[Ip-health] Essential Action Comments on the Anti-Counterfeiting Trade Agreement

[peter maybarduk]

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[ Picked text/plain from multipart/alternative ]
Essential Action
P.O. Box 19405
Washington, D.C. 20036

March 21, 2008


Rachel S. Bae
Director for Intellectual Property and Innovation
Office of the United States Trade Representative
600 17th Street, N.W.
Washington, DC 20508

Re: Comments of Essential Action on the Proposal for an Anti-
Counterfeiting Trade Agreement

Dear Director Bae,


Essential Action submits the following comments to the Office of the
United States Trade Representative (USTR) concerning a proposed Anti-
Counterfeiting Trade Agreement (ACTA).



Essential Action is a project of Essential Information, a non-profit
501(c)(3) organization based in Washington, D.C. We are concerned
generally with protecting the public domain and the information
commons. A key organizational area of focus is promoting access to
medicines, including in the United States and especially in
developing countries. While we recognize that many other important
issues are implicated by the proposed treaty, our comments focus
particularly on concerns about the proposed ACTA in the context of
the public health priority of ensuring access to safe and affordable
medicines to patients around the world, regardless of income or wealth.



ACTA priorities



USTR=92s fact sheet and ACTA materials conflate patent, copyright and
trademark infringement, =93piracy=94 and counterfeiting. An agreement
based on, or reflecting, such a conflation of distinct concepts is
likely to be overly broad, proscribing behavior that cannot correctly
be identified as counterfeiting and that is not necessarily
detrimental to the public interest.  For example, commercially
interested parties sometimes cast compulsory licensing for medicines
-- legal under national legislation and World Trade Organization
rules -- as patent theft or =93piracy,=94 but no one can argue these
practices bear any resemblance to counterfeiting. At the same time,
an agreement focused on patent, copyright and trademark infringement
is likely to overlook important options to control counterfeiting,
including by requiring companies to disclose knowledge of counterfeit
products.



A multilateral counterfeiting treaty should concern itself
specifically and uniquely with the dangers and harms posed to the
public by counterfeit goods.  Paramount among these concerns is the
proliferation of unsafe and ineffective products.  Sub-standard
drugs, for example, threaten patient health worldwide.  Notably,
however, these dangers are not limited to counterfeit products:
legitimate businesses, as well, commonly sell drugs with
inappropriate amounts of the active ingredient, and a large
percentage of brand-name drugs sold in the United States use raw
materials manufactured in India, China and other countries in
factories that are inadequately inspected by the Food and Drug
Administration.  The public interest in anti-counterfeiting, then, is
not as a subset of patent, copyright and trademark enforcement, but
rather a subset of state actions to ensure product safety and
efficacy. At least as regards medicines, this suggests counterfeiting
should be considered in a broader framework than the ACTA proposes.



Further, patents, trademarks and copyrights are private rights
subject to private enforcement actions.  While provided for in public
laws, it is generally the responsibility of private parties to
identify alleged violations of patents, copyrights and trademarks and
bring suit.  As proposed, ACTA would harness considerable public
resources to strengthen the enforcement of these private rights.
This use of public means for private ends is not only tangential to
the legitimate public goals of protecting consumers from unsafe and
ineffective products, it may also come at significant financial cost
to taxpayers.



=93Piracy=94



ACTA=92s use of the term =93piracy=94 also suggests an interest in
capturing a much broader pattern of conduct than counterfeiting.
Piracy as a term is not technically descriptive, but is instead
broadly applicable and useful in the art of persuasion.  Its
inclusion in ACTA would open the agreement to abuse, and it should be
eliminated.  Conduct ACTA intends to regulate or discourage should be
described in precise terms.



International cooperation: sharing of information and disclosure



USTR seeks input concerning the sharing of information between
parties and cooperation of law enforcement agencies.  Equally
important is the sharing of counterfeiting information by legitimate
private companies, which often have the first or most complete
accounts of counterfeit products.   Without private companies
disclosing their knowledge, agencies will be handicapped in their law
enforcement efforts.



For example, although pharmaceutical companies depend on law
enforcement and public resources to locate counterfeits and maintain
consumer confidence in their brands, companies do not always disclose
what they know about counterfeits in the market. Reportedly, the
Pharmaceutical Security Institute (PSI), formed by fourteen
pharmaceutical companies in 2002, recorded 76 cases of counterfeiting
in 2004.  The FDA only knew of 58.[1]  PSI=92s counterfeiting database
is considered the world=92s best, yet it =93is not accessible to the WHO,
health authorities or the public.=94[2]  Industry groups seem to favor
general public awareness of the counterfeiting problem, which may
lead to public assistance in enforcement, but sometimes disfavor
public knowledge of specific counterfeited products.



