PROPOSED FACT SHEET ON FTA AND MEDICINES PRICES

UNCLAS SECTION 01 OF 04 BANGKOK 000712

SIPDIS

DEPARTMENT PASS USTR FOR BWEISEL

E.O. 12958: N/A
TAGS: ETRD TH
SUBJECT: PROPOSED FACT SHEET ON FTA AND MEDICINES PRICES

REF: BANGKOK 000689


1. This is an action request -- para 4.


2. As noted in reftel, the issue of the proposed US-Thailand
FTA and that agreement's potential effect on medicines
pricing -- particularly for drugs used in the treatment of
HIV/AIDS -- in Thailand has emerged as the single most
controversial part of the FTA. Anti-FTA forces argue that
the US request for enhanced IP will result in higher
medicines prices, resulting in decreased access to medicines
in Thailand. We believe these charges, if left unchallenged,
have the potential to turn Thai public opinion against the
FTA and effectively kill it. While the Embassy and USTR
officials have addressed the IP/medicines pricing issue on
several occasions in Thailand, more needs to be done.


3. Working with local Pharma representatives, we have
prepared a "Fact Sheet" with accompanying Q's and A's on this
subject. We propose to use this document as a key component
of an aggressive public outreach campaign over the next
several weeks.


4. Action Requested -- Washington agencies are requested to
review and clear the Fact Sheet/Q's and A's below, for use by
Embassy in its public outreach efforts in Thailand.


5. Begin Document

Patents, Pharmaceuticals and the FTA -- A Fact Sheet

One of the most controversial items in the proposed
U.S.-Thailand Free Trade Agreement is patent protection for
pharmaceutical products. The provisions are complex and have
given rise to a number of misunderstandings about how an FTA
would affect prices and access to medicines in Thailand.

What,s in an FTA

Patent Term Adjustment: Both Thailand and the United States
grant patents for a length of twenty years, and that term
will remain unchanged after an FTA. However, the FTA states
that the patent term of an innovative new product can be
lengthened to compensate for &unreasonable delays8 that
occur in the process of granting of the patent or market
approval. For example, an &unreasonable delay8 of one year
would result in an extra year of patent protection. The
purpose of this provision is to ensure that pharmaceutical
and other companies have sufficient time to recoup the
expenses incurred in developing their products. The average
cost of developing a new medicine has been estimated at $800
million. It is in the interest of all, including industry,
hospitals and patients, to avoid these unreasonable delays
and speed to market life-saving drugs. Adequate resources
for the Thai Patent Office and the Food and Drug
Administration would ensure that applications for patents and
market approval were reviewed quickly and thoroughly and that
no patent term extensions for unreasonable delays would be
necessary.

Data Exclusivity: To obtain market approval for a new drug
in Thailand, a pharmaceutical company must submit clinical
test data to the Thai Food and Drug Administration to show
that the drug is both safe and effective. An FTA would
require that each country protect this data from disclosure
or unfair use for at least five years after the drug has been
approved. Data exclusivity is a different form of protection
than a patent in that it protects only the data, not the
product. Under the FTA, generic competitors would still be
able to obtain market approval for a generic copy of a drug
that is not under patent, but would need to submit their own
safety and efficacy data and not rely on the data of the
original drug manufacturer for at least five years.

It is important to note that the five years of data
exclusivity does not add on to a drug,s patent term, rather
it runs concurrently with the patent period, starting from
the date of market approval in Thailand. In most cases, the
data exclusivity term would begin and end while the drug was
still under patent and would not affect when or whether the
drug could be produced generically. It would only be of
value to a drug company for products that have less than five
years of patent protection remaining at the time of market
approval, or for products for which patents were never
issued. In these rare cases, the data exclusivity provisions
ensure that companies have at least some period of market
exclusivity.

