February 4, 1997
President William Clinton
The White House
We are writing to ask that your Administration reconsider its proposal to impose trade sanctions against Argentine consumers as punishment for that country's policies toward the pharmaceutical industry. We believe the U.S. Trade Representative has erred for two reasons. First, for public health and competitive reasons, the United States Government should not support artificial barriers to the introduction of generic versions of unpatented drugs. Second, it is inappropriate for the United States to punish Argentina consumers for plainly legal advocacy efforts undertaken by Argentine private sector domestic drug companies, who are simply seeking to protect their interests in worldwide forums on rules for intellectual property.
1. The U.S. Government should not support artificial barriers to the introduction of generic versions of unpatented drugs.
In the USTR's January 15, 1997 statement, the principal substantive complaint about Argentina's policies on intellectual property rights concerned the decision of the Argentine Congress to permit drug manufacturers to rely upon scientific clinical trials already submitted to drug regulators. The USTR statement says:
Following the April, 1996 decision, the Government of Argentina stated that it would attempt to address U.S. IPR concerns by enacting legislation to protect health registration data. Such scientific and technical data - which must support claims of efficacy and safety of new products - must be submitted by pharmaceutical innovators to Health Ministries to obtain approval for marketing new products. These data generally cost millions of dollars to develop. Given these costs to innovators, many countries prohibit competitors from relying upon such data when they seek Health Ministry approval for the same pharmaceutical product.
On December 18, just before the scheduled completion date of USTR's out-of-cycle review, the Argentine Congress passed legislation dealing with health registration data. However, this legislation does not archive (sic) its stated purpose. Specifically, the legislation does not prevent competitors from relying upon the innovator's test data when these rival firms seek marketing approval. On the contrary, the new legislation specifically permits Argentine competitors to rely upon such data that has been submitted for registration in Argentina, the United States or in certain other countries.
This is the crux of the complaint against Argentina. That country will permit firms who seek to sell generic versions of unpatented drugs to "rely upon" scientific data submitted to the U.S. FDA and other regulatory bodies, as evidence that the drug is safe and effective.
We have interviewed officials from the USTR, FDA, PhRMA and the generic drug industry to try to understand the rationale for creating unnecessary barriers to the marketing of generic versions of unpatented medicines. Joseph Papovich from the USTR did not offer a public interest rationale for the policy, but he did note that the United States protects for five years the scientific data used for FDA drug approval, and he asserted that Article 39 of the TRIPS requires countries to adopt similar measures when the WTO transition periods expire.
Article 39.1 of the TRIPS requires governments to protect against "unfair competition," data which is submitted "to governments or governmental agencies." In 39.3, TRIPS states:
Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use.Argentina has agreed to keep such data confidential, and like several other countries, simply seeks to permit the sale of generic versions of unpatented drugs, based only on bioequivalence, when the U.S. FDA or other similar bodies declare a pharmaceutical drug to be safe and effective for a particular indication.
The United States and several OEDC countries have taken a different approach than Argentina, due in large part to extensive lobbying from the pharmaceutical industry, in the case of Canada, due to extensive pressure from U.S. NAFTA negotiators. The U.S. has a statute that prevents a firm from relying upon the evidence presented by another firm to the FDA to support safety and efficacy claims for five years after the date of marketing approval. [21 U.S.C. Sec. 355(c)(3)(D)(ii) (1996)]. Some OEDC countries protect such data for even longer terms.
We are concerned about the appropriateness of the U.S. announcement from the point of view of the public's health. We believe the Argentine position is the one that best promotes public health interests, and that it is the United States which should seek changes in domestic legislation and support interpretations of the TRIPS which would permit easier entry by generic drugs.
Under the U.S. Constitution, inventions are protected for a limited time by patents. Companies that invent new drugs, or which discover new applications for drugs, are eligible for patent protection. So called "use patents" even permit firms to have a monopoly on the commercial sale of drugs such as Levamisole or AZT, when the chemical entity itself has long been in the public domain, because a patent is given for the discovery that the public domain chemical entity can be used to treat a particular disease.
The USTR actions against Argentina and the U.S. laws which create barriers to the introduction of generic drugs based upon known scientific evidence, are backdoor attempts to convey private monopoly power for drugs that do not qualify for patent protection. Often these unpatented drugs were developed with government funds.
In our view, medical scientific research which is not patented should not receive this form of protection. U.S. patent and copyright laws reward innovation and creativity, but do not extend monopoly protections to works on the basis of investment. PhRMA members may claim such protection is necessary to provide an economic incentive to undertake the research, but there is considerable evidence to the contrary. Many studies of the pharmaceutical industry demonstrate significant economic returns for "being first" on the market. More important, may of the drugs which benefit from the protectionist policies on scientific evidence were drugs where the research isn't patented because it was supported by the government.
In a cost-benefit analysis, the benefits from the prohibitions on reliance upon scientific evidence are compared to the benefits of competition. It is difficult to justify the monopoly on non-patented scientific research, because the benefits from competition are so important -- particularly with respect to matters concerning public health. Any policies that result in higher prices for medicines raise inescapable ethical issues. The United States is advocating policies which would have the predictable effect of preventing billions of consumers from obtaining access to new scientific discoveries for five years or more, because those policies would prevent would-be generic drugs from entering the market without conducting redundant medical research to recreate non-patented discoveries. This is both socially wasteful and morally repugnant.
