The USMCA Provisions on Test Data for Biologic Products

The United States-Mexico-Canada Agreement (USMCA) provisions on the term of protection of test data for new pharmaceutical products has received considerable attention, and in some cases, some inaccurate reports on the agreement have conflated the term for test data protection with the term of a patent.

The key provisions are Article 20.F.13: Protection of Undisclosed Test or Other Data, and Article 20.F.14: Biologics, from the intellectual property chapter of the agreement. These Articles, taken together, require the parties to withhold marketing approval for “a new pharmaceutical product that is or contains a biologic” that relies upon “undisclosed test or other data concerning the safety and efficacy of the product” without the consent of the person that previously submitted such information, in order to market the same or a similar product on the basis of (i) that information; or (ii) the marketing approval granted to the person that submitted such information, for a period of at least ten years from the date of first marketing approval of that product in the territory of the Party.

The term “undisclosed or other data” is understood to include the evidence from clinical trials used to establish the safety and efficacy of a drug in humans. These trials which can be expensive, and depending upon the drug, take years to complete, constituting a significant barrier to entry for generic or biosimilar products.

While it is generally understood that this provision will apply to drugs, it is important to note that Article 20.F.14.2 extends this right in test data more broadly to products “produced using biotechnology processes” as well as products that “alternatively, contains, a virus, therapeutic serum, toxin, antitoxin, vaccine, blood, blood component or derivative, allergenic product, protein, or analogous product, for use in human beings for the prevention, treatment, or cure of a disease or condition.” Here it appears as though some gene and cell therapies may be included, so long as they are defined as a “product” as opposed to a procedure or service, something that may be consequential for new therapies such as CAR T, which involves modifying one’s own T-cells with a virus.

The most common issue in reporting in the text is the 10 years of the exclusive right and what impact if any it will have on prices of biologic drugs. This is a sufficiently complex topic to make it hard to quantify. The issues are as follows.

  1. The 10 year period for marketing approval based upon third party test data is shorter than the current 12 years in the U.S., but longer than the terms in the TPP or national laws in Mexico and Canada, so at least for Mexico and Canada, it extends the term, as compared to current law. For the United States, it also is a barrier to the U.S. reforming the U.S. law. When the ACA was considered the FTC recommended a term of zero years, the drug companies lobbied for 14 to 16 years, and officially President Obama wanted 7 years.
  2. Note that at least three bills pending before the current Congress propose reducing the U.S. term from 12 to 7 years (HR 6577, HR 1776 and S.3411).
  3. Not all or even most biologic drugs will be constrained by the test data provisions, because the terms of patent protection are often longer, at 20 years from the filing of the application plus up to five years of additional patent extensions, on what in some cases are fairly large numbers of patents, some of which are filed even after drugs are approved. The 10 year terms resulting from this agreement will primarily benefit products with weak patent protection, or companies marketing products in countries where patents were not filed or granted (a principal factor for several TPP member states for the term in that agreement). Note that Canada and Mexico are typically countries where drug companies file patents.
  4. Even though the 10 years is less than the 12 year period in the U.S., it will still have a negative impact on the U.S. by delaying entry in foreign markets that otherwise would encourage earlier entry for biosimilars.
  5. One overlooked aspect of the text is the language that appears to lock the United States and other countries in to providing test data rights for therapies such as CAR T, which are more like services or procedures than drugs, and in some countries (including the United States), patents are not granted or enforced against medical procedures.
  6. Another overlooked issue concerns the lack of clear language on exceptions to the exclusive rights. This topic is addressed below.

The ability of governments to provide exceptions to exclusive rights, for example, in order to remedy shortages, excessive or unreasonable prices, or other concerns, seems poorly worded. In Article 20.F.13.3, “a Party may take measures to protect public health in accordance with the [WTO] Declaration on TRIPS and Public Health,” and any waiver or amendment to the TRIPS related to that declaration.

Among the exceptions referred to in the Doha Declaration (used here to describe the WTO Declaration on TRIPS and Public Health) is the agreement in paragraph 5.b that “Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted,” and more generally in paragraph 4, that “the [TRIPS] 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,” and that WTO members have the “right . . . to use to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose.” This may be read to mean that the required “consent” to rely upon third party test data can be acquired through a compulsory license, in the same way exclusive patent rights can be subject to compulsory licenses. A narrower reading would be that exceptions to exclusive rights in test data would only apply to the special TRIPS cases involving countries that lack manufacturing capacity, either as importers and exporters, under 31bis of the TRIPS, a complex and so far unused provision in the TRIPS for exporting products to countries lacking domestic manufacturing capacity. Not only is this a significantly narrow and complex procedure, the United States and Canada have indicated to the WTO they are not eligible to import under 31bis, as set out in footnote 3 to the Annex and Appendix to the TRIPS Agreement.