Compulsory licenses: Under WTO rules, a member country is
authorized to produce a patented drug, with or without
permission from the patent holder, in cases of public health
emergency, anti-competitive practices by the right holder, or
for public non-commercial use. An FTA would not restrict
Thailand from issuing a compulsory license for these reasons,
provided that the patent owner was given reasonable
compensation.

Tariff reduction: Thailand currently maintains a ten percent
tariff on imported pharmaceutical products, with exceptions
for vaccines and drugs to treat HIV/AIDS, malaria, and
thalassaemia. An FTA would eliminate tariffs on drugs
imported from the U.S. and could potentially result in
significant price reductions across the board.

The FTA and anti-HIV/AIDS drugs

The antiretroviral drugs used to treat most HIV/AIDS patients
in Thailand are not patented, and generic copies are produced
domestically and available for sale. The most well known
generic is GPO-vir, a combination of three off-patent drugs
produced by the Government Pharmaceutical Organization. Some
other antiretrovirals, including drugs used for patients who
have built up resistance to GPO-vir or have experienced side
effects, remain under patent and are substantially more
expensive than generic products.

An FTA would not increase the prices of drugs in Thailand,
including antiretrovirals. Drugs that were off patent would
continue to be so, and generic drugs would continue to be
produced as before. There are no provisions in the FTA that
would encourage a pharmaceutical company to increase the
prices of their products after an FTA were signed. Rather,
the issue is one of whether prices would fall as quickly as
they would otherwise were there no FTA and were more generic
competition.

For most antiretrovirals the FTA provisions listed above
would have no effect on price or access. With regard to
patent term adjustment, the Thai Patent Office and the Food
and Drug Administration recognize the importance of
antiretrovirals to saving lives in Thailand and are committed
to providing rapid approval for new drugs. It would be very
unlikely for &unreasonable delays8 to occur in granting
patents and marketing approval for a new antiretroviral, and
therefore little chance for an extension of the patent term.

Data exclusivity provisions would likely have no impact as
new antiretrovirals are almost certain to be patented in
Thailand. As mentioned above, data exclusivity runs
concurrently with the patent period and the five-year period
usually ends before the patent ends. A generic firm wishing
to copy a new antiretroviral would have to wait until the
patent term ended before producing their own version, and
would not be impacted by the unavailability of the clinical
test data for that five-year period of data exclusivity.

The option of issuing a compulsory license for production of
a patented antiretroviral would continue to exist for
Thailand. The U.S. stands by the commitment it made in the
WTO round in Doha in 2001, affirming that intellectual
property rules should not prevent WTO members from taking
appropriate measures to protect public health.

Many patented antiretrovirals are sold in Thailand at steep
discounts, with some being provided on a no-profit basis by
the companies that developed them. For some drugs it is
unlikely that a generic copy would be any cheaper than the
original drug being sold today. Other patented drugs are
more expensive, but once the patent term ends generic
manufacturers would be freely able to manufacture and sell
cheaper generic versions without restrictions.

Questions and Answers

Q: Why is the U.S. seeking &TRIPS-plus8 protection for
intellectual property that is not required by the WTO?

A: WTO rules provide an excellent base for protection of
intellectual property, but they provide general guidelines on
IP protection, rather than detailed rules on how intellectual
property should be protected. Many innovative industries,
including pharmaceuticals, face particular difficulties in
generating intellectual property which are not fully
accounted for in the WTO rules. For this reason, countries
that have an interest in promoting innovation have put more
detailed rules in place to encourage ongoing research and
development in these industries. Ultimately, these rules
benefit companies and consumers because they promote ongoing
research and encourage the development of new, innovative
products, including new medicines.

Q: Would an FTA raise prices of pharmaceuticals, including
drugs to treat HIV/AIDS?

A: There are no provisions in the FTA that would cause a
pharmaceutical company to raise the prices of their products.
If we examine the likely overall effects of the FTA on
pricing, prices of medicines would fall since the current ten
percent tariff on imported pharmaceutical products would be
eliminated.

Q: Would an FTA ban the use of generic copies of essential
drugs in Thailand?

