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Letter to Al Gore re: South Africa Pharmaceutical Policies

  The following is a letter sent today (July 29, 1997) by Ralph Nader,
  James Love and Robert Weissman to U.S. Vice President Al Gore.  The
  letter discusses U.S. trade policy with respect to the South African
  government's recent initiatives to broaden public access to
  pharmaceutical drugs.  We discuses the SA effort to permit parallel
  imports of pharmaceutical drugs, broader use of generic substitution,
  and the approval of competitors to Taxol, the cancer drug.  This letter 
  is in response to significant pressures on South Africa by large
  pharmaceutical companies, and to some extent, by U.S. trade officials. 
  We expect to soon circulate a second letter seeking International
  support for the South African government's initiatives in these areas. 
  Anyone who wants to be involved in the drafting of the second letter
  should drop a line to  James Love <love@cptech.org> or Robert Weissman
  The letter follows:
  An HTML version of this is available at:
  <a href="http://www.cptech.org/pharm/goreonsa.html">
               Center for Study of Responsive Law
                         P.O. Box 19367
                      Washington, DC 20036
  July 29, 1997
  Vice President Albert Gore
  The White House
  Washington, DC
  Dear Vice President Gore:
       It has come to our attention that several large
  pharmaceutical companies have asked United States trade
  officials to put pressure on the South Africa government to
  modify that country's policies with regard to the regulation
  of pharmaceutical drugs.  We request a meeting with
  appropriate United States government officials to discuss
  the nature of the disputes between the large pharmaceutical
  companies and the South Africa government.  In our view, the
  South Africa government is pursuing policies that will
  benefit all consumers in South Africa, including those who
  live in poverty.  The South African government is working
  closely with the World Health Organization (WHO) to adopt
  policies which may serve as a model for other developing
  countries in Africa and elsewhere.  We see no grounds for
  U.S. government intervention on behalf of the international
  pharmaceutical companies.  Indeed, the U.S. should be
  supportive of the South African government's thoughtful
  initiatives, and use the opportunity to assert that U.S.
  foreign economic policy with respect to pharmaceuticals will
  subordinate commercial concerns to broader public health
       Parallel Imports
       One of the issues in dispute concerns the matter of
  parallel imports for pharmaceutical drugs[1].  As you
  undoubtedly know, the South African government is seeking to
  lower regulatory barriers for the importation of registered
  pharmaceutical drugs.  As a country of less than 40 million
  inhabitants, many of them extremely poor, South Africa does
  not have a domestic market as large as the United States.
  The South African government believes its consumers will
  benefit if hospitals and other health care providers can
  seek the procurement of pharmaceutical drugs in the broader
  world market.
       On May 20, 1997, Aldrage B. Cooper, Jr., a vice-
  president of Johnson and Johnson (J&J) who is chairman of
  the U.S. South African Business Council, wrote U.S.
  Secretary of Commerce William Daley, asking that the U.S.
  government oppose South African legislative provisions that
  would permit parallel imports of pharmaceuticals.  In an
       attachment to a letter to Secretary Daley, he notes that
  prices for medicines "vary greatly from country to country"
  and that "parallel traders will buy goods in a low-price
  country and re-sell at a higher price in the importing
  country."  Mr. Cooper asserts that this would violate patent
  owners' intellectual property rights, although he concedes
  that Article 6 of the GATT's agreement on Trade Related
  Aspects of Intellectual Property (TRIPS), stipulates that
  the issue of exhaustion of rights is not subject to action
  before the World Trade Organization (WTO).[2]
       As you may know, parallel imports are legal within the
  European Community.  It is our understanding that in recent
  years parallel imports accounted for 8 percent of the UK
  pharmaceutical drug market, and 5 to 10 percent of the
  Netherlands market.  A number of public health officials in
  Europe and the United States are supportive of the South
  African position on parallel imports.  Indeed, by relying on
  competition and market forces, parallel importation seems
  consistent with aspects of the Clinton Administration's
  early efforts to control costs of pharmaceutical drugs in
  the United States.
       If the U.S. government voices opposition to parallel
  imports of pharmaceutical drugs solely on the basis of the
  commercial interests on the large pharmaceutical companies,
  and denies South Africa an important opportunity to reduce
  the costs of pharmaceuticals, the consequence will be less
  available to deter the spread of disease and misery among
  the poor in South Africa.  We urge you to rebuff the
  lobbying by pharmaceutical companies on this issue.
       Use of Generic Drugs
       Several pharmaceutical companies are asking the U.S.
  government to threaten trade sanctions if the South African
  government adopts policies designed to achieve cost savings
  through greater use of generic drugs.  The South African
  government has proposed that health care personnel in the
  public sector use the generic names in prescriptions, and
  that pharmacists substitute lower priced generic drugs for
  brand name prescriptions, except in those cases where
  doctors or patients specifically request a brand name drug,
  or in certain other instances, including where there is no
  safe and effective generic substitute.  Public health
  officials in South Africa are following the successful
  examples of the U.S. and other countries which encouraged
  use of generic drugs to lower prescription drug costs.
