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Hand in Hand With US Government, Big Pharma Pushes for More Profits

Pharmaceutical companies, with the help of the US government, are now coercing countries to adopt more stringent intellectual property protection.

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In January of this year, South African Minister of Health Aaron Motsoaledi cried foul: he was publicly pissed about a US-created astroturf campaign (a faux “grassroots movement” actually led by moneyed interests) meant to undermine the country’s efforts to lower drug prices through amending its intellectual property (IP) legislation.

Labeling the plot as being of “satanic magnitude” and tantamount to “genocide,” Motsoaledi slammed the creators of the campaign, a veritable who’s who of pharmaceutical companies and conservative, pro-business groups. The tripartite alliance responsible for the plot consisted of Public Affairs Engagement (PAE), a DC-based PR firm headed by US Ambassador James Glassman, formerly the undersecretary of state for public diplomacy and public affairs in the George W. Bush administration; the Pharmaceutical Research and Manufacturers of America, or PhRMA, one of the most powerful drug industry bodies on the planet; and a local pharmaceutical body, Innovative Pharmaceutical Association of South Africa (IPASA).

The group would seek to persuade the South African public that strong intellectual property policy is good for investment and that the country’s health woes are a result of a failed public health system rather than patent laws and the price of medicines.

The draft South African policy that the groups sought to undermine seeks to more strictly define how patents should be given, what is patentable and what measures the government can take if pharmaceutical patents negatively impact public health, all in an attempt to stem rising health costs. With its burgeoning middle class, “diseases of the rich” like diabetes, hypertension, obesity, heart disease and cancers are on the rise. This, matched with a high rate of HIV, TB, and other historically “poor” diseases, and coupled with the excessive cost of patented drugs, means that drugs are in high demand, but prices are sometimes inaccessibly high.

The astroturfing plot was simple: For just under half a million dollars, paid for in large part by PhRMA, the US public relations firm would support IPASA’s efforts to stem South Africa’s IP reform by setting up a puppet front group, to be named Forward South Africa and led from Washington DC. The group would seek to persuade the South African public that strong intellectual property policy is good for investment and that the country’s health woes are a result of a failed public health system rather than patent laws and the price of medicines.

What’s more, South Africa is trying to stem costs just as pharmaceutical companies want a bigger slice of its pie – with its growing wealth, its patent-friendly laws and its sick population, South Africa looks like a deliciously ripe, relatively untapped market. If South Africa pushes back, not only could current and future profits be reduced within the country, but also, and more importantly, other emerging economies that also appeal to pharma could follow suit, eliminating potential profits for companies hungry for new markets.

It’s easy to see how multinational pharmaceutical companies would be scared of South Africa’s potential reforms. The country currently offers IP protection beyond what is required under international law and does not review patents before they are granted. As a result, it hands out thousands of drug patents annually and readily gives out multiple patents on a singular medicine, offering monopoly protection on a single drug for decades. Nearly all of the country’s pharmaceutical patents are granted to multinational firms, and the country’s department of trade and industry cites drugs as a key reason for South Africa’s trade deficit. The country is also a continental leader that other African countries and middle-income countries look to for general policy guidance.

Motsoaledi’s harsh words in reaction to the PAE-led scandal represent anger, but not necessarily shock: After all, the country has dealt with US and industry meddling in its pharmaceutical policy before. In 1998, Nelson Mandela’s administration was sued by dozens of pharmaceutical companies in reaction to the country’s attempts to make minor amendments to its drug laws (the case was eventually dropped in 2001, after years of public pressure). The PAE-led astroturfing campaign, which has died in the wake of public outcry, is just one example of many in which US pharmaceutical companies, with the help of high-profile Americans connected to the US government, pressure poorer countries battling high rates of disease to ensure that the IP playing field is set as they like it.

A Legacy of Influence

The battle over intellectual property rights on a global scale is a relatively new phenomenon. Before the late 20th century, each country had its own intellectual property regime: India, for example, offered no protection on pharmaceutical products, and many other countries, South Africa included, offered anywhere from 10 to 20 years of patent protection for medicines.

