[Ip-health] Governance Now: Big pharma, IP wars and profit over people

Thiru Balasubramaniam thiru at keionline.org
Mon Aug 21 05:57:26 PDT 2017


Big pharma, IP wars and profit over people

At RCEP negotiations held in India, intellectual property rights issues in
medicine remain contentious

Shreerupa Mitra-Jha | August 21, 2017 | Geneva

#pharmaceuticals   #economy   #trade   #WTO

Martin Shkreli, a former hedge fund manager who is infamous for overnight
spiking up the price of a lifesaving drug by 5,000 percent, was convicted
on three counts of fraud in an American federal court on August 4. Shkreli
is now staring at an incarceration period of up to 25 years. The order
cheered up many across the world – people from the global North and the
South have been grappling with the issue of high-priced, life-saving drugs.
But what happens when countries bolster the Big Pharma’s agenda of keeping
prices excessive and unaffordable for many, particularly for people in
poorer countries? And what court does one go to when powerful countries
work outside established international trade laws, thereby, adversely
impacting millions of the suffering and diseased?

The 19th round of negotiations for the Regional Comprehensive Economic
Partnership (RCEP) agreement was held at a five-day meet starting July 24
in Hyderabad, the hub of the Indian generic industry. About 700 delegates
from 16 countries participated in the negotiations. The RCEP membership
comprises the ten ASEAN countries (Brunei, Cambodia, Indonesia, Malaysia,
Myanmar, Singapore, Thailand, the Philippines, Laos and Vietnam) and their
six free trade agreement (FTA) partners – India, China, Japan, South Korea,
Australia and New Zealand.

Sticking points

As is typical of many mega FTA negotiations, RCEP talks are shrouded in
secrecy. The scope of the possible deal is staggering which aims to cover
agreements on goods, services, investments, tariff and non-tariff barriers,
technical cooperation, competition and intellectual property (IP) rights.

The little that is known of the RCEP text, however, has rattled some Indian
businessmen and activists alike.

Reportedly, there were important talks finalising the maximum number of
duty-free goods. Several governments want India to eliminate duties on
about 90 percent of traded goods as part of the FTA. This may not be easy
for India to agree to. Apart from other considerations, this could also
affect the prime minister’s flagship programme of ‘Make in India’.

“India’s trade deficit [annual] with RCEP nations is about $100 billion,
and half of this is with China alone even without an FTA with China,”
Siddhartha Roy, economic advisor, Tata Group, told The Hindu after the
Hyderabad talks began.

“Post India’s FTA with ASEAN, Japan and Korea [who are all RCEP members],
our trade deficit with them have increased, and the government needs to
take this into account during RCEP negotiations,” he added.

India, on the other hand, wants greater market access for its services
sector including IT/ITeS but finds its interests at odds with many of the
developed nations who oppose this demand. This is a battle that India is
also fighting at the Geneva-based World Trade Organisation (WTO) where it
has submitted a proposal for a Trade Facilitation in Services on similar
lines as the recently-adopted Trade Facilitation Agreement in goods. The
proposal is being opposed by many of the richer member states.

The most contentious part of the text, and possibly one that will have the
most wide-reaching impact globally, however, is around IP issues.

The award-winning American NGO Knowledge Ecology International (KEI) leaked
parts of the RCEP’s IP-related text in 2015. The demands are nothing new or
surprising. Like most FTAs that involve India, the pharmaceutical-hosting
countries, like Japan and South Korea, want India to rein in its thriving
generic industry, which has given India its moniker as the pharmacy of the
developing world. Other FTAs that have similar IP asks are the EU-India FTA
and the India-EFTA (European Free Trade Association comprising Switzerland,
Iceland, Norway and Liechtenstein) FTA – they have also run into a logjam.

Additionally, like for the Trans-Pacific Partnership, the RCEP draft text
asks for the setting up of an Investor State Dispute Settlement (ISDS)
mechanism (more below), which allows private parties to drag governments to
private courts, including for IP matters.

RCEP, like many other FTAs, has IP protection requirements that not only go
beyond international laws drawn up at the WTO through the agreement on
Trade Related Aspects of Intellectual Property Rights (TRIPS) but are also
Anti-Counterfeiting Trade Agreement (ACTA)-Plus.

TRIPS protection grants the applicant a right to exclude others for a
20-year period from the date of filing. This is considered the length of a
patent following which it can be accessed and used by anyone.

The RCEP draft text proposes to increase patent terms beyond the stipulated
20 years, which ensures that patent holders can ward off generic
competition and maintain artificially high prices. The proposed text also
asks for data exclusivity for five years, which would protect results of
clinical trial data that tests if a drug is safe and effective for human
use. This means that generic drug manufacturers cannot rely on this data
and have to conduct their own tests for submission to regulatory agencies,
a process that can take several years, thus, again, preventing their entry
into the competitive market. Additionally, sources indicate that Japan
wanted to tamper with section 3(d) of the Indian Patents Act, which
stipulates that the mere discovery of a new form of a known substance that
does not enhance the known efficacy of that substance is not patentable.
This was scrapped off after fierce opposition from India and other RCEP
negotiating countries.

