Vermont Commission on International Trade and State Sovereignty

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Vermont Commission on International Trade and
State Sovereignty

• Overview of
• International Trade and
• Its Impact on
• Vermonts Health Care

November 27, 2007
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What Is International Trade and What Are
International Trade Agreements?

• International trade is the exchange of goods and
  services across international boundaries or
  territories.
• International trade traditionally was conducted
  according to agreements between two countries.
  Such agreements are referred to as bilateral
  agreements.

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What is International Trade and What Are
International Trade Agreements?

• Beginning in 1944 at Bretton Woods, trade began
  to be considered in a global manner and global
  economic institutions were created to help
  regulate its conduct.
• These institutions include
• The World Bank
• The International Monetary Fund (IMF)
• The Global Agreement on Tariffs and Trade
  (GATT)

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The International Trading System

• In the U.S.
• In 1974, Fast-Track authority was established,
  streamlining congressional consideration of trade
  bills.
• In 1979, the Office of the U.S. Trade
  Representative (USTR) was created by Executive
  Order.
• The USTR is part of the Executive Office of the
  President and is not subject to Freedom of
  Information Act (FOIA) requests.
• USTR formally consults with states through the
  Inter-Governmental Policy Advisory Committee
  (IGPAC) and Single State Points of Contact
  (SPOCs).

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The International Trading System

• In 1994, the Uruguay Round global trade
  discussions were completed and the World Trade
  Organization (WTO) was established. Today the
  WTO has 149 members
• WTO agreements include
• Goods
• Services
• Government procurement
• Agriculture
• Intellectual property rights
• A binding dispute resolution system
• More than a dozen separate agreements

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The International Trading System

• Enacted Since the Uruguay Round
• North American Free Trade Agreement (NAFTA)
• U.S.Singapore Free Trade Agreement
• U.S.Chile Free Trade Agreement
• U.S.Australia Free Trade Agreement
• Central American Free Trade Agreement (CAFTA)

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How Do Trade Agreements Affect Health Care?

• Trade agreements potentially impact
• Prescription drug purchasing, policies and
  importation.
• Licensing of health care providers.
• Certificates of Need, health insurance, and
  other issues.

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State of Vermont Prescription Drug Programs

• Medicaid program covers 146,821Vermonters (2006
  data)
• Medicaid, Vermont Health Access Plan, Dr.
  Dynasaur
• VPharm Medicare Part D wrap
• VermontRx drug coverage for non-Medicare
  eligible elderly and individuals with
  disabilities
• Healthy Vermonters discount card

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State of Vermont Prescription Drug Purchasing
Programs

• Catamount Health (Oct. 1, 2007)
• Vermont state employees
• Teachers and municipal employees

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Statutes Aimed at Controlling Costs

• Coverage of over-the-counter drugs, 33 V.S.A.
  1998
• Mandatory generic substitution, 18 V.S.A. 4601 et
  seq.
• Preferred Drug Lists (PDL) and prior
  authorizations, 33 V.S.A. 1998
• Medicaid only
• Multi-state purchasing pool and non-profit
  pharmacy benefit manager (PBM), 33 V.S.A. 1998
• Supplemental rebates , 33 V.S.A. 2002
• Importation I-Save Rx
• No. 2 of the Acts of 2005
• Mandatory insurance coverage of I-SaveRx, 8
  V.S.A. 4089i

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Why Are Prescription Drugs a Trade Issue?

• Domestic challenges to state cost control
  measures
• PhRMA v. Walsh unsuccessful challenge to
  Maines use of a Medicaid PDL
• Federal Medicaid law
• Commerce clause
• Importation of lower-cost pharmaceuticals
• Dorgan/Snowe bill would have allowed parallel
  imports
• USTR wrote a trade agreement that would have made
  passage of the bill a trade violation
• Vermont v. FDA refusal to allow reimportation

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Why Are Preferred Drug Lists (PDLs) a Trade
Issue?

• Because the Australian-U.S. Free Trade Agreement
  (AUSFTA) applies to federal health care
  programs, it addresses
• The Australian Pharmaceutical Benefit Scheme
  (PBS)
• Medicaid federal/state partnership
• Mixed funding
• Federal law and regulations on pricing and prior
  authorization
• 1115 waivers
• Medicare Part D
• Federal funding
• Federal law and regulations
• Private insurers administrating with CMS oversight

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Why Are Preferred Drug Lists a Trade Issue?

