Meeting with USTR

[James Love <love@tap.org>]

Notes from our July 30, 1996 meeting with the USTR on Intellectual
Property and Health Care. 

Charlene Barshefsky was in Canada and did not attend.  
Attendees from USTR included Joseph Papovich, the Deputy 
Assistant U.S. Trade Representative for Intellectual 
Property, Karen Chopra, the Director for the Southern Common 
Market, and Thomas Robertson, Assistant General Counsel.

Our group included Lori Wallach, Director of Public 
Citizen's Global Trade Watch, Robert Weissman, Director of 
Essential Information's International Projects, James Love, 
Director of the Center for Study of Responsive Law's 
Consumer Project on Technology (CPT) and Sara Wood, research 
associate for CPT.

We presented USTR with the following memorandum, and pretty 
much walked through each point from start to finish.

          INTELLECTUAL PROPERTY RIGHTS AND HEALTH CARE
                     July 30, 1996

Introduction

1.	The regulation of Intellectual Property involves 
countless controversies regarding the definitions of 
"property" and the rights given to owners of property.  
Examples from health care include disputes over the patents 
for surgical procedures, patenting of genetic sequences, 
patenting of life forms, patenting of medicines used by 
indigenous peoples, and the use of trademark protection to protect 
cigarette and infant formula advertising, to mention a few 
examples outside of the area of pharmaceuticals.  In the 
United State there are major disputes over proposals to 
extend the term of copyright protection, to redefine "fair 
use" in electronic media, and to create new forms of 
copyright protection for databases.   Conflicts between 
copyright protection and the rights of authors and artists 
to create derivative works are controversial. The use of 
patents to provide monopolies in businesses practices is 
controversial, as is the use of patents to protect software.  
In these an many other areas there is no simple "more is 
better" consensus.  Policy makers search for a balance 
between the private and the public domains that will satisfy 
ethical values and promote economic efficiency.

2.	There are important conflicts between the strongest 
forms of property rights for owners of pharmaceutical 
inventions and public health goals.  High prices for 
pharmaceutical drugs prevent poor consumers from obtaining 
needed medical care.  This is a problem in the United 
States, and an even greater problem in less developed 
countries.

3.	It is possible and desirable to frame U.S. policy 
toward intellectual property and health care as a public 
health issue, rather than one of export promotion.  There 
are very important ethical issues to consider.

Compulsory Licensing

4.	Compulsory licensing and price controls on 
pharmaceutical drugs are both permitted under the GATT.  
However, the conditions under which compulsory licensing is 
allowed will be regulated by the WTO.  No such restrictions 
exist for price controls. 

5.	Compulsory licensing is often a preferred mechanism for 
promoting broader access to pharmaceuticals.  Price controls 
often require more information and a greater bureaucracy to 
administer than do compulsory licenses.  Moreover, 
compulsory licensing programs contribute to a strong 
domestic presence by firms that can also offer generic 
versions of branded drugs.  The existence of a healthy 
generic drug industry is a plus for the public health.

6.	Members of the U.S. Congress are interested in using 
compulsory licensing to protect consumers from excessive 
prices for pharmaceutical inventions that were invented with 
public funds.  Indeed, under the Bayh-Dole Act, the U.S. 
government has the right to compulsory license drugs 
developed on university campuses with federal assistance



7.	The development of new medical technologies makes it 
even more important that the U.S. government retain broad 
rights to employ compulsory licensing of health care 
inventions.  New drug inventions are sometimes priced higher 
than $100,000 per year by private firms.  There is now 
greater emphasis on the development of therapies for smaller 
populations.  One can conceive in the not too distant future 
of specialized therapies which conform to exceptionally 
narrow user characteristics.  These will include life saving 
therapies, and inventions may be controlled by firms with 
little regard to older norms of pricing restraint.  Recent 
patents on human genes have raised concerns about the 
control of newly emerging scientific knowledge about 
important health care problems.  Compulsory licensing of 
such new technologies should clearly be possible, in the 
United States.


Research and Development

8.	Consumers in rich and poor countries have an interest 
in promoting progress in medical research, assuming that 
both rich and poor consumers will be able to get access to 
new health care technologies. 

9.	It is appropriate that the cost of research and 
development for health care technologies be shared broadly.

10.	There are several ways that countries can contribute to 
research and development.  One way is to extend two decades 
of patent protection for an invention, and hope that the 
expected profits from the monopoly on the sale of the drug 
creates the incentives to develop new drugs.  Another 
mechanism is direct government spending on R&D.  Countries 
can also set minimize rates of reinvestment (from sales) in 
R&D.  Any of these three approaches, or combinations of the 
three, will promote R&D.

