Trading away the health of millions

A leading international health network warns that if the US demands on intellectual property rules under the TPPA are accepted, they could severely restrict access to affordable, life-saving medicines for millions.

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ENCOMPASSING 12 countries and slated for further expansion across the Asia-Pacific region, the Trans-Pacific Partnership Agreement (TPPA) is a regional trade agreement that will 'set the standard for 21st-century trade agreements going forward'.

The TPPA negotiations are being conducted in secret, but leaked drafts of the US negotiating positions show that the US is demanding aggressive intellectual property (IP) provisions that would roll back public health safeguards enshrined in international trade law in favour of offering enhanced patent and data protections to pharmaceutical companies, making it harder to gain access to affordable generic drugs and hindering needed innovation.

If the US's demands are accepted, the TPPA will impose new IP rules that could severely restrict access to affordable, life-saving medicines for millions of people. Billed by President Obama as 'a model not just for countries in the Pacific region, but for the world generally', the TPPA will set a damaging precedent with serious implications for developing countries.

With its demands, the US is turning its back on previous US global health commitments, including:

*          The 2001 World Trade Organisation (WTO) Doha Declaration reaffirming the primacy of public health over trade and confirming that the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), to which the US is a party, can and should be implemented in a manner supportive of access to medicines

*          The 2008 World Health Assembly Resolution 61.21, the Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property, to which the US agreed, which states that countries are required to 'take into account, where appropriate, the impact on public health when considering adopting or implementing more extensive intellectual property protection than required by TRIPS'

*          The May 10, 2007 New Trade Policy (May 10 Agreement), in which the US Congress and the Bush administration reached a bipartisan agreement to include important public health safeguards in trade agreements with developing countries

*          The 2011 UN Political Declaration on HIV/AIDS, which recognises the role that flexibilities in the TRIPS Agreement can play in increasing access to treatment, and calls on UN members to 'ensure that intellectual property rights provisions in trade agreements do not undermine these existing flexibilities'.

The May 10 Agreement represented 'a fundamental shift in US trade policy', scaling back some of the harshest US IP demands for developing countries in order to strike a better balance between protection of IP and public health needs.

However, the US pharmaceutical industry has aggressively lobbied against the May 10 Agreement being applied to the TPPA negotiations. Despite concerns from several members of Congress, the Office of the US Trade Representative (USTR) is shifting US policy away from the May 10 Agreement and toward greater protection of IP rights for brandname pharmaceutical companies in the developing world.

Specific US demands threatening access to medicines

1) Broadening the scope of patentability: the US wants to make it easier to patent minor modifications of old medicines, regardless of whether they offer any therapeutic benefits for patients

Existing flexibility: The TRIPS Agreement includes important flexibilities for governments to decide what types of pharmaceutical products deserve to be protected by patents in a given country. Essential requirements such as 'novelty', 'inventive step' and 'industrial applicability' can be defined by lawmakers in different countries so they are appropriate within the context of national circumstances (i.e., public health needs).

The TRIPS Agreement allows countries to set their own patentability standards, and therefore developing countries like India, the Philippines and Argentina have started defining grounds for rejecting a patent, for instance if the pharmaceutical substance claimed is just a new form of a known substance.

This flexibility is important because it allows governments to prohibit so-called 'evergreening', which enables pharmaceutical companies to extend the patent life and monopoly protection of old drugs simply by making minor modifications to existing formulations or dosages, without necessarily increasing the therapeutic efficacy for patients, or by identifying a new therapeutic use for an existing medicine.

What the US wants: The US is seeking to erode this flexibility by requesting that TPPA countries introduce new rules that would severely limit the ability of each country to define what is 'patentable'.

For example, the USTR proposal for the TPPA requests the patenting of a 'new form, use or method of using' and 'new formulations' of an existing product - even if there is no increase in efficacy - a provision that enables the practice of evergreening.

In addition, the US seeks to require that plants and animals be patentable, as well as diagnostic, therapeutic and surgical methods for the treatment of humans or animals. The TRIPS Agreement explicitly allows governments to exclude these inventions from patent protection. This provision goes beyond even what US law allows, which exempts practising surgeons from patent liability and may preclude the patentability of some diagnostic methods.

