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Medicare and Medicaid Should Be Protected in Trade Agreements

October 22, 2014 at 3:39 PM

CBPP, AARP, the AFL-CIO, Consumers Union, and ten other national organizations have written to the U.S. Trade Representative asking that Medicare, Medicaid, and other health programs be excluded from the investor-state dispute settlement (ISDS) provisions of pending trade agreements.

ISDS would give companies a new legal avenue to challenge U.S. pricing and patent policies for drugs and medical devices: the ability to sue the U.S. government before an international arbitration panel that wouldn’t be subject to normal democratic checks and balances.  In our letter, we say:

ISDS . . . would allow global pharmaceutical firms to challenge mechanisms that state legislatures, the Congress and public agencies use to manage pharmaceutical costs in public programs.  For example, a pharmaceutical company could challenge a state’s Medicaid preferred drug list or drug utilization management rules that limit access to a certain drug under specific circumstances.  Reimbursement policies for medicines under Medicare Part B could be challenged.  If adopted, the President’s own proposal to establish rebates under the Medicare Part D program for low-income beneficiaries could be subject to an ISDS challenge.  Simply stated, ISDS would impose an unnecessary risk to government administered health programs by limiting what policy makers can do to keep these programs affordable for taxpayers and beneficiaries.

Concerns about ISDS are growing and span the political spectrum.  In a recent editorial, The Economist suggested various ways of defining and narrowing the scope of ISDS, including exempting measures “to protect legitimate public welfare objectives, such as health, safety, and the environment,” allowing only governments to bring complaints against another government, and making proceedings public and subject to appeal.  As The Economist concludes, “Firms need protection; but so does the right of governments to pursue reasonable policies.”