11.	If the promotion of R&D is a public health goal, it 
does not matter how countries achieve the goal.  Countries 
should have flexibility in meeting R&D goals.  What counts 
are R&D efforts, not the profits of pharmaceutical patent 
owners.

12.	The U.S. should work with the international community 
to determine goals for R&D.  Countries with higher incomes 
should be expected to invest more in health care R&D than 
poorer countries.  A strong form of patent protection should 
be one of several accepted options for supporting health 
care R&D. 

13.	Since the present value of cash flows past 20 years are 
negligible at current company discount rates, there is 
little to be gained by extending protections beyond 20 
years.  

14.	The U.S. should not require countries which are 
adapting to new GATT rules for drug patents to provide 
retroactive protections for existing drug inventions.  
Retroactive protection is a windfall to pharmaceutical 
companies, and does not directly impact R&D investment 
incentives, which are forward looking.


Healthcare in Less Developed Countries 

15.	Due in part to criticisms by our Congress that U.S. 
consumers pay more than do foreign consumers, today the 
pharmaceutical industry often market drugs under a single 
price worldwide.  Without price discrimination, lower income 
consumers in developing countries will have substantial 
problems obtaining access to modern medical technology. 

16.	Africa if facing a huge crisis with AIDS, with a much 
larger infected population than the U.S.  Many of the new 
AIDS drugs are so expensive that African consumers cannot be 
treated.  The high cost of these drugs is largely a function 
of the Intellectual Property regime.  

Taking the Next Step

17.	USTR views on Article 27, 30 and 31 will be very 
influential in determining the WTO jurisprudence on these 
issues.

18.	The USTR should announce that it will re-evaluate its 
positions in bilateral and multilateral proceedings on 
health care and intellectual property rights, to give much 
greater weight to public health considerations.

19.	By next spring, the USTR should convene a conference 
with a broad spectrum of consumer and public health 
organizations to consider these issues.



--------------------------------------------------

USTR Response.

The meeting was cordial.  The USTR did not agree to our 
items 18 or 19, but there did seem to be a willingness to 
participate in a spring workshop on this topic, although not 
as the primary sponsor.  USTR officials did indicate that 
they considered public health considerations legitimate 
issues in IP policies, and that they acknowledged that there 
is no "more is better" consensus with respect to regulation 
of intellectual property.  Lori Wallach told the USTR that 
health care should be treated differently than commercial 
protections for "Levi Jeans and Mickey Mouse."  Rob Weissman 
told the USTR that as things heat up with health care 
issues, it should look at what happened with tobacco and 
trade, with the Clinton administration finally signaling it 
would stop pressing for greater advertising rights by U.S. 
tobacco companies in counties that are trying to discourage 
smoking.  He urged the USTR to seek a similar distinction 
for health care.

We spent a good deal of time discussing compulsory 
licensing.  USTR indicated that they considered price 
controls preferable to compulsory licensing, because price 
controls were "more transparent," but they also indicated 
that compulsory licenses were indeed permitted under the 
GATT.  Robert Weissman noted that WTO jurisprudence on would 
be important in determining types of terms which were 
"reasonable," and that USTR should evaluate the 
reasonableness of terms within the context of public health 
objectives, rather than more narrow commercial 
considerations.  There was considerable discussion of 
problems faced by poor consumers in Africa and other 
developing countries.  Perhaps the most poignant moment 
occurred when Joseph Papovich from USTR indicated that he 
"didn't care" about public health issues outside of the 
United States, and that he didn't "work for" consumers in 
Argentina or Africa, and that his job was to promote 
developed American opinion on these issues.  

We pressed for greater involvement by consumer interests on 
the USTR advisory panels on intellectual property rights.  
Apparently the sole "consumer" representative on the IP 
advisory panel was a lawyer who represented the American 
generic drug manufactures, and he had recently parted ways 
with his client.  We indicated that a better consumer 
representative would be someone that actually represented a 
consumer organization, not a commercial concern. 

The USTR was interested in the learning more about our 
proposal that governments seek targets for R&D spending, 
which could be satisfied by a variety of means, including 
mandatory reinvestments.  They asked if that would require 
multinationals to shift more R&D investments overseas.

There was quite a bit more, but I have to run.   (I'll be gone for a few 
weeks.).


jamie


~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
James Love / love@tap.org / P.O. Box 19367, Washington, DC 20036
Voice: 202/387-8030; Fax 202/234-5176
Center for Study of Responsive Law
   Consumer Project on Technology; http://www.essential.org/cpt
   Taxpayer Assets Project; http://www.tap.org
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~