PHA-Exch> FTAs and their Impact on Access to Medicines HAI Asia-Pacific

[Claudio Schuftan]

*30th September 2008*

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*Overview:*

A regional consultation on *Free Trade Agreements and their Impact on Access
to Medicines* was held from 25th to 27th August 2008 in Bangkok, Thailand.
It was organised by Health Action International Asia-Pacific (HAIAP)[1] in
collaboration with the Health & Development Foundation, the Drug Study Group
(DSG), the Social Pharmacy Research Unit and the Health Consumer Protection
Program (HCP) of Chulalongkorn University, Thailand. The consultation was
organised to critically analyse the impact of Free Trade Agreements (FTAs)
on access to medicines, and to disseminate information about proliferating
FTAs, especially between developed and developing countries. It was
particularly timely in light of the fact that many countries are entering or
negotiating FTAs with the United States, despite concerns raised related to
the negative impact of FTAs with TRIPS-Plus Provisions2, and the contraction
of economic growth in developing countries through trade liberalisation.

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*Background:*

In an FTA between a developed country and a developing country or countries,
the latter are in a weaker bargaining position due to their weaker
negotiating strengths. It has been observed that many trade-related measures
benefiting developed nations, which have been rejected or subjected to
flexibilities at the World Trade Organisation (WTO), are now being imposed
upon developing countries through the plethora of FTAs signed, especially
with the US. The consultation organised by HAIAP focused on the effects of
FTAs relating to Intellectual Property Rights (IPR) and access to
medicines/healthcare services.

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*Latest Developments:*

Thailand – began negotiations on an FTA with the US in 2004, which included
TRIPS-Plus provisions such as, extension of the patent term3, data
exclusivity4 and limitations for compulsory licensing5. Due to advocacy and
campaigning involving the public, the negotiations failed. The new Thai
Government is on the verge of reopening negotiations with the US. The
country is also involved in the current EU-ASEAN negotiations. Thai Patent
Law is currently being re-written by the Ministry of Commerce.



India – negotiating an FTA with the EU6 at present, to be concluded by 2009
followed by a transition period of 7 years. This FTA includes a provision
for IP issues concerning data exclusivity although Indian law does not allow
it.  Recently the Indian government has taken initiatives to procure
medicines at competitive rates for the benefit of the public sector. The EU
is keen on negotiating the government procurement of medicines under the
EU-India FTA, whilst Indian negotiators continue to hold out on this
provision.


Australia - the Pharmaceutical Benefit Scheme (PBS) of Australia ensures
equity of access to necessary drugs for all Australians at an affordable
price. The recently concluded AUSFTA7 has raised public health and consumer
concern that it could undermine the public health interests that underpinned
PBS8. The negotiated FTA focuses entirely on the rights of manufacturers of
innovative pharmaceutical products. It does not mention the rights of
consumers for equitable access to affordable drugs. It ignored the crucial
role of generic manufacturers in protecting public health (by moderating
prices when patents have expired or during health emergencies). Provisions
in the FTA will facilitate the process where original patent owners seek to
evergreen (prolong) their exclusive rights over blockbuster pharmaceuticals,
whilst making spurious 'claims' over new formulations or ingredients.


Sri Lanka - was discussing a trade agreement with the Indian government in
order to liberalise trade services. Called the Comprehensive Economic
Partnerships Agreement (CEPA), healthcare was one of the important sectors
under consideration for liberalisation. Due to political pressures, CEPA
negotiations failed. Following this, the India-Sri Lanka Foundation was
created and a Memorandum of Understanding9 was signed. This document
contains areas which may jeopardise national health goals and the equitable
distribution of healthcare.**

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Malaysia - the Malaysia-US FTA10 is an example of a new breed of bilateral
agreements which are not merely about trade. It is much broader in scope and
encompasses a range of economic and social issues. The deal focuses on
increased US exports to Malaysia, opening up of services, increased
obligations on IPRs beyond the requirements of TRIPS. It also includes
provisions related to investment, government procurement and competition
policy. Malaysia is likely to suffer costs in terms of having to give up
policy space (freedom to be able to institute policies for national
development) and the use of policy instruments with ensuing socio-economic
and political implications.**

