US-Peru Trade Deal The First Test Of Renegotiated IP Provisions

By Martin Vaughan for Intellectual Property Watch
The United States House of Representatives is poised to pass the US-Peru free trade agreement this week, in the first test of the new “bipartisan trade policy” that led to the renegotiation of trade agreements with Colombia, Panama, Peru and South Korea.

The Peru pact includes new provisions that congressional Democrats negotiated with the Bush administration with the aim of increasing access to generic medicines, carving back some protections for patented drugs that have been included in US bilateral trade agreements to date.

The House Ways and Means Committee approved the US-Peru deal in a 39-0 vote on 31 October, and the legislation is expected to pass the House comfortably, though not without opposition from more liberal Democrats. Lobbyists and congressional aides predict that as many as half of all House Democrats will vote against it.

The trade pact is being considered under fast-track rules, meaning it cannot be amended and it must be considered within a set timeframe. After House action on the Peru deal slated for Wednesday (7 November), the Senate is very likely to pass the legislation before it adjourns in mid-December. [Editor’s Note: the agreement, HR 3866, passed in the House by a vote of 285 to 132 on 8 November.]

Changes to intellectual property provisions have not been much of a factor in the House debate on the Peru agreement, where opponents have focused on worker rights and economic conditions in the United States. House Democratic leaders say the revised trade agreement represents significant progress in prodding trading partners to abide by internationally-recognised protections for workers and the environment. Opponents argue that it is just one in a series of trade deals that have heaped job losses on the US manufacturing sector, and that the Bush administration cannot be trusted to enforce its new labour and environmental provisions.

US-Peru Restores Some Flexibility on Health

House Government Reform and Oversight Committee Chairman Henry Waxman, a California Democrat and a frequent critic of Bush administration trade policies with respect to IP, announced his support for the Peru agreement in a “Dear Colleague” letter on 5 November. “The revised Peru FTA restores much of the flexibility needed to protect public health,” Waxman wrote.

Negotiations between congressional Democrats, their Republican counterparts, and the Bush administration led to agreement this summer on new language to be added to the four trade agreements in the areas of labour, the environment, investment and intellectual property rights. Over the objections of brand-name pharmaceutical firms, the White House signed off on changes in several key areas related to protection of innovative products (IPW, Bilateral/Regional Negotiations, 17 May 2007).

The agreement drops a requirement included in previous US bilaterals that countries compensate patent holders for delays in the marketing approval process by extending patent periods. For other products, the agreement states that Peru “shall” extend patent terms to compensate for those delays. But in the case of pharmaceuticals, it states only that Peru “may” provide such compensation.

It also loosens data exclusivity requirements that name-brand drug firms say they rely on to protect their IP in markets where patents are hard to obtain or poorly enforced. The Peru agreement retains the boiler-plate language that Peru protect clinical test data for a “reasonable period” of five years after an innovative product has entered the market. But it stipulates that the five-year period must not extend beyond the data exclusivity period in the United States.

Besides those changes, Peru and the US agreed to incorporate into the text of the agreement a side letter stating that nothing in the agreement impedes a party’s ability to protect public health, and use the flexibilities in the World Trade Organization Doha Declaration on TRIPS and Public Health. TRIPS is the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights.

Those changes were also added to trade agreements with Colombia and Panama. They were not added to the US-South Korea trade deal, in recognition of South Korea’s more advanced level of economic development.

Other key intellectual property provisions of the Peru agreement include a requirement that Peru set up an online registration system for trademarks, and beef up enforcement against copyright piracy, according to US trade officials. It includes language recognising biodiversity and traditional knowledge, and stipulates that parties shall make “all reasonable efforts” to recognise patents on plant varieties. That includes an anti-backsliding provision to ensure that once patent protection for plants or animals is provided, it must be maintained.

The opposition of brand-name drug manufacturers to the new patent language has had some impact in the Senate, where two GOP members of the Finance Committee cited weaker intellectual property provisions as one reason they voted against the Peru deal in a 21 September markup of the bill.

“They want our taxpayers to fund billions of dollars in innovative research and then take it from us for free,” Utah Republican Senator Orrin Hatch said of US trading partners during that markup. Sen. Jon Kyl, R-Arizona, also voted against the pact. The 21 September vote was non-binding. The formal vote on Peru took place on 5 October, where the agreement was approved by voice vote.

But the Peru deal is expected to easily gain majority support in the Senate. Further congressional action on trade deals with Colombia, Panama, and South Korea will be delayed until next year at the earliest. But each of those agreements faces obstacles that make it unclear whether any will be approved before Bush’s tenure ends in January 2009. The US-Colombia agreement is strongly opposed by labour unions, and US beef producers and automakers are fighting the South Korea pact. Meanwhile, a diplomatic imbroglio involving the election as head of Panama’s national assembly of Pedro Gonzalez – who is wanted in the United States for the 1992 killing of a US soldier – has stalled that agreement.

GAO Finds US Trade Policy Rubs Public Health

Meanwhile, Waxman and Sen. Edward Kennedy, D-Massachusetts, last week released a report by congressional researchers that found that US trade negotiators have shown only limited flexibility on drug patent protections since Congress made “respect for the Doha Declaration” a negotiating objective in 2002 fast-track trade legislation.

“Other than making concessions on compulsory licensing and parallel importation provisions, and on side letters that state that the IP chapter does not affect a country’s ability to take necessary public health measures, USTR has not changed its uniformly high demands with regard to IP protection in its FTAs,” the report concluded.

GAO also found that internal Bush administration discussion of IP provisions in free trade agreements did not include an examination of the public health impact of those provisions. “Regrettably, the US trade strategy has prioritised patents over public health,” Waxman said in a statement.

A USTR spokeswoman called the GAO report “generally balanced and fair.” She added, “USTR believes that strong IPR protection and support for enhancing access to medicines are objectives that can and should be pursued together.”

Medical Innovation Prize Fund Bill Introduced

In related news, Sen. Bernie Sanders, an Independent from Vermont, last month introduced legislation to replace the current system of rewarding innovation by exclusive marketing rights to patent holders, with a system of cash prizes paid from an $80 billion per year innovation fund. The bill would allow generic competition for new drugs immediately. Prize amounts would be proportionate to the degree of health benefits delivered by a particular invention, as estimated by the managers of the “Medical Innovation Prize Fund.”

Martin Vaughan may be reached at info@ip-watch.ch.