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PhRMA submits comments to the The Office of the United States Trade Representative encouraging protection of US innovation in foreign markets.
The Office of the United States Trade Representative (USTR), an agency that negotiates with foreign governments to create trade policy agreements, publishes a report each year detailing challenges American innovators face in overseas markets. Pharmaceutical manufacturing trade group PhRMA recently contributed comments to USTR’s 2017 Special 301 Report outlining the specific actions that threaten biopharmaceutical innovation in the United States.
A new focus of the Trump administration is the "America First Trade Policy," which seeks to increase US exports to other countries and enforce import tariffs on goods coming in from other countries. In its comment to USTR, PhRMA essentially expressed its support of the pursuit of a foreign policy based on American interests.
The new trade policy from the White House focuses on the abandonment of the Trans-Pacific Partnership (TPP) and the renegotiation of North American Free Trade Agreement (NAFTA) policy. The White House states on its website, “If our partners refuse a renegotiation that gives American workers a fair deal, then the President will give notice of the United States’ intent to withdraw from NAFTA.”
PhRMA’s observations in the report mirror some of Trump’s recent sentiments about the world benefitting from drugs developed in the US at the country’s expense. Mark Grayson, deputy vice-president of public affairs at PhRMA, wrote in a blog post that the trade group would like USTR to address the barriers to market penetration overseas and take action to “ensure America's trading partners live up to their intellectual property and market access commitments in global, regional, and bilateral agreements."
PhRMA specifically expresses concern about how countries overseas regard the intellectual property (IP) protection of biopharmaceutical inventions manufactured in the US. They note that pharmaceutical products exported overseas are subject to "serious intellectual property and market access barriers.” The group identified 18 countries with the most significant barriers to effective IP protection, with a special focus on Canada, China, Colombia, and India. PhRMA has good reason to protect revenue from biopharmaceuticals in foreign markets: According to figures cited within the report, the industry exported $55 billion in biopharmaceuticals in 2015, “making the sector one of the top US exporters among intellectual property-intensive industries.”
Several countries enact regulations for the trade and development of pharmaceutical products that appear to contradict with existing World Trade Organization (WTO) policies and US trade agreements, wrote PhRMA. Current policies require agencies to issue patents for medicines that are “new, involve an inventive step, and are capable of industrial application,” but some countries are not fulfilling their commitments to comply with existing trade contracts.
Country-specific filing idiosyncrasies
PhRMA argued “restrictive patentability criteria” in foreign markets negatively affect the issuance of new patents for biopharmaceuticals. Furthermore, weak enforcement of US patents overseas and compulsory licensing-wherein a country allows the manufacture of crucial medicines without the consent of the patent holder-undermines the benefits and impact of patent ownership.
Restrictive criteria prevent patent assignments in Canada, Argentina, the Philippines, Indonesia, Argentina, India, and China, says PhRMA. In Canada, the invention listed in a patent filing must prove utility (i.e., that the invention accomplishes what it sets out to do), before the patent can be filed. Utility can only usually be demonstrated after clinical trials have concluded, which delays the filing of the patent unnecessarily, notes PhRMA.
Argentina restricts patents on new dosage forms and combinations of drugs. Thus, formulation improvements do not typically allow for patent term extensions. Laws in the Philippines and Indonesia prohibit new forms and uses of already-approved medicines. India prevents patents on known substances unless the patent demonstrates “enhanced therapeutic efficacy.”
Long-term maintenance of biopharmaceutical patent ownership in China is difficult, as China does not “consistently” allow innovator companies to present new data in patent prosecution proceedings that prove the patent is innovative if the experimental data happened to be collected after the patent was initially filed.
Long administrative delays
Patent examination delays are common in Brazil, Thailand, India, and Venezuela; it can take many years to secure patents in these areas of the world for various reasons related to workflow. In Brazil, patents need to be reviewed by the patent office and the Brazilian Health Surveillance Agency (ANVISA), which PhRMA says unreasonably protracts the patent application process.
Delays in regulatory approvals and infrequent updates to reimbursement policy and decisions in various countries cause decreased patient access to medications, according to PhRMA. Single-payer systems-in which the government has the power to negotiate drug prices-prevent manufacturers from realizing full market access, the agency concludes.
Compulsory licenses and in-country manufacturing
PhRMA contends that compulsory licenses should be granted only in emergency situations as a “last resort”-and stakeholders should be able to weigh in on the decisions to grant such licenses. Currently, India and Indonesia can issue compulsory licenses, and Chile, Colombia, Peru, Russia, Turkey, and Vietnam are considering similar legislation. PhRMA argues that alternatives to compulsory licensing-such as voluntary licenses granted by manufacturers, drug donation, non-assert declarations (where a patent holder agrees not to enforce patents in certain areas), and differential pricing programs-simultaneously protect innovator companies and increase access to medicines.
The agency asserts that some countries exploit compulsory licenses and use the licenses primarily to set up local manufacturing facilities “at the expense of manufacturers and jobs in the United States and elsewhere.” In fact, policy in some countries favors local manufacturing heavily and bans foreign medicine procurement when competing products can be found locally. PhRMA points to China as an example, where regulatory data protection is awarded to drugs that are first launched and manufactured domestically; China does not provide similar protections for drugs that have origins in the US.
