CAFTA and the Drug Lobby

CAFTA not as free trade but as intellectual property protection:

Drug Lobby Got a Victory in Trade Pact Vote - New York Times: By STEPHANIE SAUL: The sidewalk between the drug industry's headquarters in Washington and the United States trade representative's office has been taking a pounding from the wingtips of industry lobbyists. The work of these drug industry courtiers, who represent what is arguably Washington's biggest and wealthiest lobby, appears to have succeeded in the Central American Free Trade Agreement. The agreement would extend the monopolies of drug makers and, critics say, lead to higher drug prices for the mostly impoverished people of the six Latin American countries it covers....

The six countries affected by the pact "understand that the net effect of these pharmaceutical provisions will be to raise the price of medicine," said Frederick M. Abbott, a professor of international law at Florida State University. "The way they have to view it is that they're getting something out of the agreement that will give them a net trade benefit." The problem with such an analysis, Professor Abbott said, is that the textile employers and agricultural producers gain, but the economic benefits may never flow down to the people who cannot afford medicines....

In defending their efforts to extend intellectual property protection abroad, industry officials point out that pharmaceutical companies subsidize treatment for millions of people in developing countries. Bristol-Myers, for example, has invested $150 million to set up AIDS clinics and other charitable programs in Africa....

One of the most contentious provisions in the trade pact is a requirement that gives brand-name manufacturers market exclusivity for five years after a drug is registered in the countries, even if the 20-year patent has expired. A similar five-year period exists in the United States, but the trade agreement would require countries to enforce the five-year period even if the exclusivity period in the United States has already expired. During that period, manufacturers who ultimately wanted to register a generic equivalent to the drug in that country would be barred from using the animal and human test data submitted for the drug's approval, a provision that critics say could delay the approval of generics beyond the five-year period....

Critics of the trade agreement say it sets up barriers to compulsory licensing in the countries it covers - the Dominican Republic as well as Nicaragua, Guatemala, El Salvador, Honduras and Costa Rica...

Comments

[jml]

Thaks for that notice. I will surely read the article. But I've complained on this very blog for over a year that NAFTA was as much or more about IP protection and international investor insurance than about free trade. Now it seems the same maybe true re CAFTA. Are the proposed terms efficient? What are their effects on the distribution of benefits to workers in the different countries, on net benefit to poor workers in Mexico, and now, Central America. Nice to see this issues is getting some attention in the press, and might be examined more thorougly now.

[Movie Guy]

Granted, there are two sides to this issue. But my take is that this is pathetic. Anyone who has ever lived in Central America, as have I, knows why I say this.

More article excerpts:

"The agreement's pharmaceutical provisions are a sideshow in the Congressional debate, eclipsed by concerns of the textile and sugar industries and the labor unions that their interests would not be protected."

"In contrast, the agreement's pharmaceutical provisions, which provide five years of market exclusivity to brand-name drugs, have been front and center in Guatemala, where poor AIDS patients have marched in the streets to protest."

"During that period, manufacturers who ultimately wanted to register a generic equivalent to the drug in that country would be barred from using the animal and human test data submitted for the drug's approval, a provision that critics say could delay the approval of generics beyond the five-year period."

"The issue of intellectual property protection for pharmaceuticals has been highlighted in the last week with the Brazilian government's threat to break Abbott Laboratories' patent for the AIDS drug Kaletra by authorizing one of its domestic drug manufacturers to make a copy at roughly half the cost."

"Critics of the trade agreement say it sets up barriers to compulsory licensing in the countries it covers - the Dominican Republic as well as Nicaragua, Guatemala, El Salvador, Honduras and Costa Rica. The combined gross domestic product of the six countries amounts to a third of the annual revenues of major drug makers."

"The six countries affected by the pact "understand that the net effect of these pharmaceutical provisions will be to raise the price of medicine," said Frederick M. Abbott, a professor of international law at Florida State University."

[nk]

In the future the U.S. may need to consider things like labor, human rights, opportunity, risk and income distribution in Central America. Central America may need more supporting institutions to go along with free trade (universities, press, etc).

[masaccio]

Gee, $150 million for Aids in Africa! I wonder how mucy they spend advertising Enfamil there, and what their profit pictures is there?

[david]

But we should still pass it, because supporters use the words "free trade" when they talk about it.

That's an argument from somewhere I've heard -- marginal revolution perhaps?.

[nk]

http://www.cirnetwork.org/advocacy/index.cfm

what efforts exist to remove land mines from Nicaragua?

[still working it out]

The free trade agreement between the US and Australia turned out to be largely an IP agreement as well.

[dsquared]

Yes, and when you join a march against one of these things, you get called a "protectionist" and have to put up with economics professors lecturing you about the benefits of free trade in "widgets".

