Review of the 2010 Special 301 Report Sections on IP and Access to Medicines

Sean Flynn
Updated May 3, 2010

[2010 Special 301 Report]

The 2010 report indicates there has been a major policy change in the Obama administration on the issue of linkage. "Linkage" refers to requirements that FDA-like marketing authorities not register generic copies of medicines for which there is a patent claimed by a supplier. The rule in the US has led to "ever-greening" - where marketing monopolies are continually extended with new (often baseless) applications for patents that prohibit FDA approval of generics until the patent dispute is litigated. The WTO TRIPS agreement does not require countries to implement linkage rules.

In 2009, a lack of linkage was the second most cited medicines-related complaint in Special 301 (after data exclusivity). This year, the only countries cited for lacking linkage in the report are those that agreed to linkage requirements in FTAs signed before the New Trade Deal with Peru and other countries. For example Chile and Dominican Republic are cited for lack of linkage, but both signed trade agreements with the U.S. containing a linkage requirement. At least on the issue of linkage, the new administration has embraced a more progressive rule that countries will not be cited in 301 for lacking a policy not clearly required by TRIPS or an FTA obligation with the U.S.

Unfortunately, this new rule is not applied to other areas. The US still cites countries for lacking data exclusivity, even though the U.S. proposal that TRIPS include a data exclusivity requirement was rejected in the WTO negotiations.

Although data exclusivity is still complained about in the 2010 report, the number of countries cited for this issue has decreased from 21 in 2009 to 15 this year. It is not clear from the report what accounts for this change.

The concerns of state officials protesting the use of 301 to criticize reimbursement policies abroad that are similar to those used by U.S. Medicaid programs had minimal effect. There is a renamed section on price controls that continues to target "unfair" reimbursement policies without describing what is unfair about them or how these programs differ from what states now do to reduce drug prices. There are fewer countries cited for such reimbursement policies than in the past. But states should continue to be concerned that pharmaceutical reimbursement policies appear at all in the report. There is nothing in the 301 statute that authorizes USTR to pressure or sanction other countries for their pharmaceutical reimbursement policies. There is nothing in the report that backtracks from Ambassador Kirk's expressed support for a new international trade agreement that would "discipline" pharmaceutical pricing programs in developed countries such as the U.S.  

The statement in the 2010 301 report on public health has a more robust endorsement of the Doha Declaration than in last year's report. But the report continues to refuse the requests of public interest groups to endorse the language of the declaration supporting rights to use TRIPS flexibilities “to the full” to promote access to medicines. This is an unfortunate lost opportunity for the administration to distance itself from the previous administration's antipathy toward the Doha Declaration.

The most notable change in the language endorsing the Doha Declaration is the removal of the qualification of US support for the use of flexibilities only in a “crisis” or “emergency.”  The statement says that the US the “respects a country’s right to protect public health and, in particular, to promote access to medicines for all,” and also refers to support of TRIPS flexibilities to respond to “public health challenges.” These are much broader categories of public interest concerns than the US has previously endorsed.

As in the past, Special 301 program continues to be used to pressure developing countries to adopt heightened intellectual property protection and reduced price regulation of medicines in developing countries. In addition to the 15 citations for data exclusivity (Algeria, Argentina, Brazil, Chile, Dominican Republic, Egypt, India, Indonesia, Lebanon, Malaysia, Mexico, Pakistan, Paraguay, Turkey, and Vietnam), USTR expresses concern about compulsory licenses in Thailand and Ecuador and about TRIPS compliant patentability criteria in India, Brazil and the Philippines.

The uses of Special 301 to threaten unilateral sanctions on countries for not adopting controversial interpretations of TRIPS (e.g. on data exclusivity) or for not adopting policies that exist no where in any binding agreement violates the multilateral dispute resolution and most favored nation clauses of the WTO agreement. There is no authority under international law for the U.S. to decide for itself what intellectual property or pharmaceutical price regulation policies other countries should have and to sanction them for noncompliance with the unilaterally generated norm. International law generally, and the WTO specifically, was established to avoid precisely this sort of exertion of power.

Expanded analysis of some of the comments above and excerpts from the 2010 301 report follow.

 

Special 301 Violates the Agreement Establishing the World Trade Organization

Special 301 is an illegal program under international trade law. The Special 301 program is a relic of the pre-WTO period in US trade policy where unilateralism triumphed. The program authorizes USTR to threaten and sanction countries for intellectual property policies that do not violate the WTO agreement on intellectual property rights or any other legally binding instrument. It is a way to press other countries to do what we want because we want them to - not because they have agreed. As such, it violates our WTO commitments to multilateral dispute settlement and most favored nation treatment. Countries are not permitted under the WTO to adjudicate their own trade disputes and sanction other countries with trade barriers or threats of them as they wish. The continuation of this program under a unilateral Republican Congress and Administration in the last decade was not surprising given their overall foreign policy perspective. By why is this new administration and this new Congress committed to continuing an illegal, unilateral program that sanctions other countries for legal policies?

