Trade negotiators are meeting in Lima, Peru this week for the seventeenth round of talks on the proposed Trans Pacific Partnership (TPP). The negotiations are reaching the final stages as an October deadline approaches, and the most controversial topics have been pushed to the end.
The intersection of intellectual property and access to medicines is one such controversial area. Advocates for access to medicines have warned that many intellectual property provisions sought by the United States will delay the introduction of generic medicines, thereby keeping the costs of medicines high. These provisions include extensions of patent terms, extension of patentable subject matter, and data exclusivity. This blog 1) gives a quick overview of data exclusivity, 2) points to data showing how it raised drug prices in three countries where it was implemented to meet trade obligations, 3) gives a note about the questionable link between exclusivity and investment, and 4) explores alternatives to data exclusivity and limitations on data exclusivity from previous trade agreements.
What is data exclusivity?
Data exclusivity is a form of intellectual property (IP) protection that protects the data submitted by pharmaceutical and chemical firms to regulatory authorities for marketing approval. When a branded firm applies for marketing approval from a regulator, it must present clinical test data to regulators showing that the drug is safe and effective. The process of obtaining the clinical trial data is expensive, risky, and time consuming. Studies of the cost of drug development find that the majority of the cost of bringing a new drug to market is conducting the clinical trials.
If generic firms needed to reproduce the same data, the high expenses would require them to charge prices nearly as high as the innovator. Additionally, it would violate international ethical standards that prohibit doctors from conducting experiments on humans in situations where the results are already known. Therefore, most nations’ regulatory authorities grant generic firms marketing approval based on bioequivalence data, which shows that their products are chemically the same, and are absorbed into the body the same way, as the originators’ products. The generic firms rely on the clinical trials conducted by the originator firms for proof their products’ safety and efficacy.
Data exclusivity establishes a period of time during which generic firms cannot win marketing approval based on the clinical data submitted by brand name producers. It can keep generics off the market even in cases where there is no patent in place, or when a compulsory license has been issued. (For a more complete explanation of data exclusivity, see: “Undisclosed Information.” in ICTSD/UNCTAD. Resource Book on TRIPS and Development: An authoritative and practical guide to the TRIPS Agreement Cambridge University Press. (2005) Chapter 28, 520-538. )
Establishing a global norm of data exclusivity has been a long term goal of the pharmaceutical industry. During the Uruguay Round trade negotiations that led to the creation of the WTO, the industry position outlined in the “Statement of Views of the European, Japanese and United States Business Communities” included requirements for data exclusivity, as did the initial negotiating text proposed by the U.S. government. The Brussels Draft of the WTO’s Agreement on Trade Related Aspects of Intellectual Property (TRIPS) text included bracketed text mandating that “the data may not be relied upon for the approval of competing products for a reasonable time, generally no less than five years.” The provision was opposed by developing countries, and ultimately negotiated out of the final TRIPS agreement. (The aforementioned book chapter “Undisclosed Information” describes in more detail the rejection of data exclusivity in the TRIPS negotiations.)
Data exclusivity’s effect on prices
Since data exclusivity prevents the entrance of generic competitors to branded products, it prolongs the branded companies’ ability to charge monopoly prices for their medicines. Various have found evidence that data exclusivity led to higher prices in countries where it was introduced.
- Oxfam examined the effect of the US-Jordan FTA on the Jordanian pharmaceutical market during the five year period following the implementation of its trade agreement with the U.S. It found that generic competition was delayed for 79% of new medicines, raising costs for individual consumers and threatening the sustainability public health programs.
- Shaffer and Brenner examined the effect of Central American Free Trade Agreement on the Guatemalan pharmaceutical market. They surveyed drugs for the most common and important health conditions in Guatemala and found that new data exclusivity laws had blocked many generic products from winning regulatory approval. In some cases, generic firms had existing products pulled off the market when data exclusivity was implemented.
- Ifarma and Mision Salud examined the effect of data exclusivity on drug prices in Colombia over a ten year period, and found that Colombian citizens spent USD 412 million more on medicines after the its introduction than they would have in its absence. The figure was calculated from the total spending on protected new Chemical entities during the period, compared with “theoretical” spending at competitive prices. There was estimated a “differential price” by observing price reductions once the data exclusivity protection period expired.
