[Ip-health] Inside US Trade: Drug Companies Seek Changes to US-Australia FTA

[Mike Palmedo]

U.S., AUSTRALIAN DRUG COMPANIES SEEK CHANGES TO PROVISIONS IN FTA

Inside U.S. Trade
January 13, 2006

U.S. pharmaceutical companies are using every opportunity to push for
the repeal of controversial, last-minute amendments added to Australia=92s
legislation implementing a free trade agreement with the U.S. The U.S.
companies argue the amendments, added after FTA negotiations concluded,
impose burdens on pharmaceutical companies that violate World Trade
Organization rules.

Australian sources said the issue would likely be mentioned today during
a working group meeting of health officials, with a more substantive
discussion to follow in March during the annual review of the FTA
conducted by the Office of the U.S. Trade Representative and the
Minister of Trade for Australia. The March meeting will be the first
review of the FTA by the so-called Joint Committee consisting of the
U.S. trade representative and the Australian minister of trade.

Today=92s inaugural meeting of the Medicines Working Group is headed by
representatives from the Department of Health and Human Services on the
U.S. side and the Department of Health on the Australian side. The
group, established by the FTA, is intended =93to promote discussion and
mutual understanding of issues relating to=94 the transparency of the
Australian pharmaceutical reimbursement program, under which the
government subsidizes pharmaceuticals through negotiations with
companies that want to sell their drugs through the Australia
Pharmaceutical Benefits Scheme.

U.S. companies want to abolish amendments added to the FTA implementing
legislation at the behest of the minority Labor party that require
pharmaceutical patent holders to prove that any legal action they bring
to block cheaper generic drugs from coming on the market is brought =93in
good faith=94 and with =93reasonable prospects of success=94 and that the c=
ase
is =93conducted without reasonable delay.=94

It also imposes penalties of up to $10 million Australian dollars if a
patent holder is found to have filed a frivolous lawsuit to extend their
patent and prevent the generic copies from being marketed in Australia.
These penalties and requirements, according to U.S. companies, impose a
greater burden on pharmaceutical patent holders looking to protect their
rights than holders of non-pharmaceutical patents.

U.S. industry sources believe there is a chance the ruling Nationals
party, which now has a larger majority in Australia=92s parliament after
2004 elections, would be sympathetic to changing the amendments, which
were added to the Therapeutic Goods Act of 1989. However, Australian
Trade Minister Mark Vaile and leader of the Nationals party said they
would only consider removing this so-called =93anti-ever-greening=94
amendment if manufacturers can show that the amendment has been
=93commercially detrimental=94 to investment in the region.

Public health advocates argue pharmaceutical companies attempt to use
the courts to extend their patents through =93ever-greening=94 by arguing
that changes to the drugs that do not fundamentally change its
effectiveness or delivery should nonetheless lead to an extension of
patents. This has the effect of blocking cheaper, generic drugs from
getting marketing approval.

=93I am sure that the American side, particularly industry in America,
would like to have a discussion about the way those amendments and
provisions of those amendments are operating,=94 Vaile said in an
interview earlier this month on Australian radio. =93But the point needs
to be made that they would have to prove these amendments are being
commercially detrimental, which we don=92t believe they are.=94

A Medicines Australia source acknowledged the group did not have
specific examples of companies being negatively impacted by the
amendments commercially. But the source said the group and its members,
including Pfizer, Merck and Bristol-Meyers, along with the
Pharmaceutical Research and Manufacturers of America, will continue to
push to have these amendments repealed.

Former USTR Robert Zoellick criticized the pharmaceutical amendment at
the time, saying in a Nov. 17, 2004 exchange of letters with Vaile that
the new legislation imposed =93a potentially significant, unjustifiable,
and discriminatory burden on the enjoyment of patent rights,
specifically on owners of pharmaceutical patents.=94 Zoellick said the
U.S. =93reserves its rights to challenge the consistency of these
amendments=94 with Australia=92s international legal obligations (Inside
U.S. Trade, Dec. 10, 2004, p. 12).

In the March meeting with U.S. Trade Representative Rob Portman, Vaile
said he would also bring up sugar, which was excluded from the FTA.
=93Sugar will be something that I=92ll raise during those discussions,=94
Vaile said.

But Australian agricultural sources acknowledged that getting access
into the U.S. market for sugar would be difficult given the intense
lobbying by the U.S. sugar industry to keep sugar out of the agreement.
=93Either side is entitled to bring up any issue for review but whether
either side will agree to the changes is an entirely different issue,=94
one source said.

The source also noted that bringing up sugar market access, which was
left out of the agreement with the understanding of both signatories to
the agreement, is not the same as seeking discussions over the
pharmaceutical amendments to the Australian implementing legislation
added after negotiations were completed.

A more likely subject for the review will be a technical correction to
eliminate a U.S. tariff on cooked lamb and cooked goat products.
Australian agricultural sources, including members of Vaile=92s FTA
Industry Advisory Panel, said both sides overlooked these products,
which do not have a tariff classification line under the agreement and
therefore fall into the 6.4 percent catch-all tariff line even though
sheep products were granted zero-duty treatment under the agreement upon
implementation on Jan. 1, 2005.

Vaile brought up the cooked lamb and cooked goat tariff in June of last
year, according to Australian agriculture sources, but was told by USTR
it was too soon after the agreement went into effect to bring up changes
and suggested Vaile=92s office bring up the issue during the annual review.



--
Mike Palmedo
Research and Web
Consumer Project on Technology
T =96 202-332-2670
F =96 202-332-2673
mpalmedo@cptech.org