COMMENTS ON THE INTELLECTUAL PROPERTY CHAPTER
OF THE U.S.-MOROCCO FREE TRADE AGREEMENT
AND THE IMPACT ON ACCESS TO MEDICINES

By Robert Weissman
Essential Action
April 8, 2004

The U.S.-Morocco Free Trade Agreement intellectual property chapter
closely tracks the provisions of the U.S.-Central America Free Trade
Agreement. Like the U.S.-Central America Free Trade Agreement (CAFTA),
the U.S.-Morocco Free Trade Agreement (FTA) includes a wide array of
provisions that will delay the introduction of price-lowering generic
competition, meaning consumers can be expected to be price gouged in the
best of circumstances, and that, in the worst cases, patients will be
deprived of medicines that could save their lives or ameliorate needless suffering.

Essential Action prepared detailed comments on the CAFTA Agreement,
which are available at: .

The first part of these comments notes the provisions of the
U.S.-Morocco FTA that parallel those of CAFTA. It does not describe the
import or impact on access to medicines of each provision in great
detail; those more lengthy descriptions are included in our CAFTA analysis.

The second part of these comments identifies a troubling provision not
in CAFTA. This provision requires countries to ban parallel importation
-- also known as reimportation -- of pharmaceuticals. Such provisions
have been included in other bilateral trade deals to which the United
States is a party, but have not received much attention.

The third part of these comments focuses on a novel feature of the
U.S.-Morocco FTA: an exchange of letters between negotiators that
purport to establish an understanding that the intellectual property
provisions in the agreement will not undermine access to medicines. It
explains why this exchange of letters is deceptive, and unlikely to have
any significant mitigating impact on the harmful substantive provisions
of the FTA.


1. Delaying Generic Competition

1.1. Data Exclusivity Protections

Like CAFTA, the U.S.-Morocco FTA obligates countries to establish
special monopoly protections for pharmaceutical regulatory data. These
monopoly protections are not required under the World Trade
Organization's Agreement on Trade-Related Aspects of Intellectual
Property (WTO's TRIPS). The impact of these measures will be, at least,
to greatly delay countries from undertaking compulsory licensing.

As a condition of selling pharmaceuticals, countries require
pharmaceutical sellers to submit data showing their drugs are safe and
effective. This data is commonly referred to as registration data, or
marketing approval data.

Generating the data, based on animal and human testing can be relatively
expensive, costing in some cases tens of millions of dollars.

To gain regulatory approval to sell generic versions of drugs already
approved for market, generic companies generally do not repeat these
studies, which are very time consuming and, from the perspective of the
relatively low-capitalized generic industry, costly. Instead, they
typically show their product is chemically equivalent and bioequivalent
(meaning it will work the same in the body as the brand-name drug). Then
the generic companies simply rely on the drug regulatory agency's
approval of the patented product to earn approval for the generic
version of the product.

If the generics are not able to rely on approvals granted based on the
brand-name data, in many cases they simply will not enter the market.
The U.S.-Morocco FTA includes a number of provisions that will impede
this reliance. As a result, generics will effectively be barred from
entering the market -- even if patent terms have expired, and even if
countries have issued compulsory licenses that would otherwise enable
them to sell on the market while a product is on patent -- until the
monopolies on use of the data expire.

Under the U.S.-Morocco FTA:

* Countries would be required to provide five years of data protection
from the moment a product was given regulatory approval in their
country. (Article 15.10.1) This amounts to an effective five-year bar on
compulsory licensing from the time of marketing approval.

* Countries must grant five years data exclusivity protections to
brand-name companies if their product has received marketing approval
anywhere in the world -- even if the brand-name company has not
introduced the product in their country. (Article 15.10.1)

* Regulatory data monopolies must be granted for the marketing approval
data submitted for all "new pharmaceutical products." Under TRIPS, the
requirement of data protection applies only to data submitted for new
chemical entities. Under the FTA, data protection must be granted for
any new product containing a chemical entity not previously approved in
the country -- even if it is not actually new. (Article 15.10.1)

1.2. A De Facto Prohibition of Compulsory Licensing

Like CAFTA, the U.S.-Morocco FTA contains an especially far-reaching
data monopoly protection that would have an even more devastating
impact. It would effectively make compulsory licensing impossible in the
United States and Morocco, except perhaps as a remedy to some
anticompetitive practices.

