THE TTALK QUOTES 

On Global Trade & Investment

 

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No. 76 of 2015

TUESDAY, NOVEMBER 10, 2015

Filed from Portland, Oregon

Click here for last Friday's TPP quote from President Obama.
TPP - DONE OR NOT DONE

"At the end of the day, USTR may need to go back to the negotiating table and try again.  ... I understand that renegotiating may be difficult, but ... the alternative to renegotiating may well be no TPP at all."

Orrin Hatch
November 6, 2015

CONTEXT
At this point, virtually every self-respecting publication and/or organization with an interest in the Trans-Pacific Partnership Agreement, TPP, has taken note of the speech Senator Orrin Hatch (R-UT) gave last Friday at the U.S. Chamber of Commerce.  We know we are playing catch-up here, but that speech was exceptionally important and needs to be included in these pages.  
 
The senator is the Chairman of the Senate Finance Committee and a strong proponent of open markets.  He was also one of the driving forces behind the TPA legislation that will govern Congress's consideration of TPP.  In short, his warning is not one that anyone concerned about the future of TPP can ignore. 

To be sure, he did not rule out the possibility that he might support the current TPP.  He did not say that there must be a renegotiation.  Speaking just a day after the release of the text, Senator Hatch said:

"I want to take the time to review it, talk with my colleagues, and consult with all of you and other stakeholders but, as it stands right now,
I'm afraid that the current draft of the TPP agreement may fall short." 

Still, his message, his warning, was clear enough: renegotiation may be necessary.

The Senator's principal concern has to do with the intellectual property provisions of the agreement.  As he explained to the professionals at the Chamber's Global IP Summit, "over 200,000 Utahns - nearly one-fifth of the state's private sector workforce - are employed by IP-intensive companies." Within the broad topic of intellectual property rights, his special focus was, as it has been for some time, on the provisions dealing with the period of data exclusivity provided for biologics.
Senator Hatch himself defined the latter.  He said:

"The term BIOLOGICS refers to medical and pharmaceutical products derived from living organisms, rather than a combination of chemicals. 

"Biologics are on the cutting edge of medical innovation, especially in the treatment of diseases like cancer and arthritis, which, only a few decades ago, were considered untreatable.  Because these treatments can be much more selective in attacking a disease within the body, they have the potential to treat or cure many diseases without the terrible side effects that often accompany other medicines, meaning that they can not only alleviate patients' suffering, but also reduce long-term healthcare costs."

As for data exclusivity, the start of the Wikipedia entry seems about right.  It says: 
 
"Test data exclusivity refers to protection of clinical test data required to be submitted to a regulatory agency to prove safety and efficacy of a new drug, and prevention of generic drug manufacturers from relying on this data in their own applications. Pharmaceutical companies argue that since test data is so expensive to produce, it is an unfair advantage to let other companies rely on that data without cost."

Because of the very high costs associated with developing biologics, U.S. law provides a 12 year period of data exclusivity for the companies that do that work.  And even that number needs to be put in perspective.  "On average," Senator Hatch said, "these products are on the market for nearly 15 years before their developers see a profit from their investment."

Against that background and from that perspective, the agreement is indeed deficient.  "[It] appears to include a standard for only five years of data exclusivity for biologics, apparently with the possibility of an additional three years based on factors that are, as of right now, unclear at best," Senator Hatch said. 

And of course the U.S. industry is not happy.  John Castellani, the president and CEO of the Pharmaceutical Research and Manufacturers of America, PhRMA, had a somber reaction to the announcement last month that the agreement had been concluded.  "We are disappointed," he said, "that the Ministers failed to secure 12 years of data protection for biologic medicines, which represent the next wave of innovation in our industry."

And why was the U.S. unable to win 12 years of protection for the test data for biologics?  Senator Hatch expressed some doubt about the Obama administration's commitment to the 12 years.  He was more definite in discussing the reluctance of U.S. trading partners to go along.  According to reports on the final days of the TPP negotiations, he said:

"Some of our trading partners refused to accept additional data protections for biologics because doing so would lead to increased spending in their centralized health care systems.

