Mexico Weighs U.S. Plan to Strip Drugs Provision From USMCA

(Bloomberg) -- Terms of Trade is a daily newsletter that untangles a world embroiled in trade wars. Sign up here

Mexico is considering a U.S. proposal to remove protections for biologic drugs from a renegotiated Nafta trade deal, a plan that could help clear a hurdle to an agreement and deal a blow to brand-name pharmaceutical companies.

The proposed change would drop language in the U.S.-Mexico-Canada Agreement offering 10 years of market protection for drug makers from cheaper generic spinoffs, according to half a dozen sources familiar with the talks who asked not to be named because the negotiations are private. The move would leave it up to the individual countries to set their own laws on biologics, which are made from living organisms rather than chemical compounds.

It could help win approval of the deal in the U.S. Congress, where U.S. Trade Representative Robert Lighthizer has been negotiating with Democrats who control the House of Representatives. While the trade deal, known as USMCA, was signed by the executives of each country a year ago, it has received the required legislative approval only in Mexico.

Ways and Means Chairman Richard Neal, the Democrat who’s in charge of the negotiations in the House, said it’s “possible” that Democrats would agree to a deal this week. He said he would like the House to vote on the implementing legislation by the end of the year.

“We’re at it, we’re getting close,” Neal said in Washington Tuesday. “You can see how it’s coming together.”

Provisions around drugs as well as labor and enforcement have been sticking points in attempts to reach an agreement. Democrats have cautioned that no aspects of a USMCA deal with the Trump administration are finalized until they’re agreed upon as a package.

House Democrats have raised concern that locking in a time frame for pharmaceutical rules could hinder their ability to reduce protections for biologics sooner, as part of an effort to bring down soaring drug prices.

Protracted Negotiations

The proposal to leave the rules for these drugs out of the deal is among those that have been shared with Mexico’s private sector this week by Jesus Seade, the nation’s chief negotiator, according to the people. The idea is among several the U.S. shared with Mexico that reflect the months-long negotiations between the USTR and Democratic lawmakers led by House Speaker Nancy Pelosi.

The U.S. Trade Representative’s press office and the press office of Mexico’s foreign ministry didn’t respond to requests for comment. The White House declined to comment.

Read More: Biologic Medicines at Risk of Exclusivity Change in Trade Deals

Lighthizer told his Mexican counterpart he wants the trade deal to pass through both the U.S. House and Senate by Dec. 20, the final day before the Christmas holiday recess, the people said. The Congressional calendar on Monday was extended by a week, which could allow for potential votes on the trade agreement.

Mexico is expected to respond to USTR on the proposed changes by the end of the day on Tuesday as Seade travels to Washington to meet with Lighthizer, according to two of the people.

Major pharmaceutical companies argue they need exclusivity to market their drugs in order to ensure a profitable return on their research-and-development investments. Generic drug makers argue that such protection stifles competition and raises prices for patients.

The removal would mean that each country’s protections for exclusivity on biologics would be determined by their domestic laws and regulations. That’s currently 12 years in the U.S., eight in Canada and five in Mexico.

Republican Priority

The shift would abandon what has been a major U.S. and Republican priority in trade negotiations for years. It also would be a significant blow to a pharmaceutical industry that has made preserving the intellectual property protections for such new drugs a priority and is already facing an uphill battle in its fight with President Donald Trump over high drug prices.

The Pharmaceutical Research and Manufacturers of America, a lobbying group known as PhRMA that counts Johnson & Johnson, Merck & Co. Inc. and Pfizer Inc. as members, has supported the inclusion of a biologics provision in the deal.

Vice President Mike Pence is meeting with Eli Lilly & Co. Tuesday to discuss the agreement, two people familiar with the matter said. A representative for the drugmaker declined to comment and the vice president’s office didn’t respond to a request for comment.

Biologics are used to treat ailments including arthritis and asthma.

At the NATO summit in London Tuesday, Canadian Prime Minister Justin Trudeau said he was confident that a deal on USMCA between the three nations is close.

“We’re very, very hopeful that we’re going to have good news soon,” he said.

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.