Source: IP Watch
30 July 2015
As the Trans-Pacific Partnership (TPP) negotiations approach their endgame, biologics exclusivity is still considered “one of the most difficult outstanding issues in the negotiation.” Pharmaceutical companies seek longer data and marketing exclusivities to further delay market entry of cost-saving biosimilar drugs. Data exclusivity prevents follow-on pharmaceutical developers from relying on originators’ test data submitted for marketing approval while seeking such approval for its own product. The World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) requires some protection against unfair competition for this sort of data, but it does not require countries to adopt rules conveying exclusive rights over it in the same way as it does regarding patents. Currently, the US provides 12 years of exclusivity for new biological products under the Biologics Price Competition and Innovation Act (BPCIA). The provision providing 12 years exclusivity was buried inside the 20,000-page healthcare law, The Patient Protection and Affordable Care Act. A robust debate over what would be an appropriate exclusivity period, if any, was overshadowed by other controversial aspects of the bill commonly referred to as Obamacare.
There is much confusion surrounding the statutory interpretation of the BPCIA. Many scholarly articles and blog posts as well as industry-funded sources state that the United States allows for 12 years of data exclusivity. However, this is not the case. The law actually provides only four years of data exclusivity for biologic drugs, while the remaining eight years function as market exclusivity. This distinction is important – if biologics truly had 12 years of data exclusivity in the US, the FDA would not be able to consider a biosimilar application for 12 years, which would, in turn, provide the innovator with up to 13-14 years of market monopoly before a biosimilar could be approved and enter the market. Rather, after four years a developer may file an application under the BPCIA for a biosimilar, but such a biosimilar application would not be eligible for approval until the 12-year period has elapsed.
Issues surrounding the exclusivity afforded to biologics in the US are still in need of robust debate and there are members in Congress that are against this extensive period of protection. The Federal Trade Commission said in a 2009 study that 12 years is “unnecessary” to convince companies to invest in biologics. Every administration budget proposal since then has called for the window of exclusivity to be reduced from 12 years to seven years to foster greater biosimilar competition and reduce the cost burden on patients and payers associated with these drugs. In addition to reducing the period of data and marketing exclusivity, the President’s 2016 budget proposes “prohibiting additional periods of exclusivity for brand biologics due to minor changes in product formulations.” The Administration projects that these two provisions would save the federal government $16 billion over the next 10 years. Savings accrued through such policies would likely be even larger in subsequent years.
Meanwhile, separate from these domestic discussions, TPP trade ministers will be on a Hawaiian island this week hashing out whether the agreement should contain a 12-, eight- or five-year exclusivity period (or no special period at all). In late 2013, the United States Trade Representative (USTR) proposed 12 years of exclusivity (which functions as marketing exclusivity rather than data exclusivity) for biologics in the TPP, even though this contradicts and is mutually exclusive with the Administration’s domestic policy proposals.
The pharmaceutical industry lobby insists that it needs 12 years of exclusivity in the TPP to recover research and development costs associated with biologic drug discovery. But this perspective is not shared by many beyond the industry and its backers. The US is the only country among those negotiating the TPP with 12 years of exclusivity. Japan, which is often the US’s partner in submitting harmful pharmaceutical proposals, provides eight years market exclusivity for pharmaceutical products without distinguishing between small molecule and biologics drugs. Other members of the TPP such as Australia, New Zealand, Singapore and Chile provide five years exclusivity for biologics; the same as small molecules. It is unlikely these countries will submit to US demands to increase their exclusivity periods to 12 years through the TPP.
The current negotiating table debate centers on a five- or eight-year period of exclusivity, not 12. Eight years of exclusivity is not a compromise position; it would be a major change to 9 of the 12 countries’ laws, and all of those countries oppose such a change
A country’s market size is the most significant factor in pharmaceutical industry decisions regarding how quickly to seek registration of their products in a given market. Yet some pharmaceutical industry lobbyists are arguing that longer exclusivity periods would reduce their drug submission lag, supposedly incentivizing them to bring products to market sooner.. We debunk this claim in a new report, based on surveys of the industry itself.
Eight years of exclusivity would keep biologic medicines out of the hands of many who need them. Prices frequently exceed $100,000. In the United States, for patients with insurance, biologic medications are often classified as “specialty” medications, and often the consumer is forced to pay upwards of 20-30 percent of the cost of the medication. According to AARP, which has taken a public stance against long terms of exclusivity, shortening the period of exclusivity in the US would be “a critical element of any comprehensive effort to contain healthcare costs,” since “biosimilars [are priced] 40 percent lower than their brand-name counterparts. Locking eight years of exclusivity (even it is shorter than 12 years) into the TPP would still prevent adequate reforms in the US, and force other TPP countries with less resources to adopt a policy that a rich country like the US can scarcely afford. In other TPP countries, like Vietnam, where pharmaceutical procurement accounts for half of overall health spending, this could spell disaster for patients and government payers.
