clock menu more-arrow no yes mobile

Filed under:

The TPP trade deal cracks down on Big Tobacco — but gives drug companies a pass

Riccardo Mayer/Shutterstock

After nearly eight years of negotiations, the United States and 11 other countries have finally reached consensus on the Trans-Pacific Partnership, the biggest US trade deal since the 1990s.

On Thursday, the full text was finally published online. The sprawling deal would affect a variety of issues, including tariffs, labor rights, and international investment. But some of the deal's most controversial provisions had to do with health.

Critics worry that while the deal may be good global trade, it's going to be bad for public health. Specifically, they say the TPP is going to drive up the cost of medicines, make it harder for companies to bring cheaper, generic versions of drugs on the market, and make it easier for pharmaceutical (and food or other health) companies to sue governments for regulations that are bad for business.

1) New rules will reduce competition and raise prices in pharmaceuticals


This map from the Congressional Research Service shows the countries that are expected to join the TPP and the volume of US trade with each of them.

The pharmaceutical industry has lobbied hard for rules that would limit competition in the drug market, arguing that stronger protections were needed to allow drug companies to finance research and development. Those provisions have raised the ire of public health groups, which say that making drugs more expensive will deny millions of people access to potentially lifesaving medicine.

There are two specific ways the TPP would make drugs more expensive and inaccessible.

First, by allowing companies easier access to patent extensions for medicines: Every country has systems for granting patents to the first company to invent a drug — a reward for innovation. After these expire, other companies can apply to get their cheaper "generic" copies of these drugs on the market.

At the moment, it's up to countries to decide whether a small change in a drug molecule should warrant a patent extension. But the TPP mandates that governments consider extending patent terms beyond the usual 20-year term — a provision that is expected to limit a country's ability to define its own patent law and delay when generic drugs can become available.

Here's how that could work in practice. Let's say a pharmaceutical company holds a patent for a particular drug, which it filed seven years ago, and it wants to bring that drug to the Food and Drug Administration for approval for market. Jing Luo, a Harvard-affiliated doctor who wrote about the agreement in the journal JAMA, explained that patents for products usually last 20 years, which means that the company would have 13 years left on its patent at that point. If the FDA sits on the company's approval application for another four years, the company can file for a patent extension for the time lost waiting for the health regulator to rule on its application. The company would win if the FDA's delay were considered an "unreasonable curtailment of the effective patent term."

This kind of patent-term extension didn't exist before, and public health advocates like Judit Rius Sanjuan of Doctors without Borders worry companies will use the new levers to extend patent exclusivity. For example, Doctors Without Borders is currently working to get generic versions of HIV/AIDS treatments into South Africa, where a patent barrier is keeping them out. As a result, drugs are more expensive there, and there are few alternatives when certain treatments are in short supply. If generics were allowed to enter the South African market, more affordable medicines could flow into the country, improving both access and supply for patients and doctors. Under the TPP, she expects more countries will face such shortages.

tpp protest

An anti-TPP protest on March 20, 2015, in Miami, Florida. (Joe Raedle/Getty Images)

Second, through new data exclusivity protections for biologic drugs: When new drugs are created, companies perform clinical trials to test whether they are safe and effective for use in human beings. This data is submitted to regulatory authorities like the FDA when companies want to get their drugs approved for market.

The question of how long companies can keep this data secret, particularly with respect to biologic drugs, was one of the major sticking points in the negotiations.

Biologics are treatments made from biological sources, as opposed to chemicals that were synthesized in a lab. They're more difficult and expensive to make, costing on average 22 times more than non-biologic drugs.

Because of the high prices of these drugs, companies are very interested in developing "biosimilars" — cheaper copies of the original drugs, like generic versions of pharmaceuticals. The reason these biosimilars are so cheap is that manufacturers can usually just rely on data from clinical trials submitted by the maker of the original biologic. But, of course, the maker of the original drug doesn't want everyone using its data and making cheap knockoffs.

To prevent this, US law gives the maker of a biologic drug 12 years of data exclusivity. The FDA can't approve a similar drug that relies on the original data during this time. (Theoretically, other companies could conduct their own trials to create a biosimilar, but because this is so expensive, they rarely do.) By contrast, in other countries, there are looser rules — or no rules — around such data exclusivity. Japan offers eight years, for instance. Brunei offers zero.

The United States (and big pharmaceutical companies) had been pushing to get every country to agree on 12 years of data protection for biologics. The final agreement didn't go that far: Biologics data will be protected for at least five, and in some cases at least eight, years.

This means the agreement will prevent more affordable biosimilars from entering the market for a longer period of time in places that previously had no bar to entry. (The US data protection will stay the same, since the current 12 years falls in line with the "at least" five or eight years clause.)

The burden of this new law will be felt by the world's poorest countries, according to Rius Sanjuan. "It’s a catastrophe for the developing countries," she said. Many of the countries in the agreement had zero monopoly protection on data for biologics, and under the TPP, they'll have to wait at least five years before allowing cheaper biosimilars to reach patients.

