Placing healthcare above the profit margin

The Trans-Pacific Partnership package agreed by leaders of twelve Pacific rim nations on Monday represents a big win for the Australian Government both in political terms and as a trade deal, writes Marina Tsirbas.

Congratulations are in order for the Australian Government and its negotiators for standing firm during years of negotiations on the Trans-Pacific Partnership (TPP) and in the final all-night talks to the push backed by big Pharma to extend intellectual property (IP) protections for biologics.

Australia’s stance is a triumph of public policy decision-making and common sense.

Biologics are the new wave of sophisticated medicines derived from living organisms. They are used to treat a range of diseases and conditions, including cancer, diabetes and macular degeneration — diseases that are likely to be on the increase as our population ages.  Increasing the IP protections for new biologics from the current five-year term of data exclusivity in Australia to the twelve that applies in the US and demanded by big Pharma – and even eight years (applied by Canada and others and touted as a “compromise”) — would have increased the cost of such medications in the future. It also would have increased the cost for the government in listing such drugs on the Pharmaceutical Benefits Scheme (PBS) – ultimately at the expense of the taxpayer.  Estimates are that biologics cost the Government about $2.3 billion over the 2013-14 financial year.

Any increase to the term of protections could have come with legal teeth. The Investor State Dispute Settlement provisions (ISDS) in the TPP mean that (subject to any carve outs) an aggrieved company could litigate in another country, and against that country, about infringement of its rights. As much of big Pharma is situated in the US – with its healthy litigious culture – there is every reason to expect that infringements would have been robustly prosecuted.

Biologics are a growth industry. The traditional argument for intellectual property protections is to encourage and protect innovation and investment.  Australia is a net importer of IP so extensive protections are not necessarily in our public or economic interests.

The argument run by the biopharmaceutical companies would have been along the lines that an increase to the term of protections was needed to ensure that innovation in these often life-saving medications continues. Yet there is little evidence that the shorter data protection term for biologics – at least in Australia — has led to such stifling.  Increasing the IP protections for biologics would incidentally also have discouraged innovation in “biosimilars” (like generic prescription medications). It likely would simply have increased the profit margin of the large biopharmaceutical companies.

A number of biologics have been added to the PBS system this year.  The argument in the past has been that the shorter protection term in Australia will make it a less attractive destination for US and other companies to introduce their biologics. That remains to be seen. Australia has a nascent biosimilars industry. The Government, by refusing to extend data protection beyond the five-year term would have done its best to ensure conditions for this industry are not worsened.

At base even the US administration doesn’t believe in a twelve year biologics protection provision (seen by some as a “cost” extracted for getting Obama Care adopted). The administration has recommended a reduction of the term of protection in the US from twelve to seven years.

It is to be expected that Australia would have come under intense pressure over the five years of negotiations on the TPP to resile from its stance on IP protections by the world’s largest economy.

The TPP is the centrepiece of the economic component of Obama’s pivot to Asia. That some compromise was ultimately necessary (in accepting an ISDS provision with carve outs) to enable the rest of the deal to be adopted – with the many provisions that benefit other sectors of the economy – is to be expected and understood.

But in standing firm on data exclusivity for biologics, the health of Australians has been privileged over the profit margin of big pharmaceutical companies, and that is to be applauded.