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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.
INTELLECTUAL PROPERTY RIGHTS AND HEALTH CARE
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.
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
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
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.
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 / firstname.lastname@example.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