Trans-Pacific trade pact faces rocky road

Early in February, the U.S. joined other members of the Trans-Pacific Partnership (TPP) to sign the largest regional trade agreement in history. The pact, five years in the making, aims to break down trade barriers between a dozen countries that collectively produce an estimated 40% of the world’s economic output.

But before the agreement can take effect, it must be ratified by at least six countries that account for 85% percent of the combined gross domestic production of the 12 TPP nations—Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the U.S. and Vietnam.

It’s widely anticipated that the larger economies in the TPP will wait to see what happens in the U.S. before approving the deal. But TPP faces a rocky road to congressional ratification. A vote might not occur until after the presidential election in November.

Despite support from many U.S. business groups, including the American Chemistry Council, the chemical industry’s main lobbying arm, numerous roadblocks stand in the way of congressional approval. One of the biggest is pushback by the pharmaceutical industry and consumer groups who are disappointed over TPP’s intellectual property (IP) protection for brand-name biologics, a new generation of drugs used to treat conditions including asthma and cancer.

Biologic medicines differ from most prescription drugs in that they are made from living matter, such as human cells, instead of through chemical synthesis. Unlike chemically synthesized pharmaceuticals, whose generics are a copy of the original, generic versions of biologics, called biosimilars, aren’t exactly the same due to differences in the way the products are manufactured. Because of this, patent protection is less effective for biosimilars than it is for chemically synthesized drugs.

In the U.S., biologics are protected from competition with lower-cost biosimilars for 12 years from the time the Food & Drug Administration approves them for marketing. A four-year period of “data protection” prevents biosimilar makers from relying on the innovator’s clinical trial data to secure regulatory approval, while the remaining eight years provide market exclusivity.

U.S. drug manufacturers, who have set their sights on emerging markets abroad, hoped the TPP agreement would require 12 years of market protections for biologics. But other nations have adopted a wide range of approaches. Australia, New Zealand, Singapore, and Chile offer five years of protection, Japan and Canada eight years, and several TPP countries—Mexico, Peru, Vietnam, Malaysia and Brunei—have no protection.

Consequently, U.S. negotiators faced stiff opposition and ultimately agreed to a compromise on the length of market exclusivity for biologics. The deal allows the U.S. to keep its current 12-year standard. Each of the other TPP countries can choose to adopt a protection period of at least five years but no more than eight years.

Australia, which led the charge against the U.S. position in the negotiations, was unwilling to offer more than five years of protection for biologic medicines. A longer term would increase the cost of Australia’s government-subsidized medical program.

The outcome on biologics protection in TPP greatly disappointed U.S. drug manufacturers. They argue that it costs nearly $1.2 billion to develop a biologic and between 12.9 and 16.2 years to recoup this investment.

“We have serious concerns that the regulatory data protection period for biologics in the TPP falls far short of what is necessary to continue the cycle of innovation that will lead to the breakthrough medicines of the future,” says Stephen J. Ubl, chief executive officer of the Pharmaceutical Research & Manufacturers of America, which represents brand-name drug companies. The 12-year U.S. model, Ubl says, “should have been the standard set in the TPP in order for the agreement to foster more cures and treatments for patients around the world.”

The refusal of other TPP countries to agree to a similar length of IP protection for biologics is “remarkably short-sighted,” says James C. Greenwood, CEO of the Biotechnology Innovation Organization, an industry trade association. “It has the potential to chill global investment and slow development of new breakthrough treatments for suffering patients.”

In contrast to industry, humanitarian organizations and consumer advocates warn the pact will harm public health in poorer countries by delaying patients’ access to affordable biosimilars.

“TPP will go down in history as the worst trade agreement for access to medicines in developing countries, which will be forced to change their laws to incorporate abusive intellectual property protections for pharmaceutical companies,” says Judit Rius Sanjuan, U.S. manager and legal policy adviser to Doctors Without Borders

Burcu Kilic, policy director for Public Citizen’s global access to medicines program, says the “monopolistic pharmaceutical industry has won a lot with the TPP, at the expense of people’s health. They should stop crying crocodile tears.”

Whether the current GOP-controlled Congress will agree to the trade deal is far from certain. Republican leaders, who have supported free trade agreements in the past, are lukewarm at best toward TPP.

Neither Speaker of the House Paul D. Ryan (R-Wis.) nor Senate Majority Leader Mitch McConnell (R-Ken.) has endorsed the pact. And both say that complaints about the agreement will have to be addressed.

In addition, Sen. Orrin G. Hatch (R-Utah), who chairs the Senate committee that oversees trade, has vowed to oppose the TPP agreement for failing to grant biologic drugmakers an adequate shield from generic competition. “Unfortunately, I am afraid this deal appears to fall woefully short,” Hatch says.

He has gone so far as to call for the agreement to be renegotiated. “The alternative to renegotiation may very well be no TPP at all,” Hatch declares.

There is also opposition from congressional Democrats. In addition to concerns over TPP’s worker rights protections and provisions that allow foreign companies to sue a government over environmental regulations that impinge on their profits, some Democrats contend the pact will drive up global drug costs. TPP’s chapter on intellectual property “confirms some of the worst fears of health care advocates,” says Rep. Rosa DeLauro (D-Conn.). “You can freeze cheaper generic drugs out of the market.”

Under the terms of “fast-track” legislation Congress passed last year, lawmakers can ratify or reject TPP, but they cannot amend it. Obama Administration officials insist they will not renegotiate the pact.

However, Hatch and other pro-trade GOP lawmakers could exert pressure on the Administration to negotiate side deals with each of the other TPP countries to address the length of IP protection for biologics as well as other controversial issues. “There is no way TPP will pass without some significant accommodations on the biopharmaceutical side,” says Brian A. Pomper, a partner at law firm Akin Gump Strauss Hauer & Feld LLP.

U.S. Trade Representative Michael B. Froman has acknowledged the lingering concerns of the business community. Froman says he is confident that lawmakers will approve the TPP pact once they understand “the benefits for their constituents.”