[Ip-health] Bridges: Public Health and Intellectual Property in the US-Peru TPA

[Judit Rius Sanjuan]

News and Analysis =95 Volume 13 =95 Number 2 =95 June 2009
21 - Public Health and Intellectual Property in the US-Peru TPA

Source: http://ictsd.net/i/news/bridges/48540/

Incredible but true: very few of the amendments introduced by US
congressional Democrats to the IP chapter of the US-Peru trade
promotion agreement have been implemented by the Peruvian government
or respected by the Office of the United States Trade Representative.

by Santiago Roca

In many cases, the text of the original agreement, adopted in June
2006, exceeded requirements in US legislation with regard to the
length of patent protection, exclusivity for undisclosed clinical
trial data, as well as the elimination of competition from generic
drugs and the absence of safeguards to protect consumers. These
provisions also undermined flexibilities available to countries in the
Doha Declaration on TRIPS and Public Health and the WTO TRIPS Agreement.

In March 2007, a number of US Democrats expressed serious concern over
the lack of balance between intellectual property, innovation and
public health in free trade treaties concluded by the Bush
administration, but not yet ratified by Congress.1 In May, a
bipartisan agreement was reached on a series of amendments to be
brought to the pending trade pacts (Bridges Year 11 No.4 page 13).2 By
November 2007, the parliaments of both countries had approved the
modifications. All that was left was the implementation stage, i.e.
Peru=92s adjusting its legal and institutional frameworks to make them
coherent and consistent with the amended TPA.

In December 2007, the Peruvian Congress was granted special powers to
adjust national legislation within 180 days. Six months later, the
government enacted 99 legislative decrees (LDs) without any discussion
or public consultation.3 In January 2009, a final agreement reflecting
concerns expressed by the US Trade Representative was codified in laws
29316 and 29317. These modifications made it possible for President
Bush to sign the TPA into law barely a week before President Obama
came into office.

So, is the new Peruvian legislation in line with the proposals and
principles put forward by US Democrats? Or does it significantly
depart from the balance they sought to achieve between innovation,
intellectual property and access to public health? Let=92s look at a few
examples.

Protection of Undisclosed Data

The TPA provides that data will be protected only when its generation
is found to have involved =91considerable effort=92. However, term is not
defined in Peruvian law in either absolute or relative or terms, nor
is information required on the amount of investment involved in
clinical trials. Thus, even a minimal effort could be =91considerable=92,
and all data might be protected.

According to the TPA, a =91normal=92 period of protection is five years,
but could be less depending on the nature of the data, as well as the
effort and cost involved. However, Peru did not seize the opportunity
to specify the criteria for granting periods shorter than five years
in its domestic legislation. Furthermore, protection has been granted
to data generated in clinical trial phases I, II and III, as well as
to pre-clinical pharmacology and toxicology studies.4

The TPA provides that if the health authority bases its marketing
approval on one previously granted abroad (registration by reference),
the term of protection begins to run from the date of its first
adoption, thus reducing the protection period in Peru. The relevant
language in domestic law, however, does not oblige foreign companies
to use first registration abroad, thus allowing them to request direct
registration in Peru instead. In this case, the protection period
begins from the date of the Peruvian authorisation, thus circumventing
the TPA provision.

With regard to the requirements for accepting applications for data
protection, the Regulation attached to LD 1072 greatly facilitates
access to protection, requiring only sworn statements regarding (i)
the data=92s authenticity, (ii) the undisclosed nature of such
information, and (iii) the applicant=92s not having been found guilty of
conduct contrary to free competition. In contrast, other countries
require =91full evidence=92 of data generation, the =91secret=92 (i.e.
undisclosed) nature of the trial information and a verified accounting
of the investment, which must be separated from any state subsidies,
as well as administrative costs not directly related to the clinical
trials.

The TPA does not require protection if disclosure is necessary to
protect the public, or if steps are taken to ensure that the
undisclosed data or studies are protected against unfair commercial
use. Legislative Decree 1072, however, limits the use of these
exceptions to situations of emergency or extreme urgency, and restrict
the award of compulsory licenses to circumstances described in Article
40 of LD 1075 as amended by Law 29316.5 Similarly, the legislation
ignores the possibility of refusing exclusive data protection when
steps are taken against unfair commercial use, for instance through
competition laws of that penalise violators. Moreover, modifications
made to Andean Decision 486 on Intellectual Property, empower patent
holders to take action against the exceptions if they are found to be
unjustifiably harmful to their interests.6

Factors Affecting Competition

Under Peruvian law, third parties that have developed, and invested
in, their own clinical trials of a chemical entity already registered
by some one else must wait five years before obtaining authorisation
to market their product.7 This provision also applies to the national
health authority=92s use of undisclosed data from other laboratories or
companies in its analysis of safety and effectiveness.

Competition can also be limited through domestic legislation that
allows for strong administrative and judicial opposition to requests
submitted to the health registry, thus hindering the emergence of new
players in the market. While Article 4.4 of Law 1072 states that it is
subject to compliance with the provisions relating to competition in
force in Peru, the new competition law passed in one of the 99
legislative decrees does not establish any such link.

Finally, although the TPA provides that =93there shall be no limitation
on any Party to implement abbreviated approval procedures for [new]
products on the basis of bioequivalence or bioavailability studies,=94
Article 19 of LD 1072 Regulation states that in such cases sanitary
registration =93can only be granted after the expiry of the period of
protection provided by law.=94 In other words, competitors cannot enter
the market until the protection period runs out.

