The Pharmaceutical Research and Manufacturers of America has welcomed the “strong protection of intellectual property rights” (IPR) included in the Free Trade Agreement which has been agreed this week between the USA and South Korea, after 10 months of often acrimonious negotiations. However, health activists warn that the deal could force up the prices of prescription drugs in both countries.

Under the FTA, which has to be approved by the US Congress and Korea’s National Assembly, nearly 95% of bilateral trade in consumer and industrial products will become duty-free within three years of the deal’s entry into force, with most remaining tariffs eliminated within 10 years. President George W Bush said this would “generate export opportunities… promote economic growth and the creation of better-paying jobs in the United States, and help American consumers save money while offering them greater choices.”

As part of the FTA, Korea has agreed to abandon its policy of requiring drugmakers to negotiate prices with the government in order for their products to be placed on the national health care system’s positive reimbursement list. This policy was reported to be a major stumbling block at the talks, with US negotiators regarding it as a potential barrier to trade. Korea has also agreed to extend its patent period on innovative drugs.

The US industry has welcomed both these developments; Korea has “committed to some significant improvements in market access for pharmaceuticals,” and the FTA “will help enhance Korean patients’ access to the most effective, innovative cures,” said PhRMA chief executive Billy Tauzin. He added that he was “particularly pleased” by the strong IPR protection included in the deal, which will “support ongoing investment in R&D by pharmaceutical companies around the globe.”

However, the Korean Federation of Medical Groups for Health Rights has forecast that these concessions will increase costs to Koreans by 1 trillion won over the next five years, while US critics have warned that they could also increase drug prices in the USA.

This is because Korea’s drug formulary is substantially similar to the preferred drug lists used by at least 40 US states for Medicaid purchases, say Sean Flynn and Sharon Treat, writing in the online public affairs journal “Adjusted for inflation, Medicaid spending on pharmaceuticals by state governments declined in 2005, while overall national drug spending increased at double the rate of inflation the same year and by over five times since 1994. But the federal government can sue states to preempt laws and programs that conflict with FTAs. Thus, whatever is required of Korea in the FTA may apply to states as well,” they warn.

Meantime, says Mr Tauzin: “much work remains to ensure Korea adequately recognizes and rewards innovation, puts a higher priority on early patient access to cutting-edge, life-saving medicines and makes health care decisions based on fair and transparent rules. It is critical that the United States government closely monitor the full and effective implementation of Korea’s FTA commitments and continue to work with Korea regarding its new government reimbursement system.”

The agreement with South Korea has renewed speculation that negotiations for an FTA between the USA and Japan might now be accelerated.