The decision by the United States to opt-out of the right to import under the WTO mechanism that became 31.bis has been criticized, including, for example, in this 2005 Congressional hearing, where then-Representative Tom Allen questioned HHS Secretary Michael Leavitt in the context of shortages of drugs to treat a possible influenza pandemic. (Link here). At one point the European Commission wrote to the TransAtlantic Consumer Dialogue (TACD) to indicate the European Union would not use the 31.bis mechanism even if the European Union was facing a pandemic that could kill millions of its citizens, and that this would also extend to the domestic test data exclusivities, because there was no possibility of an exception in the EU regulation. Also, at various times, the European Commission and the United States Trade Representative have argued the Doha Declaration only applies to a limited scope of diseases, a view that has been expressed as recent as this year during negotiations over a non-communicable disease political declaration at the UN.

The ambiguity over the role of exceptions for test data protection is not a new issue, although it is often overlooked. One area for concern is the current lack of exceptions to exclusive rights for data in the countries where such rights are granted. There is no explicit exception in the European Union regulations or U.S. law, and countries that have been forced to implement such law due to trade pressures from the European Union, Japan or the United States have generally done so without exceptions, making this regulatory monopoly even more problematic than a patent, when dealing with abuses or health problems.

It is worth noting that the treatment of test data is different for pharmaceutical products that treat humans than for agricultural chemicals that protect plants, both in national law and in trade agreements. The European Union, in particular, has a striking mandatory exception to exclusive rights for agricultural plant protection products “to avoid duplicative testing on vertebrate animals,” which is considered unethical. In such cases, governments have a mandate to force licensing of the data, with binding arbitration to determine compensation, which is limited to sharing the costs of testing, and then only “to share in the costs of information that the applicant is required to submit to meet the authorisation requirements.” (The Comprehensive and Economic Trade Agreement, or CETA, between the EU and Canada; ARTICLE 20.30: Protection of data related to plant protection products).

The mandatory cost sharing approaches embraced and promoted by the European Union were adopted after lobbying by animal rights groups.

Unfortunately, the protections afforded to laboratory animals like mice or rabbits in regards to tests involving agricultural chemicals are not extended to clinical trials for new drugs that involve human subjects.

The leading international standard for ethical treatment of humans in medical research is the World Medical Association Declaration of Helsinki on the Ethical Principles for Medical Research Involving Human Subjects. The Declaration of Helsinki is referenced by professional societies, several governments and by the World Health Organization’s Global Strategy and Plan of Action on Public Health, Innovation and Intellectual Property (WHA61.21), which requires WHO members to:

“promote ethical principles for clinical trials involving human beings as a requirement of registration of medicines and health-related technologies, with reference to the Declaration of Helsinki, and other appropriate texts, on ethical principles for medical research involving human subjects, including good clinical practice guidelines” [6.2.g]

The 2013 revision of the Declaration of Helsinki, like earlier versions, places restrictions on the testing of humans when the risks of the tests are unnecessarily risky, excessively risky relative to benefits, or when there is conclusive proof of the outcomes. As is the case for vertebrate animals in connection with agricultural plant protection products, replicating previous studies (duplicative testing) involving human subjects is discouraged if not prohibited.

18. Physicians may not be involved in a research study involving human subjects unless they are confident that the risks have been adequately assessed and can be satisfactorily managed.

When the risks are found to outweigh the potential benefits or when there is conclusive proof of definitive outcomes, physicians must assess whether to continue, modify or immediately stop the study.

The earlier versions of the Declaration of Helsinki were even more strict. For example, the 2008 version required physicians to stop studies when conclusive proof of the results was known, which was stronger than the above language to “assess whether to continue, modify or immediately stop…”

“Physicians should cease any investigation if the risks are found to outweigh the potential benefits or if there is conclusive proof of positive and beneficial results.”

The change from 2008 to 2013 occured after the WHO formally embraced the Declaration of Helsinki in WHA61.21, and several countries sought to create biosimilar pathways for biologic drugs.

The EU/Canada CETA makes an exception for duplicative testing mandatory for plant protection products, but mentions no exceptions for drugs to treat humans. The USMCA text provides for possible exceptions for biologic drugs, but not for agricultural chemicals, creating conflict for Canada, which is required to provide exemptions for agricultural products by the EU/CA CETA, but apparently not permitted to by the USMCA.

Congress should ask USTR to clarify the practical scope of the exception for biologic drugs test data in the USMCA text (20.F.13.3)

The exceptions issue is quite important, and more important than the term for most products where even the 12 years is shorter than the patent terms. When a compulsory license (march-in) was proposed for Fabrazyme in 2010, one rationale given for its rejection was the lack of an exception in the test data regime for the biologic product. The recent bill introduced with more than 100 cosponsors in the House would provide for compulsory licenses on drugs when Medicare price negotiations fail includes exceptions to test data rights, a topic addressed, but unclear, in the USMCA.

Finally, the Trump Administration should be reminded we have farmers, and Bayer is buying Monsanto. The US may have need, and should therefore ensure that there is room for exceptions in the agricultural chemical test data provisions of Article 20.F.10: Protection of Undisclosed Test or Other Data for Agricultural Chemical Products.