Page:Special 301 Report 2005.pdf/10

 and development and production of new products. This cycle of innovation produces significant economic and social benefits by accelerating economic growth and raising standards of living.

The Special 301 process focuses on analyzing the intellectual property protection and enforcement of our trading partners, and this has been the primary subject of industry comments. In addition, however, industries – and in particular the pharmaceutical industry – have focused attention on regulatory barriers that impede their ability to sustain the cycle of innovation and may inhibit the availability of new, ground-breaking products. These types of regulatory barriers include, for example, non-transparent administrative regimes; decision-making that lacks a scientific basis; and cumbersome and lengthy drug listing and other administrative processes.

In the conference report accompanying the U.S. Medicare Prescription Drug, Improvement and Modernization Act of 2003 (House Report 108-391), the Congress directed the Secretary of Commerce, in consultation with the International Trade Commission, the Secretary of Health and Human Services and the United States Trade Representative, to prepare a report regarding trade in pharmaceuticals designed in part to provide an "[e]stimate of the impact . . . price controls, intellectual property laws, and other such measures have on fair pricing, innovation, generic competition, and research and development in the United States and each [OECD] country identified." Regarding pharmaceutical price controls, the conference report directed the Administration to examine drug pricing practices of OECD countries and assess, among other things, "whether those practices utilize nontariff barriers with respect to trade in pharmaceuticals."

The conference report directive reflects a concern in the United States that the regulatory practices of many other countries may be slowing the development of the next generation of life-saving drugs for use worldwide. Implicit in this proposition is a concern that, by adopting such mechanisms, foreign countries are not contributing adequately to research and development for new life-saving medicines.

The U.S. Department of Commerce released its report in December 2004, and found that regulatory practices in the OECD countries studied are reducing the funds available globally for pharmaceutical research and development and the creation of new, innovative life-saving drugs, and are driving up prices for generic pharmaceuticals. These practices include price controls, approval delays and procedural barriers, non-transparent processes, restrictions on dispensing and prescribing, and low reimbursement levels. The study also determined that addressing such practices in OECD countries would result in increased research and development in the pharmaceutical sector, development of three to four new innovative drugs each year, and lower prices of generic drugs.

The United States has worked with countries such as Australia, Japan, Korea, and China to address these types of issues and will continue to do so. Regarding Australia, our FTA has allowed us to address key issues relating to transparency and accountability that will improve market access for U.S. pharmaceutical companies. The Australian Government is following through on its commitments in this agreement, by setting up a transparent review system for appealing pharmaceutical listing decisions and working with U.S. officials to prepare for the first meeting of the Medicines Working Group.