The US government . . . was swayed by the notion that the death of American manufacturing had to be replaced by other industries, and that IP-heavy ones could help to pick up the pieces.

All of that changed when the Trade Relation Aspects of Intellectual Property Agreement, or TRIPS, was enacted in 1995 under the World Trade Organization (WTO). TRIPS ushered in not only a new era of IP protection – all WTO member countries are now required to give 20 years of patent protection on pharmaceuticals – but also one wherein US government ties with the pharmaceutical industry have a stranglehold on intellectual property in the international arena.

Susan Sell, professor at George Washington’s Elliot School of International Affairs, author of Private Power, Public Law: The Globalization of Intellectual Property Rights explains that before TRIPS, US companies concerned that their intellectual property was being infringed upon had to rely on either US embassies to help, which didn’t always happen, or the World Intellectual Property Organization to intervene, which didn’t have enforcement mechanisms.

As the US government began to negotiate more trade deals throughout the second half of the 20th century, IP-heavy industries saw trade – historically separate from IP – as a new avenue through which to protect their interests. Through a series of internal campaigns, intellectual property became part of US trade negotiations; the US government, and particularly the Reagan administration, was swayed by the notion that the death of American manufacturing had to be replaced by other industries, and that IP-heavy ones could help to pick up the pieces.

Meanwhile, the Office of the United States Trade Representative (USTR), responsible for negotiating international trade on behalf of the US government, had been strengthened in part due to successful lobbying from the IP sector. “(IP industries) lobbied for increased resources for the USTR,” says Sell. In response, the office “does their bidding.”

In the late 20th century, international trade rules underwent a series of massive changes, and IP industries, now cozy with the USTR, again saw an opportunity. Banding together in a coalition entitled the Intellectual Property Committee, and originally led by John Opel of IBM and Edmond Pratt of Pfizer, American-based IP-heavy industries began a government-targeted campaign to include IP within negotiations taking place under the General Agreement on Tariffs and Trade (which would later be replaced by the stronger WTO). Joining together with industries in Europe and Japan, the IP umbrella body drafted a trilateral document outlining what they wanted in an international IP treaty, a wish list that the US Chamber of Commerce pushed domestically and internationally through negotiations, with the promise of new access to US markets and the threat of sanctions if countries didn’t concede.

“This trilateral document became pretty important, and a lot of what’s in TRIPS came right out of that,” notes Sell. “It was a draft treaty; it included what the chapters should be, what should be in there. The (US government) pretty much accepted this private sector analysis as fact for what should be included internationally.”

TRIPS went into effect in 1995. Under the auspices of the WTO, also born in 1995, the agreement is notable not only for homogenizing strong intellectual property rules across the globe, but also because it is binding; the WTO can enact sanctions against members who do not comply.

Middle-Income Countries Push Back

TRIPS was signed just as the HIV epidemic was exploding, a scenario that offers a glimpse into why South Africa – and other middle-income countries facing high burdens of HIV – are acutely aware of the impact intellectual property can have in determining medicine prices.

When HIV treatment first came on the scene, first-line anti-retrovirals, which the majority of HIV positive people take, were patented, and cost $10,000 a year – a price far out of reach not only for the majority of people in Africa, but for many in the US, as well. The epidemic only began to see a decline in horrendous mortality rates when affordable generic HIV treatment became accessible, the result of court battles, international campaigning and global awareness of the injustice of an enormous death toll in the face of exorbitantly priced medicines. In 2010, a year’s treatment with first-line anti-retrovirals, now available in generic form, cost $100 a year.

