Final negotiations for the most important international trade deal of the century have just hit a snag. Earlier this month, officials from a dozen major and emerging economies, including the United States, Japan, and Malaysia, descended on Honolulu, Hawaii, to hammer out the key remaining details of the Trans-Pacific Partnership. Over half a decade in the making, the TPP will streamline commercial channels throughout the Asia-Pacific region, binding countries with a combined annual economic output of $28 trillion, or roughly 40 percent of the total global GDP.
These most recent talks did not exactly go as planned. Negotiators hit an impasse and broke off discussions early. One of the key points of contention was the strength of intellectual property statutes governing advanced pharmaceutical drugs. Australia, one of the most influential TPP partner nations, is calling for weakened protections — and America is leading the charge for strong ones.
We’re right, and the Australians are wrong — dangerously so. By instituting robust intellectual property protections, the TPP will set the groundwork for decades of life-saving medical innovation. If these protections aren’t long enough, drug research could grind to a halt, depriving patients all over the world of new cures and treatments.
The specific protections under discussion relate to “biologics,” an emergent class of advanced drugs derived from living organisms. Biologics are much more sophisticated than standard, chemical-based drugs. And that sophistication makes them more effective, particularly in the treatment of traditionally difficult to combat diseases like HIV/AIDS and cancer.
Biologics are subject to traditional patents. But those rules alone aren’t sufficient. Biologics are so complex that it is possible for an outsider generics firm to produce a version of a popular original biologic that is just different enough to avoid a patent violation but similar enough to have the same medical effects — and thus compete for the same base of customers.
That’s why international law also affords biologics what’s known as “data exclusivity.” This rule prevents generic companies from accessing the research behind a brand-name biologic. Without that data, these companies can’t even make rough copies. And the original innovator is effectively afforded market exclusivity.
It’s immensely important to get the length of data exclusivity right. Research from Tufts calculates that it costs over 2 billion dollars to bring a new biologic from the lab to market. It’s a long, time-consuming, and extremely expensive process.If exclusivity is too short, biologic inventors will face generic competition well before they’ve had the opportunity to make up that huge upfront expense in sales. Many companies will scale back on investments into new drug lines, leading to fewer new breakthrough biologics.
Researchers at Duke University conducted a wide-ranging meta-study evaluating all the existing research into the proper length of data exclusivity. They found that, for the average drug, 12 years of exclusivity is sufficient for the original producer to get back into the black.
Sure enough, American negotiators are calling for 12 years of exclusivity in the TPP.
Australia does have a domestic data exclusivity statute — but it lasts only five years. That country’s officials are pushing back against the Americans because they worry that setting exclusivity any longer will prevent lower-cost generics from hitting the market. Patients in TPP partner countries, they claim, will be needlessly forced to rely on high-priced brand name biologics.
Yet, Australia’s own history shows that strengthening intellectual property provisions for medicines through trade deals does not drive up prices. Australia signed a trade agreement with the United States to this effect in 2005, and in the years since, the cost of medicines as a percentage of GDP and healthcare spending overall have remained consistent — and price inflation has, in fact, declined.
At a recent public appearance, Andrew Robb, Australia’s trade minister, reiterated that he would not give an inch on his demand for capping TPP data exclusivity at five years. Mr. Robb didn’t even attempt to address the arguments that such a provision could devastate drug innovation. He just insisted and then made a vague threat that if the final details weren’t sorted out soon, “chances are [TPP] will fall apart.”
This is a foolhardy position. Let’s hope Mr. Robb does finally familiarize himself with the facts and embrace the robust data exclusivity required to keep the life-saving work of biologic development humming along.
Andrew Langer is president of the Institute for Liberty, a non-profit organization dedicated to defending individual rights. Thinking of submitting an op-ed to the Washington Examiner? Be sure to read our guidelines on submissions.