Notwithstanding the provisions discussed in the bulleted points just
above, the FTA's Article 15.10.4 appears to prohibit any generic firm
from relying on the data submitted by a patent holder at any point
during the term of the patent unless the generic firm has the permission
of the patent holder.

If in fact this language means what it says, then generic firms cannot
rely on marketing approval data for a product for the entire term of the
product's patent, even if a compulsory license is issued. This provision
appears to be an effective bar to compulsory licensing, including for
emergency use, in Morocco or the United States.

As we mentioned in our CAFTA analysis, because this provision appears so
draconian, Essential Action has asked the U.S. Trade Representative to
clarify if the language should properly be interpreted to mean something
other than what it appears. In an informal meeting, a USTR
representative agreed that the Essential Action interpretation of the
language appeared to be correct, but promised to contact us later with
clarification. We have not yet received any clarification.

1.3. Extending Patent Terms and Overprotecting Patents

The U.S.-Morocco FTA also tracks CAFTA in extending the life of a patent
and in providing overprotection for patents:

* Patent extensions must be provided to offset delays in the grant of a
patent (Article 15.9.7).

* Patent extensions must be provided to offset delays in marketing
approval for pharmaceuticals (Article 15.10.3).

* The agreement creates an incentive for brand-name drug companies to
submit bad patent applications. Article 15.9.9 requires countries to
permit patent applicants to amend their patent application. This gives
patent applicants an incentive to submit inadequate applications or
overly broad patents.

* The FTA's investment rules will inhibit compulsory licensing. The
investment chapter specifies that compulsory licensing done in
compliance with TRIPS and/or the FTA's intellectual property rules does
not violate the investment chapter's limitation on expropriation
(Article 10.7.5) or performance requirements (Article 10.9.3). However,
even with these savings provisions, the agreement's investment chapter
rules are so severe that they are likely to chill countries' willingness
to undertake compulsory licensing, as they fear being subjected to
investment agreement penalties.

2. Restrictions on Parallel Importation/Re-importation

The U.S.-Morocco FTA includes a provision that appears in other trade
agreements, but not in CAFTA, which would effectively prohibit parallel
importation, or reimportation, of pharmaceuticals.

Under the TRIPS Agreement, countries have complete freedom to undertake
parallel importation. For pharmaceuticals, parallel importation involves
the importation, without the consent of the patent owner, of patented
drugs that have legitimately been put on the market in another country.

Parallel importing enables countries to shop on the global market for
the best available price for products. In the case of pharmaceuticals,
companies may price differentiate between different national markets,
and shopping on the global market (or at least within countries of a
comparable level of economic development) may enable countries to reduce
their pharmaceutical bills significantly.

In the United States, parallel importation of pharmaceuticals is
typically referred to as reimportation. Reimportation of pharmaceuticals
is not presently permitted in the United States, but legislation is
pending to legalize it. Public support for reimportation is strong, and
it is increasingly popular among state government officials who would
like to obtain the price benefits available by purchasing lower-priced
drugs sold in Canada.

One strategy that brand-name companies are looking at in order to thwart
reimportation is to employ contract terms that prohibit buyers of their
products from re-selling them. Thus as part of the contract by which it
buys products from, say, Pfizer, a Canadian pharmacy would be prohibited
from re-selling its product in or to the United States. If such contract
terms are enforceable, then even if the United States were to legalize
drug reimportation, the brand-name drug companies would have a tool
available to prevent reimportation from occurring.

Article 15.9.4 of the U.S.-Morocco FTA would require countries to
prohibit drug reimportation (or parallel importation of any patented
product). A footnote says this prohibition on parallel importation may
be limited to cases where the patent holder places restriction on import
by contract or other means -- but adding such contractual terms is no
burden to brand-name drug companies, and leaves them with the absolute
power effectively to proscribe drug reimportation.

3. The Deceptive Letters of Understanding

An attachment to the U.S.-Morocco Free Trade Agreement includes letters
of understanding between the U.S. Trade Representative Robert Zoellick
and an (unnamed) Moroccan Government Official.

The letter purports to explain that the intellectual property provisions
of the free trade agreement will not undermine national efforts to
ensure access to medicines for all, but it provides little if any relief
from the onerous provisions in the trade deal itself.

The second paragraph of the letter "confirm[s] the following
understanding shared by [the] two Governments, in relation to Chapter 15
(Intellectual Property Rights);"

"The implementation of provisions of Chapter 15 of the Agreement does
not affect the ability of either Party to take necessary measures to
protect public health by promoting access to medicines for all. This
will concern, in particular, cases such as HIV/AIDS, tuberculosis,
malaria and other epidemics as well as circumstances of extreme urgency
or national emergency."

