Drug makers fear trade deal from House Dems, administration

Research-based pharmaceutical companies could be among the biggest losers if House Democrats and the Bush administration reach an agreement on trade, industry sources said this week.

The administration is prepared to accept changes demanded by Ways and Means Committee Chairman Charles Rangel (D-N.Y.) that would lessen protections in trade deals for brand-name drugs, according to drug industry sources and business lobbyists closely following talks.

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These protections consistently had been included in U.S. trade deals that were approved by the Republican Congress. For example, the Central American Free Trade Agreement (CAFTA) included “data exclusivity” provisions that can delay the arrival of generic drugs on the market, sometimes even after a patent for a brand-name drug expires.

Some public health activists see the shift as a sign that the trend toward ever-stricter intellectual property rules for drug patents is turning with a Democratic Congress. “We’d see that as an improvement,” a policy adviser at the advocacy group Oxfam, Stephanie Burgos, said.

Business lobbyists and some sources in the pharmaceutical industry also said the trade talks reflect a tougher political climate for pharmaceutical companies. They noted that while the administration is drawing a line in the sand over labor talks related to the trade deals, it is not being as aggressive in defending the pharmaceutical industry.

Industry sources said U.S. drug makers realize they cannot stop the trade deals from being approved no matter how much they protest if there is a deal between the administration and Rangel. As a result, they questioned how strenuously the drug lobby would fight the deals if they move forward.

Expending political capital on the trade agreements might not make sense in a context in which U.S. drug producers are under siege on many other issues, one industry source said, since while international patent rules are important, U.S. rules are even more valuable. Just last week, the Senate approved legislation lifting a prohibition on government involvement in price negotiations between drug makers and Medicare Part D plans.

One industry source predicted that at a minimum, U.S. drug makers would oppose pending free-trade deals with Panama, Peru, Colombia and South Korea that have different provisions than deals approved by the Republican Congress. He also said the changes “call into question the value of the intellectual property protections in the free-trade agreements” for the industry.

Rangel explained his position to drug industry representatives in a meeting last week, sources said. A spokesman for the Pharmaceutical Research and Manufacturers of America (PhRMA) said that discussions are continuing and that proposals on patent rules for pharmaceuticals in trade deals are still evolving. He said U.S. drug makers share Rangel’s objective of providing access to medicines for residents of trading partners.

Other lobbyists, however, predicted there would be at best only minor changes to the terms laid out by Rangel and his staff if there were a separate deal on labor. Rangel is insisting on the changes in response to long-standing complaints from members of his caucus, including House Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.).

Labor issues have been the major sticking point in the talks, and labor and business sources said those talks hit a snag last week after a meeting between Rangel and AFL-CIO President John Sweeney when Sweeney said labor could not support deals that would prevent U.S. labor laws from being challenged for violating International Labor Organization principles.

One of the biggest changes Rangel is pushing deals with data exclusivity, which prevents generic-drug makers from using the clinical test data used by brand-name drugs to secure marketing approval for their generic drugs. In the Central American deal, this protection lasts five years.

This has the effect of preventing generic drugs from coming to the market. PhRMA has argued that such restrictions are justified to reward the innovation of the research-based drug companies, and because of delays that can prevent those drugs from coming to market during their patent life.

The language Rangel is pushing would start the data-exclusivity clock once a brand-name drug receives marketing approval in the U.S..

Some activists, however, argue this does not go far enough, and that poor countries such as Peru and Colombia should not be subject to the same rules as U.S. law. Burgos said Oxfam’s position is that these countries should only be subject to the standards of the World Trade Organization, and not the stricter terms of U.S. law.