Problems with Current U.S. Policy.

Key Problems

* If the U.S.-Jordan Free Trade Agreement serves as a model, the FTAA will sharply limit the grounds for issuance of a compulsory license.

* The U.S. negotiating objectives for the FTAA inappropriately seek to link marketing approval to patent status.

* The U.S. is attempting in the FTAA negotiations to extend patent terms and create new intellectual property protections that will undermine Latin American and Caribbean country efforts to promote access to affordable medicines.

It is not possible to know exactly what the U.S. is advocating in FTAA negotiations because Washington has only released a summary of its negotiating objectives. Draft FTAA texts remain secret. However, the U.S. summary proposals, along with the recently completed U.S.-Jordan free trade agreement (FTA), provide some insight into the positions for which Washington is lobbying. These include both the basic framework of the WTO's Trade-Related Aspects of Intellectual Property (TRIPS) and a series of ill-advised "TRIPS-plus" measures, which would require countries to adopt intellectual property rules that extend or grant new monopolistic patent and intellectual property claims and diminish the public's rights regarding intellectual property.

Perhaps the most worrisome U.S. initiative would directly limit the grounds for compulsory licensing. Under the U.S.-Jordan FTA, compulsory licenses to achieve a public health aim--even in case of a national emergency--can only be granted to "government entities or legal entities operating under the authority of a government." Under the more permissive TRIPS arrangement, by contrast, compulsory licenses could as a matter of course be granted to private parties for commercial, nonpublic use, so long as TRIPS procedures and rules, including payment of reasonable compensation to the patent holder, are obeyed. TRIPS contemplates compulsory licensing as part of the basic schema of the intellectual property system, not as a limited exception.

If the U.S.-Jordan FTA provisions are adopted as part of the FTAA, it would still be permissible for Argentina, say, to issue a compulsory license to procure lower-priced AIDS or cancer drugs for its public health service. But it would not be possible for a private Argentine drug company to obtain a compulsory license to make lower-priced AIDS or cancer drugs available generally on the market. The narrowing of scope for compulsory licensing would tend to make governments less certain about their authority to use this critical public health tool and more worried about facing domestic lawsuits from industry if they do attempt compulsory licensing--thus inhibiting action to advance public health interests.

A second troubling proposal contained in the U.S. summary of its negotiating objectives for the FTAA would link marketing approval for a drug--based on a finding of safety and efficacy (or bioequivalence to a safe and efficacious product) granted by U.S. Food and Drug Administration (FDA)-equivalent agencies--to patent expiration. Under the U.S. proposal, unless they were sure there were no patent claims on a drug, FDA-equivalent agencies could not grant marketing approval to generics.

There should be no linkage between marketing approval and patent term. If a generic company markets an on-patent drug without license, under TRIPS, the patent holder has adequate remedy under the law. Stated differently, linkage can only serve to protect invalid intellectual property claims since valid claims receive protection through normal judicial means.

A third TRIPS-plus proposal from the U.S. would create new restrictions on the use of "undisclosed" pharmaceutical test data, the study data submitted by drug companies to show that a product is safe and efficacious. To gain marketing approval, generic companies typically show that their product is bioequivalent to a patented product (that is, that the generic is chemically similar and works the same in the human body) and then rely on the patented product's safety data to earn approval.

In many instances, if a generic company cannot use the already-generated registration data, it will not introduce a generic version of the patented product. The price of generating the data may be too high or may take several years to replicate. If the company does choose to regenerate the data, consumers suffer from the delay in the introduction of the generic product that occurs while the generic firm reconducts the relevant tests.

In those countries that establish set terms for registration data exclusivity, the period of exclusivity typically runs shorter than the patent term. Thus, registration data protections are not normally an impediment to the introduction of generics. They are an issue, however, for new drugs that are not patent-protected or in cases of compulsory licensing. If a compulsory license is granted for a drug for which registration data exclusivities remain in force, the data exclusivity can block the generic from gaining marketing approval. An effective system of compulsory licensing must also permit the use of registration data, and this does not appear to be contemplated in the U.S. negotiating position, which seeks to establish for the entire hemisphere a minimum exclusivity period of five years for registration data. In contrast, TRIPS is quite vague on registration data, requiring protection of the data against unfair commercial use but imposing no clear mandates.

A fourth problem with the U.S.' negotiation position is that it calls for patent extensions to offset delays in marketing approval for pharmaceuticals. The result would again be extended monopoly protection for drug manufacturers and further gouging of consumers. TRIPS obligates member countries to grant 20-year patents. Those patents provide a two-decade monopoly on inventions. Patent terms seek to create a balance between providing incentives for inventors and enhancing the public interest by maintaining and promoting competition. The 20-year term manifests such a balance--albeit one tilted in favor of the corporate patenting sector--taking into account the known delays sometimes associated with marketing approval. Adding additional time to the patent term after a balance has been struck improperly favors patent holders.

Robert Weissman <[e-mail]> is the editor of Multinational Monitor magazine and a codirector of Essential Action, a corporate accountability group. He is also a co-author of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, ME: Common Courage Press, 1999; see http://www.corporatepredators.org).