Drug Price Impact of UK-US Trade Deal Comes Under Scrutiny
House of Lords Examines Effects Of FTA On UK Industry And NHS
Executive Summary
A month after the UK and the US began talks on a future free trade agreement, a new House of Lords committee says that an FTA involves risks as well as benefits, and has stakeholders to give their views on the likely impact of a deal in areas like drug pricing and the NHS.
A UK parliamentary committee has launched an inquiry into the ongoing UK-US trade deal negotiations and has called for written evidence on what it calls “likely flashpoints” in the talks, including UK drug prices and the possible impact a deal might have on the National Health Service .
The House of Lords International Agreements Subcommittee (IAC) says it wants input on the possible impact of a UK-US free trade agreement (FTA) in three key sectors: healthcare and drug pricing, agriculture, and digital trade and services.
“With regards to healthcare, the inquiry will seek views on the impact of a trade deal on the NHS, in particular on the prices of drugs that are made available via the NHS,” the IAC says. It would also like to know what the effects would be if any changes were made to the cap on NHS drug prices.
Lord Goldsmith, the subcommittee’s chair, said a comprehensive FTA with the US had “the potential to bring both significant risks and opportunities for the UK, and parliament has a role to play in ensuring that these negotiations deliver a good result for businesses and people across the country.”For this reason, he said, “we are now seeking evidence related to several areas in order to inform our understanding of UK-US negotiations, and we will continue to seek evidence for the duration of these ongoing discussions."
Drug Prices 'Not On The Table'
The talks on a post-Brexit trade deal with the US were launched on 5 May by Liz Truss, UK international trade secretary, and the US Trade Representative, Robert Lighthizer. The government said at the time that the UK’s negotiating objectives “make clear that any future agreement must protect our NHS and we will continue uphold our high standards on food safety and animal welfare.”
Truss had earlier told the House of Commons that the government had been clear that when it was negotiating trade deals, the NHS would “not be on the table,” nor would the prices that the NHS pays for drugs.
However, the question of medicine prices had been raised by the USTR when it published its trade deal negotiating objectives in early 2019. It said among other things that the US wanted “full market access” for US medicines, as well as changes to the way that NICE, the health technology assessment body, assesses medicines, prompting concerns that the NHS could end up paying more for new drugs.
Later that year there were reports that UK civil servants had discussed the possibility of higher NHS drug prices at “secret meetings” with US pharmaceutical companies as part of preparations for the talks, although the government dismissed the claims. (Also see "UK Gov't Disowns ‘Secret’ Meetings With US On Post-Brexit Drug Pricing" - Pink Sheet, 30 Oct, 2019.)
“The inquiry will seek views on the impact of a trade deal on the NHS, in particular on the prices of drugs that are made available via the NHS.” – UK House of Lords International Agreements Subcommittee
The issue of medicines prices and the NHS is clearly on the radar of the IAC, a new body that was set up earlier this year as a subcommittee of the Lords EU Committee, with the specific aim of scrutinizing international agreements being negotiated by the UK following its departure from the EU in January this year.
Lord Kinnoul, a politically non-affiliated member of the House of Lords, said it was important for parliament to keep a close eye on progress with trade talks, particularly now that the UK was no longer represented by the EU institutions in forging international agreements.
The Department for International Trade (DIT) had “already acknowledged the importance of engaging with parliament at an earlier stage as new treaties and agreements begin to take shape,” Lord Kinnoul noted.“In the most recent iterations DIT has helpfully suggested that it would ensure that specialist committees of parliament would have access to ‘sensitive information’ and ‘private briefings from negotiating teams’ to ensure that parliamentarians can follow negotiations and take a comprehensive and informed position on any final agreement,” he added.
"What would be the effects if the cap on NHS drug prices were removed or raised? Would drug prices still be affordable to the NHS?" – UK House of Lords IAC
In the healthcare area, the subcommittee observed that the US’s stated objectives in the talks included seeking “standards to ensure that government regulatory reimbursement regimes are transparent, provide procedural fairness, are nondiscriminatory, and provide full market access for US products.”
In its call for evidence, the AIC says it wants to know whether the UK’s approach to the issue of pharmaceuticals and medical devices is “realistic” and how it compares with “precedents that might be seen in other recent US trade negotiations either relating to healthcare specifically or other public services.”
On medicine prices, it asks: “What would be the effects if the cap on NHS drug prices were removed or raised? Would drug prices still be affordable to the NHS, and would it have a direct impact on the average household?”
Impact On The Life Sciences Industry
The IAC also wants to know what impact a US deal that included some pricing provisions would have on the UK life sciences industry, and what effect any other provisions agreed as part of a UK-US deal, for example an investor-state dispute settlement mechanism, might have on the NHS and “the wider healthcare industry.” It asks what ISDS arrangements would be appropriate in this deal and what the “possible risks or opportunities for the UK” would be in negotiating any such arrangements.
The ISDS mechanism allows investors to take legal action against governments that they believe are subjecting them to discriminatory treatment and is included in some international trade and investment agreements. It is a controversial issue, and it was the ISDS provision in the proposed US-EU Transatlantic Trade and Investment Partnership (TTIP), and its possible impact on health care and other sectors, that contributed to the ultimate demise of the TTIP talks.
More broadly, the IAC asks for input on the “major points of disagreement” that have emerged in other recent trade negotiations by the US and that the committee should be aware of when scrutinizing the UK-US talks. It wonders whether, and in what circumstances, the two countries should seek a “mini-deal” instead of a comprehensive FTA.
Conflict With EU Talks?
The precise provisions of any future trade deal with the US will also depend on the future relationship that the UK negotiates with the EU – if indeed it manages to seal a deal before the end of the transition period on 31 December. (Also see "UK's Post-Brexit Medicine Plans Under Pressure" - Pink Sheet, 29 May, 2020.) The deadline for extending the transition period is 30 June.
In this respect the AIC asks to what extent negotiations with the EU might “conflict with negotiations with the US on a trade deal,” given that the negotiations are happening in parallel. “What are the major trade-offs involved?” it asks. “And what effect could a UK-US trade deal have on the UK’s future ability to negotiate deals with other countries?”
Concern has been expressed in some quarters that the pressure to secure a deal with the US could lead to the UK relaxing its regulatory requirements in areas such as environmental protection, climate change and workers’ protections. There have also been suggestions that the need to sign extensive post-Brexit trade agreements with other countries including the US could explain the government’s reluctance to seek close regulatory alignment with the EU in areas such as medicines.
The IAC says its call for evidence will remain open for the duration of the trade negotiations, but it would like submissions on any or all of its questions to be in by 26 June if possible. A revised call for evidence may be issued as the negotiations progress, it adds.