[Ip-health] PhaRMAC & Special 301 statute

Sean Flynn sflynn at wcl.american.edu
Tue May 3 02:45:32 PDT 2011

In response to Mickey, here is the fuller explanation.


The Special 301 authorizing statute requires the identification of
countries that lack adequate intellectual property protection or that
"deny fair and equitable market access to United States persons that
rely upon intellectual property protection."  In the 301 reports, USTR
calls pharma reimbursement programs "market access" barriers. In doing
so, it stretches the fabric of its authorizing statute.


The Special 301 statute states:


"The Trade Representative may identify a foreign country under
subsection (a)(1)(B) of this section only if the Trade Representative
finds that there is a factual basis for the denial of fair and equitable
market access as a result of the violation of international law or
agreement, or the existence of barriers, referred to in subsection
(d)(3) of this section."


(d)(3) states that "(3) A foreign country denies fair and equitable
market access if the foreign country effectively denies access to a
market for a product protected by a copyright or related right, patent,
trademark, mask work, trade secret, or plant breeder's right, through
the use of laws, procedures, practices, or regulations which - (A)
violate provisions of international law or international agreements to
which both the United States and the foreign country are parties, or (B)
constitute discriminatory nontariff trade barriers."


There is no allegation by USTR that foreign drug reimbursement programs,
or the U.S. ones that operate similarly, violate any international
agreements signed by both parties. Thus, they must "constitute
discriminatory nontariff trade barriers" to fall under the 301 statute.


But USTR does not identify anything in Pharmac or other programs that
are discriminatory nontariff barriers, a term that has meaning in
international trade law. 


Bracketing the discrimination issue, USTR takes an incredibly broad
interpretation of "market access barriers," extending it to "price
controls and regulatory and other barriers [that] can discourage the
development of new drugs."


Policies that affect the "development of new drugs" are not market
access issues, they are innovation policy issues. 


Neither TRIPS nor any other international trade agreement places any
restrictions on the non-discriminatory operation of pharmaceutical price
regulation, competition policy or other regulatory program that may
affect the price of drugs, whether or not this affects the development
of new drugs. There is still no international R&D treaty, only one on
minimum standards of IP.


There is no statutory requirement to use trade negotiating authority to
restrict foreign pricing programs. But the U.S. is bound by its
commitment to the Doha Declaration. When interpreting any ambiguity in
the statutory term "market access" in the Special 301 authorizing
statute, USTR should use the Doha Declaration and its human rights
obligations as a guide,  and avoid the use of trade pressure that will
predictably threaten access to medicines for all. 


On this basis, a group of states and health advocates appealed to the
Obama administration "to change course and halt the use of Special 301
or other trade initiatives to internationally regulate domestic drug
pricing programs that do not violate any World Trade Organization rule."
(2011 301 submission). 







From: Prof. Michael H. Davis [mailto:michael.davis at law.csuohio.edu] 
Sent: Monday, May 02, 2011 5:32 PM
ip-health at lists.keionline.org
Subject: Re: [Ip-health] NZ PhaRMAC targeted in Special 301


I don't think that is right. Pharmaceutical people think this affects
adequate intellectual property protection. If you believe in
intellectual property rights, they are correct. The statute certainly
says that much. 

The problem is 301, not whether it goes this far. Of course it does, but
even if it didn't it would be deplorable.

Mickey Davis

Michael H. Davis
Professor of Law
Cleveland State University
College of Law
Cleveland, Ohio 44115

Patent Attorney Admitted to Practice Before the US Patent and Trademark
Reg. No. 45,863

-----Original Message-----
From: Sean Flynn <sflynn at wcl.american.edu>
To: TPP-ALLIES at LISTSERVER.CITIZEN.ORG, ip-health at lists.keionline.org
Sent: Mon, 02 May 2011 17 <tel:201117> :19
Subject: [Ip-health] NZ PhaRMAC targeted in Special 301

This appears to be a new passage in the Special 301 report for this

2011 Special 301 Report, P. 14

With respect to New Zealand, U.S. industry has expressed serious
concerns about the policies
and operation of New Zealand's Pharmaceutical Management Agency
(PhARMAC). Industry continues to express concerns regarding, among other
things, the
transparency, fairness, and predictability of the PHARMAC pricing and
regime, as well as the overall climate for innovative medicines in New


State officials and health advocates have previously noted that there is
nothing in the 301 authorizing statute that allows the Special 301
Report to veer into pharmaceutical pricing policies.

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