Indonesia has a new patent policy that automatically permits compulsory licenses for medications if, by three years following initial approval, the patent holder has not set up manufacturing capabilities within the country. Indonesia further reinforces local production initiatives by issuing the requirement that any foreign biopharma company wishing to import its drugs must also transfer its technology and manufacturing knowledge to an Indonesian firm so that the country will be capable of producing the drugs in-country within five years, PhRMA reports.
By not recognizing any good manufacturing practice (GMP) certifications obtained outside of Turkey, the country effectively bars all pharmaceutical imports, writes PhRMA, unless the importing country coordinates a mutual recognition agreement that conforms with the quality standards of inspection in Turkey.
Lastly, PhRMA writes that new policy in Russia limits drug procurement to manufacturers that are members of the Eurasian Economic Union (EAEU), provided there are at least two EAEU drug makers for a drug class.
Other threats to IP
Should a patent be invalidated in Australia, and a generic equivalent is subsequently released, the innovator company must compensate Australia’s Pharmaceutical Benefits Scheme (PBS) for the higher prices PBS paid during the period in which the patent was considered valid. Additionally, PhRMA points out that, in Australia, the price of a branded product automatically drops to match the price of competing generics that enter the market. No damages are granted to innovator companies, however, if competing products are launched prematurely (i.e., if the innovator company ends up successfully defending its patent). As a result, says PhRMA, the Australian drug agency creates an “inappropriate conflict of interest by permitting the same government that examined and granted a patent to seek damages if that patent is later ruled invalid or not infringed.” In addition, while US trade agreements dictate that innovator companies be notified when a competitor wants to introduce a generic, Australia does not comply with this rule. Similarly, innovators are not notified when marketing applications are filed for competing therapies in China, India, and Russia. Processes to help an innovator defend its rights to a patent are slow and drawn out in Peru and Mexico, PhRMA explains in the document.
Although regulatory data protection (RDP) for biologics in the US is 12 years, Algeria, Argentina, Brazil, China, Ecuador, Egypt, India, Turkey, and Venezuela do not provide this protection for biologics manufactured in the US. RDP is not granted for drugs touting new formulations, dosages, indications, or compositions in Chile, and data protection in Mexico and Peru is only available for small-molecule therapies (not for biologics). As a result of a 2014 law passed in Canada, the Health Minister there has the right to share a manufacturer’s regulatory data freely, without reserve.
The WTO Trade Agreement-which was forged in March 1994 between the US and 33 other countries-guaranteed that no import duties be imposed on pharmaceutical products. For countries that did not participate in the agreement, however, high import tariffs imposed on the US are crippling the reach of certain medications, PhRMA maintains. China, India, Brazil, Argentina, Russia, and Thailand impose such taxes. Despite the fact that India exports the bulk of its generic drugs and APIs to the US, it also employs an average import tax of nearly 10% for US-manufactured biologics, argues PhRMA. Taken together, Brazil’s import taxes can increase the price of medicines by nearly 34%. It is important to note, however, that the World Health Organization (WHO) concluded in a 2005 study that when compared with gross domestic product (GDP), pharmaceutical tariffs generated an insignificant amount of revenue; WHO said approximately 92% of countries generate less than 0.1% of GDP through pharmaceutical tariffs.
In its comments for the Special 301 Report, PhRMA urges USTR to take an aggressive approach in the protection of America’s IP. PhRMA calls for a ramping up of patent enforcement activities in countries that do not already comply with regional and bilateral trade agreements, and expresses the need for increased global cooperation. The agency appeals to USTR to fight for transparency in the pricing and reimbursement of pharmaceuticals by overseas payers. Lastly, PhRMA beseeches USTR to fight the spread of counterfeit medications.
Patents promote competition in the pharmaceutical marketplace, wrote PhRMA, mostly because patent protection requires that innovators disclose their inventions to the world to obtain this protection. While this may be true for small-molecule generics, biopharmaceutical drugs and the patents that protect their manufacture are a bit more challenging. As Jacob Sherkow, JD, associate professor, Innovation Center for Law and Technology, New York Law School recently pointed out in a paper, patents on biopharmaceuticals are often filed early in the discovery process and are not described in enough scientific detail for competing manufacturers to reproduce and/or reverse engineer similar products. Sherkow attests the deficiencies in the breadth of the disclosure that appears in filed patents contributes to costly, often irreproducible research by potential competitors. Considering this point, companies that may attempt to compete against innovator drugs may not be able to secure approvals for drugs in the same therapeutic class because they cannot replicate the compounds or master the methods described in innovator patent documents. Some could argue, then, that current patent law (and the way biopharmaceutical patents are written) actually dissuades competition.
Some experts point out that the concepts of moving more manufacturing jobs back to the US and lowering the price of drugs domestically may be diametrically opposed. Repatriation is just part of Trump’s recent pledge; the Trump administration also seeks to increase wages for American workers once jobs return to the US. However, an increase in wages may mean the overall cost of manufacturing increases, potentially making drugs more expensive to Americans domestically.