[Ip-health] 2019: KEI Comments Submitted to USTR Special 301 Review

Claire Cassedy claire.cassedy at keionline.org
Fri Feb 8 09:18:03 PST 2019


2019: KEI Comments Submitted to USTR Special 301 Review

Posted on February 8, 2019 by KEI Staff

On Thursday February 7, 2019, KEI submitted comments and intent to testify
at the hearing for the 2019 US Trade Representative’s Special 301 review
process. This year's hearing will take place on Wednesday February 27, 2019
at the Office of the United States Trade Representative.

The Special 301 List published annually by USTR is a report that identifies
countries that are so-called ‘bad actors’ in the area of intellectual
property protections and enforcement. For more information on the Special
301 Report and links to past submissions by KEI and other organizations
(such as PhRMA), please visit: https://www.keionline.org/ustr/special301 [1]

Below is the full text of our comments/intent to testify, a PDF version of
the comments is available here.[2]


February 7, 2019

Daniel Lee,
Assistant U.S. Trade Representative for Innovation and Intellectual
Property (Acting), Office of the United States Trade Representative.
Regarding:  Docket number USTR-2018-0037, the 2019 Special 301

Knowledge Ecology International (KEI) requests the opportunity to testify
at the hearing on the Special 301 list on February 27, 2019. We also
provide the following comments.

KEI has provided comments and testified before the Office of the United
States Trade Representative (USTR) Special 301 Subcommittee several times
in previous years.  We maintain a web page that includes all of the Special
301 Reports issued from 1989 to 2018, as well as links to comments by KEI
and several other parties, at https://keionline.org/ustr/special301.[3]
This page includes a link to a table of each time a country has been
included in the Special 301 list, which is also available here:

For every year from 1989 to 2018, USTR placed an average of 41 countries on
either the Watch List (WL) or the Priority Watch List (PWL), including an
average of 11 countries on the Priority Watch List.  Since 1999, the list
has included an average of 3.5 countries for an Out-of-Cycle review.

As noted in the past, the criteria for being included on the list is
notoriously vague.  Canada has appeared on the 301 list 28 times, despite
having high legal standards and lower rates of copyright infringement than
the United States.   Several other countries are on the list almost every
year, without much to distinguish their policies and practices from their
less frequently listed neighbors. One factor that seems to be highly
significant to inclusion on the list is how large is the country GDP
relative to other countries in a region.

The 301 list is driven by demands from lobbyists for the right holders,
many of whom are former employees of USTR, other federal agencies, or

Our comments will touch on a few issues.

Using or threatening to use compulsory licensing of biomedical patents
should not put countries on the list.

Compulsory licensing is permitted under every trade agreement the United
States has signed, and its use is endorsed in the 2001 WTO Doha Declaration
on TRIPS and Public Health, which in turn has been endorse and cited in
many declarations and agreements.

The United States is, by far, the country that uses compulsory licensing
the most.  Following the 2006 U.S. Supreme Court decision, eBay Inc. v.
MercExchange, L.L.C., 547 U.S. 388, every patent infringement case is a
potential compulsory licensing case, if remedies for infringement are
decided by a court. Before an injunction can be granted, a judge has to
evaluate four factors.  To obtain an injunction, the plaintiff has to

    1. that it has suffered an irreparable injury;
    2. that remedies available at law are inadequate to compensate for that
    3. that considering the balance of hardships between the plaintiff and
defendant, a remedy in equity is warranted; and
    4. that the public interest would not be disserved by a permanent

In several cases where a court has decided that it is more equitable to
permit an infringement going forward than to issue an injunction, the
remedy is limited to the payment of royalties to the patent holder.   These
“running royalties” cases have benefited a number of businesses, such as
eBay, Apple, Microsoft, Abbott Labs, Johnson and Johnson, Toyota, and
Direct TV. KEI has a page reporting on several cases involving medical
technologies, here: https://www.keionline.org/us-injunction-medical [5]

