Robert Weissman
Essential Action
P.O. Box 19405
Washington, D.C. 20036
Tel: 202-387-8030
Fax: 202-234-5176
E-mail: rob@essential.org
www.essentialaction.org

February 28, 2003

Office of the USTR
Washington, DC 20508

Re: Second Draft FTAA Texts: Written Comments

To the Office of the U.S. Trade Representative:

Essential Action, a Washington, D.C.-based corporate accountability group with a long-time interest in international trade issues, is pleased to respond to your December 27, 2002 request for comments on the Free Trade Area of the Americas (FTAA), now under negotiation. Our comments here are limited to intellectual property, investment and access to medicines issues.

Our comments are based on the draft FTAA text made available following the ministerial meeting in Quito. Any analysis of the new draft must begin with the caveat that, because the text is so heavily bracketed and because country supporters of varying provisions remain secret, it is hard to state anything about the new draft with certainty. There are many directly contradictory provisions in the current text, and no way to know which version will end up in the final text, assuming a final version is ultimately negotiated. The FTAA negotiators must include the footnotes indicating which countries support which provisions for more informed public scrutiny to occur; excluding this information serves only to hide from citizens their countries' negotiating posture -- all of the other negotiators know which countries introduced and support which provisions.

With that caveat, we are deeply concerned about the draft FTAA's provisions on intellectual property and their implications for people in the hemisphere obtaining access to essential medicines. These provisions would delay the introduction of generic competition, which in a market economy is the most important means to drive down the price of medicines, with the potential exception of price controls.

Essential Action submitted detailed comments on the intellectual property provisions of the first draft text and their impact on access to medicines. (Those comments are on the web at: http://lists.essential.org/pipermail/ip-health/2001-August/001761.html.) Unfortunately, some version of all of the provisions from the first draft that would, if enacted, hinder access to medicines, remain in the second text.

Key problem provisions in the current text would:

1. Limit compulsory licensing to the public sector and for emergencies (Article 5.1 (a) and (b) on page 9.31). The exclusion of private sector entities from receiving compulsory licensing is a major, and dangerous, exclusion. In many developing countries, the public sector is too impoverished to provide full access to healthcare. Private sector involvement is typically a vital supplement -- not a substitute -- for the public sector. For a variety of reasons, private sector healthcare insurers or providers, or private pharmaceutical companies, may be able to reach patients that the public sector cannot. Moreover, there is strong market and political pressure on many developing countries to privatize healthcare, or shift greater public health responsibilities to the private sector. If current trends continue, the private sector will have greater and greater responsibility for providing healthcare to citizens. Where compulsory licensing is important to facilitate access to medicines, a limit to the public sector will likely mean that many people are denied access to medicines.

2. Prohibit the export of compulsorily licensed goods (Article 5.1(c) on page 9.31). Exports can be important for efficient and effective compulsory licensing both in the exporting and importing countries, so that sufficient economies of scale are obtained. This prohibition would interfere with such efficiencies, and in many cases prevent compulsory licensing from being viable. Paragraph 6 of the Doha Declaration on TRIPS and Public Health specifically acknowledged the problem posed by the TRIPS requirement that compulsory licensed goods be produced predominantly for the domestic market: "We recognize that WTO members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement." A bar on exports would seriously exacerbate the problem by preventing any exports at all.

3. Bar the use of compulsory licensing until four years after a patent was granted (Article 5.3 on page 9.31). Delays in issuing a compulsory license delay the benefits of competition and lower prices to consumers.

4. Prohibit sublicensing of compulsory licenses (Article 5.3 on page 9.31). Many potential compulsory license applicants do not have manufacturing capacity. These potential applicants include nongovernmental healthcare providers, insurance companies, and private hospitals. If these potential applicants are not able to authorize manufacturers to make the product -- for sale to the compulsory licensee only, not generally for the market -- they may have no way to access supply.

5. Link approval to market pharmaceuticals to patent status, effectively making FDA-type agencies into patent enforcement agencies (Article 1.5 on page 9.41). If generic companies cannot gain regulatory approval to put a drug on the market, they will have less economic incentive to challenge the validity of claimed patents. They will have to wait until a patent challenge -- which may take many years -- is resolved by the courts before putting their product on the market. In many cases, the costs of legal representation plus delay will simply be too high, and they will wait for all patents claimed on a product to expire before entering the market. This may delay the entrance of generics by years.

6. Require all countries to grant five years of exclusivity protections to marketing approval data, imposing an important bar to timely compulsory licensing (Articles 1.2 and 1.4 on page 9.41). If generics firms are not able to rely on the safety and efficacy date submitted by brand-name companies, in many cases they simply will not enter the market until they are permitted to rely on the data. Re-doing the tests conducted by the brand-name companies is not only wasteful, it is frequently too time consuming and expensive for the generic firms. The impact of this provision is likely to be to bar compulsory licensing for the term of the data protection.

7. Extend the patent term, to offset regulatory delays (Article 8.2 on page 9.33) and to match extended terms in other countries (Article 1.5 on page 9.41). The 20-year patent term required by the TRIPS Agreement was set with an awareness of potential regulatory delays. Requiring offsets simply hands a unreciprocated gift to patent holders, upsetting the balance between private incentives and public access inherent in the patent system and delaying the introduction of price-lowering generic competition.

8. Require judicial review of all matters related to intellectual property (Article 1.6) on page 9.44); in contrast, the WTO TRIPS agreement permits administrative review of compulsory licensing decisions. The requirement of judicial review adds expense and time delays, in the best scenario, to compulsory licensing cases. A worse, and perhaps more likely, scenario is that the possibility of being tied up in court will deter potential compulsory license applicants from ever submitting applications.