       PhRMA and its member companies and affiliated trade
  organizations are arguing that the South Africa proposals
  would violate the trademark provisions of the GATT.  Of
  course, since the United States is among those countries
  which use a variety of state statutes, government
  procurement and managed care programs to promote the use of
  generic drugs, it is hard to see what grounds the U.S. would
  have for objecting to very similar programs in South Africa.
  Moreover, as you know, the TRIPS permits nations to adopt
  measures to protect the public's health.  This is surely a
  case where the South African efforts to promote generic
  drugs are important for the public's health.
       We were pleased when the Clinton Administration
  announced that the U.S. government would no longer use
  threats of trade sanctions to promote the sale of tobacco
  products, on the grounds that regulatory measures to
  discourage smoking were justified on public health grounds.
  The South African generic drug measures should similarly be
  examined in the context of their impact on public health,
  rather than the commercial interests of a handful of large
  pharmaceutical companies.
       Taxol and Health Registration Data
       Bristol-Myers Squibb (BMS) is asking the U.S.
  government to bring pressure against South Africa, as well
  as Canada, the Netherlands, Australia, Indonesia, Pakistan,
  Taiwan, China, Turkey, Argentina, Thailand and other
  countries, to protect the BMS monopoly on the sale of Taxol.
  In each case, BMS is seeking to establish an international
  norm that nations should provide at least 5 years of
  exclusivity for clinical trial data used for regulatory
  approval of pharmaceutical drugs, with the period of
  exclusivity beginning with the date of drug approval.[3]
       In our view, generic versions of Taxol should be
  available now to consumers worldwide.  Taxol is a drug
  developed by the U.S. government.  BMS's sole role in the
  development of the drug was to provide the U.S. government
  with 17 kilos of Taxol, which BMS acquired in bulk from
  Hauser Chemical (a firm that manufactured Taxol for NIH) at
  a cost to BMS of about $5 million.  For its very modest
  support to the NIH's Taxol development effort, BMS has
  earned billions of dollars.  Indeed, BMS will register more
  than $1 billion this year alone from Taxol sales.
       The high price of Taxol is a hardship for consumers
  worldwide.  We are attaching a bill received by an uninsured
  U.S. cancer patient that includes $2,324.70 to purchase
  enough Taxol for a single injection.  This woman, who
  suffers from breast cancer, needs a number of these
  injections.  Consider also that the cost of Taxol to the
  patient was $8.61 per milligram, while BMS was able to
  acquire Taxol in bulk from a contractor for only $.25 per
       The United States currently gives companies who
  register new drugs with the FDA five years of exclusive
  rights to use the data for regulatory approval.[5]  That is to
  say, even though Taxol's cancer fighting properties are well
  know, and Taxol isn't protected by patent, the FDA agrees to
  prevent companies from seeking to sell generic versions of
  the drug for 5 years.  This is the basis of the BMS monopoly
  on Taxol.
       Generally, this is an issue only in those cases where
  the drug is not protected by patent.  That is, when the
  pharmaceutical company has a claim of invention which would
  lead to the award of a patent, it would have 20 years of
  market exclusivity in most cases.  For Taxol, BMS did not
  have a patent because BMS did not invent Taxol, nor did BMS
  discover Taxol's cancer fighting properties.   Why then
  should the United States government use the threat of trade
  sanctions to prevent consumers world wide from benefiting
  from competition from generic versions of Taxol?  Why
  support policies which will predictably lead to high prices
  for this life saving therapy that was developed with more
  than $30 million in taxpayer money?
       While it is not surprising that BMS would want the
  United States to impose the FDA's five year exclusivity rule
  on the rest of the world, you should consider alternative
  approaches, particularly as they apply to less developed
  nations.  After all, in South Africa about 80 percent of the
  population is poor.
       Rather than arbitrarily imposing the FDA rule for the
  rest of the world, you should support a modification of the
  rule in the United States itself.  We have serious doubts
  that any market exclusivity for health registration data is
  needed, given the fact that firms can receive patents for
  inventions, and drugs with limited client populations are
  also protected by the Orphan Drug Act.  However, at the very
  minimum, you should consider a shorter period of
  exclusivity, combined with regular compulsory licensing of
  the clinical trial data used for drug registration.[6]
  Consider the cost of the FDA's present 5 year market
  exclusivity on U.S. consumers and taxpayers.  We are
  attaching a report by the National Economic Research
  Associates[7] which examined the economic consequences of a
  two year extension of the current FDA market exclusivity for
  Taxol health registration data.  According to Dr. Rozek, if
  the US delays the introduction of generic versions of Taxol
  for two additional years, the lack of competition will cost
  U.S. Taxol consumers $1.27 billion, including $288 million
  paid by Medicare.  It is a national scandal that BMS has
  been permitted to overcharge consumers for Taxol, and the
  policies which have permitted this to take place should not
  be held out as international norms.