Data As A Barrier To The Marketing Of Taxol
A highly relevant example is Taxol, a drug which was invented by the U.S. National Cancer Institute (NCI). According to Dr. Samuel Broder, Director of NCI, U.S. government research on Taxol began sometime before 1977, and "was totally responsible for its development," including all biological screening in both cell culture and animal tumor systems, the chemical purification, isolation and structure identification, large-scale production for human use, development of dosage formulation, preclinical toxicology, filing of an FDA Investigational New Drug Application (INDA) and sponsorship of dozens of Phase I, II and III clinical trials. Research about Taxol has been extensively reported in scientific journals, and the drug was never patented.
After Phase II human use clinical trials had indicated Taxol was likely to be a blockbuster drug against cancer, the Bush Administration NCI entered into a contract between the NCI and Bristol-Myers Squibb (BMS) which gave that company the exclusive rights to use the clinical data from all past, present and future NCI-sponsored clinical trials on Taxol. In return, BMS pays no royalties, but provided the government with 17 kilos of Taxol, with a production cost estimated at about $5 million, and promised to make its "best efforts" to commercially market Taxol to cancer patents.
BMS initially used Hauser Chemical, the NCI's own contractor, to produce Taxol for $.25 per milligram. When the FDA approved Taxol for marketing, BMS initially charged a wholesale price of $4.87 per milligram, and has recently raised this price to more than $6 per milligram -- about 24 times the company's initial cost to manufacture the drug. Patients now report paying as much as $2,000 for a treatment cycle, which can be repeated as often as 25 times for a patent suffering from breast cancer -- or as much as $50,000 for a completed treatment. The U.S. government pays for many of these expensive treatments through programs such as Medicare and Medicaid.
Foreign firms would like to market Taxol in the United States at prices in the neighborhood of $.60 to $.90 per milligram, or 10 to 15 percent of the BMS price. Also, Hauser Chemical, the company that was supplying Taxol to BMS for $.25 per milligram, has indicated an interest in producing the drug for another drug company. But this competition has been put on hold by the our statute which requires a firm to wait five years, or present redundant scientific evidence that Taxol is safe and effective. As a consequence, BMS expects Taxol sales to top $1 billion this year, which is good for the BMS shareholders, but often bad news for the consumers who are paying enormous premiums for a drug BMS did not invent.
We have been contacted by consumers who have faced hardships or a complete inability to obtain Taxol, due to the high price. As one would expect, HMOs are carefully screening requests for Taxol, and erecting unnecessary barriers to the use of this very important medication.
While consumers in the United States are facing very high prices for Taxol, some countries can benefit from the lower prices, by taking advantage of a competitive domestic market. What the USTR is attempting to do in Argentina and elsewhere would enhance the BMS monopoly on this unpatented drug worldwide. Moreover, Taxol is only one of many government-funded drug inventions which are subject to protectionist policies toward health registration data.
2. It Is Inappropriate To Punish Argentine Consumers For Legal Advocacy Efforts By Argentine Private Sector Domestic Drug Companies.
The January 15, 1997 statement by the USTR included the following statement:
In addition, Argentine pharmaceutical interests continue to work aggressively to frustrate our efforts to achieve improved intellectual property protection in other countries. As a result, the United States will with draw 50 percent of the duty-free trade benefits otherwise available to Argentina under the U.S. GSP program." [Emphasis added]We were surprised that USTR Charlene Barshefsky would openly base trade sanctions against the Argentine public on the actions of private sector Argentine drug companies. Under this line of reasoning, countries abroad would be morally and legally justified linking sanctions to the political actions of U.S. firms. This does not seem an approach that the U.S. government wants to legitimize, given the extensive political involvement worldwide by large U.S. firms. The USTR should be instructed to withdraw this particular complaint. It is unseemly and hypocritical for the United States to object to the political actions by foreign private sector firms in this dispute over intellectual property rights, while PhRMA members have an enormous presence on these issues before WIPO, the WTO and virtually every national legislature on earth. PhRMA, which includes many foreign owned firms, lobbies the United States extensively, and countless other large U.S. and foreign firms lobby the United States on every conceivable government action. And of course many of these firms are huge contributors to both the Democratic and the Republican parties in the United States. What is the Administration's point? That only PhRMA is allowed to lobby the Argentine, Indian and U.S. governments?
Other critics may note the irony that while the United States is criticized at home for failing to impose trade sanctions on countries that limit dissent, the USTR is seeking to impose trade sanctions in an effort to limit dissent in newly democratically inclined Argentina.
3. Closing Comments
We urge your administration to withdraw the trade actions announced against Argentina on January 15, 1997. We furthermore ask that the Clinton Administration appoint a special task force to reevaluate the U.S. positions in international trade negotiations as they relate to public health matters.
As a precedent, we point to your commendable decision to reverse earlier administrations' record of blindly using trade policy to advance U.S. tobacco interests. We urge you to extend the same insightful analysis to the public health matters which are at stake in policies concerning the pharmaceutical industry. We have earlier written the USTR and met with USTR officials about similar concerns we have about the U.S. posture on trade issues that effect the public's health. We are including as an attachment our October 9, 1996 letter to then USTR Mickey Kantor, his November 8, 1995 response, and the notes from a July 30, 1996 meeting with several members of the USTR staff. These and other materials are also available on the Internet at: http://www.essential.org/cpt/pharm/pharm.html. Thank you for your attention to this important matter.
James Love, Consumer Project on Technology
Robert Weissman, Essential Information
 September 10 , 1991 letter to Representative Ron Wyden, reprinted in U.S. House of Representatives, Committee on Small Business, Subcommittee on Committee on Regulation, Business Opportunities and Energy, Exclusive Agreements Between Federal Agencies and Bristol-Myers s Squibb Co. For Drug Development: is the public interest protected? July 29, 1991. Serial No. 102-35, 1st Session, 102nd Congress, pages 350-377.