After seven years of wrangling toward the final terms of an ambitious free trade agreement that will join 12 Asia-Pacific nations, only the thorniest of market access and intellectual property issues remain unresolved in the Trans-Pacific Partnership (TPP). Of these, perhaps the most contentious concerns how long pharmaceutical companies should have exclusive intellectual property rights covering the clinical trial data they compile as they develop novel biologic medicines. U.S. negotiators have stood fast in advocating for 12 years of data protection — the standard that Congress enshrined into U.S. law following extensive deliberation — while other TPP parties have sought to limit the regulatory data protection period to as little as five to seven years. But while advocates of the latter position have attempted to frame the debate as a choice between access to medicines versus profits for pharmaceutical companies, the real issue is whether negotiators will conclude a TPP that is more concerned with the long-term goal of maximizing biomedical innovation around the world than the short-term goal of slightly lower prices in other nations for the stock of medicines that exist today. In other words, negotiators can complete a TPP that may deliver lower prices in other nations while also lessening incentives for and thus the output of innovation globally, or a TPP that would likely have little effect on prices in the near term, but yield much more drug innovation — and potentially lower healthcare system prices — over the longer term.
The Information Technology and Innovation Foundation (ITIF) has analyzed this issue and concluded that the time, expense and risk involved in developing biologic medicines that must be reliably and safely manufactured in living tissues are immense: approaching $3 billion per medicine in 2013. That's why the break-even time for biologics makers to recover their research and development, manufacturing, and promotion cost averages 14.6 years, meaning innovators need a significant period of time to recoup their investment before their intellectual property (IP) rights expire and generic competitors appear.
Recognizing the need to strike a balance between innovators' incentives for investing in expensive and risky novel drug development, while at the same time making room for competition by creating a path for biosimilar manufacturers to bring generic products to market, is exactly why U.S. law affords 12 years of data exclusivity protection — and why Europe offers up to 11. And that's a key reason why America and Europe have thriving markets both for novel biologics medicines and robust generic competition, as recent editorials in The Washington Post and The Wall Street Journal have noted.
The simple reality is that stronger intellectual property protections are associated with greater levels of biomedical innovations that save lives. For instance, a Canadian study on the impact of pharmaceutical innovation on premature cancer mortality finds pharmaceutical innovation has saved more than 100,000 years of aggregate life. (And biologics such as Avastin and Herceptin account for the overwhelming majority of the most effective anti-cancer drugs, with more than 300 anti-cancer biologics currently under development.) Likewise, other research has examined the effect of pharmaceutical patent protection on the speed of drug launch, price, and quantity around the world and has found that stronger IP rights can increase the availability of new treatments to patient populations in developing countries.
Moreover, the notion that lengthier periods of regulatory data protection are automatically associated with increased expenditures on medicines is not a certainty. For instance, in 2006, Canada changed its laws to increase the duration of IP rights for clinical trial data from zero to eight years, but pharmaceutical expenditures as a percentage of Canada's healthcare expenditures actually decreased over that period. Likewise, Japan increased its data protection window from six to eight years (effectively, nine) in 2007, yet pharmaceutical expenditures as a share of Japan's healthcare expenditures have actually decreased since 2005. These experiences show that bolstering IP rights does not necessarily result in meaningful increases in expenditures on medicines relative to overall healthcare budgets.
Further, as people throughout the world live longer, an increasing share of countries' healthcare resources will go toward treating patients with chronic diseases, cancer or diseases impacting the elderly, such as Parkinson's or Alzheimer's. These are the afflictions for which medical science does not yet offer cures; yet it's estimated that a cure or effective treatment for Alzheimer's could save $220 billion in the United States in just the first five years alone, while a cure for cancer could be worth $50 trillion, according to one estimate. Yet in the TPP, some would prefer to trade away the interests of future generations throughout the world in exchange for cheaper access to existing medicines, not just for less-developed nations such as Peru or Vietnam, but also first-world nations such as Australia. Is that really what we want? If so, then we should also recognize that it will mean higher costs later. In essence, the advocates of shorter periods for data exclusivity are imposing a cost on the next generation in the form of less impact on the long-term cost of health care.
Unfortunately, influencing this debate are the voices of several anti-globalist economists, such as Joseph Stiglitz, who contends that the TPP has been designed "to benefit the wealthiest sliver of the American and global elite at the expense of everyone else" and charges that U.S. trade negotiators represent corporate (i.e., pharmaceutical industry) interests over the people's interests. But Stiglitz elevates the interests of developing nations and their workers over the interests of U.S. workers, enterprises, the broader economy and the process of global innovation. So while Stiglitz and his ideological fellow travelers would be more than willing to have the results of trade hurt working Americans—including the 810,000 employed in America's life sciences industry — as long as those in developing nations benefit, that's not a sound basis for making U.S. trade policy.
At stake in the TPP is the viability of a global innovation system that affords the necessary underlying IP protections that incentivize innovators to undertake the tremendous risk and expense associated with developing breakthrough new medicines, while also providing a pathway for generics competition. Twelve years of data exclusivity protection for biologics is the right standard — U.S. negotiators should come back with nothing less.
Ezell is vice president for global innovation policy at the Information Technology and Innovation Foundation, a think tank focusing on a host of critical issues at the intersection of technological innovation and public policy.