[Ip-health] USMCA may negatively impact access to medicines in the US, Mexico and Canada

Fabiana Jorge mfjorge at mfjint.com
Tue Nov 6 13:44:41 PST 2018

MFJ International, LLC

1032 29th Street, NW


TEL    202-223-7017

FAX    202-223-2013

EMAIL   mfjorge at mfjint.com

 October 22th, 2018

Dr. Scott Gottlieb

Commissioner of Food and Drugs

U.S. Food and Drug Administration

10903 New Hampshire Avenue

Silver Spring, MD 20993

Dear Commissioner Gottlieb,

Following the July 2017 public meeting FDA held on “Administering the
Hatch-Waxman Amendments: Ensuring a Balance Between Innovation and Access”,
I sent you a letter raising several concerns that were not addressed during
the meeting, and which I strongly believe are an important piece of the
puzzle to make drugs more affordable.

As I stated in my last letter, MFJ International, LLC is a small global
consulting firm with a significant focus on increasing access to affordable
medications around the world.  MFJ regularly works with generic/biosimilar
companies, associations and governments in trying to find ways to foster
access to affordable medications, with a special emphasis on intellectual
property and trade matters.  However, this submission is not made on behalf
of any client.

The US-Mexico-Canada Agreement (USMCA) text is now public and unfortunately
some of the concerns we had raised have been realized in the new trade
agreement.  Indeed, some of the provisions included in the USMCA would have
a negative impact on access to medicines not only in Canada and Mexico but
in the U.S. as well as they would ultimately reduce competition of generic
and biosimilars in the market and the supply of safe, effective and more
affordable drugs.  Furthermore, this agreement will very negatively impact
the U.S. generic/biosimilar industry, which is critical to achieve the drug
savings that both patients and payers need.  Overall, U.S. consumers as
well as those in Canada and Mexico will be more dependent on very expensive
originator drugs.

Current Trade Agreements Make Drugs Less Accessible Including in the U.S.

The overall point in my last letter was that current trade agreements can,
in fact, make drugs less accessible as recent history has unfortunately
proven.  Indeed, the Uruguay Round of GATT, the last global trade
agreement, included for the first time an agreement on intellectual
property rights known as the Agreement on Trade Related Aspects of
Intellectual Property Rights (TRIPS) that contained a number of provisions
affecting medicines.  Many mistakenly believe that trade agreements
negotiated by the Office of the United States Trade Representative (USTR)
focus solely on opening new markets for U.S. goods and services, trying to
maximize U.S. exports.  While this would make sense, this is not what is
happening with regards to pharmaceuticals and, in fact, these trade
negotiations many times end up delaying competition thus undermining access
to medicines not only in other countries but also here at home.  It is
critical that decision makers understand this.

Indeed, the TRIPS Agreement significantly impacted access to medicines in
the U.S. costing patients and payers many additional billions of dollars.
This was done by including a provision that changed U.S. law extending the
patent term from 17 years from the date of the granting of a patent to 20
years from its filing date.  This extended drug monopolies thus delaying
competition of generic and biosimilar drugs and therefore hindering health
care budgets and consumers' drug spending.  For instance, in the case of
biologic drugs, many of which cost six figures, an extension of even one
year is extremely significant.  This longer patent period affects every
single pharmaceutical patent so this sole provision has been and will
continue to be very negative from the point of view of access.

The Originator Pharmaceutical Industry Defined U.S. Trade Policy on
Medicines Tilting the System in its Favor.

Years ago the originator pharmaceutical industry understood that with one
trade agreement it could successfully change the laws in many countries
including the United States, the largest pharmaceutical market in the
world. By influencing U.S. trade policies, the industry could sidestep
Congress given that, under Trade Promotion Authority, U.S. Congress only
reserves an up-or-down vote with no amendments on trade agreements.
Furthermore, these negotiations are done in secrecy undermining any kind of
public scrutiny.

Like most people, at that time the U.S. generic industry did not think that
a trade agreement could change the rules at home so it did not engage in
the negotiation of the TRIPS Agreement.  Since then, the originator
industry has redoubled it efforts to influence U.S. trade policies, fully
engaging in the negotiation of every trade agreement.  I have witnessed
this first hand, as I was a trade negotiator, and over the past 25 years I
have been working in support of balanced IP agreements that foster
innovation while ensuring timely competition of more affordable
generic/biosimilar drugs.  The originator pharmaceutical industry has
systematically continued to push for higher IP protection in every trade

The USTR thinking is that this is an area where the U.S. is competitive, so
it has become the enabler of the originator pharmaceutical industry's goal
to broaden and lengthen drug monopolies.  Unfortunately, by doing so the
USTR has been taking sides supporting the manufacturers of originator
pharmaceuticals at the expense of the generic/biosimilar industry.  And by
doing so, it has systematically negatively impacted and weakened the
generic/biosimilar industry.  The USMCA is one more example of this
strategy, but it is even more concerning due to the fact that for the first
time a trade agreement includes very strong provisions related to biologics
that may negatively impact the development of the incipient biosimilar
industry to the point that biosimilar companies may decide that it is too
much trouble to bring biosimilars to the market, and that it would just be
more effective to seek the approval of originator biologics only.  If the
U.S. market does not manage to have a robust and thriving biosimilar
industry, patients will be in a very difficult position and no budget will
be able to bear the increasing demand for originator biologic drugs.

