US's Proposed TPP Transition Period for Middle-Income Parties is Fools Gold

Nov. 27, 2013, By Brook Baker

Inside US Trade[1] and the USTR[2] have announced that the U.S. is floating new proposals on IP in its marathon Trans-Pacific Partnership Agreement negotiations. Although the U.S. touts its new proposals as being balanced, as prioritizing access to medicines, and as recognizing the interests of developing country negotiating partners, particularly, Peru, Vietnam, Mexico, and Malaysia, its actual proposals offer modest temporary respite at best from only a small fraction of U.S. demands.

The U.S. is essentially sticking by all of the demands revealed in the latest Wikileak disclosures, except with respect to its grudging acceptance of pre-grant oppositions (it had previously given up demands for mandatory patents on new forms of existing medicines). Required patents for new uses, required granting of patents on medicines even in the absence of improved therapeutic effects, data/regulatory monopolies on clinical trial data (data exclusivity), mandatory patents on virtually all medical, surgical, and diagnostic procedures, enhanced damages for patent infringement, mandatory injunctions, and stronger border measures will all be mandatory the minute the TPP is signed. Even more ominously, IP will remain in the investment chapter, meaning that drug companies will immediately be able to sue TPP members if the companies' expectations of IP-based profits are thwarted by fully lawful legislative, regulatory, or judicial decisions.

Even more ominously, as soon as countries cross a threshold of $12,616 GNI per capita - roughly fourth of the U.S. figure, they will be required to grant patent term extensions to compensate for regulatory delays, to allow ever-greening of data exclusivity without any explicit public health safeguards, and to require drug regulatory authorities to act as patent police through registration-patent linkage. Malaysia and Mexico are already nearing the upper-income thresholds with GNIs per capita of $9810 and $9740 respectively in 2012. Peru is half-way there with a per capita GNI of $5880. Only Vietnam will achieve any real temporal breathing room with a per capita GNI of $1400, barely lower middle-income. Accordingly, current middle-income country partners - as soon as they cross that World Bank threshold and become "upper-income" - will be bound by the highest level of patent and data monopolies ever proposed in trade negotiations.

In terms of actual "concessions", the U.S. has given very little except what was already on the books in the May 10, 2007 New Trade Policy that had been retrofitted into trade agreements with Peru and Columbia six years ago. Patent term extensions will not be mandatory nor will patent-registration linkage. Data/regulatory exclusivity will potentially have some clear public health safeguards. But each of these provision will loom on a fast-approaching horizon.

In exchange for these temporary concessions, the U.S. is proposing a ridiculously long period of biologic exclusivity - 12 years - far in excess of what other countries currently offer, if they offer biologic data exclusivity at all. Biologics are a growing element of total pharmaceutical expenditures and are particularly important with respect to certain chronic, non-communicable diseases such as diabetes and cancer that are of growing concern in low- and middle-income countries. The evidence justifying extended periods of biologic exclusivity is contested, even in the U.S., but the biotech industry has pushed its lobbying efforts at the USTR to historic levels to tie all TPP parties, even the U.S., to this unjustified period of monopoly control.

Don't be fooled. The U.S. is continuing to demand an IP straightjacket for all TPP members with respect to the IP terms that will become immediately effective to all parties. Moreover, the U.S. is fitting TPP middle-income countries for their future IP leg-irons. IP restraints will be a little looser in the short term, but highly constricting shortly thereafter. Monopolies on medicines will be longer, broader, and stronger. Generic competition and lower prices will be delayed. Patients will suffer and governments will face mounting costs for new medical technologies. The U.S.'s TPP transition period is fools gold.




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