KEI Statement on IPR/Health aspects of bipartisan "New Trade Policy"

KEI statement on bipartisan trade agreement
14 May 2007

FMI: James Love, +1.202.361.3040

On May 10, 2007, Speaker Nancy Pelosi and Ways and Means Chair Charles Rangel announced a "new bipartisan " trade package. KEI has reviewed the details of the elements of section III of the agreement, concerning "patents, IPR and access to medicine."

In general, the House Democrats have negotiated important new concessions from the Bush Administration in three areas. There are no more obligations for patent extensions, and mandatory linkage has been eliminated. These are both important changes that will benefit patients and improve the trade agreements. The changes regarding protection of test data are more problematic, both because the agreement still embraces a system of exclusive rights for data, instead of alternatives such as cost sharing (sometimes referred to as compensatory liability), and because the flexibility for limitiations and exceptions to the exclusive right is unfortunately bound to a poorly drafted side letter, rather than a plain language provision that makes it clear that countries can waive or limit the exclusive right when it is necessary to protect patient interests, regardless of patent status on products. These problems in drafting may reflect a lack of technical understanding of the issue by certain parties involved in the negotiation.

The trade agreement also does not address the current problem of USTR attacking countries for actually using such measures as compulsory licensing of patents (such as putting Thailand on the 301 priority watch list), or demanding that trading partners set limits on the grounds for issuing a compulsory license (reportedly one of the conditions presented in recent FTA negotiations and in the "action plan" for Thailand to avoid trade sanctions).

In general, the changes are welcome, as a partial but still incomplete step toward honoring the 2001 Doha Declaration. It is our hope that members of Congress and Presidential candidates will begin to think beyond IPR obligations as the only way to address the global sharing of R&D costs. Strong IPR is a mechanism to raise drug prices, and high drug prices should be seen as one possible means to support R&D, rather than an objective of trade policy . We need to be moving away from IPR agreements that create high drug prices to a new framework focusing on the support for R&D. This new approach would give countries the flexibility to consider other apporoaches to support R&D, which are less restrictive of access to medicines.

Our comments on Section III of the agreement are given below:

III. Provisions on Patents/IPR and Access to Medicines

A. Data Exclusivity

In general, any regime of “data exclusivity” is objectionable, since it implicitly requires a generic competitor to replicate scientific tests on humans, a practice that is both wasteful and unethical. The House/WH deal does not push the obligation toward one of cost sharing, which would have avoided these problems.

The benefits of III.A. are very minor, at best shortening the term of exclusivity by six months, in cases where the foreign registration is based upon the U.S. registration, and occurs within six month of the U.S. registration, a set of facts which will often not apply.

B. Patent Extensions

The replacement of "may " for “shall” means patent extensions are now optional. This is a significant and welcome change in the IPR burdens for developing countries.

C. Linking Drug Approval to Patent Status

The elimination of the mandatory linkage between drug registration and patent status is also an important and beneficial change.

It was interesting that the language would in fact only allow linkage when there were “expeditious” ways to challenging patent validity or relevance, and rewards for challenging patents, two good provisions that recognize the possiblity that poor patent quality can be an unwanted barrier to competition and trade.

It would be stronger if it mentioned that the obligations regarding injunctions should not exceed those that currently exist in TRIPS Article 44. The U.S. would also benefit from such language, since U.S. law under the eBay decision provides significant flexibility to deny injunctions.

D. Side Letter on Public Health

This provision on the side letter is potentially useful, but only if it is not implemented mechanically, since the existing side letters are not well written, and subject to interpretations that limit their usefulness. In particular, there must be clear language that:

(1) the country may override the exclusive rights in test data, in a manner similar to a compulsory license on a patent, including cases where there is no patent on the product (the position that USTR has taken informally in several seminars and meetings where this topic has been discussed),

(2) that TRIPS flexibilities are not limited to the flawed 2003/2005 “solution” to paragraph 6 of the 2001 Doha Declaration, but also include but are not limited to those referenced in Paragraphs 4, 5 and 7 of the 2001 Declaration (which implicitly are also extended to Articles 6,7,8, 30, 40 and 44 of the TRIPS), and

(3) the U.S. government will not be taking unilateral trade actions against countries that use such flexibilities in practice, such as the listing of countries on the 301 list for actually issuing compulsory licenses.