New Western Hemisphere Trade Pacts Push Back Against Big Pharma

By Thomas Andrew O’Keefe*

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Attempts to limit competition from generics by pharmaceutical giants were called “TRIPS-plus” provisions in USMCA drafts/ Ragesoss/ Wikimedia Commons

Two major trade agreements affecting the Western Hemisphere have recently struck blows against the pharmaceutical industry’s efforts to keep drug prices high by limiting competition from generic medications. Big Pharma tried, but failed, to include provisions in the United States-Mexico-Canada Agreement (USMCA) and the EU-MERCOSUR Association Agreement that would go beyond those expressly permitted by the World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

  • Those provisions would have made it extremely difficult for generic manufacturers to enter the market and contain costs. Unaffordable medicines are a large and growing global problem. Many people die of diseases today not because there is no cure, but because they cannot afford the medications.

In the version of USMCA approved by the U.S. Congress and to be signed by U.S. President Trump this week, the Democratic majority in the House of Representatives removed “TRIPS-plus” provisions that would have given “data exclusivity” for new uses of existing pharmaceutical products for up to three years and for so-called “biologics” for ten years. (Biologic drugs are produced from a living organism or contain components of a living organism, including a wide variety of products derived from humans, animals, or microorganisms by using biotechnology.)

  • Data exclusivity would have prevented generic manufacturers from utilizing the original trial results and other test data filed with regulatory health agencies concurrently with the patent application, demonstrating the medication’s safety, quality, and efficacy. Also removed from the USMCA was a provision that would have restricted competition from generic pharmaceutical manufacturers by delaying patent expirations to compensate for “unreasonable” bureaucratic delays in approving the patent. Furthermore, the USMCA now expressly allows generic manufacturers, as per Article 30 of the TRIPS Agreement, to utilize compounds used to make a patented drug in order to develop a generic version in anticipation of that drug’s patent expiration.

Similarly, the IPR chapter in last year’s EU-MERCOSUR agreement does not include TRIPS-plus provisions thanks, in part, to resistance from South American governments concerned about bankrupting their national health care systems because of increasing costs for new medications. The IPR chapter specifically supports World Health Assembly Resolutions on pandemic influenza preparedness and on a global strategy and plan of action on public health, innovation and intellectual property – both of which recognize that “intellectual property rights do not and should not prevent Member States from taking measures to protect public health.”

  • The IPR chapter is consistent with the Doha Declaration on the TRIPS Agreement and Public Health of November 2001. Furthermore, all the signatory states are required to implement articles of the TRIPS Agreement providing the legal basis for WTO members to grant compulsory licenses exclusively for the production and export of affordable generic medicines to other members that cannot domestically produce the needed medicines in sufficient quantities. (The only obligation is for the signatory states to make “best efforts” to adhere to the Patent Cooperation Treaty.)
  • The MERCOSUR countries resisted intense lobbying pressure from European pharmaceutical companies to accept provisions on data exclusivity and to compensate for bureaucratic delays by extending the monopoly on a patented medication beyond the 20-year maximum permitted by TRIPS. The fact that the United Kingdom, home to global pharmaceutical giants such as GlaxoSmithKline and AstraZeneca, was distracted by Brexit undoubtedly contributed to this outcome.

The successful pushback against attempts by the major pharmaceutical multinationals to extend their state-sanctioned monopolies to guarantee a steady flow of profits reflects public outrage over multiple scandals that have ensnared the industry in recent years. This includes not only the massive opioid addiction crisis in the U.S., but firms buying up patents that are about to expire and jacking up their prices in excess of 1000 percent. It makes the traditional industry argument of needing extended monopolies to incentivize innovation and the development of new drugs ring hollow as these speculators incur no research and development costs. As a result of the efforts of MERCOSUR and Democrats in the U.S. House of Representatives, the pharmaceutical industry may be facing a paradigm shift in which it will be forced to develop a new business model for pricing new treatments.

January 28, 2020

Thomas Andrew O’Keefe is the president of Mercosur Consulting Group, Ltd. and a lecturer at Stanford University. He is the author of Bush II, Obama and the Decline of U.S. Hegemony in the Western Hemisphere (Routledge, 2018).

The U.S. Immigration Debate: Legalization or Citizenship?

By Dennis Stinchcomb

U.S. House of Representatives Speaker Boehner has again hit the brakes on immigration reform, claiming widespread doubt among House Republicans that President Obama “can be trusted to enforce our laws.”  The dramatic about-face came only a week after Boehner and other House leaders released a one-page declaration of “Standards for Immigration Reform,” renewing hope that a legislative compromise could be reached this year.  According to press reports, reasons for the reversal included fear among a majority of House Republicans that party infighting over the legalization of the country’s 11 million unauthorized immigrants would disrupt the Republican base and imperil their perceived advantage in the upcoming midterm elections.  Despite rhetoric that places the blame on the president’s alleged unwillingness to implement certain unspecified laws, the immediate concern for House Republicans is not one of substance but of timing, according to Republican members.

The Republicans’ “Standards” document endorsed a vaguely defined program that would grant legal status to certain categories of unauthorized immigrants, but stopped short of a special pathway to citizenship like the one outlined in the Senate bill currently at the center of discussion.  What they mean by “legal status” remains uncertain.  Some Republicans have suggested that newly legalized immigrants would be permanently barred from naturalization; others insist that undocumented immigrants, once legalized, would be able to access normal avenues to citizenship (i.e., work visas, marriage to a citizen spouse, etc.) if available to them.  The White House and House Democrats have expressed willingness to listen to any emerging proposal that would offer limited legal status.  Many Senate Democrats and immigration advocates argue, however, that legalization without eligibility for naturalization is too great a concession and would create a permanent underclass of millions of legalized immigrants unable to access the rights and privileges of citizenship.

House Republican leaders appear to judge that – at least for now – they cannot sell legalization to their own caucus and seal the deal for immigration reform.  Even if they were to reach a consensus that some form of legalization is good, a majority of House Republicans either openly reject any sort of “amnesty” or consider addressing such a controversial issue too risky in an election year, especially before Congressional primaries.  If and when the Republican Party is ready to deal, willingness on the part of Democrats to reach a compromise will depend largely on the type of legalization Republicans are prepared to support.  If legalization without an explicit pathway to citizenship is the only way to halt record deportations, most Democrats appear willing to make the concession.  One thing is clear: clogged immigration courts, nearly 2 million deportations, and $17.9 billion spent annually on immigration enforcement have not translated into the bargaining chip the Obama administration had hoped for – nor have such actions given the lie to Republican accusations that he cannot be trusted to enforce the law.  And with no specific proposals on the table, Democrats, the American people, and millions of undocumented immigrants are left guessing what House Republicans mean by legalization.