21 - Public Health and Intellectual Property in the US-Peru TPA: 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 gove

11 June 2009

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's 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's 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 ‘considerable effort'. 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 ‘considerable', and all data might be protected.

According to the TPA, a ‘normal' 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's authenticity, (ii) the undisclosed nature of such information, and (iii) the applicant's not having been found guilty of conduct contrary to free competition. In contrast, other countries require ‘full evidence' of data generation, the ‘secret' (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 restricts 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's 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 "there shall be no limitation on any Party to implement abbreviated approval procedures for [new] products on the basis of bioequivalence or bioavailability studies," Article 19 of LD 1072 Regulation states that in such cases sanitary registration "can only be granted after the expiry of the period of protection provided by law." 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 ‘certification' of the TPA's 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, Análisis 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.

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