Posted: 07/10/2012 9:20 am Updated: 07/10/2012 4:09 pm
WASHINGTON — A few hours after the Supreme Court upheld his signature health care legislation last week, President Barack Obama approached a White House podium, addressed the camera and declared that the nation’s top justices had reaffirmed an important guiding principle of his presidency.
“Here in America — in the wealthiest nation on Earth — no illness or accident should lead to any family’s financial ruin,” Obama said.
That single sentence was a compelling invocation of nearly every political theme Obama has presented on the campaign trail this year: To live in a nation is to take part in a social contract; personal wealth does not determine human dignity; decent people in a nation of means do not allow the less fortunate to suffer needlessly.
But while the president has focused on lowering health care costs at home, he has repeatedly sought to impose higher drug prices abroad. For pharmaceutical companies, that has meant steady profits, but for the global poor in desperate need of affordable drugs, those lofty prices are often a matter of life and death.
Nevertheless, members of the Obama administration continue to pursue policies around drug pricing that multiple United Nations groups, the World Health Organization, human rights lawyers and patient advocates worldwide decry.
Two weeks ago, U.S. Patent and Trademark Office Deputy Director Teresa Stanek Rea sparked an uproar among public health experts when she testified before Congress on multiple administration strategies to affect drug pricing abroad by using American international political muscle. Her testimony focused on the Indian government’s efforts earlier this year to create an affordable generic alternative to an expensive cancer drug called Nexavar, which had been patented by Bayer AG, a multinational pharmaceutical conglomerate best known in the United States for aspirin pills.
Over the course of 70 minutes, Rea repeatedly castigated India’s government for approving the generic drug, calling the move an “egregious” violation of World Trade Organization treaties. India’s decision, Rea said, “dismayed and surprised” her, and she boasted about “personally” engaging “various agencies of the Indian government” in efforts to overturn it.
“This is unprecedented, really shocking testimony,” says Judit Rius, the U.S. manager of Doctors Without Borders Access to Medicines Campaign, an international humanitarian aid group that won the Nobel Peace Prize in 1999. “It doesn’t have any ground in international legal norms. I’ve never really seen a U.S. government official misinforming Congress in public like this. It’s embarrassing for the White House.”
The Rea hearing, which had all the trappings of an inconsequential technocratic snoozefest, was almost completely ignored by American media — drowned out by the furor over the Supreme Court’s historic health care ruling. Only eight members of the 23-person House Subcommittee on Intellectual Property, Competition and the Internet showed up and asked questions.
Thus far the Indian government has resisted American pressure and continues to offer the generic alternative, which was approved in March after several months of negotiations with Bayer.
Not once during her testimony did Rea — or any member of Congress — cite the price Bayer posted in India for its version of the drug. Bayer, which earned $3.4 billion last year, was charging over $5,000 a month for standard doses, according to data from the Indian government. The cost of a generic version: $157 a month.
It was the high price that Bayer demanded for its cancer medication that prompted the Indian government to act. In a nation with a per capita income of just $1,410, the Bayer drug is financially out of reach for most Indians. The government authorized Natco Pharma to begin selling the generic version and ordered the firm to pay Bayer a 6 percent royalty on the proceeds.
That practice, known as compulsory licensing, is commonplace. It’s explicitly protected by World Trade Organization treaties, an effort to ensure that good health care is not merely a privilege for the rich — the kind of principle outlined by Obama in his celebration of the Affordable Care Act. The U.S. even deploys the compulsory licensing process to address domestic drug shortages.
But at the hearing, Rea said she planned to deploy the pressure it has used against India in other countries, too. “This is front and center,” Rea said. “[We are] trying to stop the granting of further compulsory licenses.”
Public health advocates have an entirely different take on the issue. They emphasize that Rea, who declined to comment for this article, did not offer a legal rationale for her agency’s opposition to compulsory licensing, which goes against decades of international practices. Even the “Frequently Asked Questions” section of the WTO’s website details broad leeway to approve generics that clearly apply to the Bayer cancer drug.
“Ignorance is no excuse for bad argument,” says Anand Grover, United Nations Special Rapporteur on the Right to Health and Senior Advocate for the Supreme Court of India, who notes that, under WTO rules, “Setting an exorbitant price which makes the drug unavailable to those who need it … [is] grounds for the issuance of a compulsory license.”
Bayer declined to comment on specific pricing for the drug, or the Indian government’s calculations, based on Bayer data, that just 2 percent of eligible patients had received the drug during its first few years on the market.
