[Ip-health] EU-Mercosur FTA puts at risk access to medicines in Brazil, says new study

Nicolas Roux nicolas.bilaterals at gmail.com
Fri Dec 1 09:16:47 PST 2017


https://www.bilaterals.org/?eu-mercosur-fta-puts-at-risk

IP Watch | 1 December 2017

*EU-Mercosur FTA puts at risk access to medicines in Brazil, new impact 
assessment study finds*

Authors:

  * Marcela Fogaça Vieira – human rights and IP lawyer, master in Public
    Health, consultant Shuttleworth Foundation
  * Gabriela Costa Chaves – pharmacist, PhD in public health, researcher
    at Department of Medicines Policy and Pharmaceutical Services (NAF),
    Sergio Arouca National School of Public Health, Oswaldo Cruz
    Foundation (ENSP/Fiocruz)

The European Union (EU) is currently negotiating a free trade agreement 
(FTA) with the four founding members of Mercosur (Argentina, Brazil, 
Paraguay and Uruguay), which comprises a chapter on intellectual 
property rights (IPR). A new round of negotiations is taking place from 
November 29th to December 8th in Brussels[1]. Word is that they aim to 
announce the closure of the agreement at the next World Trade 
Organization (WTO) Ministerial Conference that will be held from 10-13 
of December in Buenos Aires and the clock is ticking to close all the 
chapters before that. As usual, the negotiations are taking place in 
secrecy, but the EU released a draft proposal of the IPR chapter in 
September last year, which has provided the general public some 
knowledge about what is been negotiated.

Throughout the many years of negotiations, the Mercosur countries have 
been opposing the adoption of any clauses that provide further 
protection for IPR than is already required in the WTO TRIPS Agreement. 
However, according to recent press reports[2] the EU is still pushing 
for those measures. It is suspected that they are deliberately delaying 
the issue of patents and public health to try to force an agreement at 
the last minute, when negotiations around other issues will already have 
been reached and the pressure will be high on Mercosur not to lose 
everything.

We conducted an impact assessment study to estimate the impact that the 
EU proposal for the IPR chapter could have on health policies in 
Brazil.[3] The study aims to present new evidence to inform the 
negotiations and follows the recommendation of the United Nations’ 
High-Level Panel (UN HLP) on Access to Medicines.[4] The findings show 
that the adoption of the measures proposed by the EU could put the 
sustainability of access to health policies in Brazil at risk, as they 
could sharply increase public expenditures on medicines. The report was 
released just before the negotiations that took place last September in 
Brasilia, bringing new evidence to support the Mercosur position to 
reject the TRIPS-plus measures proposed by the EU.

If we look at only what is related to medicines used to treat HIV and 
hepatitis C (which amounts to 30 medicines out of the almost 450 
provided by the Brazilian public health system), the reports reveal that 
additional expenditures could be almost BRL 2 billion per year (about 
USD 640 million)! That is equivalent to the annual Brazilian public 
expenditure on health of 1,369,256 persons![5] If that is extrapolated 
to all purchases of medicines in Brazil, the additional burden brought 
by the FTA could result in a collapse of the Brazilian public health 
system, one of the few in the world that adopts a policy of universal 
access to healthcare.

Another recommendation of the UN HLP is that “Governments engaged in 
bilateral and regional trade and investment treaties should ensure that 
these agreements do not include provisions that interfere with their 
obligations to fulfil the right to health” (p. 9). The EU proposal, 
however, contains such provisions.

We undertook an analysis,[6] released last March, of the provisions 
proposed by the EU and identified mainly three TRIPS-plus provisions 
that are harmful for health policies. Those are:

Mandatory adoption of regional or national exhaustion of intellectual 
property rights (IPR)
Extension of the period of protection conferred by a patent on medicinal 
products and
Exclusivity of data submitted to obtain market authorisation

This report also presented preliminary calculations of the impact of one 
of those TRIPS-plus measures – patent term extension – on public 
expenditures on selected medicines in Brazil. The calculations included 
six medicines that could have their patent term extended under such a 
provision: three for HIV (darunavir, etravirine, raltegravir); two for 
hepatitis C (sofosbuvir, daclatasvir) and one for cancer (dasatinib). It 
was estimated that this extension would represent an additional 
expenditure of nearly USD 444 million by the Brazilian Ministry of 
Health (MoH), in comparison with the lowest generic international prices.

