Drug Patents Still At Issue In U.S.-Central America Trade Deal

Washington, D.C.–The free trade agreement signed last year by the United States, five Central American nations and the Dominican Republic still faces a tough fight in the U.S. Congress for a number of reasons, one of which remains provisions on the treatment of pharmaceutical patents.

Guatemala recently responded to U.S. government and industry pressure by undoing a law allowing quicker access to pharmaceutical test data for its generics manufacturers, which is necessary for obtaining a marketing license in a country. This cleared the way for the Bush administration to send the agreement to the U.S. Congress for a vote, which it has not yet done.

Proponents of the agreement had said that the Guatemalan law was a reason for the delay in sending the agreement to Congress. Now opponents of the pharmaceutical patent provisions in the agreement are trying to make the provisions an issue for members of Congress who will likely be faced with a vote in the coming weeks or months. Bush administration officials decline to say when they will send the bill to Congress, but sources say they are still lining up votes and continue to aim for the end of May.

The Senate Finance Committee has scheduled a hearing on the agreement for 13 April. The other congressional chamber’s responsible panel, the House Ways and Means Committee, is mum on the subject of a hearing. Hearings are the first step in the process toward a congressional vote.

U.S. industry sources have argued that failure to pass the U.S.-Dominican Republic-Central American free trade agreement (DR-CAFTA) in the United States could have broader global implications for free trade, possibly hurting trade-liberalisation talks at the World Trade Organisation.

In a recent congressional staff briefing, Stephanie Weinberg of Oxfam countered the assertion that WTO talks may not move if DR-CAFTA does not get through Congress. Weinberg argued that the opposite may be true, that the United States’ pursuit of agreements with intellectual property provisions disliked by developing countries could hurt progress at the global level. She said the issue is better discussed at the WTO than in bilateral agreements.

The U.S. government reacted strongly to Guatemala’s passage in December of a law that shortened the time to access the test data of the drug patent-holding companies. The data is needed to market a product in the country. U.S. officials and others suggested Guatemala’s move ran contrary to the terms of the agreement signed last June.

USTR Addresses IP Concerns

Opponents to the DR-CAFTA are raising a number of intellectual property-related concerns, such as why it is necessary to include test data protection in agreements with smaller countries where they have not been recognised before.

A U.S. trade official said in a 29 March interview that this protection has been included in U.S. agreements with countries of all sizes reaching back to the 1994 North American Free Trade Agreement, which included Mexico and Canada. The official added that the statement that protection will last “at least” five years is typical for terms of protection in agreements and is not intended to open the door to an extension of protection within the United States in the future, which says simply five years. He said that some countries, like those in the European Union, have protection for six to ten years though they do not include it in their trade agreements but rather in the World Trade Organisation negotiations.

Another concern is that the test data protection provision could override countries’ ability to exercise their right to use compulsory licenses to provide greater access to necessary medicines for their populations, as stated in the 2001 Doha Declaration on TRIPS and Public Health.

The U.S. official said inclusion of the data protection provision is in essence a codification of Article 39.3 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which requires protection of pharmaceutical and agricultural chemical data from “unfair” commercial use. But he said U.S. agreements do not specifically address all of the flexibilities provided countries under TRIPS, like parallel imports (allowing imports of cheaper drugs) and compulsory licensing, or the ability to determine what constitutes a national emergency. These flexibilities are understood to apply, as are those enumerated in the Doha Declaration, he said. The side letters that accompany recent agreements, in which the Office of the U.S. Trade Representative (USTR) states that it will not interfere with a country’s ability to act in the public health interest, are merely interpretive notes.

USTR argues that the data protection rules are an incentive for early launch of innovative medicines. The official addressed a charge made by a Jordanian official at a recent Washington event that the data protection provision has brought mostly increased investment in marketing and sales of foreign-produced products. “What we’ve seen demonstrated in the case is an actual incentive for early launch of the latest medicines,” he said.

An additional concern raised in the negotiations with Morocco was about restrictions on parallel imports, and the trade representative’s office assured Congress that it would consider these restrictions on a case-by-case basis in future agreements. Democrats accepted the explanation and voted for the agreement last year, but are concerned that the restrictions will reappear. The official said U.S. negotiators prefer to include restrictions on parallel imports in agreements if the other country agrees to it, as Morocco did in its bilateral agreement.

Another concern is that USTR might be asking developing countries not to include the equivalent of the so-called Bolar amendment in U.S. law, which allows competing companies access to patented information about a drug before the rights expire. Under U.S. law, a company has exclusive right to its test data for five years, after which additional applicants can offer competing products if they show their product is bioequivalent, that is, it has the same chemical composition and performance quality.

The text of the DR-CAFTA does not preclude countries from passing such a provision on their own. The official insisted that U.S. negotiators do not pressure countries in negotiations to omit a Bolar amendment equivalent but said that it must be up to them to pass it on their own, in the same way they would choose to exercise other flexibilities like compulsory licenses or parallel imports.

In Congress, the opposition effort is seeking to appeal to “people who favour trade who don’t think we ought to foist standards on countries that are not favourable to them,” a House Democratic aide said in mid-March. It may be having some effect, he said, adding, “They’re definitely not close to having the votes.”