TRIPS allows for some variations in countries’ drug laws, including allowing each country to determine key requirements of patentability and to use compulsory licenses, wherein a government can override a patent. In the wake of the HIV epidemic, some countries are formulating their intellectual property policies to use these so-called “TRIPS flexibilities” to prevent another catastrophe. Brazil has recently proposed intellectual property reforms that would ensure new versions of old medicines won’t be re-patented, and compulsory licenses use be made easier. In 2012, China also amended its law to allow for compulsory licensing. India is the most bold of them all: whereas South Africa – like the United States and Europe – allows re-patenting an old product under new forms and indications, India’s law expressly limits this. As such, India was able to throw out a patent on Novartis’ cancer medicine Gleevec. The result is shocking: whereas the drug cost approximately $70,000 for a year’s treatment in the United States, in 2013, in India, generic versions go for one-twentieth of that price. In 2012, India also issued a compulsory license on the cancer drug sorafenib, branded by the pharmaceutical company Bayer as Nexavar. The Indian company Natco now sells the drug for just under $200 a month, compared with Bayer’s $5,600 monthly price.

Too many jaded customers skeptical of more “me too” medicines? Tap that billion plus population of aspiring, middle-class healthcare consumers in Asia, Africa, and Latin America, all with untreated chronic diseases.

The countries that are taking the most aggressive stances in amending their IP laws are also the ones that are most lucrative for the pharmaceutical industry. As companies slide down the oft-discussed patent cliff – in which patents on some of the industry’s key moneymakers expire – pharmaceutical companies look to relatively untouched markets. Middle-income countries, which hold a rising number of people with expendable incomes, health insurance, and diseases of the rich and poor – like Brazil, China, India and South Africa – have been called “pharmamerging” countries for the potentially lucrative prospects they hold for the pharmaceutical sector. Whereas emerging markets accounted for less than 10 percent of global pharmaceutical spending in 2013, that’sexpected to explode to 30 percent by 2016.

The pharmaceutical industry has not been subtle about its hoped-for expansion into markets outside of the United States and Europe: William Looney, editor-in-chief of Pharmaceutical Executive magazine and former senior director of Pfizer, characterized the pharmaceutical sentiments in a 2013 article:

Had enough of grumpy, cost-conscious, risk-averse payers and regulators? Consider the vast new opportunities in countries with undeveloped health infrastructure, a largely out-of-pocket payment system and no requirement to negotiate access.

Facing loss of exclusivity on multiple blockbuster products? Fill the gap with high-margin branded generics that benefit from a privileged market position and local infant industry protection.

Too many jaded customers skeptical of more “me too” medicines? Tap that billion plus population of aspiring, middle-class healthcare consumers in Asia, Africa, and Latin America, all with untreated chronic diseases.

Worried about the precedent amendments to national intellectual property laws could set internationally and about loss of potential profit in pharmamerging countries, pharmaceutical companies are trying to push back – and the US government is helping to do the grunt work. Each year, the USTR puts out a “Special 301 watch list,” essentially the US government’s version of Santa’s “naughty” list. In it, the USTR, with heavy industry input, highlights countries whose intellectual property laws and actions are seen as a threat to US industry; those deemed to be the baddies can be threatened with trade sanctions, even if their actions are legal under TRIPS. Brazil, India and South Africa have all faced this wrath; this year, in the wake of its compulsory license and Novartis case, PhRMA and other industry groups have recommended that India be placed on the “priority watch list,” meaning it’s the most likely to face trade sanctions.

Overt pressure is often coupled with backdoor lobbying. Take the case of Ecuador: In 2009, president Rafael Correa requested that the country include compulsory license provisions in its legislation, as allowed for under TRIPS. Wikileaks cables released in 2011 documented pressure from the US ambassador on Ecuador’s Ministry of Foreign Affairs, with the US government suggesting that adopting such measures could threaten Ecuador’s eligibility for trade agreements. The cables also show that the US Embassy met repeatedly with multinational pharmaceutical companies to discuss the provisions, in addition to meeting with Ecuadorian government officials on the matter. Despite this pressure, Ecuador issued its first compulsory license – for an HIV drug – in 2010.

