Transcript Parallel Trade

Policy Issues Concerning Parallel
Trade of Pharmaceutical Drugs in the
United States
James Love
CPTech
FDA Prescription Drug Importation
Meeting
14 April 2004
Side Point
• Parallel trade in medicines would not be
necessary if the US government declared it
would issue compulsory licenses on patents
when prices were unfair to US consumers
Parallel trade in medicines should be limited
to countries that should have good regulatory
systems and which are classified as high
income by the World Bank
• As long as we finance R&D from profits on the
sale of medicines, we need a policy framework
that explicitly supports market segmentation
between high and lower income countries.
• A single world price for medicines would not
serve the interests of consumers in high or low
income countries.
The US government needs to clarify that the United States
recognizes international exhaustion of patent rights.
Prior to Jazz Camera Photo v. International Trade Commission, 264 F.3d 1094
(Fed. Cir. 2001), and in some cases in other circuits following that decision,
the general rule in the U.S. was perceived by many to be an international
exhaustion rule. See Curtiss Aeroplane v. United Aircraft, 266 F. 71 (2d. Cir.
1920) (holding that U.S. patent holder, in consenting to the use of its patent for
manufacture of airplanes in Canada, had exhausted its right to control the
importation of the resulting aircraft into the United States). In Jazz Camera,
the Federal Circuit held that the sale of products by a patent holder in another
country did not exhaust U.S. patent rights, stating:
– United States patent rights are not exhausted by products of foreign
provenance. To invoke the protection of the first sale doctrine, the
authorized first sale must have occurred under the United States patent.
See Boesch v. Graff, 133 U.S. 697, 701-703 (1890) (a lawful foreign
purchase does not obviate the need for license from the United States
patentee before importation into and sale in the United States).
The TRIPS framework for exhaustion of rights
should be changed to permit exhaustion only among
countries of similar or higher income
Article 6 - Exhaustion
For the purposes of dispute settlement under this
Agreement, subject to the provisions of Articles 3 and 4
nothing in this Agreement shall be used to address the
issue of the exhaustion of intellectual property rights.
Article 4 - Most-Favoured-Nation Treatment
With regard to the protection of intellectual property, any
advantage, favour, privilege or immunity granted by a
Member to the nationals of any other country shall be
accorded immediately and unconditionally to the nationals
of all other Members. . .
Article 17(9)(4) of the USAustralia FTA
Each Party shall provide that the exclusive right of
the patent owner to prevent importation of a
patented product, or a product that results from a
patented process, without the consent of the patent
owner shall not be limited by the sale or
distribution of that product outside its territory at
least where the patentee has placed restrictions on
import by contract or other means.
Article 16(7)(2) of the US-Singapore
Free Trade Agreement
Each Party shall provide that patent owners shall also have
the right to assign, or transfer by succession, a patent and
to conclude licensing contracts. Each Party shall provide a
cause of action to prevent or redress the procurement of a
patented pharmaceutical product, without the authorization
of the patent owner, by a party who knows or has reason to
know that such product is or has been distributed in breach
of a contract between the right holder and a licensee,
regardless of whether such breach occurs in or outside its
territory. [Footnote 16-10] Each Party shall provide that in
such a cause of action, notice shall constitute constructive
knowledge.
U.S.-Morocco Free Trade Agreement
Article 15.9: PATENTS
4. Each Party shall provide that the exclusive right
of the patent owner to prevent importation of a
patented product, or a product that results from
patented process, without the consent of the patent
owner shall not be limited by the sale or
distribution of that product outside its territory/9/ .
fn9/ A Party may limit application of this
paragraph to cases where the patent owner has
placed restrictions on import by contract or other
means.
The Hague Convention on Jurisdiction and
Enforcement of Foreign Judgments may
inhibit parallel trade
Another possible problem concerns a current negotiation
on a treaty on cross-border jurisdiction, and in particular,
the provisions that would make contractual choice of court
provisions automatically enforced globally. Sellers of
medicines would routinely choose courts that uphold
restrictions on parallel trade. CPTech has asked the US
Department of State to exclude from the proposed Hague
Convention on Jurisdiction and Enforcement of Foreign
Judgments cases involving parallel trade or the exhaustion
of intellectual property rights. For information on this
issue, see:
http://www.cptech.org/ecom/jurisdiction/paralleltrade.pdf
October 30, 2002 IMS report on
parallel trade in Europe
The belief that parallel traded goods are of poorer quality
is actively encouraged by the pharmaceutical industry. . .
But for the most part, parallel traded products are as good
as the local product because they are identical - the only
difference is that they were packaged in a box of a
different design to appeal to the needs of a different
European market, a market which has exactly the same
high quality requirements. Parallel traded products are
high quality, well-packaged and well-distributed and
cannot be criticized for their inferior quality compared
with branded products. The market is growing.
http://open.imshealth.com/IMSinclude/i_article_20021030.asp
US Government Funded Inventions should not more be
expensive in the USA than in other High Income
Countries
• Abbott charges 5 to 10 times the Canadian or
European price for Norvir, a very important drug
for AIDS.
• Pfizer charges 2 to 5 times more for Xalatan in the
US than it does in Canada or Europe.
• These and many other drugs were invented in the
US on government grants.
• DHHS can declare that it will grant federal MarchIn licenses on government funded drugs when
prices are unfair to American consumers.
Short term mechanism to deal
with R&D
The US Government should require parallel
traders to contribute to an R&D fund
• If innovator profits decline, the pharmaceutical
industry may reduce R&D outlays.
• Policy makers can address this problem as
follows:
– Require that parallel traders to pay a fee of 15 percent
of the difference between the manufacturer’s US price
and the foreign price, into a transparent R&D fund.
– Funding research and development in this way could
focus R&D on public health priorities and increase
transparency in R&D flows.
Long term mechanism to address
R&D
We need a new framework for R&D
• Trade agreements should focus on how we share
the burden of health care R&D
– Related to capacity to pay (GDP per capita)
• Countries should have flexibility on how they pay
for R&D
• We need to separate the markets for R&D and the
markets for products
– Every product should become a generic
– Innovators should have different rewards than 20 year
marketing monopolies
Further reading
January 29, 2004. Essential Inventions, Inc., Petition to use authority
under Bayh-Dole Act to promote access to ritonavir, supported by
National Institute of Allergy and Infectious Diseases contract No.
Al27220.
James Love, “Evidence Regarding Research and Development
Investments in Innovative and Non-Innovative Medicines,” September
22, 2003.
Burton A Weisbrod, “Solving the drug dilemma,” Washington Post.
Aug 22, 2003:
Tim Hubbard and James Love, 2004. A New Trade Framework for
Global Healthcare R&D. PLoS Biology 2 (2):147-150