[Ip-health] New York Time: Drug Company Protections Are Latest Stumbling Block for Nafta Rewrite

Thiru Balasubramaniam thiru at keionline.org
Mon Mar 25 02:40:34 PDT 2019


Drug Company Protections Are Latest Stumbling Block for Nafta Rewrite

By Ana Swanson

March 21, 2019

WASHINGTON — President Trump’s ability to get his revised North American
Free Trade Agreement through Congress may hinge on a little-noticed
provision governing intellectual property protections for new
pharmaceutical products.

Congressional Democrats have seized on measures in the United
States-Mexico-Canada Agreement that establish protections for drug
companies, saying they are a boon to the pharmaceutical industry and could
undermine efforts to make American health care more affordable.

The issue is the latest complication in Mr. Trump’s yearslong effort to rip
up Nafta and rewrite the rules of trade with Canada and Mexico. While Mr.
Trump secured Canada’s and Mexico’s signoff on the new agreement last year,
the trade pact must be ratified by legislators in all three countries,
including by Congress.

Democrats, who now control the House, have already made it clear that they
will not approve the new trade deal without significant changes to labor
and environmental provisions. Now, they are also looking for revisions to
the trade deal’s pharmaceutical provisions, in particular a measure
providing an advanced class of drugs called biologics 10 years of
protection from cheaper alternatives.

Biologic drugs are made from living organisms rather than synthetic
chemicals and have been used to treat diseases including diabetes, multiple
sclerosis, rheumatoid arthritis and cancer. Obtaining approvals for these
drugs requires clinical trials and other research and development, which
are both costly and time consuming.

The new trade pact gives biologic drugmakers 10 years of protections
against other products that would rely on the data they used to win
approval. After a decade has elapsed, competing drug companies are allowed
to rely on the original company’s data to get product approvals for their
own drugs, without repeating clinical trials, as long as they can show they
have produced a similar drug.

That 10-year provision would raise the timeline in Canada, where the
industry currently has eight years of protection, and in Mexico, where it
technically has none. It would not change current policy in the United
States, where the standard is already 12 years.

But Democrats are objecting to the provision, saying that enshrining the
time period in a trade agreement could thwart their future efforts to lower
health care costs through legislative changes. Lawmakers also argue that
other provisions of the trade pact could hinder development of generic

Democrats, who say they gained control of the House with a mandate to
address spiraling health care costs, are seizing on the pharmaceutical
provisions as a way to make an impact on the trade deal and potentially
separate the president from his populist base.

“The American public is fed up with what’s going on with drug pricing,”
said Representative Earl Blumenauer, the Oregon Democrat who is the
chairman of the House Subcommittee on Trade, which is responsible for
overseeing the president’s trade agenda.

Mr. Blumenauer said he and other members of the subcommittee were not
likely to support the deal in its current form. “I personally have no
interest in our driving something through that is intensely contentious and
partisan,” he said.

The provision’s supporters, including those in the pharmaceutical industry,
say that Democratic opposition is misguided and that these are basic
intellectual property protections that are necessary to safeguard American
innovation and give companies an incentive to invest in developing drugs.

“We need to make sure we’re protecting American companies that are engaging
in research and development that will give us these lifesaving treatments,”
said Gary Locke, a former Obama administration official and the head of the
Pass USMCA Coalition, a group of trade associations and businesses.

“If Mexican and Canadian firms are able to outright copy this stuff, what
incentive is there for U.S. firms to engage in this research that often
doesn’t even pan out?” Mr. Locke asked.

The clash underscores the pharmaceutical industry’s unique position as both
hero and villain. While the industry is often hailed as an engine of
American innovation, it is also viewed as a primary driver of rising health
care costs through high prescription drug prices.

A similar conflict over drug industry protections helped delay and
ultimately sink the prospects for another trade deal, the Trans-Pacific
Partnership, which was negotiated by President Barack Obama. The deal never
won sufficient support in Congress during the Obama administration, and Mr.
Trump pulled the United States out of the pact during his first week in

The United States has led the world in the development of new
pharmaceuticals, particularly biologics. This advanced class of medicines,
spurred by the completion of the human genome and other biotechnological
research, has delivered groundbreaking treatments for debilitating diseases.