Pressure and retaliation can also come in more vicious forms. In 2006, Dr. William Aldis, a World Health Organization (WHO) representative in Thailand, wrote an op-ed published in a national newspaper warning the country about provisions in the then-proposed (now discarded) US-Thailand Free Trade Agreement that could harm access to medicine. In his piece, Aldis highlighted the essential role generic drugs had played in curbing the country’s HIV epidemic (the country had issued compulsory licenses for key HIV drugs, allowing for generic versions of otherwise patented medicines to be made, a move which resulted in it being placed on the Special 301 list on numerous occasions). Just a few months after his piece hit the paper, Aldis was removed from his position by the WHO director-general; he had served just over a quarter of his four-year position. The Asia Times Onlinefound that US lobbying pressure was behind his demotion, with US officials privately meeting with and writing the WHO director-general in the days before Aldis’ removal.

US, Industry on the Offensive

The pharmaceutical industry, hand in hand with the US government, is also on the offensive. By utilizing trade agreements, the US government is pushing other countries to adopt increased intellectual property protection above what is required in TRIPS.

The Trans Pacific Partnership Agreement, or TPP, provides a prime example of so-called “TRIPS plus” provisions being included in trade agreements. Currently being negotiated by 12 countries, early drafts of TPP text included “some of the worst intellectual property provisions with regards to access to medicine” that Judit Rius Sanjuan, US manager and legal policy advisor at Doctors Without Borders, has ever seen, calling it a “wish list of the pharmaceutical industry.” Early TPP texts required, among other things, that signatory countries explicitly outlaw adoption of Indian-like language that would limit patents on new forms of old medicines; that companies be able to directly sue governments whose policies the companies believed were infringing on their investments; and that companies offer 12 years of data exclusivity on biologics – which can extend monopoly rights on a product.

Early proposals also limited countries’ ability to negotiate drug prices. In exchange for ramped-up IP protection, countries were offered expanded access to US markets, particularly for agricultural goods. Peter Maybarduk, director of Public Citizen’s Global Access to Medicine program, says it’s notable that “the global rules (through TRIPS) were in part devised by and for Big Pharma, and today Big Pharma complains that these rules do not account sufficiently for its needs.” As Sell notes, TRIPS has become a floor, not a ceiling.

The TPP has been negotiated in secret, with those outside of the USTR virtually unable to get their hands on copies of draft text; even some in the US government have been blind to the specifics of negotiations. Over the years that the TPP has been negotiated, San Ruis has met with members of Congress to discuss the group’s concerns with IP provisions. One, who asked to remain anonymous due to sensitive negotiations, noted, “Often, we would tell them what we were hearing was in the text, and they would say ‘I had no idea!’ Even they didn’t have access.” Sell notes that this secrecy is in part due to industry lobbying for a strengthened and separate USTR. “It’s the only agency not subject to Freedom of Information Act requests. It’s not subject to the same kind of oversight and accountability that most agencies are. We don’t have rules for international trade negotiations like we do for other parts of the US government,” she says.

IP industries, on the other hand, do have access to secret texts. In 2013, The Washington Post noted that a handful of industry representatives, but not a single civil society group, sit on the USTR’s industry trade advisory committee, responsible for advising the agency on intellectual property in trade negotiations. The Post notes that “ITAC seats have access to confidential information about the US negotiating position that isn’t available to the public. . . .When USTR wants technical advice on transposing US law into international agreements, it naturally turns to the industry representatives on the ITACs.” The USTR also readily asks industry for meetings, whereas civil society groups have to strong-arm their way into discussions with the body; discussions that are largely blind, as the public isn’t privy to provisions being discussed within a trade agreement at any given time. Wikileaks cables of the TPP IP chapter, released at the end of last year, show that 600 representatives from the pharmaceutical industry were invited to participate in discussions on the trade agreement.

Additionally, PhRMA and other industry groups lobbied heavily from the earliest days of the TPP negotiations. The Sunlight Foundation reports that from 2009-2013, drug companies and pharmaceutical associations mentioned the TPP in 251 separate lobbying reports. Lobbying reports from the pharmaceutical industry mention the TPP more than any other industry (these are voluntary disclosures, and the Sunlight analysis only includes documents that specifically mention the TPP. It therefore may be an underestimation of industry’s lobbying efforts on the agreement). Of all the pharmaceutical bodies and companies involved, the Sunlight Foundation analysis shows that PhRMA campaigned most heavily.