       Concluding Comments
       The United States has a stake in sound public health
  policies, not only in the United States, but throughout the
  world.  The widespread availability of pharmaceuticals and
  other health care inventions will be increasingly important
  as the United States seeks to combat infectious diseases and
  promote development and economic growth.  The international
  rules for intellectual property in the health care sector
  are extremely important, and will bind policy makers in the
  United States and elsewhere.  These rules are simply too
  important to be left up to the imagination of the
  pharmaceutical and biotechnology industry.  A balanced
  dialogue must include stakeholders who represent consumers
  and public health officials.
       The USTR should expand the membership of IFAC-3 to
  include consumer interests.  The WTO will soon begin a
  review of the TRIPS.  We ask that the United States propose
  that the WTO working group which reviews the TRIPS include
  representation from the public health community.  We ask
  also to meet with U.S. trade officials who are engaged in a
  critique of the South Africa initiatives to enhance public
  access to pharmaceutical drugs.  In each of these matters,
  we ask that consumers and public health advocates be treated
  as important stakeholders.
  Ralph Nader
  James Love
  Robert Weissman
  [1] Parallel imports refers to the situation where the patent
  owner holds patents in more than one country, and a third
  party purchases goods in one country and imports the goods
  into another country without authorization from the patent
  owner.  Patent owners typically sell the same goods at
  different prices in different countries. The pharmaceutical
  industry has lobbied against parallel imports because they
  want to use price discrimination based upon the degree of
  competition in each market.  Countries that permit parallel
  imports benefit from opportunities to acquire
  pharmaceuticals at the lowest international prices.
  [2] The term "exhaustion of rights," describes the termination
  of patent rights following the legal sale of a good.  This
  is sometimes called the "first sale doctrine."  A patent
  grants a party a monopoly on the sale of a good.  Under the
  first sale doctrine, once a good is sold by the patent
  owner, the purchaser is free to resell the good, even if the
  resale of the good competes against sales offered by the
  patent owners.
  [3] Several drug companies are also trying to establish an
  international norm against disclosures of information
  relating to claims of safety and efficacy.  However, the
  U.S. FDA is an international leader in the disclosure of
  health registration data, which is released under the U.S.
  Freedom of Information Act (FOIA).  If U.S. trade
  negotiations truly seek to advance U.S. policy norms in
  international forums, they should push for greater
  transparency and disclosure of health registration data,
  rather than more secrecy.
  [4] BMS and other pharmaceutical companies have acquired Taxol
  in bulk from variety of sources.  At one time BMS was buying
  Taxol from Hauser Chemical for $.25 per milligram.  Today
  industry experts say that bulk Taxol could be acquired for
  as little as $.125 per milligram, if purchased in large
  quantities.  The cost of packaging and final preparation of
  Taxol for distribution to doctors is estimated to be about
  $.15 per milligram.
  [5] The FDA regulates the sale of pharmaceuticals.  For a new
  drug, a firm must submit data to the FDA which is used to
  evaluate the safety and efficacy of the drug.  If a drug is
  protected by a patent, or by exclusive marketing protections
  under the Orphan Drug Act, the FDA will not grant another
  company marketing approval.  If the drug is not protected by
  patent, and not protected by the exclusivity marketing
  provisions of the Orphan Drug Act, another firm can seek
  marketing approval for the same drug.  However, for five
  years, the FDA requires the any new firms present their own
  data which proves the safety and efficacy of the drug, even
  though the FDA has already determined the drug to be safe
  and effective.  After 5 years from when the drug was
  approved for marketing, and after any patents or Orphan Drug
  marketing exclusivity expire, a firm can obtain marketing
  approval for a drug by showing that a product is
  biologically equivalent to the approved drug.
  [6] The suggestion that a compulsory licensing provision would
  protect against abuses was made in our June 9, 1997 letter
  to USTR Charlene Barshefsky.  This letter is on the Web at
  http://www.cptech.org/pharm/USTRJune91997.html (no period).
  We believe  public health groups will make specific
  recommendations for an international norm for health
  registration data later this fall.
  [7] Richard P. Rozek, Costs to the U.S. Health Care System of
  Extending Marketing Exclusivity for Taxol, N.E.R.A.,
  Washington, DC, March 1997.
  James Love | Center for Study of Responsive Law
  P.O. Box 19367 | Washington, DC 20036 | 202.387.8030
  http://www.cptech.org | love@cptech.org