(Bloomberg) — The Obama administration is caught in a trap as it tries to bring home a trade deal with its Pacific Rim partners. Some of the chief beneficiaries may be big drug companies like Novartis AG, Roche Holding AG, and Pfizer Inc. while the losers could be consumers in both the U.S. and the region.
The administration says it’s bound by congressionally imposed instructions to try to get as much current U.S. law as possible into trade accords — including stringent protections for patented drugs that it’s repeatedly tried to ease at home to encourage more cost-saving generics.
The disconnect has put U.S. negotiators in the position of pushing provisions in the 12-nation Trans-Pacific Partnership that would preclude the administration from making further attempts to win the legal changes.
It also has negotiators pressing the region’s developing countries to sign onto a schedule for adopting the stronger rules, reversing previous exemptions to allow them easier access to cheap medicines.
Even though U.S. Trade Representative Michael Froman says the talks are “in a closing mode,” American proposals for tough intellectual-property protections for drugs are meeting resistance from Australia, New Zealand, Canada and other Pacific Rim nations. Chile’s foreign minister, for one, has said flatly that his country won’t accept some key provisions.
At stake: hundreds of billions of dollars or more in extra costs that consumers may have to pay if the proposals make it harder for cheaper generics to win approval. That, or the loss of protections sought by the U.S. for movies, music and software as well as drugs if no agreement is reached on the deal’s intellectual-property provisions.
“The USTR’s drug proposals are an astonishing effort to require other countries to adopt policies that aren’t in their best interests and lock in policies here that the Obama administration doesn’t support,” said Frederick Abbott, a Florida State University law professor and veteran consultant to the World Health Organization and the United Nations on health and trade issues.
Negotiators returned to bargaining this week to try to wrap up the most ambitious trade deal in at least a generation covering about 40 percent of global output. In the U.S., any final accord must be submitted to Congress for an up-or-down vote with no amendments allowed.
U.S. negotiators want to win makers of advanced drugs 12 years of exclusivity for data that might otherwise help competitors produce similar, cheaper versions. The administration has repeatedly sought to cut that period to seven years in domestic law.
Negotiators are also seeking language to make it easier for the big drugmakers to win “secondary” patents to strengthen their control over products. The administration has proposed changing U.S. law to make it harder to get such add-ons.
The deal would link the U.S., Canada, Mexico, Japan, Australia, New Zealand, Malaysia, Singapore, Peru, Vietnam, Brunei and Chile.
Talks are being conducted in secret, although members of Congress can read negotiating documents. Information about the U.S. position and opposition to it comes from multiple drafts of the trade pact’s intellectual-property chapter obtained by WikiLeaks, the controversial watchdog group, and from officials familiar with the latest May 11 version as well as recent bargaining over the accord. Details of the administration’s position were reported earlier by Politico. The officials asked not to be identified because of the sensitivity of the talks.
The fight over drug rules reflects the complexities involved in a new generation of trade deals.
Traditionally, such accords focused on removing tariffs and other barriers to the flow of goods across borders. Increasingly however, pacts aim at the bigger target of syncing up countries’ laws and rules.
Advocates argue that such “regulatory harmonization” can improve the global economy by relieving companies of the cost of complying with inconsistent regulations in different countries.
Yet as the bargaining over the drug provisions for the Pacific Rim deal illustrates, the effort is fraught with potential for clashes between a country’s domestic and trade goals, and the needs of developed and developing countries.
The White House referred inquiries about the differing objectives of health-care and trade policies to the U.S. Trade Representative’s office. The USTR reiterated negotiators must seek current law and that bargaining positions are open to change.
Trade analysts differ about why U.S. negotiators seem to favor the big drug companies and how it will affect consumers.
Gary Hufbauer, a senior fellow with the Peterson Institute for International Economics, said that with strong competition from generics and growing pressure for the government to control health-care costs, bargainers are seeking to help makers of patented drugs find lucrative markets abroad.
“What they’re really trying to do in these negotiations is shift drug costs, of which the U.S. bears too big a share, to at least other rich countries in the region,” he said.