Citizen Action Monitor

TPP is “the worst trade agreement for access to medicines in developing countries”

TPP’s generous intellectual property protections could still complicate efforts to control drug costs in Canada.

No 1519 Posted by fw, November 19, 2015

“While not as bad as feared, this chapter [18] is still very bad; it is a big setback for efforts to ensure affordable access to medicines in the Asia Pacific region and beyond. Its worst impacts will be felt by the poorest and most vulnerable in developing countries, but it also has worrying implications for Canada, locking our country into an industry-friendly regulatory regime that virtually ensures higher drug costs for the foreseeable future.”Scott Sinclair

Sinclair’s “quick analysis of the leaked text” reveals 5 reasons why Canadians should be concerned with the TPP’s “generous” intellectual property protections: “they could still prove a minefield for efforts to control drug costs in Canada (where they are already the second highest per capita in the world after the U.S.).”

For more about Sinclair’s TPP concerns, click on the following linked title to download a PDF copy of the The Monitor, a periodical in which the article appears. This monthly journal is published by the left-leaning think tank, Canadian Centre for Policy Alternatives.

Alternatively, below is repost with added subheadings and text highlighting.

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The TPP and the cost of drugs, by Scott Sinclair, The Monitor / Canadian Centre for Policy Alternatives/, November/December 2015 (pp 9-10)

On October 9, WikiLeaks posted the final text of the Trans-Pacific Partnership (TPP) intellectual property chapter, which the 12 negotiating countries, including Canada, had only just hammered out at a TPP ministerial meeting in Atlanta. While the chapter is not as bad as previous leaked drafts, and falls short of the most extreme demands from the brand-name drug industry and U.S. government, the concluded TPP is still a harmful agreement that will increase drug costs and reduce access to medicines, especially in developing countries. It also has worrying implications for Canada, binding our country to a regulatory regime that would lock in high drug costs.

Médecins Sans Frontières/Doctors Without Borders (MSF) and others have decried the potential impact of the TPP on drug costs and the availability of generic medicines in developing countries. The hardships that will be inflicted on the poor, the sick, and already strained public coffers in Vietnam and Malaysia are reason enough to oppose the TPP’s “abusive” intellectual property (IP) provisions. But by establishing a new high-water mark for corporate-friendly IP protections the treaty sets a terrible precedent for future agreements. MSF concludes that, “although the text has improved over the initial demands, the TPP will still go down in history as the worst trade agreement for access to medicines in developing countries.”

What about the potential impacts on regulations and drug costs here in Canada? The official line, according to the government’s technical summary of the TPP, is that the rules of the agreement “reflect Canada’s existing regime, system and laws” governing intellectual property protection for drugs. Even with the IP chapter in the public domain, it is difficult to verify these assurances until the full TPP text is released and examined by independent experts. It’s also critical to understand that when the government refers to the TPP requiring no changes to Canada’s “existing regime,” it is already including future changes Canada must make to comply with the Canadian–European Union Comprehensive Economic and Trade Agreement (CETA), which has not yet been ratified, let alone implemented.

Five good reasons to be concerned about the TPP’s “generous” intellectual property concessions

A quick analysis of the leaked text shows there are at least five good reasons to be concerned that the TPP’s generous IP protections could still prove a minefield for efforts to control drug costs in Canada (where they are already the second highest per capita in the world after the U.S.).

TPP would lock in our longer, costly, industry-friendly data protection rules forever

1/ Longer data protections for new drugs — Most media attention has focused on the length of data protection for biologics (large-molecule drugs). The U.S. had been pressing other TPP countries to adopt its standard of 12 years of data protection. Thankfully, the TPP fell short of this outrageous demand, establishing a complicated set of rules that provide from five to eight years of data protection. This is still the longest term of data protection ever enshrined by treaty, and will unquestionably hurt developing countries. Predictably, the insatiable Big Pharma lobby and its congressional supporters are unhappy. Canada was cast as a bystander on this issue because eight years of data protection is in line with our current term of data protection for both chemical and biologic drugs (eight years, plus six months for clinical trials involving children). NAFTA requires only five years of protection for new chemical entities. The TPP, along with CETA, would bind Canada to a higher, more restrictive standard and lock in our costly, industry-friendly data protection rules forever.

