July 25, 2013

Rachel Kiddell-Monroe and Stephen Cornish, Policy Options, July 2013

The closed-door negotiations to draft the Trans-Pacific Partnership (TPP) trade agreement include discussions that could severely restrict access to affordable life-saving medicines for millions of people, especially in low- and middle-income countries (LMICs). Leaked drafts of the US negotiating positions on the TPP purport to show that Washington is seeking to roll back international public health safeguards in favour of more aggressive protection for intellectual property. These protectionist provisions would buttress the American pharmaceutical industry against competition, an extension of the industry’s long-running campaign that will jeopardize access to price-lowering generic drugs and stifle innovation in public health. And because President Barack Obama has referred to the TPP as a “model not just for countries in the Pacific region, but for the world generally,” there is the alarming possibility that the deal’s intellectual property provisions will set a dangerous precedent and weaken access to medicines worldwide.

As one of 11 countries currently negotiating the TPP, Canada can play an important role in making the TPP a win-win for patients and for signatory countries. Canada has strong medical research universities and a thriving biotechnology industry. Ottawa is committed to using public-private partnerships to reduce poverty, and we are recognized internationally for our efforts to ensure access to medicines for people in LMICs through support to the Global Fund to Fight AIDS, Tuberculosis and Malaria. Ensuring that the TPP supports and promotes the health of patients worldwide is an ethical and an economic issue for all countries involved. And Canada’s policy positions make it well-placed to ensure that any new trade agreement does not undermine the policies that it has been supporting internationally and domestically.

Intellectual property protections already enshrined in international trade law present a key barrier to accessing affordable medicines in LMICs. Each year, 10 million people die because they cannot access the drugs they need. Patents are normally granted for 20 years on medicines. This prevents competition by generic pharmaceutical companies and allows the brand pharmaceutical industry to keep prices artificially high. Prices are often set according to what richer country markets will pay, so LMICs and poor patients who are unable to afford the prices are denied access to life-saving treatment. Recognizing this inequity, World Trade Organization members agreed in 2001 that the international trade provisions under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement should not undermine public health and that there should be access to medicines for all.

Despite this international agreement, many LMICs have come under pressure to implement even tougher -intellectual property protections, known as TRIPS-plus provisions, which create and expand monopolies for drug companies. Trade agreements have been the favoured vehicle used by the US and European countries operating on behalf of their pharmaceutical giants to pressure countries into signing agreements that include TRIPS-plus provisions. According to an Oxfam report in 2007, in Jordan, drug prices increased 20 percent in the five years after the US-Jordan Free Trade Agreement was implemented. According to the 2012 United Nations Development Programme Global Commission on HIV and the Law, public spending on antiretroviral drugs in Costa Rica is expected to increase by at least 50 percent as a result of IP provisions included in the US-Central America Free Trade Agreement. Given the impor-tance of drug expenses in domestic social spending, these provisions could add huge costs to health systems and pressure on government budgets, ultimately limiting access to medicines for their populations.

The TPP not only continues this TRIPS-plus trade trend but threatens to take it further. The leaks from the talks suggest that the US is demanding that TPP signatories agree to include aggressive patent provisions that would make it harder for these countries to gain access to price-lowering generic competition. The US is reported to be seeking to lengthen patent terms, lower the requirements for patentability, protect research data to prevent copying by generic companies and require the patenting of diagnostic, therapeutic and surgical methods.

Another measure may be to get TPP member countries to make it impossible to challenge the validity of a patent. That strategy for attacking high drug prices was underscored by the recent ruling by the Indian Supreme Court that upheld India’sPatents Act in the face of the seven-year challenge by the Swiss pharmaceutical company Novartis. The court rejected the drug company’s attempt to renew the expired patent of one of its cancer drugs, a move the Indian court struck down to protect the far cheaper, Indian-developed generic version.

Canada is also experiencing the negative impact of “investor-state” provisions that the US seeks to instill in the TPP. Eli Lilly recently initiated proceedings under the North American Free Trade Agreement (NAFTA) attacking Canadian standards for granting drug patents. The American pharmaceutical giant, using the investor-state system of corporate privileges established by NAFTA, claims that the denial by the Canadian courts of a patent is an expropriation of its “investment.” Even though patents are not included in the NAFTA definition of a protected investment, Eli Lilly is demanding $100 million in compensation from Canadian taxpayers.

Canada could expect similar claims in the future if the country does not push back on the US-proposed TPP rules. The draft TPP not only adopts the investor-state system set out in NAFTA, it extends it by explicitly naming “intellectual property rights” as a protected investment. Other TPP negotiating partners have balked at including these investor-state provisions. Australia has said it will not be party to such a system. The 2012 Australian Pharmaceutical Patents Review noted that reducing patent extensions would save “some hundreds of millions of dollars a year.” Seventy percent of pharmaceutical patents expire later in Australia than in other countries, according to the report. Brazil has also rejected the proposals, and South Africa said it would “avoid” agreeing to such a regime. Canada should join these countries and steer clear of investor-state dispute lawsuits by not signing on to the proposed provisions of the TPP.