Fed Up

Things may be changing. In addition to public consciousness developing in places like India, Brazil, and South Africa, Americans are increasingly concerned with the cost of medicines. Medical debt is currently the leading cause of personal bankruptcy in the United States, and new “specialty medicines,” like those for cancer, diabetes and hepatitis, are in part responsible for the rise in drug prices. Prescription drug prices rose 5.4 percent last year, and while “specialty drugs” only make up 1 percent of all prescriptions, they account for 28 percent of all spending on pharmaceuticals (cancer drug prices alone rose 24.1 percent last year). Steve Miller, chief medical officer of Express Scripts, America’s largest pharmacy benefits manager, told the Wall Street Journal, “The current pricing mentality around innovative products is unprecedented and unreasonable.”

One drug in particular – Sovaldi, patented by Gilead and used to treat hepatitis C – costs $84,000 for a 12-week course, a price that Miller thinks is “unsustainable.” In large part due to the high price of the drug, Express Scripts expects the cost of hepatitis C treatment to increase 102 percent this year. The drug is set to make $16 billion in sales in 2016 alone, and half of Gilead’s current $127 billion market value is a result of high expectations for the drug. The company’s CEO, John Martin, has a net worth of $1.2 billion. Gilead acquired Sovaldi for only $11 billion from Pharmasset Inc. in 2012.

“You see a policy sector in which rules are not being written and practices are not being determined according to public interest and logic.”

Just as they have internationally, pharmaceutical lobbying efforts also impact drug prices domestically. Take the now-well-publicized deal between the White House and PhRMA regarding Obamacare. In exchange for the pharmaceutical industry offering $80 million in drug cost savings over a decade and spending tens of millions to garner public support for the Affordable Care Act (notably, done in part through two astroturf groups), the Obama administration didn’t push key proposals that would curtail pharmaceutical prices in the US. And it’s not just about domestic policy, either; what happens internationally affects what happens at home. In pushing for 12 years of data exclusivity for biologics within the TPP, the US government is undermining President Obama’s efforts to reduce this period to seven years domestically (the US, like any other signatory, would be bound to the provisions included in the final agreement).

“If you take a step back and look at the global map of this, you see a policy sector in which rules are not being written and practices are not being determined according to public interest and logic,” reflects Maybarduk. “There’s no great calculus that’s being devised about what is the right way to promote innovation and access . . . It’s just driven by lobbyists with occasional exceptions where health advocates can break through.”

Public awareness about these shenanigans has led to public anger. Last year’s Wikileaks TPP cables offered a glimpse at just how harmful the agreement could be, and just how non-transparent the process has been. In March of this year, 16 members of Congress wrote to the USTR with concerns over how medicine access could be impacted by the agreement; even the Vatican has expressed concerns about IP measures within the agreement. Civil society organizations and law professors have called for more transparency in the process.

“Why are we aggressively exporting a policy that we’re increasingly questioning here at home?”

In November, 151 House Democrats wrote to Obama, saying that they will not support “fast-tracking” of the TPP (fast-tracking would essentially take Congress out of the process, allowing them only to accept or reject the final agreement without any oversight of negotiations throughout). Groups concerned about freedom of information, freedom of the internet, consumer protection, and American jobs are joining with those concerned about access to medicine, highlighting harmful proposals on all fronts. With negotiations continuing, access-to-medicines groups are hopeful that public pressure and scrutiny will help to remove at least the most harmful provisions.

Sell hopes that discussions within the United States about drug prices and affordability of healthcare will shake some sense into the Obama administration, which Maybarduk notes is “even more aggressive than Bush” in its efforts to push for increased intellectual property protection internationally. “I find it really weird that Obama wants his signature thing (to be) affordable health care, and then abroad we’re pushing these things,” notes Sell. “There’s a really profound disconnect between our foreign policy and the conversations we’re having at home, and (pharmaceutical companies) are trying to lock in this business model that doesn’t work anymore. Why are we aggressively exporting a policy that we’re increasingly questioning here at home?”

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