What is at stake?

To be precise: a lot. Barriers to entry of generic medicines to the market
make drugs prohibitively expensive since their entry is the most effective
way of reducing prices of essential medicines as well as ensure access to
treatment. For instance, in 2001, the price of HIV medicines came down from
$10,439 per patient per year to $350 per patient per year owing to
competition from Indian generic manufacturers, mostly Cipla. Patented
medicines have ensured that treatments to diseases like multi-drug
resistant tuberculosis (MDR-TB), cancer, hepatitis-C are beyond the reach
of most, even in rich European countries and the US. Health ministries,
humanitarian medical treatment providers such as Médecins Sans Frontières
(MSF) have relied on affordable, quality generic medicines to address
public health challenges.

India manufactures two-thirds of all generic medicines, including 80
percent of all HIV medicines, while China is a big producer of active
pharmaceutical ingredients (API) for the drug industry.

“If the most aggressive provisions in the RCEP are in the final agreement,
it will create a host of new barriers to making, selling and obtaining
generic drugs and vaccines. Prices will be even higher and monopolies will
last longer for new drugs,” Jamie Love, director of KEI, says.

“The promise of access to medicines for all will become even more empty,
and more a slogan than a reality. Negotiators who advocate TRIPS plus
provisions on medicines should be ashamed, and acknowledge the consequences
and their role in the outcome,” he adds.

Japan’s negotiating text on IP is TRIPS-plus and if accepted it will roll
back public health safeguards enshrined in international and Indian patent
law, MSF says in a letter written to the Indian commerce minister, Nirmala
Sitharaman, in August 2014.

“They have not realised that ACTA is coming through the backdoor. Majority
of the text is about IP enforcement ensuring that there is such a chilling
effect that no generic manufacturer or third-party challenges their patents
in court. They are skewing the judicial system in their favour,” Leena
Menghaney, regional head of South Asia, MSF Access Campaign, told
Governance Now.

The draft text, if adopted with its current proposals, would impair
legitimate trade between developing countries. It would allow the raiding
of manufacturing premises of generic companies and the seizing of materials
used for the manufacture of generics that includes API and machinery, say
health activists.

“The IP enforcement part is not something that countries are paying much
attention on. Japan, Australia, South Korea are pushing very hard against
Indonesia, Thailand, India and China,” Menghaney says.

As pharmaceutical lobbies grow more powerful with active funding for
political parties in many countries across the world, governments are
succumbing to negotiating to further the lobbies’ interests. Japan is one
such country, which is insisting on stricter IP rules, for instance, with a
drug patented by Otsuka for the treatment of extensively drug-resistant

“The company has been strategically withholding the registration of the
patent in India, thereby preventing a generic version of the drug from
being manufactured,” writes Feroz Ali, IPR chair professor at IIT Madras,
in the Hindu.

“In the event that a provision of data exclusivity is passed, the millions
of TB patients in India would have to buy the high-priced drugs, which
would have no cheaper generic alternative,” he adds.

He further argues that if India has an agreement with Japan through the
RCEP, India will be obliged to offer the same concessions other members of
the WTO through the most-favoured-nation clause.

“It is evident that developed countries are using FTAs to expand the
existing standards of IP,” he writes.

WTO is clear that such stringent IP protection is to be reserved for
commercial piracy only – validity of drug patents have to be tested by
courts first.

According to WTO rules, governments can tailor their national IP policies
taking into consideration a country’s economic, developmental and other
objectives, including public health. Furthermore, least developed countries
(LDCs) are allowed to maintain maximum flexibility in their approach to
patenting pharmaceutical products until at least 2033, following a decision
taken by the WTO’s Council for TRIPS in November last year.

“The value of the WTO was supposed to be a rules-based trading regime with
protections for weaker parties. The FTA negotiations have embraced
indefensible secrecy to push an agenda that benefits the powerful and the
rich at the expense of everyone else,” argues Love.

Till now, India has had a “good position” on the RCEP negotiations and some
other FTAs, says Menghanay, but the devil lies in the details. ASEAN is
being represented by Singapore and Singapore has traditionally stood by
TRIPS-plus provisions. This is what is worrying for activists and
negotiators from middle-income and LDCs.

“Whether Singapore will look after the interests of Indonesia, Myanmar,
Cambodia and other LDCs is yet to be seen,” Menghaney says.

Both South Korea and Japan are isolating India, sources indicate. It is
imperative, therefore, that negotiators remain consistent and bold for
India to be able to continue with its IP flexibilities.

