Losing the myths on the TPPA: A reply to IDEAS

whatyouthink-new-logo_200_200_100The Malay Mail; November 17, 2015. Yesterday at the launch of the Intellectual Property Rights Index (IPRI) 2015 in Kuala Lumpur, IDEAS Malaysia, a libertarian think tank and proponent of the TPPA spoke about its October 2015 report “The Trans-Pacific Partnership: Seizing the Opportunities, Losing the Myths.”

IDEAS Malaysia attempted to debunk the legitimate concerns of the Malaysian AIDS Council, the World Health Organisation, Nobel prizewinner Médecins Sans Frontières (Doctors without Borders), the American Medical Students Association, among many other bodies working in public health and access to affordable medication, that TRIPS+ provisions in the TPP would reduce access to medicines and drive drug costs up. IDEAS, on the other hand, claims that there would be no increase in medicine prices under the TPP. [1]

In the report, the author states that increases in regulatory data protection (RDP) for pharmaceuticals “do not result in meaningful increases in health care expenditures or expenditures on medicines relative to overall health care spending”, referring to a bar chart from Canada and Japan indicating these costs remaining stable after these countries increased the length of data protection. [2]

While IDEAS is correct in stating that Canada does have RDP and that drug spending as a per cent of total health care spending has levelled off in recent years, the two are not related.

The levelling off of drug spending as a per cent of total health care spending is due to two factors: first, in recent years the provinces which control the price of generic drugs have gotten much more aggressive in demanding lower generic prices; and second, and a much more significant factor, has been the expiry of patents on major blockbuster drugs.

For example, when atorvastatin (Lipitor) was on patent, the province of Ontario paid C$316 million (RM1037.8 million), but the next year when atorvastatin went off patent the Ontario government paid C$133 million. (Note: These are only public expenses and Ontario is only about one-third of the entire Canadian market.) The correlation drawn between RDP and drug costs as a percentage of healthcare expenditure as referred to in the report is therefore a distortion of the facts.

The report conveniently neglected to mention numerous studies on data protection and market exclusivity that show increases or projected increases on drug costs. A 2012 study by Abbott et al. assessed the impact of stronger IP on access to medicines pursuant to the signing of a Jordan-US free trade agreement (FTA).

They showed that due to the delayed market entry of generic products and “adjusted for increased sales volume and inflation, from 1999 to 2004 there was a 17 per cent increase in total annual expenditure for medicines in Jordan.” [3]

In a 2009 study in Thailand estimating current cost savings from generics and estimating projected costs following market exclusivity extensions, the authors found that “by extension of market exclusivity, given that there were 60 new items approved annually, the cumulative potential expense was projected to be US$6.2 million (RM27.15 million) for the first year to US$5215.8 million in tenth year.” [4]

In a 2009 study on the effects of monopolies under the Central American Free Trade Agreement (CAFTA) imposed on Guatemala, the authors found that the patent rules and data exclusivity provisions were “limiting access to some generic drugs that are less costly substitutes for newly protected brand-name drugs” and that in other cases, generic competitors were denied entry because the brand-name drugs were data protected. [5]

It is very interesting that IDEAS chose Canada to compare to, given that Canada spends the second most per capita for medicines in the world [6], and that spending in Canada is going up much faster than the OECD average. [7]

Desperate contentions like these by TPP proponents are often accompanied by claims that increased RDP and patent extensions will result in increased R&D and pharmaceutical innovation. Data shows that for developing countries, there is no relationship between patent protection and investment in R&D [8] and there is no relationship between the adoption of data exclusivity by a country and the amount of pharmaceutical industry investment in the country. [9]

In addition, in 1986 when Canada reformed its compulsory licensing law for pharmaceuticals (and then later abolished compulsory licensing for pharmaceuticals) the industry promised to increase R&D to 10 per cent of sales. While this occurred initially, subsequently R&D as a percentage of sales has fallen to below 1987 levels. [10]

Pharmaceutical companies are in an “innovation crisis” [11] despite TRIPS+ provisions. They are increasingly patenting pharmaceutical products for minor modifications. [12] In addition, studies have found that some innovation is actually hampered by stronger intellectual property [13] or that IP does not stimulate innovation. [14]

By way of illustration, Italy increased intellectual property rights and this has had little or no impact in its rate of invention. [15] A second example is the European Union, which is the most protected pharmaceutical market in the world, but has become less innovative than other regions. [16]

Stronger patent protection in general and longer periods of data exclusivity in particular only benefits one party — the brand-name pharmaceutical industry. Everybody else loses.