A: No, every generic drug on the market today would still be
available as a generic after an FTA were signed with the U.S.
Generic drugs are currently able to enter the market after
the patent on the original drug expires, and this will not
change after an FTA. There are provisions in the FTA that
could in theory delay the entrance of some new generics, but
current, longstanding Thai Government policies make such an
outcome highly unlikely.

Q: Would an FTA extend patents on drugs from 20 to 25 years?

A: No, Thailand will maintain its longstanding policy of
providing patent protection for 20 years, which is standard
international practice. There would likely be provisions in
an FTA to extend the patent term of a new product to
compensate for &unreasonable delays8 in patent and market
approval, but it is anticipated that if adequate resources
were allocated to the patent and market approval process in
Thailand such delays would be unlikely.

Q: Will data exclusivity extend the patent term on drugs?

A: No. Data exclusivity does not extend the patent term.
Data exclusivity provides a period of protection for use of
clinical data submitted to obtain market approval and is
completely separate from the patent. A generic manufacturer
would not be prevented from producing a generic copy of a
drug whose patent term had expired.

Q: Will data exclusivity prevent cheaper generic drugs from
coming to market more quickly?

A: During the period of data exclusivity, a generic
manufacturer would have to submit its own safety and efficacy
data for its drug and not be able to rely on the data of the
original drug submitted for market approval without the
consent of the original manufacturer. However, the data
exclusivity period begins after market approval and runs
concurrent with the patent. Since patent terms are
substantially greater than the data exclusivity period, for
the vast majority of drugs currently on the market the data
exclusivity period would not have continued beyond the patent
period. Exceptions have been rare.

However, when a drug is not patented, data exclusivity can
provide a certain protection for a new drug for a period of
time. Under the FTA, a generic firm would maintain the right
to introduce a generic copy using the generic firm,s own
clinical test data. However, the costs of developing safety
and efficacy data for a generic firm are typically
prohibitively high, and most firms would likely wait until
the end of the data exclusivity period before introducing a
generic copy.

Q: How will AIDS patients afford new, more expensive second-
and third-generation HIV/AIDS drugs if these FTA provisions
are in place?

A: The challenge of finding the resources to develop
tomorrow,s HIV/AIDS medicines, as current treatments
inevitably lose their effectiveness, is faced by the entire
world community, including Thailand. That challenge will
remain with or without an FTA. If history is a guide, these
medicines will be developed primarily with the resources of
the world,s innovative medicines companies. These
innovative medicines will be subject to the standard
international patent regime. FTA provisions are not likely
to add any further protection to these drugs. Here in
Thailand, the government has long recognized the importance
of antiretrovirals and has purposely avoided causing any
&unreasonable delays8 which might result in a patent term
extension. There is every reason to believe that the Thai
Government will continue that policy. If a new
antiretroviral medicine is patented and brought to market
quickly, it would be highly unlikely that data exclusivity
would have any impact on a generic manufacturer,s ability to
bring that drug to market after the expiration of the patent.

Q: Would an FTA prohibit Thailand from manufacturing
essential drugs under a compulsory license?

A: No. U.S. law specifically requires that our FTAs respect
the 2001 Doha Declaration on the TRIPS Agreement and Public
Health, which affirmed that intellectual property rules
should not prevent WTO members from taking appropriate
measures to protect public health. Thailand would still be
able to produce patented essential drugs with or without the
consent of the patent owner in cases of public health
emergency and other specific instances.

Q: A compulsory license would set aside a patent, but not
necessarily allow access to data to obtain market approval
for a drug. Wouldn,t an FTA,s data exclusivity provisions
prevent Thailand from issuing a compulsory license?

A: No. Both the U.S. and Thailand recognize the importance
of protecting public health. If circumstances ever arose in
which a drug were produced under a compulsory license and it
were necessary to approve that drug to protect public health,
the data protection provisions in an FTA would not stand in
the way.

End Document

BOYCE