“We will rigorously continue to defend our intellectual property rights which are a prerequisite for bringing innovative medicines to patients,” Bayer spokeswoman Heather Levis Guzzi said in an emailed statement. “The limited period of marketing exclusivity made possible by patents ensures that the costs associated with the research and development of innovative medicines can be recovered.”
The company also pointed to the fact that Nexavar is not one of the 348 drugs on India’s National List of Essential Medicines — a compilation of treatments intended to be available in a country’s health care system at all times.
The medical patent system has plenty of detractors. Many public health experts and economists advocate for public financing of research and development costs to avoid private sector pricing problems. Public health experts who deal with AIDS, in particular, have long sought to reform the patent regime, since HIV drugs must be taken continuously for decades, making high dosage costs an acute problem. Nexavar is one of several new cancer drugs featuring a similar treatment regimen to the best HIV drugs. It can extend a patient’s life for years, but only if taken continuously.
Whatever the import patents have in protecting intellectual property and corporations’ bottom lines, even the strictest patent rights have always been accompanied by exceptions and flexibilities.
“It’s disappointing and outrageous,” says Peter Maybarduk, director of Public Citizen’s Access to Medicines Program, a consumer advocacy group, in reference to Rea’s testimony. “Compulsory licensing is a sovereign right to protect public health and other public interests. It’s been around as long as patents have been around. It goes back to the concept of ‘crown use’ in the oldest patent rules.”
Rea and others at the briefing also failed to note that Bayer is a German company. During a lengthy discussion of the Obama administration’s efforts to prevent the Indian government from providing affordable medication to its citizens, Rea declared, “We are doing everything we can to respect the rights of U.S. innovators.” But she didn’t mention that her efforts weren’t actually supporting an American corporation.
This is new territory for U.S. trade negotiation and enforcement, according to trade experts. During the Clinton and Bush years, American diplomats were dispatched to Brazil and Thailand to fight compulsory licenses on key AIDS drugs. However, the medications facing newfound competition were patented by U.S. corporations — not foreign companies.
The Obama administration was quick to push back on Rea’s testimony, with another key trade office downplaying her comments.
“We have expressed concern with India’s interpretation of its law in authorizing the issuance of this license but we have not opined with regard to whether the action is consistent with [WTO treaties],” Carol Guthrie, spokeswoman for the Office of the U.S. Trade Representative, told HuffPost.
While the Patent Office has extensive foreign educational and advisory operations in developing nations, it does not have authority to bring unfair trade cases before the WTO. That power rests with the USTR, a White House agency that is also responsible for negotiating international trade deals. In a blog post published a few days after the hearing, Rea walked back some of her comments, acknowledging that compulsory licenses can be acceptable under WTO rules. Nevertheless, she said her agency “encourages” other nations to adopt policies that are stricter than WTO standards and maintained her opposition to the Indian generic.
“Although compulsory licensing can be permissible under the TRIPS Agreement, we encourage our trading partners to consider ways to address their public health challenges while maintaining intellectual property rights systems that promote investment, research, and innovation,” Rea wrote. “The broad interpretation of Indian law in a recent decision by the Controller General of Patents of India regarding compulsory licensing of patents, in my view, may undermine those goals.”
Public health experts emphasize that this kind of political pressure from the U.S. can be damaging to developing nations, even if no formal trade complaint is ever brought before the WTO.
“The [U.S. Patent and Trademark Office] is viewed as a regulator in other parts of the world, and not a lobbyist for U.S.-style patent laws or patent enforcement,” says Kajal Bhardwaj, a human rights lawyer in India who has done extensive work on legislation to combat HIV in India.”The statement by the USPTO official that its trainings are a method for preventing the issue of compulsory licenses is of great concern.”
Rea’s testimony is only the most explicit example of the Obama administration’s efforts to use intellectual property maneuvering to inflate medical costs abroad. This year alone, the Department of Health and Human Services and the State Department have joined USTR and the USPTO in disrupting World Health Assembly talks over reducing research and development costs for medicines targeting developing nations, and shut down World Intellectual Property Organization negotiations aimed at curtailing the prices of existing drugs in poor countries.
Of course, high medicine prices abroad mean high profits for pharmaceutical firms, and drug companies were an important White House ally during the legislative push for the Affordable Care Act. Obamacare seeks to contain medical costs by focusing on insurance reform — it makes only very modest changes to prescription drug policies, and in many respects, actually breaks new ground on pharmaceutical company efforts to establish drug monopolies.
