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End Days to Cheap Drugs With U.S. Trade Deal

Inter Press Service News Agency

End Days to Cheap Drugs With U.S. Trade Deal

By Bob Burton

CANBERRA, Aug 13 (IPS) - Australia’s ratification of a free trade agreement with the United States has sparked warnings that it represents a major win for the U.S. drug industry in blocking generic manufacturers and undermining the country’s internationally acclaimed system for lowering pharmaceutical prices.

The Senate Friday passed the enabling legislation for the Australia-U.S. free trade agreement by a vote of 51 to 10.

While the agreement provides some minor gains for Australian agricultural exporters, most economic analysts agree the benefits will be small. However, one of the most contentious areas is the provision to strengthen the bargaining position of U.S. drug companies.

Australian Greens Sen. Kerry Nettle warned the Senate on Thursday night that support for the agreement, with provisions that could block generic drug manufacturers as brand name drugs patents expire, was setting a dangerous precedent.

’’We will make it easier for the U.S. pharmaceutical companies to be able to bring in a similar system in each of the individual free trade agreements that they negotiate with poorer and weaker countries,’’ she said.

If the same standard is adopted elsewhere, she said, "women who are in African countries or in South-East Asia, suffering as a result of HIV, will not have access to timely and affordable generic drugs at a time when they need them".

The Doha Declaration on the Trade Related Intellectual Property Rights (TRIPS) Convention and Public Health states, ’’trade agreements should be interpreted and implemented to protect public health and promote universal access to medicines.’’

However, the Australia U.S. free trade agreement makes no mention of the public right to equitable and affordable access to necessary drugs.

The trade agreement requires the Australian government drug regulator to notify a brand name drug’s patent holder of the intention of generic manufacturers to enter the market when a patent expires. This provision raised concerns that, by obtaining new 20-year patents on minor changes to a drug with an expiring patent, the patent holder could ’evergreen’ an expensive drug and freeze cheap generics out of the market.

’’What they are trying to do by stealth is slow the introduction of generics to prop up the high profits on their ’blockbuster’ drugs and institute an appeals process to increase the chances of listing their new expensive drugs,’’ Dr. Thomas Faunce, a senior lecturer at the Australian National University Medical School, told IPS.

Under the Australian Pharmaceutical Benefits Scheme (PBS), which is used as a model by the World Health Organisation, a new drug is only approved if it can be demonstrated that it delivers a significant health benefit beyond what is available from existing drugs.

If approved for PBS listing, the government then negotiates under a price based on the value of the additional health benefits benchmarked against the cost of its nearest generic equivalent, referred to as ’reference pricing’.

To the annoyance of the U.S. drug industry, Australia’s reference pricing system results in PBS listed drugs being three to four times cheaper than the same drug in the U.S.

’’While the Australian market is insignificant globally, the U.S. drug industry fears the possibility that the Australian system will spread globally,’’ Dr. Ken Harvey, senior Lecturer at the School of Public Health at La Trobe University said in an interview.

Provisions in the trade agreement also provide for drug companies to be allowed to appeal against decisions to reject a drug. ’’What they want is to be able to charge high prices for drugs that provide little extra health benefit,’’ Harvey said.

In mid July the U.S. Congress voted overwhelmingly in favour of the agreement and President George Bush signed it into law last week.

Shortly afterwards Australian Prime Minister John Howard said in an interview with a Melbourne radio station that the low prices of drugs under the PBS scheme was raised by Bush when he visited Australia in October 2003.

’’I said, ’I don’t care if the whole thing falls over, we won’t change the PBS’,’’ Howard says he warned Bush.

However, the agreement also contains a commitment to create a Medicines Working Group to discuss ’’emerging health care policy issues’’.

While the Australian government has released little detail about this process, the Deputy U.S Trade Representative Josette Sheeran Shiner told a U.S. Senate committee hearing in April, that the group would consider ’’Australia’s system of comparing generics to innovative medicines.’’

Despite significant opposition in the community to the agreement and deep division within the parliamentary Labor Party ranks, the opposition leader, Mark Latham, supported its adoption but with amendments aimed at limiting the potential for ’evergreening’.

Labor Party Shadow Minister for Trade Sen. Stephen Conroy told the Senate on Thursday night: ’’ Labor will not allow cheap drugs to be delayed in anyway to be delayed by dodgy patent claims. Companies trying to pull that stunt face severe financial penalties if a court determines that their claims were initiated without a reasonable basis.’’

Howard reluctantly accepted the Labor Party amendments rather than vote against the agreement. ’’But (I) warn, as I do, that the enabling legislation could be construed by the United States as inconsistent with the free trade agreement,’’ he warned on Thursday.

Australian National University intellectual property law specialist, Professor Peter Drahos described the Labor amendments as ineffectual. ’’[In] eliminating ever-greening patents you need a system of weed control. All Labor have is like a hoe,’’ he told the ’Australian Broadcasting Corporation Radio’.

However, a series of amendments to the implementing legislation moved in the Senate by the Australian Greens, the Democrats and One Nation to exclude pharmaceuticals from the agreement altogether and toughen the Labor Party amendments were rejected by both the Labor Party and the government.