KEI comments at February 24, 2015 USTR Special 301 Hearing

On February 24, 2015, the USTR convened the Special 301 Review, taking testimony almost exclusively from witnesses representing large corporate rights holders. Over the course of the three-and-a-half hour hearing, groups such as Phrma, NAM, IPO, and the misleadingly-named Alliance for Fair Trade with India (an alliance comprised of groups such as Phrma, NAM, MPAA and many other similar groups) as well as foreign-owned multinational Bridgestone, pushed for the watch-listing of countries that fail to implement TRIPS+ measures. Many of the lobby groups continued to make false arguments, including, notably the repetition of the claim that compulsory licenses must be limited to emergency use. The hearing was void of any alternative perspective save for the twenty minutes allotted to KEI and UACT. Until KEI testified, there was not a single mention of drug pricing, nor of HIV, cancer, hepatitis C, nor any other public health issues, nor the domestic consequences of the policies the USTR supports.

Andrew Spencer Goldman testified on behalf of KEI. His testimony is reproduced here:

KEI comments at February 24, 2015 USTR Special 301 Hearing

My name is Andrew Spencer Goldman, and I am Counsel for Policy and Legal Affairs for Knowledge Ecology International (KEI), a nonprofit organization based in Washington, D.C.

KEI primarily focuses on issues pertaining to the creation, use, and management of knowledge goods.

KEI has long questioned the assumptions, methodology and objectives of the Special 301 Review.

One almost unquestioned assumption is that copyright and pharmaceutical companies are essentially U.S. assets that deserve our protection.

Foreign ownership of IP intensive firms

A March 2013 report by Jonathan Band and Jonathan Gerafi titled “Foreign Ownership of Firms in IP-Intensive Industries” should be required reading for this committee. Among the findings of their report:

Four of the “Big Six” English-language trade publishers were foreign-owned, and these foreign-owned companies published more than two-thirds of the trade books in the U.S.

Four of the five largest STM (science, technical and medical) / Professional publishers were foreign-owned. More than 90 percent of the revenue of the five largest STM/Professional publishers was generated by foreign-owned firms.

The Band study also looks at the foreign ownership of the recording music, film and other intellectual property intensive industries.

The KEI written submission in this proceeding noted that even for firms like Pfizer and Johnson and Johnson, the majority of employees work outside of the United States. For Pfizer, 2 of 3 jobs are in foreign countries.

KEI is particularly concerned about cancer drugs, and so too, it seems, is PhRMA and USTR, given the extraordinary trade pressures on India. As our submission notes, two Swiss firms, Roche and Novartis, had more than 45 percent of the global oncology market in 2013. Bayer, the firm at the center of the Nexavar compulsory licensing dispute, is a German firm. Over the past five years, a majority of new cancer drugs approved by the FDA were registered by foreign-owned firms.

Many of the comments from the pharmaceutical lobby focus on a set of policies that lead to higher prices for drugs.

These include, among others, demands that countries grant multiple patents on new uses, formulations, combinations and doses of older drugs, demands that governments extend patent terms beyond 20 years, complaints about the use of compulsory licenses to curb excessive prices for drugs, and demands that governments provide exclusive rights to test data used to prove the efficacy and safety of drugs.

PhRMA’s 208-page submission also makes extensive complaints about government efforts to exercise cost controls. The word “price” appears 359 times in the submission, and the context is always that PhRMA wants the United States to use its power to promote higher drug prices.

Before turning to the impact of these trade policy enforced norms on the United States, consider for a moment the impact on people living in developing countries.

Developing Countries

In 2013, the United States had per capita income of $53,470. (GNI per capita, Atlas method). For last year’s Special 301 list, the median per capita income of the countries on the watch list was $7,120, just 13.3 percent of incomes in the United States.

For the priority watch list, the median per capita income was just $5,340, less than one tenth the per capita income in the United States. A person earning three times that much would qualify for Medicaid in the United States. For many of the people living in developing countries on the 301 list, health insurance is quite limited or nonexistent.

Doha Declaration

The Doha Declaration on the TRIPS Agreement and Public Health, adopted in 2001 and agreed to by the United States under the Bush Administration, states, in Paragraph Four, that the “TRIPS Agreement does not and should not prevent members from taking measures to protect public health” and that the “Agreement can and should be interpreted and implemented in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all.”

During the December 2014 WTO Trade Policy Review of the United States, USTR officials reiterated the Obama Administration’s full support of the Doha Declaration. But policies that make access to medicine for all impossible are clearly, obviously, and without any room for doubt, contrary to the plain language and the intent of the Doha Declaration. This is most visibly true for the new high-priced cancer drugs, most of which have prices in excess of $100,000 per year.

When the government of India considered a compulsory license for dasatinib, a drug for leukemia that Bristol Myers Squibb priced at $108 per day — in a country with a GNI per capita of $1,570 — USTR was widely reportedly to have pressured India, and the license was blocked. How does this play out? BMS sales in India, at a price of $108 per day, will be very limited. But, cancer patients will suffer the consequences of having no access. This policy is wrong, and tarnishes our reputation around the world.

Effects on the Aging U.S. Economy

With respect to the United States, the policies that PhRMA wants — the norms that PhRMA is promoting through trade policy — are designed to raise prices. And while the impact of high prices is harsh in developing countries, it also creates problems in the United States.

Many developing countries have higher birth rates and shorter life expectancy than does the United States. About 14 percent of the U.S. population is now 65 or older.

For the entire world, the figure is 8 percent. For Latin America and the Caribbean, 7 percent. For South Asia, 5 percent.

Because cancer has higher incidence in older populations, we will bear a disproportionate burden of high cancer drug prices, and things will get worse.

In 5 years, more than 16 percent of the U.S population will be 65 or older. In 15 years, it will be 19.3 percent.

US employers are already struggling with the taxes and insurance premiums to pay for expensive drugs. Things are getting worse, not better, and USTR is part of the problem.

Sharing R&D Costs as Trade Policy

Instead of supporting policies that are both harmful and wasteful, that place strains on us at home and have such harmful effects on poor people living in the developing world, USTR should be pursuing new trade policies.

The funding of R&D should be the focus of trade policy, not the promotion of stronger IPR or higher drug prices.

Trade policy can be reformed to reconcile both innovation and access, and lower barriers to reforms that improve the value for money spent on R&D. This includes, most importantly, for the longer run, evaluation of strategies to delink R&D costs from product prices. We would like to supplement the written record with suggestions for how this can be done.

Thank you for the opportunity to appear today.