For example, in 1995, GlaxoSmithKline allegedly asked the Ghanaian
government not to alert the public of the presence of fake
halofantrine antimalarial syrup in the market, for the sake of the
company=92s reputation.[3]  In 2002 in Kansas City, BMS and Eli Lilly
settled for $72 million with the families of deceased victims of
counterfeit drugs, seemingly to avoid the precedent that drug
companies could be held liable for failing to disseminate information
about counterfeits.[4]


Governments should require companies to disclose any information they
obtain about the existence of dangerous counterfeit products.  If the
public is to incur expenses combating counterfeiting, the public
should at least have a right to the best information available so its
enforcement activities are effective.  We are concerned that
proposals for mandatory disclosure requirements are absent from the
available materials on the ACTA.



There are at least two existing proposals for statutory disclosure
requirements.  Cockburn et al. propose a model based on the United
Kingdom Civil Aviation Authority=92s reporting requirements for
suspected unapproved aircraft parts.[5]  Companies would be required
to report suspected counterfeits to regulatory agencies.  The agency
would then take responsibility for confirming the report and deciding
whether and when to alert law enforcement and the public.  Meanwhile,
legislation introduced by Representative Steve Israel (2nd District
of New York) proposed requiring drug companies to notify the FDA
within two days of learning of a counterfeit threat.[6]



Enforcement practices: public/private advisory groups



USTR=92s ACTA fact sheet mentions provisions for advisory groups
assisting in enforcement practices.  It is important that any such
advisory groups consist of balanced memberships representing not only
industry, but also consumers, and, in the case of medicines, generics
firms as well as brand-name companies.  Overrepresentation of patent,
copyright and trademark-dependent industries in anti-counterfeiting
enforcement agencies could lead to enforcement priorities and
expenses out of step with the public=92s interest in safe and effective
products and a competitive marketplace.



Role of market forces



There is broad consensus that high prices of some legitimate products
drive both supply and demand in markets for counterfeits.  For
example, according to the World Health Organization, =93When the prices
of medicines become excessively high and unaffordable, patients tend
to look for cheaper sources.  Such situation [sic] encourages
counterfeiters to produce cheaper counterfeit drugs. =85 When price
differences exist between identical products, patients and consumers
go for the cheaper ones.  This creates a greater incentive for
counterfeiters to supply cheap counterfeit medicines.=94 [7]  Despite a
relatively well-controlled drug supply, high prices make the United
States an especially attractive target. =93America has become the go-to
market for counterfeiters because we pay the highest prices of anyone
in the world,=94 states Katherine Eban, author of =93Dangerous Doses: How
counterfeiters are contaminating America=92s drug supply.=94[8]  Public
Citizen commented to the FDA, =93In our opinion, as the costs Americans
pay for prescription drugs continue to skyrocket and as the disparity
in these prices continues to grow in comparison to other countries
the economic incentives for counterfeiting and selling substandard
drugs increases proportionally.  This incentive is now greater than
ever before.=94[9]



Patent regimes, which often allow exclusive rights holders to set
high prices without fear of competition, create incentives both to
innovate and to counterfeit.  The high cost of research and
development is reflected in each consumer=92s purchase of a bottle of
brand-name pills.  By contrast, a prize system, in which medicines
could be sold at marginal cost, with innovators compensated through
prizes rather than marketing monopolies, would create incentives only
to innovate.  Counterfeiters would be forced to compete with low-
price legitimate sales reflecting only the low overhead and
manufacturing costs of each pill.  Incentives to trade in fakes would
dwindle. There are other possible measures to reduce prices, and
which would also reduce incentives to counterfeit.



A treaty focused on counterfeiting should not fail to address the
role of the high prices for medicines in promoting counterfeiting. We
recommend that this matter be discussed in the context of any treaty
negotiation, and that any resulting treaty include provisions for a
study and review of the interconnections between high price and
counterfeiting, and possible measures to contain prices.



Sincerely,





Peter Maybarduk

Staff Attorney

Essential Action




[1] =93Counterfeit medicines =96 What are the problems?=94 Pharma-Brief
Special, BUKO Pharma-Kampagne, a member of Health Action
International (2007) at 5.

[2] =93The global threat of counterfeit drugs: why industry and
governments must communicate the dangers.=94  Robert Cockburn, Paul N.
Newton, E. Kyeremateng Agyarko, Dora Akunyili, Nicholas J. White,
Public Library of Science (PLoS) Medicine, April 2005, Volume 2,
Issue 4, at 305.

[3] BUKO, supra, and PLoS, supra.  GlaxoSmithKline also was reluctant
to share information about fake syrup with the authors of the PLoS
article.

[4] PLoS, supra.  There are, of course, counterexamples.  =93In 2002,
Johnson and Johnson issued 200,000 letters to health care
professionals in the US warning them of fake Procrit=85within one week
of being notified of a severe counterfeit problem.=94  PLoS.

[5] PLoS, supra at 307.

[6] H.R. 2345, 109th Congress.
[7] =93What encourages counterfeiting of drugs?=94  World Health
Organization Counterfeits FAQ, available at: http://www.who.int/
medicines/services/counterfeit/faqs/16/en/index.html.

[8] Harcourt (2005).

[9] =93Comments on the Final Rule implementing the Prescription Drug
Marketing Act of 1987/PDUFA,=94 Comments of Public Citizen=92s Health
Research Group, October 27, 2000.