Brand-Name Drug Industry Alarmed At IPR Precedent Of FTA Template
Inside US Trade
May 18, 2007
The brand-name pharmaceutical drug industry is arguing that the
intellectual property rights provisions in a bipartisan compromise for
handling free trade agreements scales back protections for brand-name
drugs and could set a much lower standard for IPR protection in
developing country markets.
The agreement contains three main provisions: a reduced period of time
in which generic companies are restricted from using brand-name test
data to approve generic drugs, an end to the requirement that a foreign
health regulator would have to certify that a generic drug does not
violate a patent before extending marketing approval, and language
giving countries the option of extending patent duration if a patent
approval does not happen on a timely basis.
These elements apply only to FTAs negotiated with Peru, Panama and
Colombia as developing countries, but do not apply to the FTA with Korea
as an industrialized country.
Partly for this reason, health advocacy and generic drug industry
sources this week charged that the pharmaceutical industry was not
harmed in any substantive way by the conceptual agreement announced May
10. Health advocacy sources also pointed out that under the conceptual
agreement, the brand-name pharmaceutical industry is still receiving
strong IPR protections.
But brand-name drug industry sources this week countered that the
conceptual agreement could have large implications if it is used as a
precedent for handling trade-related IPR issues. These sources said they
fear that the U.S. Trade Representative's office will no longer insist
on tough data exclusivity, patent linkage, and patent extension
provisions in developing countries, especially in China, India, or
A U.S. trade official this week downplayed the precedent-setting nature
of the agreement by saying it is "about the four FTAs that are pending
congressional approval." The official said he could not comment on
whether the U.S. would now negotiate the new IPR provisions in future
FTAs, but did not explicitly rule out this possibility. "This was not a
part of our discussion with Congress, and that is just a bridge we
haven't crossed yet," he said.
The official also said it was unclear if the new IPR provisions would
reduce the leverage of the U.S. in demanding tough IPR protections in
developing countries more generally. In the so-called Special 301
process, for example, the U.S. pressures trading partners to change
those IPR policies and practices it considers objectionable.
"We are not getting too far in front of ourselves in terms of potential
effects of other aspects of trade policy," he said. "We'll have to see;
I think we are not jumping to any conclusions."
Sources on all sides of the debate agreed that the reaction of the
pharmaceutical industry to the conceptual agreement has been muted thus
far. In particular, sources noted the cautious response of the
Pharmaceutical Research and Manufacturers of America (PhRMA), which in a
May 11 statement said it is still evaluating the agreement. The
statement did say PhRMA members have been "extremely concerned" that
core American intellectual property rights remain protected in FTAs.
However, brand-name industry sources explained that the cautious
reaction reflects the fact that the brand-name industry recognized that
the emerging deal was based around negotiations on labor provisions and
could not be stopped over industry objections on the IPR provisions.
Without a chance of winning this fight, it is important not to "burn any
bridges" and work constructively with all players so that the IPR
provisions in the conceptual agreement do not become a precedent, they
One source also highlighted that pharmaceuticals are an export-oriented
industry, and so it is hard to lobby against FTAs, and pointed out that
even under the conceptual agreement the brand-name industry still
receives IPR protections, although they are weaker than what would have
otherwise been the case. Another source indicated the muted response
could reflect the fact that the pharmaceutical industry is pleased at
the efforts of the Bush administration to achieve its domestic
priorities, such as stopping the imports of Canadian drugs into the U.S.
in legislation considered by the Senate this month.
Under the conceptual agreement, Peru, Panama and Colombia will be asked
to make five changes to the IPR provisions contained in their respective
FTAs related to provisions on data exclusivity, patent linkage, and
patent extensions. In addition, these countries are obligated to include
a new provision providing for access to medicines in critical
circumstances, and also incorporate an existing side letter on public
health into the text of their FTAs.
The first change would help generic drug manufacturers enter foreign
markets more quickly by shortening the time of data exclusivity in
foreign markets in certain circumstances. Specifically, a foreign
country would only have to provide data exclusivity for drugs already
approved in the U.S. until the U.S. period of data exclusivity expires.
