Free trade agreement

CHOICE is opposed to the removal of the evergreening provision of the US Fair Trade Agreement.
 
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  • Updated:20 Sep 2007
 

01.Free trade agreement

Two foil sheets of pills

The issue

Australia has four Free Trade Agreements (FTAs); with New Zealand, Singapore, Thailand and most recently signed one with the US, which entered into force in January 2005. The AUSFTA (Australia US Free Trade Agreement) covers all areas of trade and investment between Australia and the US and is an ongoing agreement; there is no ‘sunset clause’.

One of the contentious issues surrounding the AUSFTA is access to drugs. Certain aspects of the agreement threaten the viability of the Pharmaceutical Benefits Scheme (PBS) in Australia. In particular there has been recent talk about the Commonwealth Government removing the evergreening provision of the AUSFTA due to pressure from the Pharmaceutical industry and Government in the US.

Under the ‘evergreening’ provision, pharmaceutical companies are subject to multimillion dollar fines if they are found to have stopped another company from introducing a cheaper drug. The most common way for a company to ‘evergreen’ its drug is to seek to extend the patent of the drug. Newly developed drugs receive patent protection for up to 25 years in Australia, allowing the company marketing the innovative drug to recover its investment. Once the patent period is over, other companies may be able to manufacture the drug, leading to cheaper options (generics).

If the provision is removed, Australian consumers will have less choice because there will be fewer generic products available on the market. The Government will then need to spend more on prescription drugs because of the lack of availability of cheaper options. This will lead to an increase in the cost of the PBS.

Other concerns with the AUSFTA apart from intellectual property and higher drug prices and pressure on the PBS include the new drug approval appeals procedure and dispute resolution and enforcement issues. Outside of the drugs issue, there are concerns about the sugar industry gaining greater access into the US market.

What we want

  • The Australian Government to act in the best interest of consumers.
  • A Government commitment to retain the evergreening provision of the legislation enacted following the AUSFTA.

What we are doing

In January 2006 CHOICE wrote to the Prime Minister about the evergreening provision of the AUSFTA. Our letter was endorsed by twelve individuals and organisations. CHOICE has yet to receive a response from the Prime Minister.

The one year review of the AUSFTA was held in the US in March 2006 and Minister Vaile said that “we certainly intend to remain in close dialogue on these issues and monitoring the circumstances as it goes forward”. No announcement was made about removing the provision, which indicates that it here to stay for now at least.

More information

Letter to Prime Minister: Pharmaceuticals and AUSFTA 
Letter to Australian Financial Review, January 2006 
Letter to The Australian, January 2006


 
 

 

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