sean - 150x150The first Obama campaign for the presidency reached out to access to medicines campaigners to join the broad coalition he was building to gain the presidency. In response to their concerns, he declared that his presidency would “break the stranglehold that a few big drug and insurance companies have on these life-saving drugs,” and pledged support for “the rights of sovereign nations to access quality-assured, low-cost generic medication to meet their pressing public health needs under the WTO’s Declaration on Trade Related Aspects of Intellectual Property Rights (TRIPS).”  The Obama administration has now produced five Special 301 reports cataloging its policies on intellectual property and access to medicines. In the first three reports, as detailed below, the administration received low marks on its commitments from public health campaigners.

To further the administration’s campaign and policy pledges to promote access to medicines and global health, a broad coalition of public health advocates made a public health submission to the Special 301 process pressing the administration to adopt a limiting principle in its trade policy to “[f]orbid the use of threats and punitive actions . . . in response to a country’s use of TRIPS safeguards and flexibilities or refusal to adopt TRIPS-plus measures.”  In a submission to USTR in the 2010 Special 301 process, a coalition of global health groups pressed the Administration to put this principle into effect through an extension of President Clinton’s Executive Order 13155 to all developing countries. The submission argued that the policy of the United States should be:

(a) The United States shall not seek, through Special 301 listing decisions, negotiation or otherwise, the revocation or revision of any intellectual property or pharmaceutical price or competition regulation of any developing country that

(1) promotes access to affordable pharmaceuticals or medical technologies; and

(2) provides adequate and effective intellectual property protection consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) referred to in section 101(d)(15) of the Uruguay Round Agreements Act (19 U.S.C.  511(d)(15)), the Doha Declaration on the TRIPS Agreement and Public Health, the August 30 Decision system promoting access to generics for countries with inadequate local capacity to manufacture medicines, and the WHA Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property.

The Obama administration has not come close to following this pro-public health policy. The post-2009 reports continue to press developing and other countries to adopt access to medicines limiting policies in excess of those required by TRIPS, and in excess of the restrictions placed on the Bush Administration’s trade negotiations by the May 2007 New Trade Policy for America. (See previous PIJIP submissions at

a.   Incomplete Embrace of the Doha Declaration

The use of Special 301 to pressure countries to adopt TRIPS-plus intellectual property rules and other policies that limit access to affordable medicines has always stood in uneasy tension with the U.S. commitment to the Doha Declaration on TRIPS and Public Health.

The Bush Administration Special 301 reports rhetorically embraced the Doha Declaration while avoiding its affirming of the rights of countries to use TRIPS flexibilities “to the full” or the commitment that TRIPS “can and should” be interpreted and implemented to promote access to medicines for all public health problems. In the first Special 301 report after the Doha declaration, the U.S. limited its embrace of the Doha declaration to situations to “address a major health crisis, like the HIV/AIDS crisis in sub-Saharan Africa.”  By 2008, the Bush Administration’s stance had moderated somewhat, recognizing the application of the Doha Declaration to “serious public health problems,” rather than only to “crises.”

The Obama Administration’s statements on the Doha Declaration are slightly broader. The 2009 Report eliminates the qualification “serious” from the public health problems Doha was meant to address, explaining: the “United States respects a country’s right to protect public health, in particular, to promote access to medicines for all.”  For the first time, the Report explicitly mentioned support for use of compulsory licenses, stating: “the United States respects our trading partners’ rights to grant compulsory licenses in a manner consistent with the provisions of the TRIPS Agreement.”

The Administration still appears intent on avoiding the Doha Declaration’s affirming of the rights to use TRIPS flexibilities “to the full” and the instruction that TRIPS “can and should” be interpreted and implemented to promote public health and access to medicines. A strong endorsement of these principles would stand in stark contrast to the many TRIPS-plus pressures on medicines issues included in the reports.

b.   Data exclusivity

The most common objection in the Obama Administration Reports related to pharmaceutical policy is a complaint about “lack of protection [in a particular country] against unfair commercial use of undisclosed test and other data.”  The issue arises because of requirements that manufacturers must prove the safety, efficacy, and quality of medicines through clinical trials or other data. When a generic manufacturer subsequently attempts to obtain marketing approval for a therapeutically equivalent medicine, it is normally required to prove only bioequivalence to the already approved drug. In this way, the generic firm relies on the original safety and efficacy data. “Data exclusivity” rules delineate a time period in which a generic firm may not rely on the originator’s data, thus requiring that the generic product either remain off the market or repeat costly and ethically troublesome clinical trials.