* Fifa Rahman MHL, is Policy Manager, Malaysian AIDS Council and Joel Lexchin, MD is Professor, School of Health Policy and Management, York University, Toronto, Canada.

* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.

Bibliography

1. The Malaysian Insider, No Increase in Medicine Prices Under TPP, Says IDEAS (16 November 2015) <http://www.themalaysianinsider.com/malaysia/article/no-increase-in-medicine-prices-under-tpp-says-ideas> Accessed 17 November 2015

2. Wan Jan WS. The Trans-Pacific Partnership: seizing the opportunities, losing the myths. SEANET Perspectives, Issue No. 05, October 2015

3. Abbott RB. et al. The price of medicines in Jordan: the cost of trade-based intellectual property. (2012) 9(2) Journal of Generic Medicines 75-85

4. Akaleephan C, Wibulpolprasert S et al. Extension of market exclusivity and its impact on the accessibility to essential medicines, and drug expense in Thailand: Analysis of the effect of TRIPs-Plus proposal. (2009) 91 Health Policy 174—182

5. Shaffer ER, Brenner JE. A trade agreement’s impact on access to generic drugs. (2009) 28(5) Health Affairs w957-w968

6. Lexchin J, Gagnon M-A. CETA and pharmaceuticals: impact of the trade agreement between Europe and Canada on the costs of prescription drugs. Globalization and Health 2014 10:30

7. OECD. Health at a glance 2013: OECD indicators. June 2013.

8. Park W. Intellectual property rights and international innovation. In Frontiers of economics and globalization. Volume 1. Edited by Mascus K: Elsevier Science; 2007: 289-327

9. Palmedo M. Do pharmaceutical firms invest more heavily in countries with data exclusivity? CURRENTS International Trade Law Journal Summer 2013.

10. Patented Medicine Prices Review Board. Annual Report 2013. Ottawa, ON. ISSN: 1495-0561, at 34

11. Cynthia Ho, ‘Sovereignty under Seige: Corporate Challenges to IP Decisions’ (2015) 30(1) Berkeley Technology Law Journal

12. For example, Alimta, the blockbuster lung cancer drug. http://www.fiercepharma.com/story/eli-lilly-pops-bubbly-us-alimta-patent-victory/2015-08-26

13. Lerner J, 150 Years of Patent Protection, Harvard MA, Harvard Business School Working Paper (2001), Monitoring Financial Flows for Health Research 2005: Behind the Global Numbers by Global Forum for Health Research page 31. The Global Forum for Health Research is funded by the World Health Organisation, the World Bank, the Rockefeller Foundation and various national governments. This Chapter of the Report was written by Donald Light who in addition to being an academic is a member of the Business Advisory Council of the Republican Party and a member of the President’s Business Commission.

14. Deardorff A, “Welfare Effects of Global Patent Protection”. Economica 1992; 59: 35-51 and Branstetter LG ‘Do Stronger Patents Induce More Local innovation?’ in KE Maskus and JH Reichman (eds) International Public Goods and Transfer of Technology Under a Globalised Intellectual Property Regime, Cambridge University Press. Cambridge 2005; 309-320

15. Commission on Intellectual Property Rights, Study Paper 1b, Intellectual Property Rights, Technology and Economic Development: Experiences of Asian Countries, Dr Nagesh Kumar.

16. EGA press release: Brussels, 10 November 2005, a Call to Review the Patent System, IPH 10/11/2005

– See more at: http://www.themalaymailonline.com/what-you-think/article/losing-the-myths-on-the-tppa-a-rebuttal-to-ideas-malaysian-on-regulatory-da#sthash.ImNZk1Xg.dpuf

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