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TPP Poised to Improve, Not Diminish, Health Outcomes Across Asia-Pacific Nations

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In a not-so-shocking revelation last week, a leaked draft of the Trans-Pacific Partnership (TPP) intellectual property (IP) chapter turned up the fact that…surprise…the United States is fighting for its domestic industries in a trade agreement.

No real news there, especially since that’s exactly what our trade representatives should be doing, namely bringing home the strongest possible deal that protects and creates jobs and fosters the kind of innovation that will secure 21st century prosperity for Americans. What is extremely disconcerting, however, is that special interest groups and the generic drug industry are lobbying for drastic cuts to intellectual property protections for innovative medicines that could have lasting consequences for both global patient health as well as U.S. jobs and economic competitiveness.

These groups are (wrongly) asserting that the IP provisions being negotiated in the TPP will weaken competition from generics and raise drug prices by establishing protections that go beyond U.S. law. But, as usually happens, groups that oppose free trade agreements never let minor inconveniences like facts get in the way of their arguments.

For instance, it’s telling when the head of one of the world’s largest generic drug companies distorts, confuses, or ignores the truth to score political points, as the CEO of Mylan did when claiming that “patent linkage” for innovative medicines constitutes “a recipe for indefinite evergreening of pharmaceutical monopolies.” Patent linkage simply means that a generic can’t be marketed until the patent of the underlying innovation expires, and ensures patents are not infringed upon. This is quite different from what critics refer to as “evergreening,” which involves the patenting of a new innovation related to an existing medicine, oftentimes consisting of improvements such as a more effective delivery system, smaller dosages, or fewer side effects. Again, critics ignore the fact that generic companies are free to market an innovative drug as soon as its original patent runs out.

Because the United States is a global leader in many of the industries being impacted by the TPP, from agriculture to automobiles to biopharmaceuticals, it stands to reason that other nations are trying to wrangle concessions. But free trade only works when there’s a level playing field among partners, and in the case of intellectual property the floor, or starting point, for any negotiation must be current U.S. law. The United States has one of the most sophisticated and forward-thinking IP regimes in the world. Not only should our partner nations aspire to such standards, but weakening them puts U.S. innovation at a disadvantage. Our IP ecosystem is a significant reason why the United States can lead the world in scientific discovery of new medicines yet still allow fierce competition from generics, which now comprise nearly 85 percent of all prescriptions written.

Yet according to an article in POLITICO last week, critics say the TPP could “dump trillions of dollars of additional health care costs on patients, businesses and governments around the Pacific Rim.” First, that’s not really the point. This would be like saying that TPP will dump costs on a nation because they buy U.S. exports. Moreover, as ITIF’s March 2015 report, The Imperative of Protecting Life Sciences Innovation In the TPP, points out, IP protections that foster innovative biologics and pharmaceutical drugs have the potential to pump trillions of dollars in savings into TPP countries’ health-care systems. For example, a 1 percent reduction in mortality from cancer would deliver roughly $500 billion in benefits, while a cure would deliver $50 trillion in present and future benefits. For Alzheimer’s, an effective treatment could save $220 billion in the first five years alone just in the United States. So rather than “dumping trillions of additional dollars in health care costs” the TPP is primed to create the conditions through which biomedical innovation can flourish throughout the TPP region, delivering trillions of dollars in health care systems savings.

Indeed, it’s not a coincidence that the United States, fielding one of the world’s best systems for rewarding risk and innovation by protecting intellectual property, leads the world in biomedical advancements. And with the promise of biologic drugs, which may help us find answers for some of the world’s most intractable diseases, now is the time to double-down on innovation, not stifle it by weakening global IP standards. It’s why the National Academy of Sciences and Engineering wrote, “It is critical that a balance be struck in finding an appropriate period of exclusivity such that innovation is stimulated and sustained but patients have access to generic drug pricing structures” and recommended that this data exclusivity period should be “at least 10 to 11 years.” Some researchers think that number should be even higher, up to 16 years. That’s why the U.S. Congress—on a bipartisan basis and after extensive deliberation—settled on 12 years and enacted that standard in the Affordable Care Act. And that’s precisely why the U.S. Trade Representative should continue to push for 12 years of data protection for biologics in the TPP.

Lastly, it’s important to remember that innovation doesn’t occur in a vacuum, and that the generics industry—which by definition could not exist but for innovators assuming the risks of developing novel new drugs—relies on innovative biopharmaceutical companies for its success. Striking the appropriate balance between allowing innovation to flourish and ensuring a healthy generics industry is at the heart of U.S. policy, and that should be reflected in the TPP. As U.S. Trade Representative Michael Froman recently noted, “I think what we’ve found around the world is that you only have generics if you have innovative medicines…. You have to have a pipeline of innovative medicines to feed the generic pipeline, which is critical to controlling health care costs in the United States and around the world.”

If the TPP is going to live up to its full promise, the United States cannot afford to back down from its positions on intellectual property issues at this point in the negotiations.

Photo credit: The World Bank

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About the author

Stephen Ezell is vice president, global innovation policy, at ITIF. He focuses on innovation policy as well as international competitiveness and trade policy issues. He is coauthor of Innovating in a Service-Driven Economy: Insights, Application, and Practice (Palgrave MacMillan, 2015) and Innovation Economics: The Race for Global Advantage (Yale, 2012). Ezell holds a B.S. from the School of Foreign Service at Georgetown University.