Use of Special 301 to Restrict Access to Medicines Violates the Administration's Own Policies and Commitments to Global Health

The use of Special 301 to press developing countries to adopt intellectual property protections and pharmaceutical regulation restrictions in excess of those mandated by the WTO or other trade rules shocks the conscious and violates the administration's stated policies in this field. The Obama Administration is committed to a global health policy to "increase access to affordable drugs" in developing countries, including through support for "the rights of sovereign nations to access quality-assured, low-cost generic medication to meet their pressing public health needs under the WTO's Declaration on Trade Related Aspects of Intellectual Property Rights (TRIPS)." It is a signatory to the Doha Declaration, which affirms the "the right of WTO Members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility" to promote access to medicines for all. And the United States has endorsed the 2008 World Health Organization (WHO) Global Strategy on Public Health, Innovation and Intellectual Property Rights, WHA61.21, which pledges "to take into account in trade agreements the flexibilities contained in the Agreement on Trade-Related Aspects of Intellectual Property Rights and including those recognized by the Declaration on the TRIPS Agreement and Public Health adopted by the WTO Ministerial Conference." Yet, Obama's USTR is continuing the Bush Administration policy of using Special 301 threats and sanctions to promote excessive intellectual property rules in developing countries that cannot afford the medicines they need even without such an increase monopoly protections.  

Pressure on Access to Medicines Violates International Human Rights Obligations

The report violates more than the administration's own policies - it violates the internationally recognized rights of people in developing countries to have access to needed and affordable medications. Promoting access to affordable medicines for the poor is a widely recognized human rights duty, emanating from the recognition of civil and political as well as social and economic rights that bind the United States. Health and social policies which increase mortality and morbidity implicate the right to life in Article 6(1) of the International Covenant on Civil and Political Rights as well as Articles 22 and 25.1 of the Universal Declaration of Human Rights. States are bound to promote and protect the rights to life and health not only of their own citizens, but also of the citizens of other countries affected by their foreign policy, trade and assistance programs. As described in a Report to the UN General Assembly by the Special Rapporteur on the Right to Health, to promote access to medicines and the right to health while complying with the minimum standards of the TRIPS agreement, developing countries

"should incorporate the flexibility to: (a) Make full use of the transition periods; (b) Define the criteria of patentability; (c) Issue compulsory licences and provide for government use; (d) Adopt the international exhaustion principle, to facilitate parallel importation; (e) Create limited exceptions to patent rights; (f) Allow for opposition and revocation procedures. In addition, countries need to have strong pro-competitive measures to limit abuse of the patent system."

The Obama Administration's use of Special 301 violates these international human rights norms. A complaint has already been filed with the UN Human Rights Council seeking investigation of this matter in its November 2010 Universal Periodic Review of the United States under human rights instruments. PIJIP will work with public health advocacy organizations to file other complaints in appropriate forums to force the Administration to account for its policies.

The Administration's Policies Threaten Affordable Medicines in the U.S.

State legislators and officials have long opposed the use of trade policies to push for new international standards that would limit pharmaceutical pricing regulations, including those in the U.S. Maine Governor John Baldacci is the latest such official to criticize this trend toward "a trade policy that might ultimately constrain the ability of the State of Maine and the federal government to continue best practices to control pharmaceutical prices." His letter to Secretary Sebelius and Ambassador Kirk this week explained:

The USTR is not a health-regulatory authority and it has no expertise in public health matters. I hope that the USTR will reverse the previous administration's support for using trade policy to restrict governmental powers to control medicine prices. . . . Medicaid and other local programs run by the state and federal governments provide healthcare for over 40 million people. To control the costs of pharmaceuticals in these programs, some states compare the safety, efficacy and cost effectiveness of new drugs to existing therapeutic alternatives and construct Preferred Drug Lists (PDLs) for preferential reimbursement. There are also federal mandates that require companies to offer their best prices to Medicaid. Similar mechanisms keep drug costs low for the Veterans Administration, Defense Department and the General Services Administration. As a result, although consumers and businesses in the U.S. generally pay the highest drug prices in the world, the prices for government-run programs in the U.S. tend to be equal to or lower than, the prices in Canada and other wealthy countries with national health insurance.