Is there a link between data exclusivity and investment?
Advocates for intellectual property standards that exceed those required by the TRIPS Agreement (“TRIPS-Plus”) argue that greater IPR protection will lead to more investment in national economies by innovative industries. However studies correlating strong IPR protection with higher levels of investment tend to rely on indexes of IPR strength that do not consider data exclusivity. These indexes give high marks to countries that abide by TRIPS obligations, rather than countries that have implemented TRIPS-Plus forms of protection.
A large body of academic literature contradicts the assertion that TRIPS-Plus IPR protection is more beneficial than TRIPS-level protection. Many authors have found no conclusive link between IPRs and investment in developing countries. The chief economist of the World Intellectual Property Organization has written that “the available empirical evidence does not conclusively establish the relationship between IPRs and foreign direct investment decisions.” The UK’s Commission on Intellectual Property Rights concluded that “the evidence that foreign investment is positively associated with IP protection in most developing countries is lacking.” Walter Park surveyed countries at various levels of development, and found that stronger IPR in developing countries have an “insignificant effect on R&D and a negative effect on licensing.”
A forthcoming paper of mine looks at levels of investment in countries with and without data exclusivity. It suggest there is no relationship between whether or not a country has data exclusivity, and the amount of investment in the country by the pharmaceutical industry.
Data protection options for the TPP
In September 2011, the U.S. proposed data exclusivity provisions in the TPP that is similar to the provisions found in other American FTAs. The proposal would require five years of exclusivity for new chemical entities. It would require three years for any new pharmaceutical product that “includes a chemical entity that has been previously approved for marketing in another pharmaceutical product.” Unlike some data protection provisions in other trade agreements, there are no limits to this period of exclusivity.
However, there are other ways to approach the protection of test data.
Below I list some examples of text that have appeared in previous trade agreements or have been proposed as models for trade agreements by others. Each example shows a way to protect test data other than granting absolute exclusivity over the use of clinical test data to pharmaceutical companies.
1. Cost-sharing approach or compensatory liability
A cost-sharing approach gives generic competitors an automatic right to use originators’ data upon payment of fair compensation to the originators. The amount that generic competitors pay can be based on the actual cost of generating the data, the generic firm’s sales, and the size of the global market in which they are selling their product. Although cost-sharing approach is a TRIPS-plus approach, it is a more balanced alternative to data exclusivity options. Examples from other trade agreements include:
EFTA-Republic of Korea FTA, Annex XIII (Art. 3):
The Parties shall prevent applicants for marketing approval for pharmaceutical and agricultural chemical products from relying on undisclosed test or other undisclosed data, the origination of which involves a considerable effort, submitted by the first applicant to the competent authority for marketing approval for pharmaceutical and agricultural chemical products, utilizing new chemical entities, for an adequate number of years from the date of approval, except where approval is sought for original products. Any party may instead allow in their national legislation applicants to rely on such data if the first applicant is adequately compensated.” [Emphasis added]
EFTA-Lebanon FTA, Annex V (Art. 4):
The Parties shall prevent applicants for marketing approval for pharmaceuticals and agricultural chemical products from relying on or referring to undisclosed test or other undisclosed data submitted by prior applicants to the competent approval authorities of the respective Parties for a period, from the date of approval, of at least six years, except where approval is sought for original products, or unless the first applicant is adequately compensated.” [Emphasis added]
For a more detailed explanation, including on the determination of royalties, see Judit Rius Sanjuan, James Love, and Robert Weissman. “A cost sharing model to protect investments in pharmaceutical test data.” CPTech Policy Brief No. 1. (2006) http://www.cptech.org/publications/policybrief-no1-cost-sharing.pdf
2. Compulsory licensing system for registration data
An FTA provision could require that automatic compulsory licensing systems for registration data be put in place in certain circumstances. These circumstances could be broad (for instance, when price is acting as a barrier to access) or more narrow, (for instance, when a medicine is not covered by a patent or where a compulsory license has been issued for the patents protecting the medicine). Under such a system, countries may authorize generic entrants to rely on the data upon payment of a royalty, set by statute or by the government official issuing the license. It may For generic entrants that receive a compulsory license for the test data, the practical result would be similar to the cost sharing approach. But there are two differences: 1) automatic compulsory licenses could satisfy rightholder demands that data exclusivity be included in the agreement, and 2) the requirement that generic competitors obtain the licenses creates a procedural barrier to the waiving of exclusivity. The second point makes it a less favorable outcome for consumers of medicine than the more straightforward cost sharing approach. Nonetheless, several countries have adopted this approach, including Costa Rica, Brazil, and Columbia.