[anne]

There is a quiet struggle going on between Brazil and American drug companies over the cost of AIDS drugs. Brazil has a wonderful AIDS treatment program that entails treatment for all who are HIV positive, but Brazil is not a rich land, Brazil is a land of much inequality, and AIDS treatment is most costly. So, Brazil either needs deep drug discounts or must copy drugs on its own so that people may be saved. Brazil then copies drugs.

[anne]

http://www.nytimes.com/2005/06/23/opinion/23thu3.html?ex=1277179200&en=9772e2786c6dc983&ei=5090&partner=rssuserland&emc=rss

June 23, 2005

Brazil's Right to Save Lives

Brazil has the best anti-AIDS program of any developing country. It has a model prevention effort and was the first poor country to provide free AIDS treatment to all who need it, a program countries around the world are now beginning to emulate.

It has been able to afford this because Brazilian labs make copycat versions of expensive brand-name drugs. Brazil can freely copy any drug commercialized before 1997, when the country began to respect patents on medicines, a requirement for joining the World Trade Organization. But newer AIDS medicines are still imported and are expensive, and Brazil is spending two-thirds of its antiretroviral budget on just three of these drugs.

The government is now contemplating measures that would allow Brazilian labs to copy these drugs. Brazil's health ministry has asked the manufacturers of the drugs to voluntarily license Brazil to make copies. They have refused, and Brazil is threatening to break the patents and pay the holders a reasonable royalty, as W.T.O. rules require.

Right-wing groups in the United States and pharmaceutical manufacturers are calling this theft, and several members of Congress have asked the United States trade representative to apply trade sanctions. American trade officials have refrained, but they have criticized Brazil's threat to seize patents. While property rights deserve respect and should not be carelessly violated, what Brazil is doing is legal and deserves Washington's support.

Brazil's opponents argue that the country has no real AIDS emergency. Drug companies note that they offer Brazil drugs at deep discounts and say that Brazil can afford them. But the World Trade Organization rules are clear: they encourage all members to use the flexibilities in the intellectual property rules to promote access to medicine for all. Countries need not wait for an emergency, and Brazil isn't even a tough call....

[anne]

Several times I argued with John Rawls and Lawrence Kohlberg that setting ethical problems in rich and poor countries would provoke different solutions. Rawls tended to agree, where Kohlberg was more of a universalist. Kohlberg would ask whether we might "steal" a drug to save someone dear to us were we too poor to afford the drug. Surely this seems to be a universal problem, but I was always struck by the ethical choice not applying to people for whom life saving drugs were beyond stealing. What of a Brazil or Central America where there are no drugs to be stolen? Now here is indeed a profound ethical question in what should and should not be taken for a measure of societal well-being.

[anne]

http://www.nytimes.com/2005/06/25/health/25drug.html?ex=1121140800&en=61621367362c27b4&ei=5070&emc=eta1

Brazil to Copy AIDS Drug Made by Abbott
By TODD BENSON

SÃO PAULO, Brazil - Brazil announced late Friday that it would start copying an AIDS drug made by the American pharmaceutical company Abbott Laboratories to provide a cheaper version for its AIDS treatment program, becoming the first country to break the patent of an antiretroviral medicine.

The Brazilian government, which provides free AIDS treatment to all who need it, estimates that it will save about 130 million reais a year, or about $55 million, by making a generic version of the drug, called Kaletra.

The government contends that it can make the drug for 68 cents a pill, almost half the $1.17 that it is paying Abbott for the medication.

The country's health minister, Humberto Costa, said late Friday that the government decided to break the patent after Abbott refused to lower its price voluntarily or allow Brazil to make a cheaper version of the drug.

Abbott, which is based in Abbott Park, Ill., now has 10 days to present a counteroffer before Brazil officially breaks the patent.

If it does not, Mr. Costa said Brazil would pay the company a 3 percent royalty on the generic version of the drug, as required by the World Trade Organization.

Abbott criticized the move, arguing that Brazil already receives the drug at the lowest price in the world outside of humanitarian programs in Africa.

"The Brazilian government does not have a legal basis to issue a compulsory license for Kaletra on the grounds of public interest or national emergency," it said. Still, the company did not say how it would respond to Brazil's decision, saying only that it remained willing to work with the government to find a "mutually agreeable solution." ...

[Oskar Shapley]

anne wrote:
"The government contends that it can make the drug for 68 cents a pill, almost half the $1.17"

I assume that $0.68 is the variable cost of producing the pills. The other $0.49 must therefore include both the producers profits as well as reimbursement of research expenses.

Brasil is already receiving the drug at the lowest price in the world, so that the producer is probably not making much of a profit on them anyway. Brasil was probably paying less for the research costs than other countries.

Now Brasil has simply decided that it wants someone else to pay the whole bill for the research from which they do benefit. That's free-riding if not outright theft.