The past administration pursued a trade policy that sought to limit the ability of foreign governments to restrain medicine prices. At the public hearing on the Special 301 report held in March 2010, government officials indicated that there has not been any policy change on this issue in President Obama's Administration, and that the Special 301 Report would continue to press countries to restrict pharmaceutical pricing programs that are substantially identical to those used by states such as Maine. Trade agreements are, of course, reciprocal by nature. The USTR should not promote policies abroad that it is not prepared to require at home.

As you know, the success of health reform, including the federal role in covering much of the costs of state Medicaid expansion, depends on the ability of governments to control pharmaceutical costs. An administration-wide policy to protect the right of governments to affect medicine prices is in the best interests of citizens. I urge you to work to ensure that such a policy is reflected in the Administration's trade agenda.

The 301 Process is Flawed and Biased

Despite modest changes this year, the Obama Administration continues to use a flawed, biased and non-transparent process for creating this report. In the hearings and meetings with public health advocates on Special 301, the invited representative of HHS did not even show up, much less influence the process toward public health outcomes. Public health advocates made up 85% of the submissions at an all-day public hearing on the report, but those submissions carried vary little weight in the process. Industry, on the other hand, traditionally sees 75% to 85% of their recommendations adopted in the report, an influence rate that appears similar in this year's report.

Further Information:

 

 


 


EXCERPTS FROM REPORT

For example, USTR works closely with the Department of Health and Human Services to ensure consistency of the Administration’s trade policy (including support for the 2001 WTO Doha Declaration on the TRIPS Agreement and Public Health) with the Administration’s health policy.

In 2010, USTR will conduct OCRs of the Philippines and Thailand to monitor progress on IPR protection and enforcement in those countries, and to consider again their Special 301 status.

. . .

Numerous comments in the 2010 Special 301 review highlighted important concerns arising at the intersection of IPR policy and health policy. The 2001 WTO Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration on TRIPS and Public Health) recognized the gravity of the public health problems afflicting many developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria, and other epidemics. As affirmed in the Doha Declaration on TRIPS and Public Health, the United States respects a country’s right to protect public health and, in particular, to promote access to medicines for all, and supports the vital role of the patent system in promoting the development and creation of new and innovative lifesaving medicines. The assessments set forth in this Report are based on various critical factors, including, where relevant, the Doha Declaration on TRIPS and Public Health.

Consistent with these views, the United States respects our trading partners’ rights to grant compulsory licenses, in a manner consistent with the provisions of the TRIPS Agreement, and encourages our trading partners to consider ways to address their public health challenges while maintaining intellectual property systems that promote investment, research, and innovation.
The United States is firmly of the view that international obligations such as those in the TRIPS Agreement have sufficient flexibility to allow countries to address the serious public health problems that they may face.

We strongly support the WTO TRIPS/health solution concluded in August 2003, in which members are permitted, in accordance with specified procedures, to issue compulsory licenses to export pharmaceutical products to countries that cannot produce drugs for themselves. The General Council adopted a Decision in December 2005 that incorporated this solution into an amendment to the TRIPS Agreement, and later that month the United States became the first WTO member to formally accept this amendment. The United States hopes to see at least two-thirds of the WTO membership accept this amendment by the December 31, 2011 deadline, at which point the amendment will go into effect for those members that accept it. The August 2003 waiver will remain in place and available until the amendment takes effect.

The United States will work to ensure that the provisions of our bilateral and regional trade agreements are consistent with these views and do not impede the taking of measures necessary to protect public health. Accordingly, USTR will continue its close cooperation with the Department of Health and Human Services to ensure that public health challenges are addressed and the patent system is supported as a mechanism to promote research and innovation.

Supporting Pharmaceutical and Medical Device Innovation through Improved Market Access

USTR has sought to reduce market access barriers faced by U.S. pharmaceutical and medical device companies in many countries, and to facilitate both affordable health care today and the innovation that assures improved health care tomorrow. For example, this year’s Special 301 Report highlights concerns regarding market access barriers affecting pharmaceutical products in Algeria and Indonesia.

