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Meeting with USTR

  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.
                       July 30, 1996
  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 
  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 
  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 
  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 
  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 
  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