Impact on access to medicines: Evergreening significantly affects access to medicines by allowing pharmaceutical companies to extend patent monopolies, potentially keep prices high indefinitely, and delay the arrival of more affordable generic medicines into the market.

The patentability of surgical methods without an exemption for practising surgeons can raise doctors' liabilities if they are found to infringe a patent during the practice of a medical operation. This is the first time that the US has included requirements to patent surgical methods in a trade agreement with developing countries.

2) Restrictions on pre-grant patent oppositions: the US wants to make it harder to challenge invalid or frivolous patents

Existing flexibility: The TRIPS Agreement imposes no restrictions on filing an opposition to the granting of a patent - either before it has been granted (pre-grant opposition) or after (post-grant opposition).

What the US wants: The USTR's proposed provisions would forbid pre-grant oppositions in TPP countries, even those that already have the mechanism incorporated in their national laws. This would mean that third parties will have to wait until the patent is granted to challenge a weak or invalid patent. Forbidding pre-grant patent oppositions not only makes it more costly and cumbersome to oppose a patent, but also deprives patent offices of the benefit of the expertise of third parties or even competitors to the applicant, who may be able to identify inaccuracies in the application before a patent is approved.

Impact on access to medicines: Pre-grant oppositions have successfully precluded granting of patents on several life-saving drugs, thus expanding access by allowing lower-cost generics to enter the market. The use of this safeguard has resulted in rejection (or withdrawal) of key patent applications on important HIV/AIDS medications, including tenofovir, darunavir, nevirapine syrup and lopinavir/ritonavir, allowing generic companies in India to continue to manufacture, supply and export these HIV medicines to other developing countries. Patent oppositions are an essential public health safeguard that can accelerate the entry of generic competition, improve the patent system through public oversight and help reduce over-patenting.

3) Expanding data exclusivity: the US is seeking to grant a backdoor route to monopoly status

Existing flexibility: Data exclusivity is not currently required in international law. The TRIPS Agreement requires member states to protect clinical data, but there is no obligation to grant any period of monopoly or exclusivity in the use of these data.

When a second entrant or generic manufacturer applies to register and sell a generic version of a previously registered medicine, the manufacturer has to provide data showing that its product is bioequivalent to the original registration. The drug regulatory agency already has the necessary clinical data for safety and efficacy, submitted by the originator, and must only assess if the generic version meets bioequivalence standards.

The introduction of data exclusivity prevents drug regulatory agencies from referring to existing clinical data to approve registration of generic versions of a drug by 'locking up' the clinical data for a period of years, shutting down the entry of price-lowering generic competition for the duration. Data exclusivity essentially creates a new system for granting monopolies in order to prevent generic competition.

Generic manufacturers are forced to wait for the 'data monopoly' period to end, even if the drug is unpatented, and even when a compulsory licence is issued to override a patent. The only way a generic manufacturer can get a drug registered without access to existing clinical data is to repeat the clinical trials. However, duplicating clinical trials is not only extremely costly but also unethical, since safety and efficacy has technically already been established, rendering further clinical trials medically unnecessary.

Many experts and UN agencies, including the World Health Organisation (WHO), UN Development Programme (UNDP) and Joint UN Programme on HIV/AIDS (UNAIDS), have recommended that developing countries do not incorporate data exclusivity in their national laws.

What the US wants: The USTR is currently proposing at least five years of data exclusivity for new chemical entities and at least three years of data exclusivity for drugs containing an already approved active ingredient.

Moreover, the placeholder text calling for data exclusivity for 'biologic' medicines in the TPPA is especially alarming. Pharmaceutical firms are lobbying for the data exclusivity period for biologics to be set at a minimum of 12 years. Because biologics are structured differently than traditional chemical medicines, second-entrant 'generic' biologics are called 'biosimilars' or 'follow-on biologics', and require a different regulatory approval process. This would be the first time the US has included a demand on biologics in a trade agreement, and if incorporated in the TPPA, it would considerably delay the market entry of biosimilars.

It is unclear if the US will renege on the public health safeguards specified in the May 10 Agreement, where exceptions were allowed in order to ensure governments could still effectively implement public health safeguards, including compulsory licences, caps and concurrent periods of exclusivity (vs. effectively longer 'consecutive' periods of exclusivity).

