[Ip-health] WSJ: Drug Patents Pose a Major Hurdle to Pacific Trade Deal

Thiru Balasubramaniam thiru at keionline.org
Thu Feb 5 05:29:04 PST 2015

Drug Patents Pose a Major Hurdle to Pacific Trade Deal


William Mauldin

The Wall Street Journal @willmauldin <http://twitter.com/willmauldin>

Feb. 1, 2015 10:33 p.m. ET

Disagreement over the international reach of drug patents has emerged as a
significant challenge as the Obama
<http://topics.wsj.com/person/O/Obama/4328>administration tries to hatch a
Pacific trade deal acceptable to U.S. companies, political factions in
Congress and trading partners.

The issue flared last week as half a dozen senators grilled U.S. Trade
Representative Michael Froman about his commitment to rules that would
protect medicines called biologic drugs from imitation for up to 12 years.

U.S. trade negotiators met over the weekend with officials from 11
countries, including Japan, to work out rules for the drugs in a proposed
trade bloc, the Trans-Pacific Partnership, or TPP.

Critics of President Barack Obama’s trade policy say defending drug makers
from competition and imitators for years makes medicine unaffordable in
some poorer countries and could even cost lives. The issue is part of a
broad debate on intellectual property that pits more innovative economies
including the U.S. and Japan—against developing ones with less of an
interest in movie rights and agricultural patents.

“This is one of the most difficult outstanding issues in the negotiations,”
Mr. Froman told the Senate hearing.

Pharmaceuticals are a big part of the TPP talks, and an industry where U.S.
officials see a clear advantage. For Japan, medicines are the largest
import from the U.S. after aircraft, meat and medical equipment.

Biologic drugs—made from living cells, blood components and tissue as
opposed to chemicals—are expected to generate up to $200 billion in sales
by next year, according to IMS Health, a data provider.

This month, a U.S. Food and Drug Administration advisory panel recommended
approving the first “biosimilar” drug in the U.S., a version of Amgen
Inc.’s cancer drug Neupogen from Novartis AG’s Sandoz unit.

The pharmaceutical industry wants makers of biologics to have 12 years to
exclusively market their drugs before competitors can offer biosimilar
drugs in TPP countries, the same rule enshrined in the 2010 Affordable Care
Act. It also is significantly more than most TPP partners offer
domestically but similar to Japan’s level of protection.

“If you don’t do that, your biologics companies won’t be able to compete,”
Republican Sen. Orrin Hatch, chairman of the Senate Finance Committee, said
Friday at the American Enterprise Institute.

Mr. Hatch is drafting negotiating goals for the TPP with other committee
leaders that will be included in legislation known as fast track, designed
to ease congressional passage of the TPP and other trade deals.

It isn’t clear whether U.S. officials will be able to clinch a deal that
includes 12-year protection without compromises in other areas of the TPP,
according to people following the talks.

In fact, the Obama administration has previously outlined just seven years
of so-called data exclusivity for biologic drugs in its budget proposal,
and Monday’s new proposal may include the same plan as a cost-saving
measure for the government.

The pharmaceutical industry says drug companies need the promise of a big
payout to invest $1 billion or so on creating the next biologic
blockbuster. Research and development costs are equal to about a fifth of
revenue that companies make from biopharmaceuticals, said John Castellani,
president of industry group PhRMA.

“This needs to be done if we’re going to be able to continue to attract
investment in this very long process,” Mr. Castellani said.

But critics in the U.S. say other countries struggle to afford many
expensive biologic drugs, and that their health-care systems might opt not
to offer the drugs for years until biosimilar drugs or other competitors
drive down the price.

Several Democrats have concerns about drug affordability overseas, though
it is unclear how many could ever be convinced to support the TPP, which is
seeing much broader support among Republicans.

One way of making a pharmaceutical deal more palatable would be to phase in
the rules for poorer countries, according to people following the talks.

*Write to *William Mauldin at william.mauldin at wsj.com


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