Does the TPP Threaten India’s Role as the Developing World’s Pharmacy?
Opinion about the impact that the Trans-Pacific Partnership (TPP) will have is sharply divided between free trade advocates who argue that the agreement will bolster the economies of signatories and non-signatories alike and those who argue that the agreement will benefit corporations at the expense of workers in all of the TPP countries. The sharpest criticism of the TPP does not, however, center on issues of neoliberalism and globalization rather, the most strident opposition to the TPP has emerged from the unlikely sector of international public health advocates protesting the intellectual property provisions of the trade agreement.
Both Oxfam and Medecins Sans Frontieres have been quite vocal opponents of the intellectual property provisions of the TPP, arguing that the trade agreement’s intellectual property regime will put lives at risk throughout the developing world and beyond because of the threat that it poses to India’s generic drug market and its export of cheap medicines. India is not a TPP country, but the intellectual property provisions of the agreement could have a detrimental impact on these affordable generic drug exports which agencies like Medecins Sans Frontieres rely on for roughly two thirds of all drugs that they use to treat HIV, tuberculosis, and malaria in roughly 60 countries worldwide. India’s generic export market was valued at 12.5 billion US dollars last year, and roughly 40% of India’s total trade in generic drug exports is to countries that are TPP signatories. Interestingly, the United States market is the top destination for generic drug exports from India with a value of 3.7 billion US dollars in 2014, a fact that gives legitimacy to suggestions that any impact will not be felt just by citizens in the developing world but also by people in developed countries who are dependent on lower cost generic drugs to maintain access to adequate healthcare.
India’s weak intellectual property laws provide the essential underpinnings for the country’s role as the pharmacy of the developing world. India’s current patent regime allows for a process of “reverse engineering” of major blockbuster drugs which makes it possible for Indian pharmaceutical companies to develop the same drug at a fraction of the cost. Pharmaceutical companies in India do not have to invest as heavily in research and development on the front end of drug development and can rely on clinical trial data and results from the originator drug to gain regulatory approval for their generic version of the drug. Furthermore, Indian patent law does not recognize patent protection for pharmaceuticals obtained before 1995 at all.
The TPP clearly attempts to close the door on India’s ability to maneuver around the World Trade Organization’s TRIP Provisions for intellectual property rights related to trade, an agreement to which India is a signatory. However, the TPP (now being referred to as TRIPS Plus) is far more stringent than TRIPS and contains three key provisions that are potentially problematic for the generic drug industry in India: the allowance of and mechanisms for the “evergreening” of patents, the terms related to data exclusivity, and the patent debate for a class of drugs known as biologics. Unlike traditional medicines that are chemical based compounds, biologics involve a biological source and are difficult to manufacture and very costly. First generation biologics might include, for example, live vaccines. Second generation biologics include well known drugs like Enbrel, Humira, and Herceptin.
The TPP significantly expands the scope of patentability to allow for the issuance of patents for new forms, new uses, or new methods of production for existing products even where there is no demonstrable increase in the efficacy of the drug which was previously the standard for extending a product patent. The effect of this change is to “evergreen” the patent of the originator drug by allowing the patent holder to make small modifications to the original compound to extend the patent term, thereby delaying the market entry of a generic version of the drug. Perhaps as restrictive as this change is the data exclusivity provision of the TPP. During the process of obtaining marketing approval for a new pharmaceutical, the company developing the original product must conduct clinical trials demonstrating safety and efficacy of the drug, and then submit data to the relevant regulatory authority for approval. These trials are a major cost in the development of a pharmaceutical. The term of data exclusivity is the period in which other pharmaceutical manufacturers cannot rely on the clinical trial data generated by the innovative pharmaceutical company in order to gain marketing approval for their own generic products. Thus, when a data exclusivity term is in place, a generic manufacturer must either wait until the protected period lapses or conduct its own clinical trials.  Of particular controversy in the negotiations surrounding the TPP was the treatment of the data exclusivity period for biologics. The US pushed for 12 years’ protection for data related to biologics during the negotiations in order to align the data exclusivity period in the TPP with the term that was passed as part of the U.S. Affordable Care Act. However, the final deal limits data exclusivity for new marketing applications to a 5 year period, a provision heavily supported by countries that already have 5 year data exclusivity terms in place, like Australia and New Zealand.
It is perhaps no surprise that ten of the bestselling biologic drugs either have or will have reached the expiration of their patents by 2020. Worldwide sales of these ten drugs had already reached 57.5 billion US dollars in 2011. The generic version of these biologic drugs are known as biosimilars. A number of industry analysts predict that the biosimilar market will experience several years of explosive growth by 2020. Biosimilars are extremely expensive and in most instances, access to these medicines is driven by cost considerations. India has already developed and is selling biosimilars for Enbrel and Humira. Pharmaceutical giant Roche declined to even apply for patent protection for its breast cancer biologic treatment Herceptin in India, instead offering a course of treatment for $1200 there as opposed to the $70,000 cost for the same treatment in the United States. Despite Roche’s effort to retain sales of Herceptin in the Indian market through this costing structure, an Indian pharmaceutical company received approval for a biosimilar to Herceptin and is selling it for approximately $900. Ten of the fourteen largest generic drug and biosimilar pharmaceutical companies are located in the Asia-Pacific Rim, and these companies remain uniquely poised to exploit the patent cliff faced by several pharmaceutical companies as the original patents for their biologic blockbusters expire.
While there are provisions in the TPP that have the potential to disrupt the generic drug market in India, the refusal of other signatories to accept the US proposal for a 12 year data exclusivity period for the burgeoning biosimilar market is a clear indication that in the race to encourage innovation, TPP signatories are not willing to sacrifice the public health of their citizens. While the evergreening of patents offers a significant challenge to generic drug manufacturers everywhere, India’s generic drug market may face a unique challenge in its capacity to sustain continued growth of its export market for generic drugs through exploitation of the patent cliff faced by biologics. However, it seems more likely than not that the rejection of the 12 year data exclusivity period by the TPP signatories has the potential to have a substantially greater and negative impact on biosimilar drug development and the cost of biologic medicines in the US than it will have on the Indian market. Observers would be wise to monitor for shifts in the American position on the data exclusivity terms for biologics that currently exist in the US Affordable Care Act. Most importantly, the true lesson to be learned here is that trade deals are not the appropriate forum for debating complex regulatory provisions for the pharmaceutical industry that are primarily designed to balance the competing demands of innovation and patient safety.
MBA Candidate 2016