Model text for compulsory licensing of registration data proposed by Robert Weissman
a) Where a compulsory license has been issued on a pharmaceutical-related patent, the registration data for the pharmaceutical product incorporating that patent shall automatically be compulsory licensed as well. Third parties, including government agencies or contractors, using or relying on such information, or requesting government agencies to grant marketing approval with reference to the compulsory licensed data, shall not be required to pay compensation to data submitters for use of the data.
b) Upon application or its own initiative, and for the purpose of advancing public health objectives, the health ministry shall issue to the government or third parties non-exclusive licenses to use registration data. The health ministry shall determine adequate compensation in such circumstances, not to exceed a 6% royalty.
Circumstances in which the ministry shall issue such licenses include:
i. instances where the price of registered medicines is a barrier to people who need them obtaining such medicines, and there is evidence that competition will lower price; and
ii. instances where a third party has unsuccessfully endeavored during a reasonable period of time (e.g., 90 days) to obtain the data submitter’s consent for the use of the data under reasonable terms and conditions.
More information on this approach is found at United Nations, Using Intellectual Property Rights to Stimulate Pharmaceutical Production in Developing Countries: A Reference Guide, 177 (2011). http://bit.ly/MCrNhN; see also Robert Weissman, “Public Health-friendly Options for Protecting Pharmaceutical Registration Data,” International Journal of IP Management (2006). http://bit.ly/LolIHR
3. Limiting the term of exclusivity to coincide with patent term
An extra provision could be added to data exclusivity language to prevent exclusivity from blocking generic competition beyond the term of patent protection. The European Union’s requirement for a six year term of data exclusivity is found in Directive 2001/83/EC, and it originally included a provision allowing countries to limit this term of exclusivity to that of the underlying patent. Greece, Spain and Portugal opted to include this limitation to data exclusivity within their domestic law. (The directive was amended in 2004, and this particular provision was removed.) Though data exclusivity would still create an extra barrier to generic competition beyond the patent barrier, this would minimize its impact.
Directive 2001/83/EC, Art. 10.1(a)(iii)
… Member States are at liberty not to apply the six-year period beyond the date of expiry of a patent protecting the original medicinal product.
4. Public Interest Exception for Data Exclusivity with a Public Interest Exception
Article 231 of the recently passed trade agreement between Peru and the EU requires a five year period of data exclusivity for pharmaceutical products containing new chemical entities. This requirement for data exclusivity, however, is balanced by Article 231(4)(a) grants a an public interest exception.
EU-Peru Trade Agreement, Art. 231(4)(a)
Parties may regulate exceptions for reasons of public interest, situations of national emergency or extreme urgency, when it is necessary to allow access to those data to third parties; [emphasis added]
The full text of the “Trade Agreement between the European Union and Its Member States, of the One Part, and Colombia and Peru, of the Other Part” is available at http://trade.ec.europa.eu/doclib/docs/2011/march/tradoc_147704.pdf
5. Misappropriation Approach
Other ideas could come from writings about the best way for developing countries to implement the TRIPS Agreement. For instance, Carlos Correa and others have argued for a misappropriation approach to the protection of test data – where a country would prevent “the use of information acquired through dishonest practices (e.g. espionage, breach of confidence), as background for an independent submission for marketing approval.” More on this approach to the protection of test data can by found in Correa’s 2002 white paper for WHO, available at http://www.who.int/medicines/areas/policy/protection_of_data.pdf