The TRIPS agreement requires that certain pharmaceutical test data submitted to registration authorities be protected from “unfair commercial use.”  Article 39.3’s literal scope is relatively narrow.  Importantly, countries have great leeway in defining what use or reliance on test data may be “unfair” or “commercial.”  A World Health Organization paper advises that “[c]ountries are not obligated under Article 39.3 to confer exclusive rights on the originator of marketing approval data,”  and most traditional uses of registration data “to assess the efficacy and toxicity of a pharmaceutical or agrochemical product is not a commercial use subject to Article 39.3.”

The practice of providing a form of exclusivity for pharmaceutical test data originates with the Hatch Waxman Act in the U.S. The Act included a political compromise by providing an avenue for generic firms to register based on originator safety and efficacy data, but prohibiting such reliance in the first five years after the data is filed. In the EU, data exclusivity periods were later enacted that can run as long as eleven years.  These periods operate independently of any period of patent exclusivity, and in the EU have been interpreted to be impervious to compulsory licensing, even in a health emergency.

Most countries in the world do not follow exclusivity rules.  In such countries, the only marketing monopoly companies receive is through the patent system rather than the registration system.

USTR has adopted a legal interpretation of TRIPS that Article 39.3 requires data exclusivity similar to the U.S. or EU. This interpretation is in direct conflict with the negotiating history of the TRIPS agreement, during which the U.S. proposal to require that pharmaceutical test data be “reserved for the exclusive use of the registrant for a reasonable period”  was amended out of the final text.  Despite this rejection of a data exclusivity requirement by TRIPS negotiators, both PhRMA and the USTR have argued that Art. 39.3 of TRIPS requires countries to implement data exclusivity regimes.

The USTR’s use of Special 301 to push its interpretation of Article 39.3 on developing countries displays the inadequacy of Special 301 as a just and neutral adjudicative process and highlights the reason why it violates the WTO. Countries cannot have the right to list and sanction other countries for violating their own interpretation of the WTO accord. The proper route for pressing TRIPS complaints is through dispute resolution.

c.   Registration and Patent Linkage

There has been a subtle change in the Obama administration on the issue of “linkage.”

“Linkage” refers to requirements that FDA-like marketing authorities not register generic copies of medicines for which there is a patent claimed by a supplier. This is an added enforcement process favored by patent holders. It permits them to use patent claims to block marketing of products without the need to sue the alleged infringer in courts to enforce the patent rights. The rule in the US has led to “ever-greening” – where marketing monopolies are extended with new (often baseless) applications for patents that may be used to prohibit marketing approval of generics unless and until the generic firm successfully challenges the patent in court.  Evergreening problems are likely to be more pronounced in developing countries that lack the rigorous patent examination process and other regulatory resources and expertise of the U.S.  TRIPS does not require countries to implement linkage rules.

The 2007 New Trade Policy for America called on the USTR to “eliminate [the] requirement that a drug regulatory agency withhold approval of a generic until it can certify that no patent will be violated if the generic were marketed,” calling instead for the U.S. to work to “strengthen and expedite judicial processes in countries to ensure patent rights of innovative companies are respected.” Nevertheless, USTR continued to demand linkage rules through Special 301.

In 2009, a lack of linkage was the second most cited medicines-related complaint in Special 301 (after data exclusivity). The complaint was normally framed as an alleged failure by countries to “implement an effective system to prevent the issuance of marketing approvals for unauthorized copies of patented pharmaceutical products.”

In 2010, the number of countries cited for similar problems was reduced to eight – Chile, Pakistan, Columbia, Dominican Republic, Ecuador, Egypt, Malaysia and Mexico. Of these, Chile, Columbia and the Dominican Republic are signatories to free trade agreements with the US that already require linkage. The other countries have no outside obligations to enforce linkage rules.

Perhaps more importantly, the language used to define the complaint shifted. Instead of requesting a “system to prevent the issuance of marketing approvals,” as in 2009, the 2010 report asks for “an effective system to address patent issues expeditiously in connection with applications to market pharmaceutical products.”  To be consistent with the 2007 New Trade Policy, such a system could be an effective court adjudication process for the enforcement of patent rights.

d.   Restrictions on Compulsory Licensing

Compulsory licensing is perhaps the most important flexibility in the TRIPS agreement. Despite the express mention of respect for the rights of countries to issue compulsory licenses in the Report, the Obama Administration is continuing to use Special 301 to pressure countries to reduce the use of this important tool to promote public health.

A compulsory license is a government-issued license to one or more competitors permitting entry in the market upon payment of adequate royalties to the patent holder. The Doha Declaration affirms the broad right of all countries to use compulsory licenses to promote access to medicines, stating that each country “has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.”