"So in essence it appears this agreement would once again require the American public to pay higher costs at home in order to subsidize socialized medicines in other countries."

****

We need to add just a little more background before turning to our own brief comments.  To the extent that one country (fairly or un-) has been singled out in this discussion, it is Australia.  There are pharmaceutical firms in Australia, but, in TPP, the Australian government's main concern seems to have been keeping down costs for Australia's Pharmaceutical Benefits Scheme, which covers prescription medicines.  Australia's Trade Minister, Andrew Robb, has been outspoken on this point.  He told the Australian Associated press that Australia did not move "one iota" on this issue.  Rather, he said, "We have absolutely no intention of increasing the cost of medicines to the Australian public by seeing any increase in the [5-year] period of data protection."

As for renegotiating the TPP agreement, America's TPP trading partners are saying "no" to that, and U.S. Trade Representative Michael Froman said "no" to any renegotiating even before the text was out and before Senator Hatch had given his now famous speech.  In the course of an October 15 Council on Foreign Relations conference call, Ambassador Froman explained, "This is isn't one of those agreements where you can reopen an issue or renegotiate a provision."


COMMENT
TPP is on everyone's lips these days.  That is understandable and as it should be.  It is a very important agreement.  What all of this activity masks, however, is the fact that we are at the start of a very long process. 

As for the issues at hand, we find ourselves largely in agreement with Senator Hatch's assessment of the situation, largely but not completely.  We understand his skepticism with respect to just how hard the Administration pushed to get the other eleven TPP countries to agree to 12 years of data exclusivity for biologics.  Even so, it is not clear to us that any argument would have carried the day.  The domestic sensitivity on this issue in Australia and elsewhere may well have been an insurmountable obstacle.  It seems to us quite possible that, on this issue, they simply could not come around to the American point of view.

Stepping back, TPP had to have been a tough deal to negotiate, however you count the pages.  From rice to autos, the "normal" market access issues were daunting.  The behind-the-border issues like data exclusivity even more so.

But there is another reason why renegotiating may not be in the cards.  It seems doubtful to us that the U.S. could produce a discreet list of demands for justifying the re-opening of the negotiations.  We may see the proof of that theory in the coming days as Congress generates-as it almost certainly will-a laundry list of Congressional concerns over TPP.

Finally, there is the painful irony of how national governments approach new medicines.  Of course they are a godsend if you need them and they really help.  But if they are for someone else and you're paying for them, they can be a bit of a curse, especially if your companies aren't the ones that will profit from them.

At the risk of injecting a cruel thought where no cruelty is intended, this entire issue raises questions about government funded healthcare.  Dylan Thomas's famous poem Do Not Go Gentle Into that Good Night came to mind as we were writing this.  When the patient himself is the customer, the poem rings true, and we say with the poet, "Rage, rage against the dying of the light."

But when government (or anyone else) is the paying customer and the question comes up, "Should we turn out the lights?,"  the obvious response is, "Why wouldn't you?"   In short, as a practical matter, it is not all clear that government agencies welcome new drugs with the same enthusiasm as desperate patients or that they are willing to sacrifice to keep the fruits of pharmaceutical research flowing.
SOURCES, LINKS, & NOTES
Senator Hatch at the U.S. Chamber of Commerce is a link to the text of the Senator's November 6 speech at the Chamber's Global IP Summit, as it appears on the website of the Senate Finance Committee.

Note: How Big a Deal?  In an earlier entry, we referred to the 1,500 pages of the Trans-Pacific Partnership Agreement.  That was an understatement.  We didn't count all of the pages. Jay Chittooran of Third Way did count them all.  Here is what he got: "Including all side agreements and appendices (with tariff schedules, TPP comes in at 6,347 pages. "

Data Exclusivity is a link to the Wikipedia entry on this topic, part of which is quoted above.

PhRMA reacts is a link to the PhRMA press release last month with the organization's response to the news that the TPP agreement was done.

Andrew Robb on biologics is a link to a press report with Minister's statements on Australia's firm stance on this issue.

 

 

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