Luo also explained that this type of barrier "never occurred prior to the TPP" and noted that the reason these protections were put in place originally was to encourage new products to come to the market and protect them for as along as possible. On the other hand, after that period of exclusivity, the public could benefit from the widespread availability of generic medicines. With the TPP, Luo thinks that balance — between protecting companies' interests and protecting public health — is out of whack.

"I'm worried that the agreement is very strong in terms of intellectual property protection for medicines — and it was developed without consultation with the public sector," he said. "As I read the agreement, it seems to be motivated by corporate interests and interest to expand economies. Often public health concerns take a back seat."

2) The TPP could make it easier for companies to fight domestic regulation


International agreements decades ago created quasi court systems that let multinational companies push back when they felt their investments in countries were being undermined.

Critics say the TPP's provisions, related to these investor-state dispute settlements (or ISDS), will make it easier for foreign companies to challenge laws in member countries that they feel cut into their profits.

"These investor-state dispute settlement provisions have very broad definitions about the kinds of things investors can object to — not just expropriation but regulations of all kinds," Amy Kapczynski, who wrote about the deal's health impact in the New England Journal of Medicine, told Vox when a version of the chapter was leaked in the spring.

Tobacco companies, for example, have used similar provisions to push back on a variety of anti-smoking policies in countries like Uruguay and Australia. And because of that, the final TPP agreement allows countries to ban tobacco companies from using these private tribunals for that purpose.

The text also includes other protections in chapters beyond the ISDS. In the expropriation annex, for example, the text reads: "Non-discriminatory regulatory actions by a [country] that are designed and applied to protect legitimate public welfare objectives, such as public health, safety and the environment, do not constitute indirect expropriations, except in rare circumstances."

But that doesn't mean companies won't take to these private tribunals to fight policies on everything from soda taxes to drug pricing rules that they argue are bad for business, said Deborah Gleeson, an Australian public health researcher who has analyzed the TPP. "While [the safeguards] appear to protect public health and the environment, they leave a big loophole for corporations to exploit, in launching an ISDS case arguing that their circumstances are rare."

3) Companies have more rights to challenge government decisions about drug and medical device reimbursements

Trade representatives attend an October 2014 TPP press conference in Sydney.

Trade representatives attend an October 2014 TPP press conference in Sydney. (Peter Parks/AFP/Getty)

A big theme in the agreement is transparency. And part of the "transparency annex" mandates that countries give drug and medical device companies more rights to monitor and challenge government decisions on drug reimbursements, explained Jamie Love, director of the NGO Knowledge Ecology International. (Reimbursements are the prices insurance companies or governments agree to pay drug companies for their new products.)

"The TPP includes a bunch of provisions that say you have to give all kinds of information to the drug companies that sell drugs or medical device makers that seek reimbursement for government agencies," he added. "They can harass agencies if they don't accept a price that they like."

Love said this means that countries will now be required to justify why they decided to pay $7,000 per month for a reimbursement of a specific cancer drug, as opposed to the $12,000 the company was looking for — a burden he expects will drive up the cost of drugs.

4) There are loopholes that empower countries to fight against corporations that undermine health — including anti-tobacco provisions

The Obama administration was aware of criticisms from the public health community, and the agreement includes some provisions that — according to the White House — limit the power of large drug companies. For example, the intellectual property chapter "confirms that [countries] are not prevented from taking measures to protect public health," according to the White House.

Language in the "exceptions chapter" also gives countries flexibility to "regulate in the public interest, including for a [country’s] essential security interest and other public welfare reasons."

One of the strongest public health wins probably came with the tobacco exception under the "investor-state dispute settlements" section. Again, tobacco companies have been fighting local governments that enact laws they don't like. (Famously, in 2012, US tobacco company Philip Morris sued Australia from its headquarters in Hong Kong — under a Hong Kong–Australia state-investment treaty — after the country enacted a law that required companies use only plain cigarette packaging.)

Under the new law, countries in the TPP can "deny the benefits of Investor-State dispute settlement with respect to a claim challenging a tobacco control measure of the [country]," the White House said.

But how well all of this works in practice, particularly in countries with limited resources to fight multinational corporations, remains to be seen, Love said.

"It’s one thing to be able to sue Australia from Hong Kong," he said. "But it's another thing to be able to sue anybody in the TPP. The [investor-state dispute settlement] provision will bring [these litigation strategies] to a whole different level."

Gleeson also felt the tobacco exception is too limited. "It’s optional rather than an absolute carve-out, so countries can elect to deny the right to use ISDS to challenge tobacco control measures," she said. "And it only applies to ISDS, not to other parts of the agreement or to the state-to-state dispute settlement process. So we could still see the sorts of legal challenges that Australia is facing from other countries over tobacco plain packaging through the World Trade Organization’s state-to-state dispute settlement process."

So the question becomes whether there is any language that would make these public health researchers and advocates feel safe. And with nearly half the world's economy and many millions of lives at stake, it's possible the answer is no.