The Big Deal About Biologics

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The United States is attempting to expand monopolies on medicines in the Trans Pacific Partnership. Deborah Gleeson and Ruth Lopert explain why Australia must stand firm.

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Talks intended to finalise the Trans Pacific Partnership (TPP) Agreement wound up in Hawaii at the end of July without reaching a final deal. Over the last five years, 12 countries – Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam – have been involved in negotiations over the agreement which will cover trade and investment for 40% of the global economy.
This is not the first time the conclusion of the agreement has been delayed - the TPP negotiations have already missed several deadlines, including those set for 2012 and 2013.
But delays are hardly surprising given the span of controversial and politically sensitive issues involved. The agreement is not just about trade liberalisation and tariff elimination, but strays into many other critical policy areas – many of which directly or indirectly affect health. A health impact assessment of the TPP conducted by a group of Australian academics and non-government organisations found the potential for negative effects on the costs of medicines, tobacco control, alcohol policy and food labelling.
Despite the setback in Hawaii, there is likely to be a strong push to sort out the remaining issues in August. According to Australia’s trade minister Andrew Robb, the agreement is already 98% complete – once a few inconvenient differences over agricultural products and car parts are resolved, the rest can be quickly wrapped up.
Or can it? As in many things, timing is everything. Come the end of August, the Canadian and US election cycles will make further progress in concluding the agreement next to impossible. And one of the most highly charged matters negotiators will be trying to resolve over the coming weeks is intellectual property protections for medicines.
Over the next few weeks, Robb will be under intense pressure to renege on the government’s oft-repeated commitment to reject anything in the deal that could undermine the Pharmaceutical Benefits Scheme (PBS) or increase the cost of medicines for Australians.
Throughout the negotiations, the US has sought to extend and expand intellectual property protections for medicines in a variety of ways. These include (among others) expanding the scope of patentability to include new forms and new methods of using existing products, extending the term of patents beyond 20 years, and preventing regulatory agencies from aproving generics where there is a patent on the original product.

The US push has been so aggressive Mèdecins sans Frontiéres has warned that: 'Unless damaging provisions are removed before negotiations are finalised, the TPP agreement is on track to become the most harmful trade pact ever for access to medicines in developing countries.'

 

Data exclusivity

While some of the intellectual property provisions in the most recent leaked draft of the TPP’s intellectual property chapter are consistent with current Australian domestic law, there are a number others for which the US is pushing for obligations that go well beyond our current settings. This is particularly the case in relation to ‘data exclusivity’ for biologics, products derived from living organisms.
Biologics include many new and very expensive medicines in immunology and oncology, such as Keytruda, a melanoma drug recently listed on the PBS. Without the PBS subsidy, it would cost over A$150,000 to treat a patient for a year. Soliris, a drug listed in 2014 for Atypical Haemolytic-Uraemic Syndrome (a rare auto-immune disease), comes with the astronomical price tag of A$500,000 per patient.
Data exclusivity refers to the period during which clinical trial data submitted to a regulatory agency as part of an application for marketing approval of a medicine may not be relied on to support the subsequent marketing approval of a follow-on generic or biosimilar product. It’s an entirely different type of monopoly protection to a patent and importantly, unlike a patent, can’t be revoked or challenged in court.
Section 25a of Australia’s Therapeutic Goods Act 1989 provides for five years of data exclusivity for all medicines. It makes no distinction between biologics and other drugs.
The powerful biopharmaceutical industry lobby in the United States is seeking 12 years of exclusivity for biologics, as currently applies in the US. This is despite President Obama calling for a reduction in the period from 12 to seven years, and a 2009 analysis by the US Federal Trade Commission taking the view that no period of data exclusivity was needed at all.
Facing intense and consistent opposition, in Hawaii the US Trade Representative fell back to a ‘compromise’ of eight years. While this was heralded as a new level of ‘flexibility’ in the US position, in reality it remains a significant extension of intellectual property rights in most TPP countries, who, with the exception of the US, Japan and Canada, currently have either five or zero years of data exclusivity for biologics.
 

