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US, Australia drug dispute is holding up settlement of the Trans Pacific trade deal

AFR | 4 October 2015

US, Australia drug dispute is holding up settlement of the Trans Pacific trade deal

by John Kehoe

A standoff between Australia and the United States on monopoly rules for
pharmaceutical drugs has emerged as the ultimate impediment to clinching an
historic trade deal sweeping across 12 Pacific Rim countries.

Trade ministers in Atlanta extended Trans-Pacific Partnership negotiations
into an unscheduled fifth day Sunday, US time, stirring impatience among
other countries on the impasse between Trade and Investment Minister Andrew
Robb and US counterpart Mike Froman over intellectual property terms for
biologic drugs.

The stalemate has reached the highest levels of government, with US
President Barack Obama telephoning Prime Minister Malcolm Turnbull late
last week to press for a TPP deal.

Trade officials at the talks said the debate over the data exclusivity
period for biologics was the major remaining hurdle to finalise a trade and
investment accord covering 40 per cent of the world economy.

Andrew Robb (right) and US Trade Representative Ambassador Michael Froman,
in previous talks. The handshake is what most commentators want to see now.

One official referred to the US-Australia disagreement as a "Mexican


As of Saturday night in the US, Mr Robb appeared to be standing firm on
maintaining five years of data exclusivity for inventors of biologics,
considerably short of a watered down American push for at least eight years.

Each extra year of data exclusivity would delay the entry of cheaper
"bio-similar" drugs and cost the federal budget through the Pharmaceutical
Benefits Scheme more than $100 million a year, a figure that would rise as
new biologics are developed.

US pharmaceutical company representatives who appeared in Atlanta on the
weekend and the powerful Republican chair of the Senate finance committee,
Orrin Hatch, have pressured President Obama to deliver 12 years in line
with US domestic law.

Underlining how the stalemate is holding up the entire TPP package,
Japanese economic minister Akira Amari told reporters on Saturday he had
agreed to another 24 hours of talks, but only if the US could wrap up the
biologic drug issue.

"This would be the last chance, in other words there had to be certainty of
getting a deal on pharmaceuticals," Mr Amari told reporters in Japanese,
according to a Reuters translator.

The talks are possibly the final chance to seal the TPP ahead of anti-trade
rhetoric in the lead up to next year’s US presidential election and
Canada’s October 19 2015 poll.


"We want this deal now because the dangers of unravelling on things that
have been advanced here are so extreme," on Saturday said New Zealand Trade
Minister Tim Groser, one of the founding fathers of the TPP in 2006.

Australian and US trade officials have been negotiating into the early
hours of the morning for the past few days. Mr Robb and Mr Froman, the US
Trade Representative, have held a series of meetings in an effort to break
the deadlock.

The TPP meeting was originally scheduled to run two days and finish last

Officials at the talks are hopeful other key outstanding issues including
sugar and dairy market access for Australia and New Zealand in North
America, can be swiftly sorted out if an agreement is struck on biologics.

Original ambitions for a "21st century trade deal" that would eliminate
trade barriers across a region stretching as far as Chile, Canada and
Japan, have been wound back to an expectation of more modest concessions in
politically sensitive sectors like agriculture.

The US has held back on tabling its final offer for reducing tariffs and
quotas on Australian and Kiwi farm produce until the biologics data
exclusivity period is agreed.


Biologics are derived from biological sources including vaccines, blood,
anti-toxins, human cells, proteins and antibodies, to treat diseases
including cancer and rheumatoid arthritis.

Data exclusivity rules for biologics stop follow-on manufacturers who are
developing biosimilars from using the originators’ clinical trial data in
the regulatory approval process. In effect, it is a temporary monopoly in
addition to a multi-year patent, prolonging the entry of competitor
medicines into the market.

Canada and Japan have eight years of data exclusivity, New Zealand five
years and developing TPP economies Peru, Chile, Malaysia and Brunei are at
zero and only willing to move to five. They are depending on Australia
holding the line against the US.

Mr Robb told the US that Australia’s system was, in practice, more like 6-7
years, once regulatory approvals and PBS listing time is added in, but this
was unsatisfactory for US negotiators.

The Productivity Commission has raised concerns about potential stringent
IP protections in the TPP, but Australian biotech companies like CSL
support longer than five years data exclusivity to encourage and reward
investment in life-saving technologies.

The TPP is a key part of the Obama administration’s "rebalance to Asia", to
take advantage of the expected 3 billion middle class consumers expected to
emerge in next 15 years, and to help offset China’s rising influence in the
region. President Obama wants the TPP to be a key part of his foreign
policy legacy.

The regional pact would be the largest trade deal since the Uruguay Round
in the 1990s set up the World Trade Organisation.

It would set sweeping new rules for trade, investment, intellectual
property, labour and the environment across Australia, Brunei, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and


Mr Robb is under pressure at home not to cave into the US on data
exclusivity for biologics, with the Public Health Association of Australia
writing to Mr Turnbull on the weekend and the Greens voicing concerns about
a potential increase in the time limit.

"Studies have shown that even one year’s delay in availability would cost
the Pharmaceutical Benefits Scheme hundreds of millions of dollars a year,
and higher costs would be passed on to patients," Greens spokesperson for
trade, Peter Whish-Wilson said.

Separately, the US has reluctantly agreed to a TPP clause that would
prevent tobacco companies in the future from suing governments for
introducing laws to curtail tobacco use, such as Australia’s plain
packaging cigarette laws that are being challenged by Philip Morris.

The option for countries to "carve out" tobacco from investor-state dispute
settlement treaties, was pushed by Australia and public health advocates.

All countries face political challenges selling the TPP at home and it
would take several months for each country to pass the TPP in their
legislatures if the 12 nations sign a pact.

Canada’s New Democratic Party leader Tom Mulcair said a letter to the
country’s trade minister on Friday the party won’t be "bound to any
agreement" at the TPP negotiations in Atlanta if it wins government at this
month’s election.

If a deal fails in Atlanta, like it did in Hawaii in July, the APEC
leaders’ meeting in the Philippines on November 18-19 may be the final
chance until 2017 after President Obama has left office.

The US and Japan, the two biggest economies in the TPP, have largely
settled their bilateral deal on agriculture and the automotive sector
within the broader TPP, hence the Japanese minister’s frustration at delays.

 Fuente: The Australian Financial Review