In 2007, Thailand was elevated to the Priority Watch List (PWL) in large part for its announcement of compulsory licenses for excessively priced medicines needed to treat AIDS and heart disease. The official U.S. complaint was not about the license per se, but rather an alleged failure of Thai government to “engage openly and transparently with the companies that developed the drugs that are at issue.”  In 2009, Thailand was kept on the PWL, noting concerns about “the uncertainty created by the previous Government’s policies concerning the issuance of compulsory licenses on patented pharmaceutical products.”  Thailand remained on the 2010 PWL as well. Although use of the words “compulsory license” was eliminated from the entry, the issue was clearly indicated through the call for Thailand “to engage in a meaningful and transparent manner with all relevant stakeholders, including owners of intellectual property rights, as it considers ways to address Thailand’s public health challenges.”

Other countries were also targeted for pressure. China was singled out for complaints about “the possible use of compulsory licensing for essential patents included in national standards,” and for concerns about “the scope of and procedures related to compulsory licensing.”  And reports noted that “the United States will continue to monitor recent developments concerning compulsory licensing of pharmaceutical and agricultural chemical products in Ecuador.”

e.   Patent Extensions

Under TRIPS, WTO members are required to grant patents for a period of 20 years from the time the patent is filed. This period takes into account the known delays in regulatory processes. But the U.S. has long used Special 301 to pressure countries to extend patent terms for delays in granting patents or marketing approvals for medicines.

In response to the public health concerns with such extensions,  the 2007 New Trade Policy demanded that the U.S. “[e]liminate [the] requirement that an FTA country extend the term of a patent on a pharmaceutical product for delays in the patent and regulatory approval process,” and instead “ensure expeditious patent and regulatory approval.”  In 2009 and 2010, no developing country was targeted for a failure to grant patent extensions to compensate for regulatory delays. But Israel was cited for lack of patent extensions in both reports.

f.    Patentability criteria

One of the key flexibilities in the TRIPS agreement is the ability of a country to decide for itself what inventions qualify for patents for being sufficiently “new,” involving an “inventive step” and being “capable of industrial application.”  In pharmaceuticals, the definition of these terms can determine whether a country grants patents for new uses or formulations of existing products that are already known. The grant of such patents is controversial between countries and among experts and there are no provisions in TRIPS restricting country flexibility in making these basic policy decisions.

Past reports have singled out Brazil, India and Philippines for laws that ban patents on polymorphs (i.e. new forms) and new uses of known inventions.  These complaints press countries to grant patents on a larger range of inventions than TRIPS requires and thereby would limit access to affordable medicines in each country. In the case of India, the claim is particularly troublesome because that country is the largest supplier of generic medicines in the world. The more patents India grants, the less possibility there will be to find a source of generic supply for other countries.

g.    Restrictions on evidence-based reimbursement programs

Beginning in 2009, the USTR included sections on “Supporting Pharmaceutical [and Medical Device] Innovation” that promotes only one narrow pro-innovation policy: convincing other countries to abandon regulatory and reimbursement programs that restrain the high cost of patented prescription drugs. The Reports single out all OECD members and have specifically mentioned Finland, France, Italy, Japan, Korea, Canada, Germany, New Zealand, Taiwan, and Poland for administering “unreasonable . . . reference pricing or other potentially unfair reimbursement policies.”

As in other areas, the use of Special 301 to target reimbursement programs appears linked to a broader international regulatory agenda. Two Free Trade Agreements negotiated under the Bush Administration – with Australia and Korea – included chapters imposing restrictions on pharmaceutical reimbursement programs. During and after the negotiation of these agreements, U.S. state officials repeatedly warned USTR and Congress that the norms adopted in these agreements, if applied to U.S. state governments, would cripple Medicaid programs.  This is because Medicaid programs rely on preferred drug lists to exact lower prices from pharmaceutical companies, which operate very similarly to the formularies and other programs targeted by the US in other countries.

TRIPS does not restrict how countries regulate the market power of companies that is created by patents. Patents on medicines create particularly strong and socially harmful market power because people will pay anything they can for life-savings drugs, there often are literally no substitutes if a truly innovative medicine is under patent, and the burdens of lack of access fall almost exclusively on the poorest people (or, in the U.S., the uninsured).

U.S. state officials appeared at the 2010 Special 301 hearing to “oppose the recent and disturbing use of the Special 301 Report to discipline effective and non-discriminatory pharmaceutical pricing policies.”  Referring to Ambassador Kirk’s expressed “support” for broadening a discussion of a proposal by Pfizer for a new international trade agreement to “discipline” pharmaceutical reimbursement programs in the U.S. and abroad,  the elected state officials explained that U.S. state reimbursement programs “follow the same basic policies and principles of foreign countries that USTR seeks to discipline.” The officials warned: “Reciprocal enforcement of USTR standards to state programs would obliterate the effectiveness of Medicaid pricing programs and threaten the administration’s policy goal of reducing the cost of healthcare in this country.”

The concerns of state officials protesting the use of 301 to criticize reimbursement policies had minimal effect. Future reports continued to target “unfair” reimbursement policies without describing what is unfair about them or how these programs differ from what U.S. states now do to reduce drug prices.