Good reasons not to budge

Thus far, the Australian delegation has apparently maintained the position that it will not go beyond existing domestic law. And just days before the talks broke up, the trade minister indicated in an interview on ABC Radio National that he didn’t see the sense in accepting a longer monopoly for biologics.
Three factors are likely to be contributing to this resolve. First is the direct costs of extending monopoly protections on biologics. These are likely to be tens, and even hundreds of millions of dollars a year in the short term, and could increase exponentially as the longer period of data exclusivity extends beyond the expiry of patents on biologics already listed on the PBS.
In a submission to the Department of Foreign Affairs and Trade in 2014, we showed that if biosimilars had been available for the 10 most expensive biologic products listed on the PBS in the 2013-14 financial year, $205 million in PBS subsidies would have been saved, simply by virtue of the 16% statutory price reduction that is triggered when the first biosimilar version of a product is listed on the PBS. Savings in subsequent years would have been even greater, as more competing products entered the market and PBS price disclosure mechanisms kicked in to reduce prices further.  
Higher costs to the PBS resulting from longer data exclusivity periods could be expected to flow on into higher patient co-payments, a sure vote ‘winner’ for any government. And as the Government now requires new PBS listings to be offset through savings, delays in biosimilar listings could well mean delayed access to new medicines (a point the industry would do well to ponder).
A review of the Australian pharmaceutical patent system conducted under the previous government in 2012-13 found that there was insufficient evidence to warrant an increase in data exclusivity for any class of drugs, including biologics. The review panel’s final report was also strongly critical of Australia’s approach to negotiating trade agreements, and recommended that “The Government should strongly resist changes – such as retrospective extensions of IP rights – which are likely to reduce world economic and social welfare and it should lead other countries in opposing such measures as a matter of principle.” (Recommendation 3.2, p. xv)
The second factor likely to be front and centre for the Trade Minister is the growing public and political opposition to longer medicine monopolies in Australia. Extending the period of data exclusivity would require an amendment to the Therapeutic Goods Act 1989 – a move Labor, the Greens, and many independents would likely strongly oppose. And failure to get implementing legislation through the Senate would compromise the whole deal.
In a clear indication of the degree of political opposition, just days after the TPP talks stalled former Minister of Finance Senator Penny Wong (leader of the Opposition in the Senate and Shadow Minister for Trade and Investment) and Catherine King (Shadow Minister for Health) issued a joint statement indicating Labor’s concern about the US proposal for biologics. The statement called on the Abbott Government to “reassure the public that it will not agree to any TPP provisions that will increase the price of essential medicines in Australia”.
A third factor is the evident lack of progress in gaining access to US markets. In Hawaii the US reportedly made only a token offer on sugar, and actually withdrew an earlier offer on dairy products. Few Australians would consider an improved export market for sugar and dairy to be an acceptable trade-off for higher co-pays on PBS medicines. And the loss of future health policy flexibility seems an overwhelmingly high price to pay for what at best will be only modest gains in exports.
Eight years of data exclusivity won’t be an appealing option for any of the other TPP countries either. New Zealand’s trade minister recently faced outrage at home over admissions that the cost of medicines may be expected to increase after the agreement. The country’s opposition, also Labor, has declared it wouldn’t support a deal that raised the costs of medicines. Even Japan and Canada, which already allow for eight years, would be ‘locked in’ by the agreement, precluding future policy flexibility.
The US position is itself inconsistent, as the White House has for some time been proposing a reduction in the exclusivity period for biologics to seven years, to speed up the availability of cheaper alternatives. The faster introduction of biosimilars would lead to an estimated US$16 billion in savings over the next decade.
It seems clear to everyone except US negotiators – and the biopharmaceutical industry and its lobbyists – that the pursuit of additional data exclusivity for biologics must be abandoned if the TPP is to be finalised. In the final denouement the Australian Government must maintain its resolve and continue to reject the US demand outright.
This article is an extended version of a piece first published on The Conversation. Read the original article here.
 

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Dr Deborah Gleeson

Dr Deborah Gleeson is a lecturer in public health at La Trobe University. Her research focuses on the impact of trade agreements on healthcare and public health policy. She is convener of the Political Economy of Health Special Interest Group
of the Public Health Association of Australia (PHAA), and represents PHAA on matters related to trade agreements, including the TPP.

 
 

Ruth Lopert

Ruth Lopert is a former Harkness Fellow and is currently Deputy Director, Pharmaceutical Policy and Strategy at Management Sciences for Health and an adjunct professor in the Department of Health Policy at George Washington University in Washington DC. From 2008-
11 Ruth was TGA’s Principal Medical Adviser, and in 2005-06 directed the Pharmaceutical Policy Taskforce in the Department of Health. In 2003-04 she was primary negotiator of the pharmaceutical provisions of the Australia-US Free Trade Agreement.

 

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