Impact on access to medicines: Data exclusivity can delay the registration of generic or biosimilar versions of a medicine for many years. Some of the newest breakthrough medicines are biologics sold at extremely high prices. The introduction of data exclusivity for biologics will delay the introduction of affordable versions of these medications. The need for low-cost biosimilar alternatives to highly expensive life-saving drugs, including pegylated interferon to treat Hepatitis C and herceptin to treat breast cancer, is acute.

Some members of the US Congress have expressed formal opposition to the inclusion of any data exclusivity relating to biologics in the TPPA. In fact, the US itself is considering reducing its current data exclusivity provision for biologics from 12 to seven years, in order to reduce the cost of medicines. In addition, the Federal Trade Commission (FTC) has even recommended eliminating data exclusivity for biologics in the US.

4) Requesting patent term extensions: the US is seeking to keep generic competitors out of the market, for longer

Existing flexibility: The TRIPS Agreement requires patents to last 20 years, but imposes no additional provisions to extend monopoly rights further.

What the US wants: The US's proposed terms in the TPPA would allow brandname pharmaceutical companies to lengthen this period by requiring countries to grant patent extensions of at least five years to compensate for administrative delays in the regulatory or patent approval process. Even though the May 10 Agreement recognised the harmful impact of patent term extensions on access to medicines, and made them voluntary/optional for countries negotiating trade agreements with the US, the US is demanding that patent term extensions in the TPPA be mandatory.

Impact on access to medicines: The extra years added to the patent are extra years in which the patent holder can maintain a monopoly position and continue to charge artificially high prices for the drug, free from generic competition. Patent term extensions further delay the entry of generic medicines. Both the patent office and the drug regulatory authority have crucial roles to play in examining thousands of patent applications and making sure that registered medicines are safe and of good quality. Based on the provision that the US is proposing, the time taken to process patent and regulatory applications in developing countries could extend patent monopolies unduly.

5) Requesting patent linkage: the US is seeking to turn drug regulatory authorities into 'patent police'

Existing flexibility: Patent linkage is not only absent from international law, but is not even permitted in many developed countries. For example, most countries in Europe do not impose linkage between patent status and drug registration.

A drug's patent status and its registration status - its approval to market the drug in a particular country - are separate, each handled by separate government agencies with specific areas of competency. Patent offices assess whether a drug is innovative and novel enough to be patented, and national drug regulatory authorities assess whether a drug is of a high quality - safe and effective enough to be registered for use by the population they are responsible for.

Patent linkage is a 'TRIPS-plus' provision that forces drug regulatory authorities to assess whether a generic drug could potentially infringe existing patents before approving its registration, but drug regulators are simply not equipped to evaluate patent validity; furthermore, it is up to the patent owner itself to identify and pursue potential patent infringements through the judiciary, a practice which ensures that the validity of a patent can be publicly questioned and held up to scrutiny before it is enforced.

What the US wants: The USTR has proposed that patent linkage be required of TPPA countries, imposing more restrictive conditions for the registration of generic medicines in low-income nations than are found in Europe, and creating an important new and burdensome role for national regulatory authorities.

With this demand, the USTR is reneging on the May 10 Agreement, which made patent linkage optional for countries negotiating trade agreements with the US.

Impact on access to medicines: Patent linkage provisions delay the market entry of generic medications. By requiring drug regulatory authorities to take on the responsibility of policing patents, this aggressive TRIPS-plus provision hinders generic drug registration while circumventing patent dispute processes between the patent holder and the patent authorities.

6) Imposing new forms of IP enforcement: the US wants to allow customs officials to seize shipments of drugs on mere suspicion of IP infringement and to delay generic competition through threats of increased damages

Existing flexibility: The TRIPS Agreement allows for considerable flexibility in designing national mechanisms of IP enforcement and permits exclusion of border measures on patented products.

If pharmaceutical products are considered to be infringing trademarks, the TRIPS Agreement only requires governments to ensure customs officials can seize drugs if they are the product of wilful and commercial-scale actions (e.g., drugs that misrepresent their source and may have been purposefully adulterated and are dangerous for public health). Also, governments can limit damages or the availability of injunctions (which might otherwise prohibit a generic company from marketing a drug) in the interest of public health.

What the US wants: The US's proposed terms would eliminate some of these flexibilities. The US is demanding that TPPA countries implement and apply stronger enforcement measures than required by international law.