“We’re taking the worst parts of U.S. law, the parts that make these medications unavailable to patients, and putting them into a trade policy as a guiding principle for developing countries,” says Reshma Ramachandran, a fellow with the American Medical Student Association, which advocates for universal quality affordable health care and global health equity, among other priorities. “That’s ridiculous.”
As HuffPost reported in the fall of 2009, the Obama administration cut a deal with PhRMA — the dominant drugmaker lobbying group — intended to smooth the bill’s congressional path. Obama agreed to go easy on pharmaceutical companies with his reforms, if PhRMA would support the overall legislation. One of the key giveaways to PhRMA? A new 12-year monopoly on test data used in medical trials for drugs derived from proteins or living tissues. Obama approved the PhRMA freebie over the explicit objections of the Federal Trade Commission, which concluded in a 2009 report that the new test data rights would lead to anti-competitive behavior.
This new power, called data exclusivity, prevents companies from relying on another firm’s clinical trials when seeking government approval for their own drug. The practice violates centuries of scientific standards, but it can also lengthen patent monopolies and prevent the development of new, even broadly unrelated, medications that rely on previous scientific tests.
“The 12 years of exclusive rights in test data creates an automatic monopoly right that is stronger than a patent monopoly in most countries, and it raises drug prices,” says James Love, Director of Knowledge Ecology International, a nonprofit dedicated to public health and access to knowledge. “It violates the Helsinki Declaration on ethical principles for research involving human subjects, because it requires the duplication of experiments on human subjects.”
The WTO has never required countries to abide by these standards, but according to Rea, the U.S. is trying to use trade negotiations with 10 other Pacific nations to export the policy abroad.
India isn’t part of the Trans-Pacific deal, but Rea’s discussion of the pact underscores the administration’s multi-pronged approach to elevating drug prices. While attempting to prevent the introduction of generic drugs in WTO nations, the U.S. is simultaneously seeking new trade agreements that would impose stricter rules than those required by the WTO. Countries involved in the Trans-Pacific talks include Malaysia, which has a per capita income one-third less than that of the U.S., and Vietnam, a nation significantly poorer than India.
“We view that the Trans-Pacific Partnership provides a good venue to make sure that we get appropriate data protection, and that the 12 years of data exclusivity is something that we are definitely trying to negotiate for right now,” Rea said during her testimony.
The USTR rejected Rea’s statement.
“That is incorrect,” USTR’s Guthrie told HuffPost, referring to Rae’s claim about data exclusivity. “U.S. negotiators have not proposed a specific term for data exclusivity for biologics … discussions on issues relating to biologics are continuing because we want to get the substance right.”
Although the Patent Office is a key adviser on trade agreements, negotiating the Trans-Pacific deal is USTR’s responsibility. Draft terms of the pact, and the Obama administration’s hoped-for final results, are withheld from the public — a policy which has embroiled the agency in considerable controversy with members of Congress, who want staffers to be able to access key documents. Rea’s announcement of a negotiating goal was a major diplomatic faux pas.
Rae walked back this point from her under-oath testimony in her blog.
“I was also asked to comment on a twelve year period for data protection for biologics which is favored by the research-based pharmaceutical industry,” Rae wrote. “The Trans-Pacific Partnership (TPP) negotiations are ongoing and the United States Government has not made a proposal for a longer term of data protection for biologic medicines.”
But while there is a clear pattern to the Obama administration’s strategy on such issues, different factions of the executive branch do not always agree on details. In its latest budget proposal, the Office of Management and Budget suggested a 7-year time limit on data exclusivity. But if Rea’s preference policy made its way into the Trans-Pacific deal, the U.S. would be subject to international trade sanctions if it ever opted to shorten or eliminate the 12-year right.
The U.N. Development Program and UNAIDS, meanwhile, oppose any term of data exclusivity whatsoever, and issued a report in June encouraging countries not to sign trade agreements that include the provision.
The latest round of Trans-Pacific negotiations began the week after the Supreme Court upheld the Affordable Care Act. The irony is not lost on health care reform activists in developing nations.
“That the Obama administration cannot see the gross inequity of charging $5000 per person per month for a cancer medicine in a developing country says a lot about this government,” says Shiba Phurailpatam of the Asia Pacific Network of people living with HIV/AIDS. “Affordable care, it seems, is only for U.S. citizens, not for the developing world.”
Article updated to reference India’s nominal per capita income, rather than purchasing power parity figures.