U.S. Trade Policy Becoming Less Pharma-Friendly

    By Kevin E. Noonan --

The economic and political realities (both at home and abroad) are beginning to be felt with regard to intellectual property protections for Western companies in poor and developing nations, as evidenced by changes to American trade policies announced recently (see "Worldwide Drug Pricing Regime in Chaos").  Specifically, the Bush administration has agreed with Congressional negotiators to reduce the extent to which the U.S. government uses its influence in international trade to encourage (some would say coerce) foreign governments to enforce patent protection for drugs protected by patents in their home countries.

The new agreement is limited at present to three CAFTA countries: Peru, Panama, and Columbia.  However, industry experts are concerned that this is the beginning of a trend, as reported by Sarah Lueck in The Wall Street Journal today (see "In Trade Deal, a Shift on Generics"; full article only available to subscribers).  Billy Tauzin (at left), president of the Pharmaceutical Research and Manufacturers of America (PhARMA), was quoted in The Journal as accusing the administration of "permit[ing] the weakening of intellectual-property protections in these agreements."  Mr. Tauzin attributed this turn of events to the administration's desire to maintain continuing trade authority from the Democratic Congress, and being thus willing to capitulate to the less pharma-friendly environment existing since the November elections that swept the Democrats to their majority.

The changes in the administration's approach are subtle but meaningful.  One is that the administration will leave to individual pharmaceutical companies the responsibility for preventing marketing of patent-infringing drug products in these countries.  Another is loosening the requirement for countries to extend patent protection to make up for delays in regulatory approval (similar to the patent term extension provisions of the Hatch-Waxman Act, codified at 35 U.S.C. § 156, in the U.S.); now countries "may," not "shall," afford such patent term extensions.

These changes signal that the administration is willing to adopt as formal policy what it has practiced informally for years:  accommodation to the realities that high drug prices are not sustainable in poor and developing countries.  Indeed, attempts to do so have led to affirmative actions, both at the national and international level, that have reduced the extent of patent protection for Western pharmaceuticals (see "The Law of Unintended Consequences Arises in Applying TRIPS to Patent Drug Protection in Developing Countries").  These developments are applauded by groups in the U.S., such as the Center for Policy Analysis on Trade and Health (CPATH) in San Francisco, which opposes "high" drug prices in poor and developing countries as well as for the poor and senior citizens in the U.S.  What neither these groups nor the administration have fully addressed is the balance that must be struck between providing affordable drugs to citizens and providing sufficient return on investment to fund the research, development, and regulatory vetting required to bring a new drug to market.  Solutions to this problem will be much more difficult, but it is clear that a continued patchwork approach will ultimately be unsatisfactory for drug companies and consumers alike.  Unfortunately, it is not likely that there will be the political will necessary to tackle these issues until after the current occupant of the White House leaves office.