TPP raises the barriers to access to affordable medicines

New trade treaties like the Trans-Pacific Partnership are ratcheting up already high levels of intellectual property protection to the benefit of big pharmaceutical corporations from the US and the EU.

by Carlos M. Correa

The pharmaceutical industry from the US and Europe scored a major victory with the adoption, in 1994, of a binding agreement on intellectual property – the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) – in the context of the then nascent World Trade Organization (WTO).

While some transitional periods were allowed, the TRIPS Agreement did not leave any space for special and differential treatment based on the countries’ levels of development. In particular, it imposed on all WTO member states the obligation to grant patents in all fields of technology.

The lack of patent protection promotes price competition in the pharmaceutical market and, in some cases, clears the way for the development of generic pharmaceutical industries. The most notable case is that of India, which developed a strong pharmaceutical industry and is known today as “the pharmacy of the developing world.”

The Trans-Pacific Partnership (TPP) is an ambitious trade agreement between the US and 11 other countries from the Pacific Rim region (Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam).

Notably, there are major differences in the level of development of these countries; for example, Vietnam’s gross domestic product per capita is approximately 43 times less than the US GDP per capita. Despite this, Washington seeks the application of the same standards of protection to all parties in the partnership.

In fact, tariffs are already low among the TPP countries. There is very little gain to be obtained from the TPP in this regard. What such agreements tend to be really about are issues such as intellectual property rights. And the most important strategic reason of the TPP initiative for the US is likely to be to counter China’s growing influence in the Asia-Pacific region, and to make the region less hospitable for Chinese “state capitalism.”

Enhanced intellectual property protection

Enhanced intellectual property protection of pharmaceutical products had been a key concern for the US in the trade negotiations that led to the adoption of the TRIPS Agreement. Despite the significant enhancement of the international standards of intellectual property protection that that agreement entailed, the pharmaceutical industry from the US and the European Union remained unsatisfied. They aimed at even higher standards of protection.

However, it soon became evident that it would not be possible to obtain such higher standards within the relevant multilateral organizations, the WTO and the World Intellectual Property Organization (WIPO), where developing countries resisted further increases in intellectual property protections.

In this scenario, developed countries opted to seek the enhanced protection demanded by the pharmaceutical industry and other constituencies through bilateral or plurilateral trade agreements, where the bargaining position of individual countries is weaker and the promises of market access, or other real or expected trade advantages, make agreements on intellectual property more viable.

Thus, while under the TRIPS Agreement patents must last for 20 years from the date of application, the free trade agreements (FTAs) promoted by the US oblige the partner signatory countries to extend the patent term to compensate for “unreasonable” delays beyond a certain period in the procedures for the marketing approval of a medicine as well as in the examination and grant of patent applications.

FTAs also oblige member states to, among other things, grant patents based on “utility” rather than industrial applicability and, importantly, to secure market exclusivity on the basis of the protection of test data required for the marketing approval of pharmaceuticals, generally for five years from the date of such approval in the country where protection is sought.

FTAs also require partners to establish a “linkage” between the marketing approval of medicines and patents, thereby granting pharmaceutical companies rights that, under some FTAs, are stronger than those available under the US law.

For instance, a study found that the patent term extension would generate in Colombia an increase in pharmaceutical expenditures of $329 million and a reduction in pharmaceutical consumption of 7% by 2025.

With respect to the potential impact of the TPP in particular, a study by Australian and US researchers estimated that, in Vietnam, the government would only be able to provide antiretroviral therapy to 30% of people living with HIV (down from its current rate of 68%) since the cost per person per year of treatment would increase to $501 under the US proposal from its current level of $127.22.

The negative impact of TRIPS-plus standards on access to medicines has been found even in developed countries that are not net exporters of intellectual property rights, such as in Canada and Australia.

The costs incurred by the smaller partners in FTAs are disproportionately high in relation to the benefits that accrue to pharmaceutical companies. (IPS)                                               

Carlos Correa is the special adviser on trade and intellectual property issues at the South Centre.

Third World Economics, Issue No. 601/602, 16 September -15 October 2015, p24