Indeed, in your July 18th remarks at the Brookings Institution on the
release of the FDA’s Biosimilar Action Plan you stated: “I’m worried that
the biosimilar manufacturers may pull out of these endeavors altogether if
the brand drug makers are able to lock up markets even in cases where
there’s a fully interchangeable competitor.”  While we do not yet have
interchangeable biosimilars, the originator companies are locking the
biologic markets including in the U.S., in part, through trade agreements.
Indeed, the USMCA is locking the market with a very long 10-year
exclusivity period for these very expensive drugs.  It also includes a
broad definition of a biologic product that goes even beyond U.S. law and
which, if not amended, will force a change in U.S. law with serious
consequences. Furthermore, it could even roll-over the protection granted
to drugs under transition into a new period of 10 years of exclusivity.
All this reinforces your concerns that unless government policies ensure
the proper framework for the development of the biosimilar industry, we may
just never realize the promise of safe, effective and affordable
biosimilars which are critical for the health of our citizens and the
sustainability of programs such as Medicare and Medicaid.

HHS, FDA and FTC Must participate More Closely in Trade Negotiations to
Ensure Balanced Provisions that allow the Growth of Both Originator and
Generic/Biosimilar Companies.

We are now at a crossroads, with drug prices that are increasingly
unattainable. The FDA, and more broadly the Department of Health and Human
Services and the Federal Trade Commission, should weigh in on trade
negotiations to ensure that U.S. trade policies not seek to ratchet up IP
protection, but strive to strike a balance between promoting innovation and

We are at a pivotal time when the FDA is trying to increase access to
medicines. During the FDA meeting, some participants recommended lowering
the period of biologic exclusivity to increase access to these extremely
expensive but very important drugs.  As you are aware, the Federal Trade
Commission's report on follow-on biologics concluded that no exclusivity is
necessary for biologic drugs because they will maintain most of the price
and market share even after patent expiration.  The FTC continues to
support its findings.  In addition, bipartisan commissions to deal with the
debt have also recommended reducing the exclusivity to 7 years and Members
of Congress have introduced bills in this regard.  Despite that, the USMCA
includes a period of exclusivity of 10 years for biologic products.  This
would tie the hands of Members of Congress who would be precluded from
reducing such exclusivity in the future (I am attaching an article I wrote
during the negotiation of the Trans Pacific Partnership (TPP) that
continues to apply within the context of the USMCA).

Furthermore, the USMCA includes a very broad definition of biologic
products that may even go beyond U.S. law as it does not exclude chemically
synthesized polypeptides.  This could potentially extend then this long
exclusivity to products that are not considered biologics under U.S. law
resulting in a negative impact on access to biosimilars, which you seem to
care deeply about.

USMCA Could Extend the Scope of Linkage in the U.S.

Under the USMCA, there are two options: a) no mandatory linkage following
the New Trade Policy and b) mandatory linkage.  Countries could choose
which one to apply.  We believe this is a very regressive provision in term
of access to medicines as it automatically delays the entry of competition
whether there is or not infringement.  But the USMCA presents a very
serious flaw, which is that the option of mandatory linkage would apply to
every drug with a patent “a pharmaceutical product subject to a patent”.
Under U.S. law linkage only applies to three types of patents (product,
method of use and substance) and only for small molecule drugs. The
language included in the second option (mandatory linkage) of the USMCA
would extend to every single drug with a patent including biologic drug
that currently are not covered by linkage.  In addition, it does not
include any of the checks and balances of linkage under Hatch-Waxman and
does not include either the incentive to launch generic products sooner
(180 days of exclusivity).  If the United States, in the implementation of
this agreement, were to choose the second option (mandatory linkage) it
could force a change in U.S. law to extend it to every single drug with a
patent including biologics.  As you know, biologic drugs have many times
hundreds of patents and if linkage is applied to biologics it would be a
monumental blow to the biosimilar industry to the point that it may deter
companies to seek the approval of these drugs.

The Generic/Biosimilar Industry Has Reached Out to the USTR Time and Time
Again Without Success.