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*Concerns:*

Bargaining an FTA is a serious exercise as outcomes can have extreme impacts
on development policy.  While it can result in certain export gains, it may
also: a) increase imports with implications on trade balance and debt
position; b) facilitate import surges as tariffs decline or are eliminated,
adversely affecting local industries; c) reduce tariff revenue, affecting
government budget; and d) restrict and, in some cases, remove policy space
or options and instruments available to a country in order to institute
certain social, economic and development policies. Universal healthcare
coverage schemes existing in certain countries will be greatly threatened
due to patent life extensions, data exclusivity and limitations on
compulsory licensing as proposed by US FTAs.**

Data exclusivity is opposed, rightly so, by the generics industry because of
the serious impact it would have on the domestic industry. Generics make
positive contributions towards the community, as they are cheaper and do not
compromise on quality.* *Two Thai studies conducted on FTAs11 and their
impact on access to medicines revealed that one year of data exclusivity
(best case scenario) can increase the drug expenditures from 257 million to
2,636 million Bahts a year. In the worst case scenario, a 10-year
exclusivity extension increases expenditure from 21,456 million to 33,466
million Bahts a year. Similar concerns were raised in a study done by
PAHO12regarding FTAs signed with the US in the Americas. In Australia
too worries
are that an AUSFTA aimed at 'rewarding innovation' would ultimately result
in higher prices for patented drugs and less generic competition. These
fears have now been realised by the creation of a new category of PBS
medicines (F1), which is likely to maintain higher prices for some patented
medicines. This change appears to be a direct outcome of the AUSFTA.13

The ambiguity of negotiations as well as the haste to complete them
according to the timetable set by the US raises serious concerns that need
to be urgently addressed. **

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*Recommendations:*

The following civil society strategies will be useful to actively promote
access to medicines for all:

[image: *]       *CONTROL medicines prices to match cost of living *- this
includes promoting efficacious enforcement of Drug Price Control Law,
particularly on patented drugs and drugs with monopoly power. Governments
must be encouraged to use TRIPS flexibilities such as compulsory licensing
and parallel imports. **

[image: *]        *REINFORCE efficacy of domestic generic drug
manufactures*– enhancing the availability of essential drugs to solve
health problems and
production of import-substituted drugs are important steps towards the
capacity-building of domestic drug manufacturers. Governments must promote
the use of the Bolar provision (regulatory exception) that allows generic
manufacturers to develop the technology of patented drugs before patent
expiry. This will enable research and development (R&D) that accelerates the
registration of generic versions before the patent protection expires. In
this context, the establishment of clinical research centres should be
encouraged and the efficient implementation of the drug registration system
must be ensured. Developing regional cooperation amongst countries to expand
market size in order to create a profitable market for investment will
benefit domestic drug manufacture.

[image: *]        *STRATEGISE just and fair practices* - there should be no
TRIPS-Plus provisions within an FTA.

IPR protection must be excluded from FTAs. Developing patent databases to
facilitate quick, easy and comprehensive searching, particularly for
pharmaceutical patents, will be advantageous for developing countries. IP
Acts in countries must be amended to promote just and fair practices.

[image: *]       *ENDORSE rational use of drugs* - the National List of
Essential Medicines (NLEM)14 must be constantly updated to be comprehensive
enough to cover all diseases that are of public health importance. Public
and private facilities must be called upon to adopt the NLEM in a rigorous
manner. The use of International Non-proprietary Names or generic names at
all levels must be encouraged. Healthcare professionals should take the
leading role in promoting the proper and rational use of drugs, notably the
use of generic drugs.

[image: *]       *ADVOCATE people-orientated new drug R&D *- new medicines
R&D must be driven by public health needs. Feasibility studies must be
undertaken to find alternative approaches or methods apart from the patent
system to promote research on new drugs.

