NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, August 17, 2015

After seven years of wrangling toward the final terms of an ambitious free trade agreement that will join 12 Asia-Pacific nations, only the thorniest of market access and intellectual property issues remain unresolved in the Trans-Pacific Partnership (TPP). Of these, perhaps the most contentious concerns how long pharmaceutical companies should have exclusive intellectual property rights covering the clinical trial data they compile as they develop novel biologic medicines. U.S. negotiators have stood fast in advocating for 12 years of data protection — the standard that Congress enshrined into U.S. law following extensive deliberation — while other TPP parties have sought to limit the regulatory data protection period to as little as five to seven years. But while advocates of the latter position have attempted to frame the debate as a choice between access to medicines versus profits for pharmaceutical companies, the real issue is whether negotiators will conclude a TPP that is more concerned with the long-term goal of maximizing biomedical innovation around the world than the short-term goal of slightly lower prices in other nations for the stock of medicines that exist today. In other words, negotiators can complete a TPP that may deliver lower prices in other nations while also lessening incentives for and thus the output of innovation globally, or a TPP that would likely have little effect on prices in the near term, but yield much more drug innovation — and potentially lower healthcare system prices — over the longer term.

The Information Technology and Innovation Foundation (ITIF) has analyzed this issue and concluded that the time, expense and risk involved in developing biologic medicines that must be reliably and safely manufactured in living tissues are immense: approaching $3 billion per medicine in 2013. That’s why the break-even time for biologics makers to recover their research and development, manufacturing, and promotion cost averages 14.6 years, meaning innovators need a significant period of time to recoup their investment before their intellectual property (IP) rights expire and generic competitors appear.

Recognizing the need to strike a balance between innovators’ incentives for investing in expensive and risky novel drug development, while at the same time making room for competition by creating a path for biosimilar manufacturers to bring generic products to market, is exactly why U.S. law affords 12 years of data exclusivity protection — and why Europe offers up to 11. And that’s a key reason why America and Europe have thriving markets both for novel biologics medicines and robust generic competition, as recent editorials in The Washington Post and The Wall Street Journal have noted.

The simple reality is that stronger intellectual property protections are associated with greater levels of biomedical innovations that save lives. For instance, a Canadian study on the impact of pharmaceutical innovation on premature cancer mortality finds pharmaceutical innovation has saved more than 100,000 years of aggregate life. (And biologics such as Avastin and Herceptin account for the overwhelming majority of the most effective anti-cancer drugs, with more than 300 anti-cancer biologics currently under development.) Likewise, other research hasexamined the effect of pharmaceutical patent protection on the speed of drug launch, price, and quantity around the world and has found that stronger IP rights can increase the availability of new treatments to patient populations in developing countries.