This statement of understanding expresses noble sentiments, but is
unlikely to make much if any material difference in the implementation
of the agreement.

First, it is clearly subordinate to the terms of the agreement itself,
since it is external to the agreement.

Second, it refers only to measures "necessary" to protect public health.
In international trade language, "necessary" is often a very limiting
term. A measure may be "necessary" to promote public health only if
there is no other way to achieve the public health objective, even if
the alternatives are not politically or financially viable.

Third, and most importantly, the statement does not purport to a) modify
the intellectual property chapter of the agreement; or b) create an
exception to terms of the agreement that may conflict with the goal of
promoting access to medicines for all. It merely offers a description of
the understood impact of the agreement. But in fact, as these comments
argue, such an understanding is at odds with many of the substantive
terms of the agreement, which will delay the introduction of
price-lowering generic competition, effectively block countries' ability
to undertake compulsory licensing of pharmaceutical products, and even
erect an effective prohibition on parallel importation (re-importation)
of pharmaceutical goods. At most, the letters of understanding can be
utilized to shape interpretations of the U.S.-Morocco FTA, and to argue
for pro-public health interpretations -- but not to override specific
provisions that clearly are deleterious to public health and the goal of
achieving access to medicines for all.

By way of further illustration, consider alternative approaches that
would have had more substantive effect. A first alternative would simply
have been not to include the onerous intellectual property provisions,
since their purpose is to delay introduction of price-lowering generic
competition. Or, the intellectual property chapter of the agreement
could have been excluded altogether, since both the United States and
Morocco are already members of the WTO, and bound to uphold the terms of
TRIPS. A second alternative would have been to include language in the
actual text of the U.S.-Morocco agreement that created a clear public
health exception: "Each party may provide an exception to any provision
in this Chapter that in practice conflicts with the paramount public
health goal of promoting access to medicines for all." Such an
alternative, or a variant, would have been remained undesirable -- since
the default rules embedded in the agreement would remain those
provisions which do undermine or delay generic competition and block
parallel importation -- but at least it would have showed a seriousness
about giving countries some flexibility under the terms of the agreement
to address public health considerations.

The third paragraph of the letters of understanding establish that, if
TRIPS is amended, the parties shall enter into consultations to adapt
the U.S.-Morocco agreement appropriately. This presumably relates to a
possible TRIPS amendment incorporating the Doha Declaration Paragraph
Six implementation waiver decision (involving the issue of countries'
ability to export more than 50 percent of what is produced under a
compulsory license for a pharmaceutical product, in order to meet public
health needs in an importing country). Because there are no limits on
compulsory licensing included in the U.S.-Morocco agreement, a revision
of the TRIPS prohibition on exporting more than half of the production
of a pharmaceutical product produced under compulsory license should not
require any parallel changes to the U.S.-Morocco agreement. However,
effective compulsory licensing would require changes in the data
protection scheme included in the U.S.-Morocco FTA. (By contrast, the
minimal data protection requirements in TRIPS should not require
revision.) Whether the parties have in mind creating even limited
exceptions to these provisions to make the Doha export provisions
workable is unclear.

Conclusion: Reject the U.S.-Morocco FTA

Unfortunately, the U.S.-Morocco FTA provisions on patents and regulatory
issues related to pharmaceuticals follow the model of CAFTA and other
preceding U.S. bilateral trade agreements.

The misleading assurances of the "letters of understanding" to the
contrary, the agreement is sure to undermine the public health goal of
ensuring access to medicines for all.

The U.S. Trade Representative is on a mission to impose these TRIPS-plus
terms on countries around the world through bilateral trade deals. The
consequence will be needless death and suffering. Thanks to the breadth
of these trade deal provisions, including on the issues of reimportation
and marketing approval data, the impacts will be felt directly in the
United States, as well as in U.S. trading partners.

These are dangerous and deadly terms. The agreements that contain them,
including the U.S.-Morocco FTA, should be rejected.



* Robert Weissman is an attorney and co-director of Essential Action, a
Washington, D.C.-based corporate accountability group. Contact: Robert
Weissman, 202-387-8030, PO Box 19405, Washington, DC, 20036,
rob@essential.org, www.essentialaction.org.