was concluded last year by the Bush administration. One of the key players in the implementation of the agreement is Bill Steiger, a young hardliner who closely follows issues concerning pharmaceutical prices and intellectual property rights.


Bill is the son of former Wisconsin Congressman Bill Steiger, and former FTC Chair Janet Steiger, and the godson of former President George HW Bush.

The US Australian FTA is probably the second major US trade agreement to regulate prices of OECD countries.

In 1999, President Clinton negotiated an agreement with Korea that set a floor for the prices of innovative medicines to at least the average prices of A-7 countries (United States, United Kingdom, Germany, France, Italy, Switzerland, and Japan).

Consider also this July 2, 2001 letter from Bush appinted Commerce Secretary Don Evans, to Korean Minister of Health and Welfare Kim Won-Gil:

Under the reference pricing system proposed in the Plan, patients would incur a co-payment for certain pharmaceutical products within a given therapeutic category based upon the cost of those products. Research-based, innovative pharmaceuticals are often more expensive than generics and other products; therefore, it is mainly these products that would be subject to a co-payment requirement. Requiring patient co-payments for only some products within a therapeutic category would create a distinctive for patients to use these pharmaceuticals, regardless of their effectiveness. . .

Before final decisions are made, it is important that your government consult and fully and substantively with interested parties, including foreign research-based pharmaceutical manufacturers, as well as with our government. . . .

The United States has considerable expertise and experience in health care financing matters, and we look forward to the opportunity to work with you to find ways to bring high-quality health care to the Korean people in a fiscally prudent and equitable manner.

Surprised to learn about the Bush Administration's "considerable expertise and experience in health care financing matters"? Should Korea look for our advice on being "fiscally prudent" or "equitable"?

This month in Geneva the World Health Assembly (the governing body of the UN's World Health Organization) will debate proposals for a new global framework to foster medical R&D. So far, the main opponent of this has been the Bush administration, led by Bill Steiger. Big pharmaceutical companies see a global treaty on medical R&D as a threat to trade agreements like the US Australian FTA or the Korean A-7 pricing agreement.

A large number of public health groups, scientists, and other stakeholders want to begin discussions on the new trade paradigm, focusing on R&D, rather than high drug prices, and providing more space for governments to address access concerns, and to push for more efficient and priority sensitive outlays of R&D dollars.