However, this concurrent data exclusivity arrangement only applies if a
trading partner issued a marketing approval within six months of a
receiving the application for marketing approval from a U.S. company.
That timeline can only be met if the trading partner relies on the U.S.
marketing approval and does not perform its own complete investigation.
This change helps address the fear that under recently negotiated FTAs
such as the Central America Free Trade Agreement, a pharmaceutical
company could benefit from five years of data exclusivity in the U.S.
and then seek five additional years of exclusivity in an FTA partner
country once the U.S. exclusivity period was almost expired.
Sources on all sides of the debate agreed that this change provides an
incentive for brand-name manufacturers to more quickly seek marketing
approval in the FTA partner countries after obtaining approval in the
U.S., as that would ensure that most of the five-year data exclusivity
granted in the U.S. is preserved in the FTA partner market.
However, these sources also agreed that the five-year data exclusivity
period in FTA partner countries would likely only be reduced by a matter
of months as a result of this change. This is one reason why health
advocacy sources argued this was only a minor improvement.
In addition, health advocacy sources questioned whether Peru, Panama and
Colombia rely on U.S. marketing approvals for their own approval
processes, as the data exclusivity provision applies only in these
scenarios. The U.S. trade official and brand name drug sources said
these countries generally do rely on U.S. approvals, but could not
Sources agreed that the six-month marketing approval window is a
realistic timeframe under which FTA partner countries could process
marketing approvals only if they relied on U.S. approvals.
The conceptual agreement would also eliminate the mandatory requirement
in FTAs that a FTA partner's health regulators cannot issue a marketing
approval for a generic drug until they certify there is no patent
infringement. While an FTA partner could still choose to have a
so-called patent linkage system, it is not required to do so.
If a country chooses not to have a linkage system, it must establish a
mechanism to alert patent holders of generic marketing approval requests
that may be patent-infringing, and must also establish procedures to
adjudicate any patent infringement dispute. This would be coupled with
the ability to seek preliminary injunctions or remedies that are just as
effective under the legal system to block marketing approval in a case
of a patent dispute, according to a USTR official.
The notification arrangement should give patent holders sufficient time
and opportunity to effectively enforce their rights, according to a
Democratic fact sheet describing the change. An example of that would be
posting a marketing approval application on a government website so a
patent holder could discover applications that might be infringing, it
Regardless of whether countries choose to adopt a linkage system, the
FTA partner country would also have to provide for an expeditious
procedure for generic drug companies to challenge the validity or
applicability of a patent, according to a U.S. trade official.
Health advocacy and generic drug sources were generally supportive of
this change, but brand name pharmaceutical sources said they are worried
about the consequences of shifting the burden for determining patent
infringement to court procedures in developing countries. One source
argued this would more easily allow patent-infringing generic drugs to
get on the market.
Health advocacy sources also supported the agreement for lifting the
requirement that countries must provide extensions for patents if the
original patent approval was delayed.
Specifically, the new agreement would make optional patent extensions
for pharmaceuticals if patents or marketing approvals were delayed. This
is coupled with an across-the-board requirement applying to all fields
of technology that countries will make their "best reasonable efforts"
to ensure expeditious patent approval, according to a USTR official.
This would mean FTA language would stipulate parties "may" compensate
patent holders for unreasonable delays in patent approvals, instead of
the language in current FTAs that says they "shall" do so, according to
a Democratic summary of the deal. Health advocacy sources were
unequivocally supportive of this change.
Also under the agreement, Colombia, Peru, Panama and Korea will be asked
to incorporate new language into their FTAs making it clear that they
would provide an exception to data exclusivity rules in those agreements
if necessary to protect public health. Specifically, it will be made
clear that these countries are allowed in certain circumstances to issue
a compulsory license that would supersede data exclusivity rules in the
FTA, according to a U.S. trade official.
Korea, Peru, Panama and Colombia would also be asked to incorporate an
existing side letter on public health into the text of their FTAs, which
state generally that the intellectual property chapter does not prevent
an FTA partner country from taking the necessary measures to protect