The cost of extended exclusivity is not only monetary. Extended monopolies can threaten innovation, which relies on prior knowledge, with progress measured by the next innovation, not the last. Therefore, policies that lengthen the time of exclusivity may actually reduce the pace of innovation because it stifles discovery of new or improved biologic treatments.Kenneth Arrow, a Nobel laureate in economics, has argued that “the incentive to invent is less under monopolistic than under competitive conditions” reaching the conclusion that monopolists don’t innovate.
As TPP negotiators and trade ministers gather in Maui to attempt to resolve these contentious issues and others, they should be mindful of the devastating effects that excessive periods of exclusivity can have on patient access and future innovation. TPP negotiators already have achieved success in pushing back against some of the harmful pharmaceutical rules being advanced by USTR at the behest of the brand name pharmaceutical industry. An eight year exclusivity period, though shorter than USTR’s initial outlandish ask, would still be a damaging outcome from a public health perspective. Eight years is three to eight more years of exclusivity than most TPP countries currently provide, and would thus delay access to affordable treatments. Enshrining it in the TPP would be a major victory for the brand-name industry, but damaging to the health of those living in the region as well as the future of innovation. Negotiators and trade ministers should stand firm against this industry demand.
 Public Citizen’s Global Access to Medicines Program
 Randi Hernandez, Patent Exclusivity for Biologics: Seven or Twelve Years?, BioPharm International (Jan. 30, 2015), available at http://www.biopharminternational.com/patent-exclusivity-biologics-seven-or-twelve-years?rel=canonical.
 See 42 U.S.C. §262, Biologics Price Competition and Innovation Act of 2009, available athttp://www.fda.gov/downloads/drugs/guidancecomplianceregulatoryinformation/ucm216146.pdf.
 Id. at §262(k)
 See Rep. Henry Waxman Letter to Ambassador Froman Opposing 12 Years Exclusivity for Biologics (Dec. 6, 2013), available at http://uschinatradewar.com/files/2014/01/Waxman-TPP-Drug-IP-Letter.pdf; see also, Letter from 16 Members of Congress to USTR Expressing Concern Over TPP Provisions’ Effect on Access to Medicines (March 14, 2014), available athttp://www.citizen.org/documents/congressoinal-letter-to-ustr-on-TPP-and-medicines-march-2014.pdf.
 Peter Gosselin, Obama is in a Bind on Drugs that Could Cost Consumers Billions of Dollars, Bloomberg Business (July 10, 2015), available athttp://www.bloomberg.com/news/articles/2015-07-10/obama-pushes-trade-partners-to-add-drug-rules-he-opposes-in-u-s-.
 See 2013, 2014, and 2015 Fiscal Year Budgets, available athttps://www.whitehouse.gov/omb/budget.
 Hernandez, supra note 1.
 Fiscal Year 2016 Budget of the U.S. Government 63, available athttps://www.whitehouse.gov/sites/default/files/omb/budget/fy2016/assets/budget.pdf
 See Into the Home Stretch: For All its Flaws, the Biggest Trade Deal in Years is Good News for the World, The Economist (July 25, 2015), available athttp://www.economist.com/news/finance-and-economics/21659716-all-its-flaws-biggest-trade-deal-years-good-news-world?fsrc=rss|fec (stating that “People familiar with the negotiations say the data-exclusivity term is likely to be pared back [from 12 years], perhaps to seven years.”).
 In TPP, U.S. Floats 12-year Data Period for Biologics, Flexibilities for Developing Countries, Inside U.S. Trade (Nov. 27, 2013), available atfile://pcdc1/User%20Data$/cpine/Downloads/2013_12_09_TPP_US_IPR_2.pdf.
 See generally, The Trans-Pacific Partnership and Innovation in the Bioeconomy: The Need for 12 Years of Data Protection for Biologics, BIO, available athttps://www.bio.org/sites/default/files/TPP%20White%20Paper%20_2_.pdf.
 Submission lag can be defined as the time period between first world approval of a medicine to the time a drug is submitted for approval in another country. In a 2012 CIRS study, the major factor for submission lag by pharmaceutical companies was the “size of the country’s population and nature of its market.” See 3Lawrence Libert, et al, Influencers of Lag Time in the Emerging Markets, CIRS R&D Briefing 51 (2012), available at http://www.cirsci.org/sites/default/files/ CIRS R&D Briefing 51 Lag Time in EM.pdf.
 See 12 Years Exclusivity in the TPP: A Need or A Greed?, Public Citizen (July 2015),available at http://www.citizen.org/access
 Andy Miller, Lifesaving Drugs ‘Out of Reach’ for Many, Georgia Health News (Sept. 12, 2011),available at http://www.georgiahealthnews.com/2011/09/lifesaving-biologics-out-reach/.
 Nancy LeaMond, Letter to USTR, AARP (Oct. 22, 2013), available athttp://infojustice.org/wp-content/uploads/2013/10/AARP-Letter-to-USTR-TPP-Biologics-10-22-13.pdf.
 OECD. Health at a Glance: Asia/Pacific 2012. http://dx.doi.org/10.1787/9789264183902-en (note that Vietnam drug spending accounts for half of all health spending in the country).
 Kotlikoff, supra note 9.