In July 2017, the U.S. Senate Armed Services Committee sent a directive to
the Department of Defense (DoD), in connection with the National Defense
Authorization Act,  to “exercise its rights” including march-in rights
under § 203 of title 35, “whenever the price of a drug . . . is higher in
the United States than the median price charged in the seven largest
economies that have a per capita income at least half the per capita income
of the United States.” This is the text of the 2017 directive:

   "Licensing of federally owned medical inventions

    The committee directs the Department of Defense (DOD) to exercise its
rights under sections 209(d)(1) or 203 of title 35, United States Code, to
authorize third parties to use inventions that benefited from DOD funding
whenever the price of a drug, vaccine, or other medical technology is
higher in the United States than the median price charged in the seven
largest economies that have a per capita income at least half the per
capita income of the United States.

    115TH Congress, 1st Session, 2017, Senate Report 115–125. National
Defense Authorization Act for Fiscal Year 2018. Report to accompany S.
1519, on page 173. July 10, 2017."

On February 4, 2019, Clare Love, a veteran of the Vietnam war, and David
Reed, wrote to Dr. Mark T. Esper, the Secretary of the Army, asking the
Army to exercise its march-in rights for patents on the prostate cancer
drug Xtandi, a product that had a 2018 list price of $159 thousand per
year.  From the petition:

    "The petitioners are two prostate cancer patients, and are hereby
asking the U.S. Army to use the federal government’s royalty-free or
march-in rights on the three patents listed in the FDA Orange Book for
Xtandi, on the grounds that the price is not reasonable.

    We have provided evidence that the price of Xtandi in the United States
is more than four times the median price in the seven high income countries
identified by the U.S. Senate Armed Services Committee in 2017 to be used
to determine if the U.S price on a DoD-funded drug is reasonable. We also
note that the price in the U.S. is five times the reimbursed price in Japan
(where Astellas is headquartered)."

Today, legislation was introduced in the U.S. Senate and the House of
Representatives, to provide robust compulsory licensing authority to be
used in connections with negotiations over prices for drugs for the
Medicare program.  In January, even broader compulsory licensing
legislation was introduced in both houses of Congress.

Given the challenges the U.S faces in curbing high drug prices, and also
protecting patient access, it is important to have the ability to use the
authority to issue compulsory licenses on biomedical patents.

Compulsory licensing, when used or threatened, provides governments
leverage in negotiating drug prices, and that leverage can be exercised
without resort to restrictive formularies or high patient copayments, thus
ensuring that patients will have access and avoid fiscal toxicity when
dealing with cancer or other severe illnesses.

To the extent that the U.S. government is concerned about foreign
government free riding when it comes to financing biomedical R&D, there are
more productive and more patient friendly ways of addressing the global
issues than trade pressures that are designed to raise foreign drug
prices.  The United States can pressure foreign governments to expand
public sector funding of R&D, to provide incentives that are not linked to
drug prices, like market entry rewards, or to provide R&D subsidies, like
the U.S. Orphan Drug Tax Credit.

Transparency of pharmaceutical markets is a global public good.  The U.S.
government should support efforts at the World Health Organization or in
other fora to create global norms and practical mechanisms to provide
greater transparency of drug prices and the outlays on R&D investments,
including in particular, the expenditures on each clinical trial used to
support the registration of a new drug or to justify an expanded marketing
authorization for new uses.

The U.S. government should also work with other governments to ensure that
there is routine and useful disclosure of know-how to make biologic
products and services like CAR T.   Such disclosures are necessary to
introduce more competition for biologic drugs and cell and gene therapies,
and to protect patients by ensuring that biosimilar products are safe and

There are many technically complex issues addressed in the Special 301 list
each year regarding the granting of, exceptions to, and enforcement of
patents on drugs and other medical technologies, as well as the appropriate
policies to protect test data for new drugs and vaccines, policies on
pricing and reimbursement of new medicines. The USTR has generally
acknowledged that countries “should…promote access to medicine for all,”
and then has punished them whenever they take steps to improve access or
affordability. This includes countries with per capita incomes far below
that of the United States.

