[Ip-health] KEI Testimony at 2020 USTR Special 301 Hearing

James Love james.love at keionline.org
Thu Feb 27 13:05:30 PST 2020


KEI Testimony at 2020 USTR Special 301 Hearing

February 26, 2020

Today, the Office of the United States Trade Representative hosted the
hearing for the annual Special 301 Review. The review process includes a
solicitation of written comments and hearing testimony, and results in the
publication of the Special 301 Report. The report is a list of countries
that the USTR identifies as bad actors on intellectual property rights
protections and enforcement, and is used to pressure foreign countries to
change their domestic laws and policies towards US interests.

KEI was one of three non-industry, non-government groups to testify at the
hearing. KEI’s testimony at the hearing follows below. The full docket of
written submissions is available here.

Comments of Knowledge Ecology International at US Special 301 Hearing
February 26, 2020.

Re: 2020 Special 301 Review: Identification of Countries Under Section 182
of the Trade Act of 1974: Request for Public Comment and Announcement of
Public Hearing


Medical technologies

The Pharmaceutical Research and Manufacturers of America (PhRMA), the
Biotechnology Innovation Organization (BIO), the US Chamber of Commerce,
the National Association of Manufacturers (NAM), the Alliance for Fair
Trade with India, and a few other organizations, are asking the U.S.
government to take measures to expand and extend monopolies, and otherwise
raise prices for medical inventions in foreign countries.

The scope of the demands is broad. The Office of the US Trade
Representative (USTR) is being asked to discipline the breaking of global
norms, the use of exceptions that exist in those norms, even thinking of
using those exceptions, and finally, to discipline attempts to influence
those norms in ways not favored by big drug companies.

(Footnote 1. See, for example, page 12 of the PhRMA submission, Charts 1
and 2 in the NAM submission, page 2829 of the US Chamber Submission, pages
29 and 30 of the IP submission.)

The drug company-backed asks are framed in terms of the U.S. having an
interest in promoting biomedical innovation and U.S. jobs in this sector.
This argument holds some water, but it also leaves out a lot.

The measures proposed by the drug companies also present obvious conflicts
with policies to curb anti-competitive practice and to promote health,
affordability and more equal access.

Opportunity costs

Also worth noting, measures that will raise foreign prices on drugs to
treat cancer and other illnesses are unpopular in the foreign countries
that are targeted. When the U.S. pressures countries to raise drug prices,
the U.S. incurs costs, both politically and economically.

When our trade policy favors one particular sector of the economy at the
expense of others, there is a cost to the other sectors. That’s something
to put on the table.

The U.S. can’t ask every country to do everything one industry sector wants
since, every time the US makes a demand, there is an opportunity cost.

Alternatives to address innovation

The pharma industry has an insatiable appetite for new rent-seeking norms
and actions. But governments can, should, and need to consider alternatives
that don’t pit affordability, access and equality against innovation.

For several years, drug companies have lobbied against efforts by the World
Health Organization (WHO) to set global norms for funding research and
development (R&D). More recently, drug companies have lobbied against
global norms on the transparency of pharmaceutical markets, and most
aggressively, against transparency of R&D costs.

It is in our interest, the interest of the United States, that foreign
governments expand public sector financing of biomedical research. The U.S.
government does a laudable job of funding billions of dollars in biomedical
research as a public good, and spends billions every year to subsidize
clinical trial costs. The U.S. could push other countries to raise the
level of their biomedical R&D spending and clinical trial subsidies, as
this could have a more pronounced positive impact on innovation than higher
prices for drugs, vaccines and gene and cell therapies.

For the past two decades, PhRMA has opposed all efforts to pivot from IPR
to R&D, regarding the focus of trade policy. To be sure, the pharma sector
wants to claim that its policies are designed to enhance R&D spending, but
when proposals have been made to create even soft norms on R&D funding, or
to address the lack of transparency in R&D spending, pharma has mobilized

The large biomedical companies understand, perhaps better than some
government officials, that a focus on R&D, rather than IPR, could undermine
policies that protect price gouging, and eliminate their biggest price
gouging defense. While it is true that price gouging can spur innovation,
so can lots of other cheaper, and less harmful measures, such as expanded
R&D subsidies, enhanced government direct funding of research, or
incentives like market entry rewards that are delinked from prices or

One reason the U.S. government needs to rethink its strategy on the
cross-border funding of biomedical R&D is that the U.S. is consistently the
biggest victim of excessive pricing and anticompetitive practices, and is
facing a significant aging of our population over the next 15 years, which
will add more fiscal stress to our already costly and globally most costly
health care system.

