360° Trade

When it comes to global trade, there is no value to living in the past. We no longer trade in barter or beads. The Trans-Pacific Partnership (TPP) acknowledges that we live in a global village – and innovation is an essential commodity. Why are some people finding this so surprising?

The evolution of the TPP has been long and arduous – but the basic premise has never changed. In order for global trade to flourish in an equitable manner, there have to be rules. Minus the rule of law, chaos ensues and we find ourselves in a survival of the fittest situation without fairness, predictability, or incentives for innovation. In a world without rules, ambiguity trumps investment and risk outweighs rewards.

One of the more important aspects of the TPP is intellectual property protection for pharmaceutical innovation. This is of particular importance to the United States, where the U.S. biopharmaceutical research sector leads the world in the development of new medicines with about 4,000 in development or FDA review in the U.S. and more than 7,000 in development worldwide. This sector generates high-quality jobs and powers economic output and exports for the U.S. economy, serving as “the foundation upon which one of the U.S.’ most dynamic innovation and business ecosystems is built.

According to the Information Technology and Innovation Foundation (ITIF):

America’s biopharmaceutical companies are among its most innovative and commercially important. In 2014, the sector generated $97 billion in economic value-added, produced $54 billion in exports, and supported more than 3.4 million jobs. As measured by Battelle, the overall economic impact of the biopharmaceutical sector on the U.S. economy totals $789 billion on an annual basis when direct, indirect, and induced effects are considered. Moreover, the sector is extremely research-intensive, investing over 21 percent of its sales in research and development (R&D), while accounting for 23 percent of domestic R&D funded by U.S. businesses—more than any other sector. And measured by R&D expenditure per employee, the U.S. biopharmaceutical sector leads all other U.S. manufacturing sectors, investing more than 10 times the amount of R&D per employee than the average U.S. manufacturing sector. Strong private and public sector investment has made the United States the world’s largest global funder of biomedical R&D investment over the past two decades, a share that some analyses suggested reached as high as 70 to 80 percent.

Let’s not forget the wise words of our sixteenth President, Abraham Lincoln, who commented that patents  “add the fuel of interest to the passion of genius.”

The TPP’s life sciences IP provisions make progress in several important areas toward creating a robust regional innovation ecosystem. While some nations already had data protection obligations in place, the TPP commits countries to provide patent term adjustments for unreasonable curtailments of effective patent terms. It includes measures improving transparency in the listing and drug reimbursement programs run by national healthcare authorities. And it commits countries — such as Vietnam — which had previously lacked explicit data protection periods for the clinical trial data of biologic drugs to introduce them.

Data exclusivity protects the investment needed to develop the necessary clinical data, not the initial innovation. Patent protection rewards innovation and disclosure of that innovation to the public. Data exclusivity protects the investment necessary to generate the extensive clinical and other data that are necessary for, but that do not guarantee, FDA approval. It also encourages further research and development following initial product approval—research and development that has led to medical advances in treatments and patient care. Data exclusivity does not prevent competitors from entering the market, if those competitors generate their own safety and efficacy data.

It is essential to provide innovative manufacturers with a period of exclusive use of the data they generated, in order to help recoup the investment necessary to develop data, and to encourage future research and development.

If American innovation isn’t protected, not only will we not, as a nation, benefit economically – but also the world will suffer the unfortunate unintended consequence of – no innovation. And that is not acceptable.

The United States, with a largely market-based system, rewards the major risks that must be taken to bring new drugs to market. New drug development cannot occur unless innovators have the opportunity to be compensated for their financial risks. Put simply, the new medicines of today allow our industry to continue research into the cures of tomorrow. Our IP system, that covers patents and data protection, is among the strongest in the world, which is why the U.S. has the most medicines in development.

However, our system also encourages competition from generics and biosimilar manufacturers. This is of great benefit to U.S. patients: new medicines improve patient lives and can help reduce healthcare spending by mitigating the need for costly surgery or hospital visits, while allowing follow-on manufacturers to profit and compete once those IP protections expire. Generics and biosimilars would not exist without the IP of the innovators who developed them and assumed all the risks and costs associated with bringing a new drug to market.

In fact, a healthy innovative biopharmaceutical sector is a prerequisite for the generics and biosimilar industries to thrive. In short, for the generics and biosimilar industries to continue their growth, IP rights must continue to help spawn the medicines of tomorrow.

It is not by accident that pharmaceutical innovation is a key point in the debate over the Trans-Pacific Partnership.

Per the ITIF report:

Congressional Trade Promotion Authority directed the Obama administration’s trade negotiators to seek IP protections similar to those enshrined in U.S. law. Thus—while certainly achieving progress with regard to nations that previously lacked biologics data protection altogether — it is disappointing that the TPP commits partners to provide at most eight years of data exclusivity protection.

But even if all TPP partners were to clearly enact eight years of data exclusivity protection for biologic drugs (and outside of Canada and Japan, which already provide eight years of regulatory data protection for biologics, this is far from a certainty), the TPP will still have fallen short of promoting globally a 12-year data exclusivity standard that has proven instrumental in contributing to world-leading levels of biomedical innovation being produced from the United States.

This represents a step back compared to the only other regional group of nations to have established a biologics data exclusivity standard—the European Union, with at least 10 years of data protection—thus setting a lower global standard for data exclusivity protections for biologics. This matters significantly, not only with regard to the countries currently participating in the TPP, but also to countries that may join the TPP in the future—such as China, Indonesia, or Korea. With as much as half of U.S. pharmaceutical companies’ revenues now stemming from foreign sales, the TPP’s eight-year data exclusivity standard will constrain some share of those revenues, relative to a 12-year standard.

Appropriately robust IP protection doesn’t only benefit the United States, but encourages faster entry of innovative medicines into overseas markets. In addition, growth in generics and maintaining the new drug pipeline are not mutually exclusive, as demonstrated in the United States where there is not only a strong IP system that supports innovation, but where generics penetration is at 88 percent. Further, there is no evidence that watering down IP protections has in any way helped to tackle the real access challenges developing economies face; however, it is clear that a lack of commitment to protect IP in trade agreements will ultimately impair future R&D necessary to help patients, grow innovative ecosystems, and develop the next generation of therapies.

Failure to take full advantage of the opportunity provided by the TPP to establish a 12-year standard of regulatory data protection can only limit the promise and potential of biologics.

To borrow an over-used adjective from the world of global climate change – we must protect  “sustainable innovation.”

Peter J. Pitts, a former FDA Associate Commissioner, is President of the Center for Medicine in the Public Interest


Morning Consult