Significantly, as mentioned before, the investment rules proposed in the
RCEP would make it possible for pharmaceutical companies to sue governments
in secret arbitration tribunals, if they find their interests dampened,
through the ISDS mechanism. This would allow foreign companies to seek huge
amount of financial compensation – if sovereign states legislate in public
interest negatively impacting the profits of these companies – thereby
throwing both the national laws and TRIPS rules to the wind.

There have been many such instances in the past. For example, tobacco giant
Phillip Morris sued Uruguay asking for financial compensation in 2010 at
the International Centre for Settlement of Investment Disputes when
Uruguay's anti-smoking legislation ate into its profits.

“This regime has, more or less plausibly, been characterised as a network
of secret or ‘shadow’ courts dominated by a clique of elite arbitrators
motivated not by justice but by personal wealth acquisition, a system where
multinational corporations unleash blue chip law firms on some of the
poorest countries in the world, forcing multimillion dollar settlements or
winning awards that are even larger, sometimes more than an impoverished
nation’s entire annual budget for health, education, and public security,”
Robert Howse, professor of international law at New York University, writes
in a well-argued paper entitled ‘International Investment Law and
Arbitration: A Conceptual Framework’.

“Through ISDS, the federal government gives foreign investors and foreign
investors alone the ability to bypass that robust, nuanced, and
democratically responsive legal framework,” Howse writes, quoting a letter
to the US government by over 200 academics in law and economics, including
distinguished scholars such as Laurence Tribe and Joseph Stiglitz.

Freed from fundamental rules of domestic procedural and substantive law
that would have otherwise governed their lawsuits against the government,
foreign corporations can succeed in lawsuits before ISDS tribunals even
when domestic law would have clearly led to the rejection of those
companies’ claims, Howse argues.

The larger fight—UNHLP/WTO/UNHRC

The fight to arm-twist governments so as to maintain excessive prices of
medical products is one that is being played out across multilateral forums
in the United Nations (UN) and its agencies like the World Health
Organisation (WHO) and the WTO.

At the WTO Council for TRIPS held on June 13, a major, first-ever proposal
tabled by Brazil, China, Fiji, India and South Africa raised the question
of growing concern about the “imbalance between intellectual property and
the public interest”.

The five governments called on WTO member-states “to exchange views and
experiences on measures within the IP system that they have adopted to
promote the public interest, including but not limited to compulsory
licensing, patentability criteria, IP and competition, and the Bolar
exception”. They also called for the sharing of experiences on the use of
compulsory licences for accessing health and other technologies.

The co-sponsoring governments also said that political and economic
pressure placed on governments to forego the use of TRIPS flexibilities
violates the “integrity and legitimacy of the system of legal duties and
rights created by the TRIPS Agreement, as reaffirmed by the Doha
Declaration”. This affects the policy space available to governments for
legislating in public interest. Investor-State regimes either under
bilateral or regional investment protection agreements are growing
significant threats to using TRIPS flexibilities.

The paper emphasises the findings of the UN Secretary-General’s High Level
Panel on Access to Medicines (UNHLP) – the report of which was released in
September last year. The report become contentious even before it could be
published with governments of pharmaceutical-hosting countries, like the
US, the EU, the UK, Japan and South Korea, dismissing the panel and its
findings arguing that the panel mistakenly assumes that there is
incoherence between IP rights and drug prices.

Among other things, the report recommends that governments should give
patents only for genuine innovations, should ensure that the use of
flexibilities built into the TRIPS agreement is not undermined, that
governments should create an enabling environment for exporting medicines
under compulsory licencing; the WTO should register complaints of pressure
on countries to curb using TRIPS flexibilities, to bring greater
transparency to drug pricing, also through a WHO database that keeps record
of prices of patented and generic drugs and biosimilars.

In the UN Human Rights Council’s (UNHRC’s) last session in June, a
resolution was tabled by Argentina, Belgium, Brazil, Bulgaria, Colombia,
Ecuador, Egypt, Haiti, Honduras, Luxembourg, Malta, Mozambique, Paraguay,
Peru, Portugal, Romania, Spain, Timor-Leste, Qatar, Thailand, and Turkey,
and later co-sponsored by India and some other countries. It emphasises
that the primary responsibility for promoting and protecting all human
rights rests with governments, and calls on the international community to
assist developing countries in promoting the full realisation of the right
of everyone to the enjoyment of the highest attainable standard of physical
and mental health, including through access to medicines, in particular
essential medicines, vaccines, diagnostics and medical devices that are
affordable, safe, efficacious.

Given India’s strong and well-known ethical stand on the issue of access,
it would do well to stand firm against any pressure by rich governments to
dilute its IP norms and standards. The consequences of India’s decisions
will not only affect its own people but will have a significant impact
across the developing world.

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

More information about the Ip-health mailing list