The recently released report presents the findings of a more 
comprehensive impact assessment of two of the TRIPS-plus provisions 
contained in the EU proposal: patent term extension and data 
exclusivity. As Brazilian law already adopts the national regime of 
exhaustion of IPR, the impact of that specific provision was not 
individually calculated. The study – using the reality of the Brazilian 
market as a base for calculations – applies the Intellectual Property 
Rights Impact Aggregate (IPRIA) Model[7] in order to estimate the impact 
of adopting such provisions on the public expenditures and domestic 
sales of medicines in Brazil.

The Model was applied only to the market segment comprised by 
antiretroviral (ARV) medicines indicated for the treatment of HIV and to 
the market segment of medicines for hepatitis C, which are both provided 
in the public system in Brazil. It was not applied to estimate the 
impact of IPR changes in the Brazilian retail pharmaceutical market as a 
whole.

The selection of the two case studies took into consideration the 
significant difference between them. In Brazil, the ARV market has been 
relatively stable over the past years in terms of public expenditures 
and included an important share of generic medicines, both imported and 
locally produced, mostly as a result of adoption of measures to 
challenge patent barriers (threat and issue of compulsory license, 
patent oppositions, experimental use/Bolar exception and voluntary license).

On the other hand, the hepatitis C market has been sharply increasing; 
it is historically almost 100% under exclusivity and the sales of 
national producers are only residual. In 2015, there were changes in the 
Therapeutic Guidelines with the incorporation of the direct-acting 
antivirals (DAA) sofosbuvir, daclatasvir and simeprevir. The strategies 
adopted to try to remove IPR barriers had not fully resulted in changes 
in the market as of 2016, resulting in a market in which the negative 
impact of IPR on public expenditures and local production can be 
measured in full.

The study used the scenarios method to produce prospective simulation of 
five different scenarios in order to estimate the impact of the 
inclusion of each of the above-mentioned TRIPS-plus provisions proposed 
by the EU both separately and together:

 1. Base scenario – the evolution of the market if there are no changes
    on IP regulations in Brazil, therefore including TRIPS-plus
    provisions already adopted in Brazilian law
 2. Alternative scenario 1 – the evolution of the market in the absence
    of the article 40, sole paragraph, of the current Brazilian patent
    law, which allows for patent term extension based on patent
    examination delay
 3. Alternative scenario 2 – the evolution of the market in the case of
    adoption of patent term extension as a consequence of the time
    necessary to obtain market authorization
 4. Alternative scenario 3 – the evolution of the market in the case of
    adoption of data exclusivity for a period of 5 and 8 years
 5. Alternative scenario 4 – the adoption of both data exclusivity (5
    and 8 years) and patent term extension due to market authorization
    time lag.

The main results on what is related to the variation on public 
expenditures are summarised in the table below.

Chart 1. Findings related to variation in public expenditures on ARV and 
hepatitis C medicines in Brazil

PNG - 72.3 kb <https://www.bilaterals.org/IMG/png/18.08.56.png>

The results for what is related to the variation of sales of domestic 
producers in the ARV market are shown in the following chart:

Chart 2. Findings related to variation in sales of domestic producers on 
the ARV market in Brazil

PNG - 47 kb <https://www.bilaterals.org/IMG/png/18.09.30.png>

The discussion of the results highlights the implications that changing 
the IP law could have for policies of access to health and national 
development in Brazil, summarised below:

