Transcript Slide 1

Vermont Commission on
International Trade and
State Sovereignty
Overview of
International Trade and
Its Impact on
Vermont’s Health Care
November 27, 2007
What Is International Trade and
What Are International Trade Agreements?
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International trade is the exchange of
goods and services across
international boundaries or territories.
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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?
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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.
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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. :
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In 1974, “Fast-Track” authority was established,
streamlining congressional consideration of trade bills.
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In 1979, the Office of the U.S. Trade Representative
(USTR) was created by Executive Order.
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The USTR is part of the Executive Office of the President
and is not subject to Freedom of Information Act
(FOIA) requests.
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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
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In 1994, the “Uruguay Round” global trade discussions
were completed and the World Trade Organization
(WTO) was established. Today the WTO has
149 members
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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:
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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:
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Prescription drug purchasing, policies and
importation.
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Licensing of health care providers.
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Certificates of Need, health insurance, and
other issues.
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State of Vermont
Prescription Drug Programs
Medicaid program covers 146,821
Vermonters (2006 data):
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Medicaid, Vermont Health Access Plan,
Dr. Dynasaur
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VPharm – Medicare Part D wrap
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VermontRx – drug coverage for
non-Medicare eligible elderly and
individuals with disabilities
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Healthy Vermonters – discount card
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State of Vermont Prescription Drug
Purchasing Programs
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Catamount Health (Oct. 1, 2007)
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Vermont state employees
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Teachers and municipal employees
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Statutes Aimed at Controlling Costs
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Coverage of over-the-counter drugs, 33 V.S.A. 1998
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Mandatory generic substitution, 18 V.S.A. 4601 et seq.
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Preferred Drug Lists (PDL) and prior authorizations,
33 V.S.A. 1998
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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
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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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Drug & Supplies Spending by Payor
Vermont 2004
$200.0
$180.0
$160.0
Millions of Dollars
$140.0
$120.0
$100.0
$80.0
$60.0
$40.0
$20.0
$0.0
Out of Pocket
Medicaid
Self-Insured
Employers
BC/BS
Other Private
Insurance
MVP
Medicare
Payor
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Why Are Prescription Drugs a
Trade Issue?
Domestic challenges to state cost control measures:
• PhRMA v. Walsh: unsuccessful challenge to Maine’s
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:
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The Australian Pharmaceutical Benefit Scheme (PBS)
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Medicaid – federal/state partnership
 Mixed funding
 Federal law and regulations on pricing and
prior authorization
 1115 waivers
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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?
Vermont’s criteria and procedures for choosing the drugs on its PDL
may not comply with AUSFTA
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AUSFTA’s preamble requires PDLs to be based on drug safety,
quality and efficacy. “Affordability” is not addressed and thus
it is unclear whether it is an allowable criterion.
Vermont’s 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 Australia’s PDL:
Pfizer Ltd – Australian case
Facts: Pfizer argued that VIAGRA should be covered as
part of Australia’s 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.
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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
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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
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cost-saving measure for Vermonters and for
the state Medicaid program
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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
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U.S. law regulates the sale of drugs, including their
importation
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

Food and Drug Administration (FDA)
Approves drugs for certain uses by specific
manufacturers
Patent law
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FDA guidance on enforcement
 Discretion for enforcing when quantity is for personal
use
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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
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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
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GATS rules apply to countries that join the World Trade
Organization. The rules apply to specific “sectors.”
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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.
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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
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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 FTA’s application to state health care
programs.
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The U.S.-Korea FTA applies to the health programs of the
party countries’ central governments.
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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.
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