The US is requesting that TPPA countries grant customs officials the ex-officio right to detain shipments of medicines at the border, even for generic medicines in transit to developing countries, when they are suspected of civil, non-counterfeiting trademark infringement. But customs officials are not equipped to apply trademark law's complex multi-factor tests. The US proposal conflates pure commercial trademark disputes and criminal offences, such as production of counterfeit, falsified or substandard medicines. The result is a policy that could harm, rather than help, public health, by delaying legitimate medicines en route to people who need them in developing countries.

The US also seeks to require mandatory injunctions for alleged IP violations. This runs counter to provisions in TRIPS that allow for the possibility of judicially authorised licences and royalty payments as damages. Furthermore, the US is requesting TPPA countries to mandate that judicial authorities consider valuing damages based on 'the suggested retail price or other legitimate measure of value submitted by the right holder' in cases of infringement of intellectual property rights, a mechanism that strongly favours the rights holder and increases damage amounts. Each country should have the flexibility to individually determine the appropriate remedy and measure for damages for IP infringement.

Impact on access to medicines: Increased enforcement of IP laws has already been used to limit legitimate trade in generic medicines between developing countries. Extending IP enforcement rules beyond the enforcement measures required in the TRIPS Agreement, and without safeguards against abuse, widens opportunities to disrupt legitimate trade in generic medicines. Customs and border officials often do not have the necessary expertise to make accurate assessments with regard to intellectual property disputes, yet will be granted the power to seize medicines on a mere suspicion or allegation of IP infringement. Unwarranted interception of legitimate in-transit pharmaceutical supplies can undermine legitimate trade in generic medicines. If TPPA countries agree to the US's proposal for valuing damages, their judiciaries will have their hands tied and will no longer be able to balance intellectual property rights with public health.

This article has primarily addressed the US government demands on patents and intellectual property, but the TPPA contains other chapters that, if accepted, would also negatively affect access to medicines in developing countries. The following two provisions, from the pharmaceutical pricing and investment chapters, could have a detrimental effect on access to medicines.

7) Pharmaceutical pricing chapter: the US is seeking to assist pharmaceutical companies in locking in high prices

According to the leaked text, the USTR's proposed terms would force government pharmaceutical reimbursement or price control programmes that exist in some countries to reflect the 'market value' of drugs, thereby increasing the purchase price and restricting the capacity of governments to negotiate discounts or price reductions.

The US proposal for the TPPA mandates that governments buy medicines at much higher fixed prices, allows pharmaceutical companies to be part of the decision-making process, and even allows pharmaceutical firms to challenge government decisions. The TPPA would be the first trade agreement where the US is known to be proposing a standard that would restrict the operation of non-discriminatory domestic pharmaceutical price policies in developing countries. And the US is proposing these measures in an agreement it describes as having 'global' and 'gold standard' ambitions.

8) Investment chapter: the US wants to allow pharmaceutical companies to sue governments and limit their ability to effectively set medicine prices

The leaked TPPA investment chapter contains provisions that would give private corporations the right to sue governments if the regulatory environment negatively affects their 'investments', including expected profits.

The definition given to 'investment' in the TPPA encompasses intangible investments, including intellectual property. Granting companies these rights could therefore undermine TPPA governments' ability to issue regulations to protect public health and promote access to medicines, and expose them to lawsuits from corporations that claim their IP rights are being infringed upon by government action.

This could happen if, for example, a government decided to regulate drug prices. A company could then claim that the government's action negatively impacts its 'investment' in the country.

To resolve disputes, the TPPA proposal creates extra-judicial international investor-state tribunals that bypass national judicial systems and even WTO-based dispute settlement mechanisms, that can override national laws and issue penalties for failure to comply with their rulings, and that make decisions via closed-door processes that are usually unappealable.                                                 

The above is extracted from 'Trading Away Health: How the US's Intellectual Property Demands for the Trans-Pacific Partnership Agreement Threaten Access to Medicines', an Issue Brief produced by Medecins Sans Frontieres' Access Campaign (August 2012). The full text of the briefing is available on the Campaign's website msfaccess.org. Medecins Sans Frontieres is an international humanitarian aid organisation that provides emergency medical assistance to populations in danger in more than 60 countries.

*Third World Resurgence No. 275, July 2013, pp 25-28