Sanitary Registration and Marketing Approval

Peruvian rules implementing the TPA  broaden both the scope and the
requirements for products that need sanitary registration and
marketing authorisation. Sanitary registration is now obligatory for
all drugs, and any marketing authorisations previously obtained must
be renewed. The new equivalency studies required increase the cost of
generic drugs, or make them disappear from the market. The rules also
favour importers since they will not be reviewed by Peruvian
authorities for a year, while domestic producers must comply
immediately.

In addition, restarting the sanitary registry from scratch entails
considerable risks if the many chemical entities that are currently
licensed and marketed in the country are not reinstated, since this
would allow foreign laboratories to seek test data protection for
these compounds in the future. A balance between access to public
health and intellectual property rights would have required the
establishment of abbreviated procedures for updating previous
registrations, as well as proactive work by the Ministry of Health to
oblige third parties to identify and register chemical entities
previously marketed, but not registered, in the country.

Furthermore, enforcement systems have been greatly strengthened with
the establishment of detailed civil, administrative and criminal
procedures and remedies, including provisions on precautionary
measures and special requirements related to border measures.

Consumer Protection

Finally, several provisions that protect the consumer in the United
States have been left out, including (i) the expiry of data protection
if a product is not offered for sale within one year of marketing
approval, (ii) preventing the issuance of frivolous or unjustified
patents based on minor changes, (iii) requiring the patent to describe
the best way for others to eventually reproduce the invention, and
(iv) requiring laboratories to transfer know-how in exceptional cases
that are consistent with the Doha Declaration on TRIPS and Public
Health.

How Did It Happen?

Differences between Democrats and Republicans in the United States
form the backdrop for the current situation. Both parties share the
view that innovation, technology and expanded intellectual property
rights serve the interests of their companies and citizens in general,
but Democrats seek a balance between intellectual property and public
health, while Republicans prioritise the interests of large US-based
transnational pharmaceutical companies.

When the =91certification=92 of the TPA=92s implementation legislation was
in the hands of the Republicans, they sought to thwart the amendments
the Democrats had successfully fought for in the US Congress. Second,
both the Toledo and Garcia governments in Peru viewed the TPA as an
instrument to promote exports and investment, regardless of its
potential negative impacts in areas such as intellectual property,
among others. Moreover, Peru has apparently not understood that while
any gains from trade will be diluted over time as other countries
conclude similar market opening agreements, the expansion of
intellectual property rights will be permanent and will always favour
countries with the highest technological development. There is little
or no concern in Peru for the protection of public health, the
promotion of free competition, the common good and the need to promote
a production structure that adds value, transfers technology and
creates domestic capacity instead of protecting and expanding foreign
exclusive intellectual property rights and ownership of technology.

What Can Be Done?

There are three major possibilities. The new Democratic executive in
the US could ask Peru to seek a better balance without changing the
TPA, but agreeing to interpret it in conformity with the text itself.
Second, Peru could unilaterally abrogate those parts of the
legislation that were ostensibly adopted to implement the TPA but in
fact have nothing to do with it, or represent the interests of local
groups related to foreign pharmaceuticals, which took advantage of the
extraordinary powers granted by Congress when the laws were being
drafted. Third, the Peruvian Congress could request eminent experts
from civil society on health and intellectual property issues to
prepare legislation that promotes generic drugs and achieves a more
balanced relationship between intellectual property and public health
(a kind of Hatch-Waxman law for Peru). This law should have the
authority to repeal those parts of the TPA implementation legislation
that contradict the TPA itself.

Santiago Roca is Professor of Economics and Finance at the Graduate
School of Business Administration, Universidad ESAN, in Lima and Past
President 2004-2006 of the Peruvian Patent, Trademark and Intellectual
Property Authority.

endnotes

1 Letter from 12 Representatives of the Lower Chamber of the US
Congress, led by Henry Waxman and Jim McDermott, to USTR Susan Schwab,
dated 12 March 2007.

2 Although the agreement was reached between Democrats and Republicans
in May 2007, in the case of Peru, the USTR made it clear much earlier
that the changes in intellectual propriety were due to pressure from
Democrats. The modification process of the Peruvian agreement started
well before the bipartisan agreement was made public.

3 Several of the legislative decrees have been questioned as being
unconstitutional. See for example, Francisco Eguiguren, An=E1lisis de la
Conformidad Constitucional del Uso de Facultades Legislativas
Otorgadas por el Congreso al Poder Ejecutivo mediante Ley 29157,
manuscript, August 2008. LDs 1015 and 1073 have already been amended
by the Peruvian Congress.

4 LD 1072 Regulation, Art. 2b and c.

5 LD 1072 Regulation, Art. 17.

6 Article 8 of Law 29316, which modifies Article 39A of LD 1075.

7 The wording of Art. 6 of the LD 1072 Regulation allows for this
interpretation, contradicting LD 1072 Art. 4.2, which only blocks
marketing approval if the sanitary authority uses test data from other
laboratories to verify the safety and efficiency of the products.

Judit Rius Sanjuan
Attorney
Knowledge Ecology International / Essential Information
www.keionline.org / www.cptech.org
Phone: +1.202 332 2670, ext 18