But some of the drugs can cost hundreds of thousands of dollars per patient
per year. Biologics are a small share of prescription drugs taken today,
but they make up a rapidly expanding share of medical spending in the
United States. Generic versions of these drugs, called biosimilars because
biological drugs often cannot be reproduced identically, are mostly still
in their infancy.

Advocates for patients and the generics industry say provisions in the new
trade deal would further restrain that development — and preclude cheaper
drug prices — by blocking the development of cheaper biosimilars.

“The objective is to tie the hands of members of Congress so that they
cannot reduce the long exclusivity period for the most expensive drugs
since they would be infringing the terms of the trade agreement,” said M.
Fabiana Jorge, president of MFJ International, an advocate for patients and
the generics industry.

In a letter sent in November to Robert Lighthizer, the United States trade
representative, groups including the AARP and the A.F.L.-C.I.O., a labor
organization, expressed “serious concern” that the agreement would
“exacerbate the problem of high prescription drug prices in the United

But the pharmaceutical industry says the United States needs to provide
protections to encourage further research and development of these
cutting-edge drugs.

“At a time when markets like China are proposing to raise their standard to
12 years, North America must also have strong intellectual property
protections that balance innovation and competition,” said Stephen J. Ubl,
the president of the Pharmaceutical Research and Manufacturers of America,
the industry’s largest lobbying group.

The Trump administration, which negotiated the 10-year provision, has
largely rejected the Democrats’ objections and says the measures will have
no effect on the American drug industry given the existing 12-year limit.

“The provisions will have no impact on current U.S. law in this area, and
should not have any impact on Congress’s ability to act in the future,”
said Emily Davis, a spokeswoman for the United States trade representative.

Other disagreements center on the trade pact’s definition of biologics, as
well as rules governing other ways drug companies can extend protections,
like putting existing products to new uses or combining them with other
drugs. Democrats are also scrutinizing the length of protections companies
receive when introducing their products in foreign markets.

The generics industry says these protections could restrict exports of
biosimilars, undermining the industry as a whole and therefore the mission
of making drugs more affordable. Given that the Trump administration has
said the new pact will serve as a model for other trade deals, the industry
is also concerned that these provisions could someday be expanded around
the globe.

Jonathan Kimball, vice president for trade and international affairs at the
Association for Accessible Medicines, which represents the generics
industry, said the deal’s drug provisions would strengthen the ability of
pharmaceutical companies to extend their current monopolies.

“That goes against the entire public debate we are having now about
reducing drug prices,” Mr. Kimball said.

The agreement has several provisions that should appeal to Democrats,
including measures intended to encourage automakers to pay higher wages so
that their cars qualify for zero tariffs and limits on a special dispute
settlement system that allowed corporations to sue governments.

But Speaker Nancy Pelosi, Democrat of California, has signaled that she
will not pass the deal without strict enforcement. The deal’s passage seems
more certain in the Senate, which is still controlled by Republicans.

“The Senate would pass a paper bag as long as it had the words ‘free
trade,’” said Lori Wallach, director of Global Trade Watch at Public
Citizen. “The real battle over Nafta is going to be in the House.”

Mr. Trump’s trade adviser, Mr. Lighthizer, has worked closely with
Democrats and unions to craft a deal that the administration hopes will
receive broad bipartisan support.

But the Democratic Party has yet to settle on a consensus position about
the changes that would be required to win its vote. Several aides to senior
House Democrats described passing the tweaked trade bill as a relatively
low priority — unless Mr. Trump officially pulls the United States out of
Nafta, which could require Congress to act.

There are a number of ways the administration could make changes to the
already-negotiated trade deal, but the most rigorous would require
reopening negotiations with Canada and Mexico, something the Trump
administration has said it will not do.

Last week, Mr. Lighthizer fielded questions from House lawmakers, who
mainly pressed him on labor and pharmaceutical issues.

“We want a deal,” Ms. Pelosi said in her introductory remarks, according to
a House Democrat who took notes in the meeting. “We can’t afford to let
Nafta crumble and just go away.”

But that position may not be widely shared among her base. Representative
Ro Khanna, Democrat of California, last week retweeted a letter sent by
House Democrats to the administration in February 2018, which called for
the administration to roll back provisions in the deal that provide “new
tools for pharmaceutical corporations to extort high prices.”

Mr. Khanna added, “Let me be clear: Any Dem that doesn’t sign this letter
is selling out to Big Pharma.”

Glenn Thrush contributed reporting.

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

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