Delinking R&D incentives from prices

Among the many reforms being considered to address the crisis in
affordability of medicines are those that would delink R&D costs, and in
particular the incentives to invest, from the prices of products or
services. More generally, this is about delinking R&D incentives from the
use of temporary monopolies on products, services or inventions, including
by using market entry rewards, as the incentive to invest in new treatments.

Delinkage has many advantages, including the ability to more directly
reward improvements in health outcomes and by eliminating considerable
waste in marketing and non-outcomes-improving or scientifically
questionable medical research. Delinkage also can dramatically move prices
closer to marginal costs, thereby eliminating price based rationing and
fiscal toxicity, and of course, reduce the inequalities of access and
outcomes. Why wouldn’t governments want to at least conduct feasibility
studies? Yet, pharma companies and the U.S. government have lobbied to
block such studies at the WHO and elsewhere.

During the George W. Bush Administration, the USTR actually convened a
meeting to discuss these issues. This needs to be revisited.

U.S. has an aging population

The U.S. Census projects the number of Americans ages 65 and older to
nearly double from 52 million in 2018 to 95 million by 2060. The percent of
the U.S. population over 65, which is now 16 percent, is projected to
exceed 23 percent.2 If policy makers are not taking this into account, they
are ignoring where we are headed.

(Footnote 2. 2017 Census projections for 2060. Total US Population: 404.83
million, population 65+: 94.676 million. Percent of US population 65+:

Foreign owners/suppliers of treatments

The United States is not the only country that supplies new medical
inventions, and often, we are paying foreign companies for new drugs, cell
or gene therapies. Novartis, a Swiss firm, now owns the first CAR T
therapy, as well as the Luxturna gene therapy. Roche, another Swiss firm,
has reaped tens of billions of dollars from U.S. cancer patients, including
the treatment my wife takes, which is invoiced at more than $470,000 per

Korea, Japan and Singapore have extensive biotech programs, and China is
investing heavily in new treatments, including cell and gene therapies.

ClinicalTrials.Gov currently lists 470 clinical studies mentioning
“”Chimeric antigen receptor”. Of these, 204 are taking place in the United
States, while 208 are taking place in China.

Patent thickets in the United States on CAR T, gene therapy and CRISPR, and
the high costs of licensing patents, are creating barriers to entry in the
United States. We have to consider the use of compulsory licensing or
expanded exceptions for patents used in the treatment of humans, to
overcome these problems.

Technology transfer/local working

It is also worth reflecting on some other issues relevant to the industry
301 submissions that complain about local working or technology transfer
obligations. It is the United States government that is now expressing
concern over the lack of national capacity to manufacture pharmaceutical
APIs or finished products domestically, including in the context of a
potential coronavirus pandemic. KEI also expects the U.S. Congress to
examine the need to mandate technology transfer for biologic drugs,
vaccines and cell and gene therapies, in order to overcome the current lack
of competition or to address safety concerns for biosimilars or biogenerics.

Income disparities

I will also submit for the record an attachment that provides estimates of
the distribution of income for 96 countries, including data on per capita
income, by country and within counties. (Link).

Many of the countries targeted for trade sanctions by PhRMA, NAM, the
publisher lobby, and others, have significant populations that live with
far lower incomes than in the United States. These countries are often
trying to adopt intellectual property laws that are both fair, and have
sufficient legitimacy to justify enforcement. If you want countries to
enforce intellectual property laws, you should not insist on laws that have
the practical impact of blocking access to life saving medicines or
important educational materials.


On the copyright side, we note that the BSA is seeking broader global
protections for fair use (and other exceptions) as it concerns text and
data mining, in the context of “non-consumptive” reproductions that are
necessary for the development of AI-related technologies. In its
submission, the BSA urges the U.S. government to continue such exceptions,
to foster innovation and creativity, and to maintain U.S. technology
leadership in AI and opening foreign markets to innovative US companies.
KEI agrees with the BSA.

KEI notes that regarding education materials, many of the issues raised
regarding policies in countries in Africa and Asia have a larger impact on
European publishers than on U.S. publishers. Giant firms like Pearson and
Elsevier, Springer-Nature and Hachette are based in Europe, not the United

James Love.  Knowledge Ecology International
U.S. Mobile +1.202.361.3040
U.S. office phone +1.202.332.2670
http://www.keionline.org <http://www.keionline.org/donate.html>

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