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