In our view, the USTR needs to reframe its focus, from protecting and
advancing the commercial interests of global drug companies (many of them
based in Switzerland, Japan, Germany, France, Canada, Ireland, Denmark or
the United Kingdom) to something more enlightened and forward looking. The
United States is spending more money on health care and more money on
drugs, being charged the highest prices in the world, and the very policies
that will make other countries pay more will make things worse in the
United States. As we are locking in global norms for intellectual property
rights (IPR) and reimbursement policies that are designed to increase drug
prices in foreign countries, we are also effectively creating a situation
that will prevent the United States from implementing much-needed reforms.

The Special 301 list was created in 1989, when our population was much
younger, and prices for drugs and insurance coverage were much lower.
Today, the United States is slowly moving towards having both broader
insurance coverage and an older population. In 2000, the percent of the US
population 65 or older was 12 percent. By 2020, it will be 17 percent and
by 2030, 21 percent.

Year                Population     Percent of Total Population
1990                31.2 million     12.5%
2000                35.0 million     12%
2010                40.3 million     13%
2020 (projected) 56 million      17%
2030 (projected) 74 million      21%
2040 (projected) 82 million      22%
2050 (projected) 88 million      22%
2060 (projected) 98 million      24%

Source: Population figures and projections from U.S. Census Bureau.

With workers entering the labor force later and having an increasing life
expectancy, the challenges of paying for health care are large. Innovation
in the areas of drugs, vaccines, diagnostics and new technologies like CAR
T are important, and the United States has an interest in promoting both
innovation and access to that innovation. USTR needs to look at a broader
range of issues other than high drug prices, and most importantly, needs to
look at the trade related aspects of funding the research that enters the
public domain and advances science.

Also, the USTR needs to take a fresh look at proposals to delink research
and development (R&D) incentives from product prices, not through the lens
of companies that specialize in marketing drugs and profiting off of
government-funded medical discoveries, but rather through the lens of
employers, taxpayers and patients who pay for new technologies.

*Copyright, related rights, software*

On the copyright side, the United States should continue to advocate that
foreign governments adopt balance in the copyright system so that law
abiding companies can provide services that require fair use of copyrighted
works. The United States should also address the global crisis in orphaned
works, an issue made worse by extended copyright terms and restrictions on
the requirements to register works (which is not required by the Rome

Similarly, the United States should expand its advocacy efforts to push
back against foreign “ancillary copyright” regimes, which will plainly
undermine the mandatory exceptions in the Berne Convention for quotations
and the news of the day, and create new barriers to trade.

USTR should encourage foreign countries to adopt policies providing access
to published research.   The U.S. government has adopted policies at the
NIH and other agencies to require that the research it funds enters open
access archives.  It is is in the U.S. interest that foreign governments
adopt similar policies. For commentary, see: Open Access at a crossroads,
October 11, 2018, Physics Today, DOI:10.1063/PT.6.2.20181011a. [6]

The USTR needs to oppose efforts by the World Intellectual Property
Organization to create a new layer of rights for broadcasters that will
complicate access to works, and only benefit corporate owners who do not
create, own or license works, but merely transmit them.

The USTR should not back norms that block government interventions to make
software code or protocols transparent.   We are facing enormous challenges
in dealing with malware, software enabled fraud, voting machine security
and a rapidly evolving environment of software to shape public opinion,
influence sentencing and parole, data lockin of medical records, and
thousands of other complex issues.  Government have to have the flexibility
to force transparency of code or protocols when appropriate.


James Packard Love

Knowledge Ecology International
1621 Connecticut Avenue, Suite 500, Washington, DC 20036

[1] https://keionline.org/ustr/special301.
[3] https://keionline.org/ustr/special301
[4] https://bit.ly/2Sk2LA6
[5] https://www.keionline.org/us-injunction-medical
[6] https://physicstoday.scitation.org/do/10.1063/PT.6.2.20181011a/full/

Claire Cassedy
Knowledge Ecology International
1621 Connecticut Avenue NW
Suite 500
Washington, DC 20009
Tel.: 1.202.332.2670

More information about the Ip-health mailing list