[image: *]       *DEVELOP experts network for access to healthcare and
medicines* - it is important to gain support from vast faculties of skilled
community such as governments, lawyers, academics, pharmacists, civil
society organisations (CSOs), international NGOs and the media.

[image: *]       *UTILISE public discussion to ensure direct democracy* -
public awareness, participation and transparency should be essential
elements of any national discussion on a FTA. Conducting referenda and
cost-benefit analyses consulting all stakeholders before further
negotiations, is crucial and will stimulate the mobilisation of informed
health consumers who make up the general public.

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*Conclusions:*

A patent is in actual fact, a limited right and *not* an absolute property.
It is a privilege that a state or global community grants to a patent-holder
to advance invention for human good. The right to protect citizens so
sustainable healthcare can be achieved is as lawful and as genuine a
validation. It is imperative and justifiable that human rights are taken
into account when negotiating a FTA, as it will undoubtedly affect the
different aspects of life and all sections of our society.



*References:*

[1]  Visit http://www.haiap.org <http://ww.haiap.org/> to read more about
HAIAP campaigns on Access to Essential Medicines (AEM), the Rational Use of
Medicines (RUM) and Democratisation of Medicines Policies (DMP).

2 To learn more about the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS) go to http://www.wto.org .

3  In most countries, patents on drugs last 20 years from date of filing, as
required by WTO.  The US is seeking to reimburse drug companies for any
irrational time a national drug authority or patent office spends on
examining or approving a patent application.

4  Data submitted by a patent holder to drug regulatory authorities to
obtain market approval for its safety, cannot be made use of as part of the
drug regulatory approval process for other applicants.  Thus a generic drug
producer, who has already been given permission under a compulsory license
(TRIPS flexibility) to sell or produce a generic version of a patented drug,
can make use of that data when seeking safety approval from
authorities.  However,
in bilateral FTAs the US seeks to establish or expand 'exclusive rights'
over test data provided by the originator companies to prevent the
registration of an equivalent generic version of the drug, thus preventing
compulsory licensing and curbing the supply of generic drugs.

5  During a public health emergency, authorities are allowed to issue a
compulsory license (within TRIPS flexibilities) which will allow generic
production of an expensive patented drug. US-FTAs seek to limit the
circumstances under which compulsory licenses on drugs are issued.

6  For more information on EU-India FTA visit http://ec.europa.eu/trade .

7  Learn more about AUSFTA at http://www.austrade.gov.au .

8 Harvey KJ, Faunce FA, Lokuge, Drahos P, 'Will the Australia-United States
Free Trade Agreement undermine the Pharmaceutical Benefits Scheme?' (MJA
2004); 181: 256-259.

9  Find more details on the Memorandum of Understanding at http://
www.indiasrilankafoundation.com .

10 The site http://www.ftamalaysia.org has more details on the Malaysia-US
FTA.

11Akaleephan, Chutima et al, 'Impact of Intellectual Property Rights
Prolongation on Pharmaceutical Products: Price and Accessibility' (Ministry
of Foreign Affairs 2005), pp 76-79;     Limpananont, Jiraporn et al, 'Impact
of Thai-US FTA on Expansion of Intellectual Property Rights and Mitigation
Measures: Dimensions of Access to Medicines and Health' (2008), unpublished
research report.

12 The Pan-American Health Organisation (PAHO) is the regional office of WHO
for the Americas ( http://www.paho.org ).

13Harvey KJ, Harris AH, Bulfone L, 'the National Health Amendment
(Pharmaceutical Benefits Scheme) Bill 2007: Reform or Fracture?' (MJA 2007);
187 (4): 206-207.

14The selection of essential medicines based on due regard to public health
relevance, quality, safety, efficacy and comparative cost-effectiveness.
NLEMs are the outcomes of the World Health Organisation's (WHO) Model
Essential Medicines List, a prototype for governments created in 1977 (
http://www.who.org ).

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