• Vermonts criteria and procedures for choosing
  the drugs on its PDL may not comply with AUSFTA
• AUSFTAs preamble requires PDLs to be based on
  drug safety, quality and efficacy.
  Affordability is not addressed and thusit is
  unclear whether it is an allowable criterion.
• Vermonts Medicaid PDL strives for a balance of
  cost and quality
• Over-the-counter and generics preferred
• Manufacturers agree to supplemental rebate
• Prior authorization needed for drugs not on PDL

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Why Are Preferred Drug Lists a Trade Issue?

• AUSFTA has been used to challenge Australias
  PDL
• Pfizer Ltd Australian case
• Facts Pfizer argued that VIAGRA should be
  covered as part of Australias Prescription
  Benefit Scheme (PBS). Federal PBS authorities
  declined to include Viagra. Pfizer appealed to
  the Medicines Review Board and lost.
• Medicines Review Board - required by the
  US-Australia agreement. Gives pharmaceutical
  companies another venue.

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Why Are Prescription Drugs a Trade Issue?
Generic Drugs

• U.S. patent law allows pharmaceutical
  manufacturers to keep the formulation of a drug
  private.
• Brand name drugs are under patent protection.
• Generics
• Same drugs after the patent runs out
• Less expensive than brand name drugs
• Used as a cost-saving measure in Vermont

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Why Are Prescription Drugs a Trade Issue?
Generic Drugs

• Trade Related Aspects of Intellectual Property
  (TRIPS) agreements protect patents of World
  Trade Organization (WTO) members
• Patents allowed for 20 years from time filed
• Countries have right to protect public health
• Compulsory licensing state requires generic
  production for public health reason

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Why Are Prescription Drugs a Trade Issue?
Generic Drugs

• AUSFTA and CAFTA
• Require 5-year period of data used in patent
  approval process
• Data used by generic manufacturers
• USTR negotiations seem to prioritize patent
  protection over public health issues

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Why Are Prescription Drugs a Trade Issue?
Generic Drugs

• Vermont requires a generic drug preference in
  prescription drug programs
• cost-saving measure for Vermonters and for the
  state Medicaid program
• limits on the production of generics will
  increase health care costs to Vermonters

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Why Are Prescription Drugs a Trade Issue?
Importation

• U.S. law regulates the sale of drugs, including
  their importation
• Food and Drug Administration (FDA)
• Approves drugs for certain uses by specific
  manufacturers
• Patent law
• FDA guidance on enforcement
• Discretion for enforcing when quantity is for
  personal use
• FDA approval for programs
• Authority to approve importation programs
• To date, no program approved

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Why Are Prescription Drugs a Trade Issue?
Importation

• Because of patent protection in FTAs, there is
  potential international liability if states
  pursue importation programs (for example, AUSTFA
  and arguably NAFTA).
• Several states and cities have started
  importation programs to offer less expensive
  drugs.
• Vermont joined I-Save Rx, an Illinois program.
• Participants in I-Save Rx are expected to save
  20-50.
• Efforts are underway to change federal law on
  drug importation.

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GATS and Health Care Issues

• GATS rules apply to countries that join the World
  Trade Organization. The rules apply to specific
  sectors.
• For example, the domestic regulation rule
  currently under negotiation could potentially
  affect health insurance, hospitals and other
  health care facilities, prescription drug
  distribution, medical records and claims
  processing.
• Regulations must be no more burdensome than
  necessary and may be challenged if they are an
  unnecessary barrier to trade.

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GATS and Health Care Issues

• Health Insurance
• Catamount Health
• Licensing of Health Care Providers and Pharmacy
  Benefit Managers
• Other Regulation
• Certificate of Need restrictions on facilities
  and purchasing of equipment
• Health Resource Allocation Plan
• Standards of Care - staffing regulation

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Results of Interested Party Input

• Input from the National Legislative Association,
  from state legislators, and from other interested
  parties led to the USTR clarifying the U.S.-Korea
  FTAs application to state health care programs.
• The U.S.-Korea FTA applies to the health programs
  of the party countries central governments.
• A footnote to the FTA clarifies that state health
  care programs are programs of regional levels of
  government, not programs of the central level of
  government.