The Pharma Industry and Trade: What Issues Are on the Policy Table?

Trade is a large issue in current public policy debates, particularly with the new US Presidential Administration. So what are some key issues on the policy table for the pharmaceutical industry?

Earlier this month, the Pharmaceutical Manufacturers and Researchers of America (PhRMA) submitted comments for a report to be released in April by the Office of the US Trade Representative, which reviews intellectual property protection and enforcement abroad. PhRMA identifies what it terms as “serious intellectual property and market access barriers” in 18 countries negatively impacting the pharma industry. So what did PhRMA’s comments highlight?

PhRMA comments on competition and risk
PhRMA submitted its comments for the 2017 Special 301 Report the Office of the US Trade Representative (USTR) . Published annually, the Special 301 Report reviews intellectual property protection and enforcement abroad. It identifies challenges facing US industries in overseas markets and highlights ways for effective protection of patents, trademarks and copyrights and for business and economic growth.

“PhRMA’s comments urge USTR to address these barriers and to ensure America’s trading partners live up to their intellectual property and market access commitments in global, regional and bilateral agreements,” said Mark Grayson, deputy vice president of public affairs at PhRMA, focusing on intellectual property, trade and international issues. “They call for urgent action to improve medicines pricing and reimbursement transparency and to combat the worldwide proliferation of counterfeit medicines.”

The importance of trade to the pharmaceutical industry is underscored in PhRMA’s comments. It notes that in 2015, the industry exported $55 billion in biopharmaceuticals, making the sector one of the top US exporters among intellectual property-intensive industries. In its comments, PhRMA cites data that assert that in 2014, biopharmaceutical research and development activity added more than $1.2 trillion to the US economy and supported 4.4 million American jobs, including indirect and induced jobs.

PhRMA’s comments also underscore increased competitive forces for new medicines and the importance that intellectual property plays. “In the 1970s, a new medicine might remain the only innovative treatment available in its therapeutic class for ten years or more,” said PhRMA in its comments. “By the 2000s, that period had declined to about two years. Generic competitors now challenge patents earlier and more frequently – even as early as four years after the launch of an innovative medicine. PhRMA comments cite data that show that 94% of innovative medicines experience at least one patent challenge prior to generic entry compared to 25% in 1995. “Strong intellectual property protection and enforcement at home and abroad provides essential incentives for investment in the biopharmaceutical sector and in all of the innovative industries that today account for nearly 40% of US gross domestic product,” said PhRMA. It also cites data that of the approximately 1,200 biopharmaceutical companies in the United States, more than 90% do not earn a profit, underscoring the risk-based nature of drug development and commercialization.

PhRMA offered further information on the cost of research and development in the pharmaceutical industry comparative to other industries and the unique issues that the pharmaceutical industry faces. It noted that firms in the pharmaceutical industry invest 12 more times more in research and development per employee than the average of all other manufacturing industries. Between 2013 and 2015, the US biopharmaceutical sector invested more than $50 billion annually in research and development. Clinical trials can account for more than 60% of the total cost of bringing a new medicine to market, and less than 12% of all potential new drugs entering clinical trials result in an approved medicine.

PhRMA comments on intellectual property and market access
Given the high-risk environment to bring innovative drugs to market, PhRMA outlined some issues as it related to intellectual property rights and protection outside the US in its comments for the USTR report. “National laws, regulations or judicial decisions that prohibit patents on certain types of biopharmaceutical inventions or impose additional or heightened patentability criteria restrict patient access to valuable new medicines and undermine investment in future treatments and cures,” said PhRMA in its comments. “These restrictions prevent innovators from building on prior knowledge to develop valuable new and improved treatments that can improve health outcomes and reduce costs by making it easier for patients to take medicines and by improving patient adherence to prescribed therapies.” PhRMA points to particular issues of concern: heightened patent utility requirements in Canada; patentability restrictions and additional patentability criteria in countries such as Argentina, the Philippines, Indonesia, and India; and restrictions on post-filing submissions in China. “

”Restrictive patentability criteria in many of these countries and others appear contrary to WTO [World Trade Organization] rules and US. trade agreements, which require parties to make patents available for inventions that are new, involve an inventive step and are capable of industrial application,” said PhRMA in its comments. “These laws also appear to apply solely to pharmaceutical products, either expressly by law or in an de facto manner as applied. This is not consistent with the obligations of WTO Members and US trade agreement partners to make patents available without discrimination as to the field of technology.”

PhRMA also cited problems with patent-examination backlogs in countries such as Brazil and Thailand as well as additional patent filing fees in Venezuela. “PhRMA members support patent-term restoration provisions in trade agreements and national laws to address unreasonable patent-examination delays,” said PhRMA in its comments. “They support initiatives to increase the efficiency of patent prosecution and reduce patent backlogs, including the PCT [Patent Cooperation Treaty] and work sharing arrangements through the IP5 and Patent Prosecution Highway (PPH) programs.” The PPH speeds up the examination process for corresponding applications filed in participating intellectual property offices. ”Through these and other initiatives, national and regional patent offices in the European Union, Japan, Korea, Mexico, and elsewhere are succeeding in reducing patent examination delays. Further work is needed to consolidate these gains and extend effective models to other countries,” said PhRMA in its comments.

Other issues of concerns raised by PhRMA in its comments to the USTR are the use of laws or policies that allow governments or other non-parties to a patent dispute to collect “market-size damages” after the fact from innovators that pursue unsuccessful patent claims, in countries, such as Australia; overall weak patent enforcement; compulsory licensing; and regulatory data protection failures.

PhRMA’s comments also point to issues that limit or deny market access, such as import tariffs and taxes. Under the WTO Pharmaceutical Agreement, the United States and the 33 other countries do not impose any import duties on a wide range of medicines and other health products, according to information from PhRMA. “Biopharmaceutical innovators in the United States do not benefit from the same access to China, India and other emerging economies that are leading producers and net exporters of drugs and active pharmaceutical ingredients, but are not parties to the WTO Pharmaceutical Agreement,” said PhRMA. Between 2006 and 2013, the value of worldwide biopharmaceutical trade in countries that are not parties to that Agreement increased at a compound annual growth rate of more than 20%, according to information cited by PhRMA. “This means that a larger proportion of medicines distributed around the world are potentially subject to tariffs,” said PhRMA.

Other issues on market access aboard cited by PhRMA in its comments are regulatory approval delays, a lack of transparency and due process, and localization barriers, which benefit local producers at the expense of manufacturers and their employees in the United States. PhRMA cites these localization barriers in countries, such as Algeria, China, India, Indonesia, Russia, Turkey and Vietnam. It also points to practices by countries that conditioned market participation on local production, citing countries such as China, Russia, Indonesia, and Algeria as examples, as well as practices limiting technology transfer in other countries.

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