The move to extend patent protection would violate existing American commitments. In the May 2007 New Trade Policy, the US Congress and the Bush administration reached a bipartisan congressional agreement to preserve public health safeguards in trade agreements with LMICs. The US has also made global health commitments in numerous multilateral agreements, including the World Trade Organization’s 2001 Doha Declaration on the TRIPS Agreement and Public Health, the World Health Assembly’s 2008 Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property, and the 2011 UN Political Declaration on HIV/AIDS. The US position threatens the sustainability of its own global health program, the US President’s Emergency Plan for AIDS Relief, and undermines its support to the Global Fund to Fight AIDS, Tuberculosis and Malaria. Both programs depend heavily on the availability and affordability of generic medicines.

But Washington appears to be driven by the crisis in drug innovation, in which pharmaceutical companies face high research and development (R&D) costs at the same time as they encounter low rates of success for their drugs in clinical trials. The result is a lack of new drugs for diseases affecting the world’s poor, while existing drugs are priced out of reach.

Yet the causes of the innovation crisis are based on what Andrew Witty, the CEO of Glaxo Smith Kline (GSK), calls one of the great myths of the industry: the $1.1-billion price tag for developing a new drug. This figure has been cited for many years by industry pundits as a key defence of the need for pharmaceutical patents, so that companies can recoup their huge investments, and it was confirmed most recently by Deloitte and Thomson Reuters in their report on R&D productivity among the world’s 12 top drug makers. Yet this figure masks two important facts. First, performance varies widely among companies — the Deloitte report notes that the average cost of drug production for one successful company was in fact $315 million. Second, the $1.1-billion price tag includes the hidden and unaccounted-for cost of the high failure rate of drugs in late-stage testing. Yet the very existence of a business model that accepts such a high rate of failure has been brought into question by Andrew Witty. Reuters reported on March 14, 2013, that a major revamp in the way research is conducted at GSK to reduce the number of drug failures in late-stage testing has increased the rate of return on R&D investment by about 30 percent. As a result, Witty suggests that the pharmaceutical industry can and should be able to charge less for new drugs in future simply by passing on efficiencies in R&D to its customers.

Instead of enhancing intellectual property protection that will perpetuate the price myth, the TPP negotiations should mark the moment when the world finds a new way of dealing with the development of medicines and access to them. The existing approach has three fundamental weaknesses: global public health needs are not in the driving seat; LMICs have to make do with innovation that primarily caters to conditions in richer countries; and when there is innovation, the resulting products are often priced out of reach of the majority of patients. But there is a pressing need for a paradigm shift in the way pharmaceuticals are researched and developed, and how intellectual property is applied to medicines as global public goods. Only by turning away from the price myth will global pharmaceutical companies be able to shift their business models away from outmoded and inefficient practices.

One example of such an approach is the open-source drug development model, which is proving to be far cheaper and more efficient than the traditional models. The product development partnership model used by the Drugs for Neglected Diseases initiative (DNDi) has shown how open-source drug discovery is able to deliver on treatments for diseases that command no market attention. By focusing on patient needs and embracing the innovation that the current pharmaceutical model stifles through its dogmatic protection of information, DNDi has used open-source to make advances and support potential breakthrough technologies that had not been possible in the traditional market-driven system.Canada can play an important role in making the TPP a win-win for patients and for signatory countries.

Many economists and public health groups have also begun asking governments to consider new incentive mechanisms that break the link between the costs of research and development and drug prices. Prizes are an example of such an incentive model for innovation. There have been proposals for the World Health Organization to offer $250 million in prize money for drugs to treat Chagas disease, a parasitic disease that affects the rural poor in Latin America but that receives little research funding. Prizes have also been proposed for medicines for AIDS, tuberculosis and malaria; a rapid point-of-care diagnostic test for tuberculosis and priority medicines, vaccines and cancer treatments in LMICs.

Instead of using trade deals to legislate protectionism for medicines by the back door, governments should be seeking to establish improved global norms for research and development. The World Health Organization’s Consultative Expert Working Group on Research and Development concluded that better norms that address the failures of the current system to serve global public health needs can also deal with market failures in medical R&D. The working group proposed that members of the WHO negotiate a medical R&D convention. The goal of the convention would be to deliver a sustainable system of medical innovation with appropriate financing in order to deliver products designed for a developing country’s health needs. It would establish an evidence-based, inclusive process to set priorities for medical R&D, link global R&D priorities with adequate and sustainable financing, ensure that money is used to stimulate R&D in the most effective way and establish principles to ensure access to the fruits of R&D.

Access to medicines is a matter of life and death. The TPP or any other trade agreement cannot put protectionism and short-term profits ahead of global health and medical innovation models. As a medical humanitarian organization working in nearly 70 countries, Médecins sans Frontières/Doctors without Borders (MSF) has witnessed the impacts on its patients of limited or no access to essential medicines. We recognize that the TPP negotiations present countries with a choice for a new approach to drug patent innovation that does not seek to use trade agreements to achieve what the drug companies could not get in courts of law or public opinion. Millions of lives hang in the balance.

Rachel Kiddell-Monroe has worked with Médecins sans Frontières (MSF) since 1992, heading emergency humanitarian missions in various countries in Africa in the 1990s and in Latin America from 1999 to 2003. In Canada, she led MSF’s Access to Medicines Campaign until 2007, and she is currently president of the board and senior policy adviser of Universities Allied for Essential Medicines (www.uaem.org). Stephen Cornish is executive director of Médecins sans Frontières/Doctors without Borders (MSF) in Canada. Over the last two decades, he has worked in development and emergency humanitarian response with the Canadian Red Cross, CARE and MSF, including as head of mission for various MSF country programs in Africa, South America and the Russian Federation.