During the TPP negotiations we reached out many times to the USTR and
others on behalf of the generic/biosimilar industry to explain that the
inclusion of such exclusivity protection for biologics was too premature as
no biosimilar drugs had even been launched in the U.S. market (the first
one was launched towards the end of the negotiation).  We also explained
how this and other provisions could be problematic for the U.S. market at
the same time that they set new barriers to entry to the exports of the
generic/biosimilar industry.  Indeed these provisions only benefit some of
the most profitable companies (the originator industry) at the expense of
the generic/biosimilar industry, payers and patients.  Unfortunately, the
outcome of the USMCA continues to demonstrate that the USTR provisions
continue to tilt markets to benefit originator companies at the expense of
everyone else.

Trade agreements should seek to maximize the export of both originator and
generic/biosimilar products, which can be attained by putting forward
balanced provisions.  The U.S. Congress achieved this in 2007 when it
forced the renegotiation of some provisions related to labor, environment
and access to medicines in the agreements that had been concluded with
Peru, Colombia and Panama.  The New Trade Policy, as it is now known,
reflected a true compromise that garnered bipartisan support.

The U.S. Trade Policy is Putting at Risk the Sustainability of the
Generic/Biosimilar Industry.

Since the adoption of the TRIPS Agreement, the USTR seems to have cherry
picked the provisions that benefit patent holders by failing to include
those provisions that would bring some balance to foster the launch of
generic/biosimilar drugs.  A clear example is provided by the regulatory
review exception (Bolar provision) that is so critical to the
generic/biosimilar industry.  While the USTR included several mandatory
provisions benefiting the originator pharmaceutical industry such as patent
term extensions or exclusivities for data, it resisted the inclusion of a
mandatory Bolar, which was only permissible but not required.  In the TPP
the USTR introduced for the first time a mandatory Bolar provision but it
dropped the word “imports” so that it would not apply necessarily to them
even though that is clearly part of US law.  Eventually the text was
further negotiated and the TPP ended up with broad language on a regulatory
review exception (as it is referred in the agreement) with a footnote
stating that it would apply to both imports and exports.  The USMCA has now
eliminated that footnote.  Even in the case of patent term extensions,
which are mandatory under the agreement, the USTR failed to include any of
the conditions or limitations that are set in U.S. law.  While it could be
argued that this does not force an immediate change to U.S. law, it leaves
the door open to changing those provisions that protect consumers while the
ones protecting the monopolies of right holders are locked.  This already
happened, for example with the elimination of the Best Mode requirement in
U.S. patent law as the basis for an inequitable conduct defense in patent
infringement lawsuits. This issue started in a trade agreement, where the
best mode requirement was dropped from the disclosure of a claimed
invention and subsequently a U.S. Member of Congress introduced a bill that
eliminated the inequitable conduct defense so while best mode is still a
requirement under U.S. law, there are no longer penalties for failing to
comply with this requirement when applying for a patent. This is not a
minor issue, as the best mode requirement is critical for the development
of biosimilars.  These are only a few of our concerns, as there are many

We believe that if the FDA is serious about expediting the launch of
generic/biosimilar drugs, together with other agencies and departments, it
will have to weigh in on U.S. trade policies before it is too late,
including with regards to the terms being set in the USMCA. Increasing
access to affordable drugs requires that the U.S. engage in trade
negotiations that do not undermine, but protect and foster, patients'
timely access to more affordable drugs and that do not preclude Congress
from seeking additional solutions to address health care challenges.  It
also means that the USTR should pursue balanced provisions and not only the
adoption of those that benefit right holders while weakening the
generic/biosimilar industry by delaying or precluding the launching of
products both in the U.S. and in foreign markets.

Since the adoption of the TRIPS Agreement in 1994, the generic/biosimilar
industry has faced additional barriers to entry for its products both in
the U.S. and overseas as a result of provisions championed by the USTR in
trade negotiations.  The generic industry, which grew and is now at the
point of saturation in the U.S., needs access to other markets to continue
to do so.  However, it faces growing hurdles from these agreements that
reduce its revenues and can potentially increase its litigation expenses to
launch its products.

In order for the industry to continue to provide the strong savings it is
responsible for in the U.S., it will require that the USTR negotiate
different and more balanced provisions – something that has not happened
for about 25 years.  These agreements are very costly from the point of
view of access to medicines including in the U.S.  It is important to
understand that the generic/biosimilar industry is under enormous pressure
as a result of these agreements that are putting its sustainability at
risk.  If this continues, we may possibly end up with brand-to-brand
competition as the generic/biosimilar industry may feel that it needs to
morph into a type of brand/originator company as market conditions change
due to trade agreements that set up new standards of protection.  Given
that this industry plays such a pivotal role in access to medicines, I
respectfully urge you to seriously consider these concerns.

I would very much appreciate if I could meet with you or your staff so that
we can further discuss our concerns about this and other provisions that
could further hinder access to medicines.

I will call your office to see whether such meeting would be possible.

Sincerely yours.

M. Fabiana Jorge

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