TPP’s patent linkage requirement would be a pretext for litigation even on spurious grounds

2/ A locked-in patent linkage system — The TPP is the first of Canada’s international trade agreements to require “patent linkage.” Under Canada’s existing patent linkage system, before Health Canada can grant marketing approval to a generic version of a brand-name drug, the generic company must demonstrate that all relevant patents on the brand-name product have expired. This provides a readymade pretext for litigation even on spurious grounds, delaying cheaper generic drugs from reaching the market. The TPP’s IP chapter does not appear to require any changes to Canada’s current patent linkage system. But none of Canada’s other trade treaties, including the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and NAFTA, require patent linkage at all, leaving future governments completely free to reform or even eliminate it. Nor would CETA require patent linkage. In fact, patent linkage is not permitted in the EU, where its negative impact on drug costs is well understood. By contrast, the TPP, alone of all free trade agreements, will bind Canada’s costly patent linkage system, making future cost-saving reforms far more difficult.

TPP’s patent term extensions will increase Canadian drug costs

3/ More generous patent term extensions — The TPP also includes obligations for patent term “adjustments” (i.e., patent term extensions), supposedly to compensate patent holders for delays in getting regulatory approval. Experts analyzing similar provisions in CETA conservatively estimate the increased drug costs to Canadians at $850 million annually, which is almost double the savings from removing tariffs on all European goods entering Canada. The TPP and CETA will add up to two additional years of monopoly patent protection on top of Canada’s existing term of 20 years. By entrenching patent term extensions in two major international treaties, the brand-name industry has won added insurance that these extremely costly concessions can’t be undone by future Canadian governments.

ISDS provides another mechanism for big pharma to employ aggressive challenges against Canada

4/ New investor rights for foreign drug companies — Another controversial aspect of the TPP is its investor–state dispute settlement (ISDS) mechanism, which empowers foreign investors to bypass domestic courts and seek compensation before private tribunals when government measures taken to protect the public interfere with their investments. ISDS supplies yet another powerful tool for brand-name pharmaceutical companies to protect their monopoly profits (in total violation of the espoused principles of free trade, we should add). Under NAFTA’s ISDS mechanism, Canada is currently being sued for US$500 million ($651 million) by the giant U.S. drug company Eli Lilly because Canadian courts invalidated extended patents on two of the company’s drugs. The courts ruled that the patent extensions were not justified because Eli Lilly had failed to provide evidence of new therapeutic benefits. This opened the drugs to generic competition, reducing costs to Canadian consumers and the public health care system. By expanding new investor–state dispute settlement rights to drug companies from Japan and elsewhere, we can expect the TPP to multiply these types of aggressive corporate challenges against Canada and other countries.

Still secret TPP provision could allow US pharma to go after government drug agencies

5/ Transparency annex is still secret — A final aspect of the TPP that could be cause for concern is its “transparency annex” on health care, which is still secret. Throughout the TPP talks, the U.S. and Big Pharma targeted New Zealand’s government agency Pharmac, which does an exemplary job of controlling drug costs by negotiating with both brand-name and generic companies over the costs of drugs that it approves for use in the country’s health care system. New Zealand’s per capita drug costs are among the lowest of OECD countries. In the TPP’s “transparency annex” the U.S. pursued new rights for brand-name companies to contest the decisions of public drug agencies and tilt the playing field toward “market-based” pricing, increasing costs to governments and the health care system. New Zealand strongly resisted this push, with little help from Canada. It’s unclear what the final TPP text says, but there are concerns that Canada bowed to U.S. pressure to cover federal drug purchasers under the annex. While most drugs in the Canadian public health care system are purchased by provincial governments (which will not be covered), the federal government buys for Aboriginal peoples, the military and others. The TPP sets a terrible precedent to encumber the federal government in its ability to get the best therapeutic value for taxpayer’s money when it purchases medicines. It could also interfere with Ottawa’s ability to co-operate with provincial governments in lowering costs and impede the future creation of a cost-effective national pharmacare program. The leaked TPP intellectual property chapter reveals that resistance from other TPP governments, pressure from the generic industry, and protest by outside public interest groups successfully watered down the most extreme demands of the U.S. and Big Pharma.

While not as bad as feared, this chapter is still very bad; it is a big setback for efforts to ensure affordable access to medicines in the Asia Pacific region and beyond. Its worst impacts will be felt by the poorest and most vulnerable in developing countries, but it also has worrying implications for Canada, locking our country into an industry-friendly regulatory regime that virtually ensures higher drug costs for the foreseeable future.

Scott Sinclair is Director of CCPA’s Trade and Investment Research Project. For more CCPA analysis on the recently concluded TPP, visit www.policyalternatives.ca .

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