Medicare and the TPP

What has an international trade deal got to do with Medicare?  Apparently, the issue of drug costs for seniors, veterans, and people on Medicaid is right in the middle of the Trans Pacific Partnership (TPP) free trade agreement.  You may have heard about the political fight over the TPP and figured it doesn’t affect you.   But maybe it will affect you.

Part of the trade deal would create new rules to protect the American pharmaceutical industry, which sounds okay until you read the details.  Some of the details are set up protect the high prices charged by drug companies by making it illegal for governments to demand lower prices for drugs they spend billions of dollars on for their citizens.

According to Public Citizen, a watchdog group:

“The new rules would set broad limits on governments’ prerogatives to negotiate or mandate lower drug prices, including for taxpayer-funded programs such as Medicare, Medicaid and veterans’ and military health programs. Pushed by U.S. negotiators, these proposed TPP rules would conflict with existing and proposed policies to reduce healthcare costs for seniors, military families and the poor”.

Medicare and the TPP:  Drug Prices and the Donut Hole

The Affordable Care Act requires drug companies to give a 55% discount to people who go into the coverage gap (donut hole) due to expensive brand drugs they take (like insulin). By 2020, the discount is supposed to be 75% and that will be a big cost saving for seniors and for the Medicare budget.

Under the TPP rules, the U.S. government would not be allowed to force drug companies to provide those discounts.


The Veterans Administration  (VA) pays  24 percent below average market prices for the drugs it buys. TPP rules could make this VA requirement illegal and would send the VA budget soaring.


As a condition for having their drugs covered by Medicaid, companies must provide state and federal governments with rebates. These rebates have resulted in a 45 percent reduction in Medicaid spending for brand-name drugs.  Language in the TPP could make these requirements illegal.

Generic Drugs

In an op-ed piece in the New York Times, Joseph Stiglitz, a Nobel laureat and Economics professor at Columbia University, wrote about the TPP rules that would protect higher-priced brand drugs from generic competition.  Stiglitz writes that preventing brand drugs from going generic will cost Medicare and all insurance companies billions of dollars.  And that cost is passed on to seniors and anyone who needs expensive medications.

According to a Public Citizen report:

“The Trans-Pacific Partnership (TPP) is a massive “free trade” agreement currently being negotiated behind closed doors by officials from the United States and 11 other countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. TPP negotiations started in 2008.

The public cannot see the draft TPP text, and even members of Congress, after being denied the text for years, are now only provided limited access. More than 500 official U.S. “trade advisors,” most representing large corporations, have access. The Obama administration hopes to sign the TPP in early 2015.”


I must admit, I had not paid much attention to the fight between Democrats over the TPP. (Most Republicans support the trade deal.)  I had heard the noise about more manufacturing jobs being lost to low-cost countries – but the TPP rules that protect high drug costs and would push Medicare, VA, and Medicaid costs ever higher, have definitely gotten my attention.

The TPP doesn’t sound like such a good deal for Medicare, Medicaid, and VA budgets.  That means it’s not a good deal for the millions of Americans who depend on those programs.

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