Trans Pacific Partnership and Intellectual Property Protection

On July 31, trade ministers from countries (including the U.S.) seeking a final draft of the Trans Pacific Partnership (TPP) went home from Maui disappointed. Negotiations got hung up on a few things, especially intellectual property protection (patents) for pharmaceuticals.

The policy associated with the TPP that has been most controversial within the U.S. is Trade Promotion Authority (TPA or “Fast Track”). TPA is not a features of the treaty itself, but an entirely domestic policy defining the power of the Senate to ratify the agreement signed by the President’s men.

At NCPA, we were concerned that giving President Obama fast track authority would result in a poorly negotiated agreement, without adequate protection for intellectual property rights – the fuel of innovation. Congress went ahead and gave the president TPA, so all we can do is wait until we see what comes out of the hitherto confidential discussions.

There have been some positive signals that the administration is standing up for strong intellectual property rights. If that is why the negotiations broke up without a final agreement, then we should be glad to take a breather until other countries recognize the value of pharmaceutical patents like the U.S. does.

Just look at how Time reported the logjam:

At issue in TPP negotiations is when cheaper generic forms of new drugs can come to market, or when that exclusivity ends. In the U.S., that timeframe is about 12 years, but most countries involved in negotiations want it to be shorter—eight years or less, though Australia is insisting on five. It makes sense that the U.S. wants the longest period of exclusivity; of the ten largest pharmaceutical companies in the world, six are based in the US.

Hmm: Doesn’t that signal that strong intellectual property rights are important for a successful research-based pharmaceutical industry?

What is curious is that Australia, a highly developed country, is one of the parties most hostile to strong intellectual property rights for pharmaceutical innovation. Australian negotiators are concerned that an agreement would threatened the government’s ability to centrally dictate prescription drug prices.

Not so, according to a report by the Institute for Policy Innovation. Discussing price changes for prescription drugs since the 2003 negotiations for the bilateral Australia-U.S. free trade agreement:

According to Australia government data, the Pharmaceutical Benefits Scheme did not experience significant increases in spending in the years since the passage of the Australia-U.S. FTA.  From the implementation of the Australia-U.S. FTA in 2005, PBS spending remained stable at an average growth of 5.48 percent per year, which was below the 6.9 percent growth rate in overall healthcare spending.

Moreover, Australia spends around 1.25 percent of its GDP on medicines, compared with an average OECD rate of 1.5 percent.

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