How the TPP will restrain the growth of generic medicines and access to affordable medicines

The final text of the Trans-Pacific Partnership agreement confirms beyond doubt the apprehensions expressed by civil society, academia and the generic industry about new barriers to access to medicines, says DG Shah.

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THE final full text of the recently concluded 12-country Trans-Pacific Partnership trade agreement was recently released. The key elements in the TPP and their likely impact on the pharmaceutical industry - both innovative and generic - are noted below.

Patentability criteria

The TPP member states have surrendered their sovereign right to define 'patentability' criteria. Not only have they surrendered their right, they have agreed to grant patents for:

a)    new uses of a known product;

b)    new methods of using a known product;

c)    new processes of using a known product.

This would lead to the 'evergreening' of patents and result in an average extension of monopoly by at least five years. Some can stretch it beyond five years, as was done by Novartis AG for the anti-cancer drug Gleevec (imatinib). This would encourage innovators to go for low-hanging fruits at the cost of more difficult-to-succeed efforts. Generics will slow down and patients will have to wait longer for affordable treatments.

Patent term extension

The TPP member states have agreed to adjust the term of the patent for 'unreasonable' delays in the issuance of patents. The 'unreasonable' period is defined as 'more than five years from the date of filing of the patent application'. Likewise, any delay in granting marketing approval for a drug will entitle the rights holder to extension of the patent term.

The patent term adjustment provision has several implications. Firstly, it would enable the rights holder to delay launch of the product in relatively low-priced markets, particularly developing countries. Secondly, to delay the launch, the innovators may even furnish incomplete data to the drug regulator to make the approval process look tardy and inefficient.

Thirdly, it would thus deny access to a new medicine in the lower-priced markets. Fourthly, even after the expiry of a patent in the developed countries, the product would retain monopoly status in the developing countries. This could on average give at least two years of extended monopoly, further impacting generic growth and patient access.

Protection of undisclosed test data

Commonly known as 'data exclusivity', the protection ensures that a drug regulator cannot rely on the innovator's data for approval of a subsequent manufacturer's application for a specified period from the date of marketing approval to the innovator. This would ensure extended monopoly for innovators in developing countries, though the patent may have expired in developed countries. This is because innovators launch their new drugs in low-priced countries years after their launch in the developed economies.

As regards biologic drugs, the TPP member states are required to either grant eight years of exclusivity or deliver a 'comparable outcome in the market' through 'other measures'. This would add to the period of monopoly for innovators and delay the launch of generics.

Patent linkage

'Patent linkage' means linking marketing approval by the drug regulator to the patent status of the drug. The Orange Book system as it operates in the US generally provides a 30-month time frame to the drug regulator for approval of a generic (Abbreviated New Drug Application) product.

The proposed obligation could effectively lead to three to four years of additional monopoly in other markets, as they do not have a formal system similar to the Orange Book which binds the drug regulator to approve a generic product within the stipulated time frame. This would benefit innovators and delay launch of generics, depriving patients of an affordable alternative.

Compulsory licences

The intellectual property provision in the TPP's investment chapter will curtail governments' ability to use a compulsory licence as a tool to negotiate the price of a medicine with the rights holder, as was done by Brazil for antiretroviral medicines. It provides that the meaning of the World Trade Organisation (WTO)'s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) can be subject to review and arbitration led by the private rights holders.

The review extends to 'adequate' or 'reasonable' compensation or remuneration for non-voluntary use of intellectual property rights; the standards of patentability; and other issues to determine the extent to which an action or policy is 'consistent' with the TPP intellectual property chapter.

This would not only lead to 'forum shopping' between the WTO's Dispute Settlement Body and the TPP's investor-state dispute settlement (ISDS) mechanism, but also empower the private rights holder investors (and not end consumers) to bring cases against governments and benefit from sanctions.

Eli Lilly & Co.'s $500 million suit under the North American Free Trade Agreement (NAFTA) against Canada for the Canadian Federal Court's invalidation of the Zyprexa (olanzapine) patent is a portent of the shape of things to come. Not only the government but also the judiciary of a country will be subject to arbitration proceedings by a private investor.

Border measures

The TPP member states have agreed to empower certain 'competent authorities' such as customs to initiate border measures, including against goods in transit.

Thus, goods originating in a non-member state and destined for another non-member state, if transiting through a TPP member state, could be seized for alleged violation of intellectual property rights as determined by the customs authorities, and not through the judicial process. This would certainly curtail generic companies' reach to many markets.

Dispute settlement mechanism

The inclusion of intellectual property as a covered asset in the TPP investment chapter is potentially more consequential than anything in the intellectual property chapter itself. It enables private investors to use the ISDS mechanism under the investment chapter to interpret the intellectual property chapter as well as the TRIPS Agreement.

This will provide the arbitrators in the ISDS mechanism with discretion to interpret and decide on compliance with the TRIPS Agreement, even though the WTO has its own dispute settlement mechanism. This would change the dynamics, as private parties would have less restraint than states regarding policy space as well as the perspective of seeing intellectual property rights as innovation stimulants rather than as assets.

Collective impact

Thus, the collective impact of the TPP on the pharmaceutical industry will be to grant at least 10 years of additional monopoly to innovators in various ways. This may reduce pressure on innovators to research new drugs and develop new remedies. Consequently, the society at large will suffer.

It would also mean that patients in TPP countries would have to continue to pay higher prices for 10 more years. Those who can't afford these will have to suffer without medicines that could have cured them.

This will in turn slow down the development and commercialisation of generics elsewhere in the world, depriving people of access to affordable medicines.                              

DG Shah is CEO of the Vision Consulting Group and Secretary General of the Indian Pharmaceutical Alliance. This article was first published in PharmAsia News (19 November 2015) and also appeared on the Intellectual Property Watch website, from which it is reproduced here under a Creative Commons licence.

*Third World Resurgence No. 303/304, November/December 2015, pp 25-26