Even where a country’s IPR regime demonstrates a commitment to strong IPR protection, other types of measures have the potential to affect market access in the pharmaceutical and medical device sector. For example, government practices including unreasonable regulatory approval delays and potentially unfair reimbursement policies can discourage the development of new drugs and other medical products. The criteria, rationale, and operation of such measures are often nontransparent or not fully disclosed to patients or to pharmaceutical and medical device companies seeking to market their products. USTR encourages trading partners to provide appropriate mechanisms for transparency and opportunities for public engagement in the context of their relevant health care systems

U.S. industry has expressed concerns regarding the policies of several industrialized trading partners, including Finland, France, Italy, Japan, Korea, New Zealand, Poland, and Taiwan, on issues related to innovation in the pharmaceutical sector and other aspects of health care goods and services. For example:

  • With respect to Japan, pharmaceutical and medical device issues are an integral part of bilateral discussions. While Japan has made progress on these issues, the United States continues to press for improved transparency, which would facilitate the introduction of innovative pharmaceuticals and medical devices into Japan’s market. Ways to improve transparency include ensuring meaningful opportunities for interested stakeholders to provide input into important regulatory, reimbursement, and pricing matters.
  • With regard to Poland, the United States remains concerned about Poland’s enactment in 2006 of a regulation that appears to reduce the official maximum wholesale and retail prices for imported drugs by 13 percent, while generally leaving the prices for drugs of Polish origin unchanged. The U.S. pharmaceutical industry reports that this regulation has had a significant impact by reducing prices for numerous products manufactured outside Poland. The United States is concerned that this regulation created an impediment to market access for this industry and will continue to monitor the situation in Poland throughout the coming year.

The United States is seeking to establish or continue dialogues with Organization for Economic Cooperation and Development (OECD) members and other developed economies to address these and other sectoral concerns, and encourage a common understanding on questions related to innovation in the pharmaceutical and medical device sectors. For example, the United States-Korea Free Trade Agreement, once in force, would improve access to innovative medical products and ensure the transparent, predictable, and non-discriminatory pricing and reimbursement of innovative and generic pharmaceutical products, and medical devices. Separately, the United States is also continuing its engagement with China to promote fair and transparent policies in this sector.

The United States shares policy goals and concerns related to health care with other countries, including challenges surrounding aging populations and rising health care costs. The United
States also shares the objective of continued improvement in the health and quality of life of its citizens, and the objective of delivering care in the most efficient and responsive way possible. The United States looks forward to engaging with these trading partners to address specific concerns related to reimbursements, regulatory policies, and transparency.

India

One concern in this regard is a provision in India’s Patent Law that prohibits patents on certain chemical forms absent a showing of increased efficacy. While the full import of this provision remains unclear, it appears to limit the patentability of potentially beneficial innovations, such as temperature-stable forms of a drug or new means of drug delivery. The United States also encourages India to provide protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical and agricultural chemical products.

Thailand

In the pharmaceutical sector, the United States encourages Thailand to engage in a meaningful and transparent manner with all relevant stakeholders, including owners of intellectual property rights, as it considers ways to address Thailand’s public health challenges while maintaining a patent system that promotes investment, research, and innovation. In addition, the United States reiterates its support for the 2001 Doha Declaration on the TRIPS Agreement and Public Health, as described in Section I of this Report. Overall, the United States encourages Thailand to continue its efforts to strengthen its IPR protection and enforcement regime, and looks forward to working with Thailand in the coming year through the OCR.

Brazil

Patent concerns remain, including about the scope of patentability and the uncertain role of ANVISA, Brazil’s sanitary regulatory agency, in examination of certain patent applications. Brazil also does not provide for the adequate protection against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approval for pharmaceutical products.

Dominican Republic

The United States is also concerned about excessive delays in the issuance of patents. The United States will continue to monitor the Dominican Republic’s implementation of its bilateral and multilateral obligations to provide an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approvals for pharmaceutical and agrochemical products, and to provide an effective system to address patent issues expeditiously in connection with applications to market pharmaceutical products. The United States looks forward to future cooperation on IPR matters with the Dominican Republic, and will continue to monitor the Dominican Republic’s implementation of its IPR commitments under CAFTA-DR.

Ecuador

The United States is also concerned about excessive delays in the issuance of patents. The United States will continue to monitor the Dominican Republic’s implementation of its bilateral and multilateral obligations to provide an effective system for protecting against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approvals for pharmaceutical and agrochemical products, and to provide an effective system to address patent issues expeditiously in connection with applications to market pharmaceutical products. The United States looks forward to future cooperation on IPR matters with the Dominican Republic, and will continue to monitor the Dominican Republic’s implementation of its IPR commitments under CAFTA-DR.

Egypt

The United States continues to urge the Ministry of Health to clarify its commitment to protect against unfair commercial use, as well as unauthorized disclosure, of undisclosed test or other data generated to obtain marketing approvals for pharmaceutical products, and to provide an effective system to address patent issues expeditiously in connection with applications to market pharmaceutical products.

Peru

In connection with its obligations under the PTPA, Peru should clarify its system for protecting undisclosed test or other data submitted to obtain approval of agricultural chemical products, particularly in light of recent measures that appear to provide for automatic approval of generic products.

Permalink :