Trans-Pacific Partnership: Effects on Pharmaceutical Innovation


The Trans-Pacific Partnership (TPP) has been a subject of debate in recent months. A brainchild of the Obama administration, the TPP ideally aims to promote regional trade activities among the United States and 11 other participating nations, which collectively amounts to 40% of the world’s annual economic output.

Map showing all original members of TPP, before USA left. (Source: The European Financial Review)

However, the closed-door nature of TPP negotiations had also drawn its share of skeptics, who criticized that only multinational corporations (MNCs) would reap the most benefits at the expense of a larger consumer base. Much of it ties to the extended reach of US intellectual property (IP) laws onto its economic partners, with technology-intensive industries, such as pharmaceuticals, expected to receive the toughest blow.

“I did not complete my PhD for this.” (Source: Pixabay)

Leveraging on their existing patents, US pharmaceutical MNCs could charge exclusive rates for their patented drugs, which usually rank among the best of its kind. This effect is more evident in the orphan drug market, where patients have little alternatives but to fork out the extra zeros. Earlier this year, FDA had approved Biogen’s Spinraza, a novel drug for spinal muscular atrophy for sale, and it now fetched an astonishing US$750,000 price tag for the first year of treatment. If existing products could already fetch similarly sweet returns, there is little incentive for pharmaceutical MNCs to invest in new drug research.

The TPP wave does not simply end there, as the new economic climate may force competitors out of business. To protect market interests, there are loopholes for MNCs to delay product launches deliberately, and indirectly stall any information accessible to competitors developing generic drugs. Biologic drug manufacturers are also granted another 8 years of exclusivity in TPP’s developing markets, further reinvigorating the oligopolistic power MNCs wield over their generic substitutes. On top of that, MNCs are able to secure strategic manufacturing sites with their deep coffers and connections, and significantly impede the process of product delivery by their competitors. As previously discussed, protectionist regulations will land the final nail in the coffin, where cheaper, biosimilar generic drugs are simply not commercially available in the country.

Same formula, but higher profits (Source: Pixabay)

The majority of the competition is unlikely to survive against the onslaught of MNCs. Unless there is news of a strong rival rising from the dead, MNCs would be less concerned about innovation to diversify their products. To be fair, MNCs could perhaps innovate new drugs to increase their market share. However, given the high capital risks involved, plus passing all official bureaucracies en route to FDA’s approval, it is unlikely that MNCs would trade in their fruits of labor for another leap of faith at innovation. Especially so with the added security vouchsafed by the TPP.