Patent Docs: The Trans-Pacific Partnership--What it may mean for the pharmaceutical industry

The Trans-Pacific Partnership (TPP), the latest in a series of multination international agreements (like the North American Free Trade Agreement (NAFTA) and the GATT/TRIPS agreements), is aimed at reducing trade barriers and promoting global free trade. It has been signed by representatives of 12 nations: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States and Vietnam. The signatory countries (and perhaps other countries in the region that have evinced an interest in becoming signatories in future, such as Korea and China) are a growing part of the globe and are expected to comprise the world’s fastest growing market over the next 10 to 20 years. While the treaty’s principal provisions include lower tariffs and dispute resolution mechanisms, there are several sections related to patent law relevant to the U.S. pharmaceutical industry.

The intellectual property provisions are aimed at establishing a minimum level of protection among the member states and to harmonize such protections where possible. The patent provisions define eligible subject matter broadly; however, signatory countries are also permitted to exclude from patent eligibility “diagnostic, therapeutic and surgical methods for the treatment of humans or animals” and “animals other than microorganisms, and essentially biological processes for the production of plants or animals, other than non-biological and microbiological processes.” The agreement’s exclusivity provisions regarding pharmaceuticals and biologic drugs have engendered controversy and opposition. Regulated pharmaceutical products are entitled to at least five years of market exclusivity (subject to the provisions of the Doha Declaration), and signatories must provide a legal framework for the pharmaceutical license holder to challenge approval and marketing of any generic version of a patented drug. Biologic drugs are afforded at least eight years of market exclusivity, or at least five years combined with other regulations in a signatory country that result in at least eight years of exclusivity.

Because even these exclusivity terms—which are shorter than those available to biologic drug innovators in the United States (12 years) or Europe (10 years)—are longer than the terms (i.e., no exclusivity term) available in many of the signatory states, their inclusion in the agreement has produced opposition from nongovernmental organizations and others on the grounds that pharmaceutical corporate interests have been satisfied at the expense of public access to medicine, particularly in developing country signatories of the agreement. These provisions provide in signatory countries the prospect that patent protection will be supported by regulatory regimes that encourage investment in creating distribution and professional networks to bring patented pharmaceuticals to these populations that might otherwise be unattractive for such investment. Paradoxically in view of the clamor that the treaty will preclude access to life-saving medicines in developing countries, having this framework might actually increase the likelihood that such drugs become more generally available in those countries. In any event, all these provisions are subject to further review by the signatories after 10 years, which provides the ability to adapt the exclusivity term based on experience.

The treaty will not come into effect unless it is ratified, either by all 12 nations or by enough of them to constitute 85 percent of their combined gross domestic product (GDP). (These nations comprise about 40 percent of global GDP.) In the United States, President Obama was able to get so-called “fast track” ratification authority, wherein Congress must bring the treaty to a vote within 90 days of the treaty being formally sent to Congress for ratification, and there can be no amendments. Nevertheless, a significant number of disparate groups have begun to exert political pressure against ratification, and the presidential candidates are either weakly supportive or in outright opposition to the treaty. If it is to be ratified, the best chance will be in the lame duck session of Congress that convenes after the election. In addition to providing greater (albeit not absolute) certainty for U.S. pharmaceutical and biotechnology companies in increasing markets abroad harmonization should also reduce the disparate costs and other differences between the U.S. and the rest of the world. Such an outcome is likely to blunt some criticisms regarding domestic drug pricing and to reduce political pressure for the U.S. to adopt price controls and other pricing schemes that could reduce the attractiveness of pharma investment, with the resulting loss of innovation that would surely occur.

EDITOR’S NOTE: This column was originally intended to run with the September issue rather than the October issue. As of October, with the U.S. presidential election nearing, it seemed unlikely that the administration of Barack Obama would oversee any forward movement on TTP.

Kevin Noonan is a partner with the law firm McDonnell Boehnen Hulbert & Berghoff LLP and represents biotechnology and pharmaceutical companies on a myriad of issues. A former molecular biologist, he is also the founding author of the Patent Docs weblog, https://patentdocs.typepad.com/.