  * The public expenditures on ARV in Brazil have been relatively stable
    in the past years as a result of multiple strategies adopted to
    negotiate price and remove patent barriers, such as the use of
    public health TRIPS flexibilities, allowing for the treatment of
    more people with small increase in total expenditures.
  * The hepatitis C market in Brazil was almost 100% under exclusivity
    between 2006 to 2016. The market share of non-exclusive products in
    terms of sales has been residual and the fewer strategies adopted to
    remove patent barriers have not resulted in changes in the market
    yet. Public expenses have been increasing and treatment has not been
    available to all those in need. The impact of exclusive rights is
    higher in hepatitis C than in ARV as of today and will be even worse
    if more exclusive rights are adopted in the country.
  * The adoption of the TRIPS-plus measures proposed by the EU, besides
    the increase in public expenditures on medicines and reduction of
    domestic sales shown in the study, would also reduce the policy
    space currently available to adopt measures to reduce the negative
    impact of IPR on health policies, such as the TRIPS flexibilities.
    That could lead to even higher increase in public expenditures and
    decrease of sales by national producers in the whole pharmaceutical
    market.
  * The removal of already existing TRIPS-plus provision that extends
    the market exclusivity due to patent term extension would lead to
    savings of public money and increase in domestic sales.
  * Public expenditures on medicines have been increasing in the past
    years, consuming rising shares of the total public health budget as
    a result of incorporating medicines under market exclusivity.
    Therefore, the adoption of new measures that increase market
    exclusivity is detrimental to the sustainability of the public
    health system.

Based on the results and discussions of the study, the authors make the 
following recommendations:

  * The rejection of any TRIPS-plus provision that extends market
    exclusivity as proposed by the European Union in the negotiation of
    the Free Trade Agreement with Mercosur, considering the negative
    impact of those measures on policies of access to health and
    national development in Brazil.
  * For the Brazilian government and other countries involved in the
    negotiation of the FTA to conduct a full impact study in the field
    of public health and human rights, as recommended recently by the UN
    High-Level Panel on Access to Medicines. The impact studies should
    be conducted transparently and be made publicly available.
  * The negotiations of the FTA should be transparent and all draft
    texts and proposals from all parties involved should be publicly
    disclosed and public consultations should be held to allow the
    participation of all sectors of society.
  * For the Brazilian government to make all efforts necessary to
    exclude TRIPS-plus measures already foreseen in national IP
    legislation, especially the removal of the provision included in the
    sole paragraph of article 40 of the patent law that allows for
    patent term extension due to delay in patent examination.

The full study is available at:

http://www.ensp.fiocruz.br/portalensp/informe/site/arquivos/anexos/01abfe4ae54f0d6efd743fe6eea6abe259bdb702.PDF

*End Notes*

[1] European Commission, 
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1761.

[2] Valor Economico, October 3, 2017. 
http://www.valor.com.br/brasil/5142476/negociacao-frustrada-na-propriedade-intelectual

[3] Full report available in English at – 
http://www.ensp.fiocruz.br/portal-ensp/informe/site/arquivos/anexos/01abfe4ae54f0d6efd743fe6eea6abe259bdb702.PDF.

[4] UN SG HLP on Access to Medicines, Final Report, September 2016. 
Available at – http://www.unsgaccessmeds.org/final-report/.

[5] The Brazilian annual public expenditure on health on 2014 was of BRL 
1,419.85 (USD 604.20) per person, according to a study published by the 
Conselho Federal de Medicina (CFM). Available at – 
https://portal.cfm.org.br/index.php?option=com_content&view=article&id=25985:2016-02-18-12-31-38&catid=3

[6] What To Watch Out For In The EU-Mercosur FTA Negotiations: 
Consequences For Access To Medicines. IPWatch. 22/03/2017. Available at 
– 
https://www.ip-watch.org/2017/03/22/watch-eu-mercosur-fta-negotiations-consequences-access-medicines/

The full report is available at: http://bit.ly/ftaeumercosur1 (in 
Portuguese) and http://bit.ly/ftaeumercosur1eng (in English).

[7] Guide to the IPRIA (Intellectual Property Rights Impact Aggregate) 
Model (2009). Available at 
–https://www.ictsd.org/sites/default/files/event/2010/03/guide-to-the-ipria-model.pdf


-- 
** 	*Nicolas Roux***
http://bilaterals.org
@bilaterals_org
Skype: caveman3k

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