Groups target EU-Mercosur FTA to advance access to health in trade deals

AIDS activists, health activists and civil society organizations in Brazil and Argentina are pushing back against the negative effects of the planned free trade agreement (FTA) between the Mercosur countries and the European Union. Studies implore the Mercosur negotiators to stay firm in the rejection of TRIPS-plus regimes that could mean the deterioration of access to health in their countries.

Original version first published on IP-Watch. Author: Monika Ermert.

There are potentially harmful effects of the planned free trade agreement between the Mercosur countries and the European Union. However, the EU-Mercosur negotiations might be the best chance as of now to advance an intellectual property (IP) agenda that is more favourable to access to health, says Pedro Villardi, executive director of our partner organisation the Associação Brasiliera Interdisciplinar de Aids Observatorio National de Politicas de Aids (ABIA).

The most recent leak of the IP chapter agreement suggests a number of compromises, for example the withdrawal of the controversial “supplementary protection certificates,” according to the draft text dated February 27. Nevertheless, some TRIPS-plus provisions remain, the activists warn.

“There is a lot of insistence from the EU negotiators,” Villardi said. For many rounds of negotiations, the Mercosur negotiators have asked their EU counterparts to drop all provisions that would expand the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Data exclusivity and extended times for patent protection, translating to more monopoly rights for pharma companies, are the big battleground.

The EU Commission so far have proposed reshaped versions for TRIPS plus provisions, said Villardi. “But they never accepted to completely drop it, and as Mercosur negotiators are not accepting these provisions and the EU never remove them from the text, there was no advancement,” he argued. “The EU Commission negotiators are always playing, but not accepting that TRIPS plus should be removed.”

Cecilia Malmström, Member of the EC in charge of Trade, and Phil Hogan, Member of the EC in charge of Agriculture and Rural Development, participate in the Mercosur Ministerial meeting. © European Commission

EU wants to go beyond TRIPS 

The EU Commission Directorate General for Trade emphatically rejects the allegations and underlines that “promoting access to medicines remains an essential pillar of the EU’s policy on intellectual property and this is also fully taken into account in the negotiations with Mercosur”. The EU-Mercosur Association Agreement does “not contain any provision that would impose minimum or fixed prices for medicines or health services,” the Commission wrote in a brief answer to Intellectual Property Watch, while declining to comment on the actual text.

An EU-Mercosur trade agreement certainly would neither undermine the right of Mercosur partners to produce generic medicines for domestic and international purposes, the Commission stated. The Commission according to its statement has “no intention to negotiate any intellectual property rules that would change the delicate balance between innovation and keeping medicines accessible to citizens”. It is “confident that its proposal for an intellectual property chapter in the EU-Mercosur negotiations ensures this balance is kept,” it added.

“Generally speaking, the EU negotiates bilateral FTAs precisely to go beyond what was agreed at the multilateral level,” acknowledged David Martin, member of the European Parliament (EP) and former chair of EP access to health working group of Parliament. “The TRIPS agreement dates back to 1994 and it is obvious that certain provisions need to be updated and brought more in line with the modern times.”

Martin told Intellectual Property Watch that he supports striking “a delicate balance between the need to guarantee an adequate IP rights protection especially for modern medicines and the development of the most advanced treatments, and at the same time safeguard the right to affordable medicines”.

The EU, he underlined, “takes into account the level of development of third countries and the need to comply with the Doha Declaration on the TRIPS agreement and Public Health,” which in 2001 reinforced nations’ right to use flexibilities to TRIPS. The Parliament in several resolutions asked the Commission to strike the right balance, Martin said, and the Commission in charge of the negotiations in his view had been responsive to that call. On 16 May, the EP International Trade Committee will host another public exchange of views about the state of play of Mercosur negotiations.

At the same time, Martin noted that “certain countries we are negotiating with, have already in place TRIPS-plus legislation that applies domestically”. This is something the Commission also underlines.

Calculating the cost of TRIPS plus 

Villardi rejects the very notion of TRIPS plus already being in place, calling this “misleading”. Article 40 of the Brazilian patent law provides compensation to patent owners “if the patent application process takes more than ten years. If it is two years beyond this ten year period, the patent owner gets two years compensation,” Villardi said. “But what the EU is demanding, is a patent term extension tied to the market authorisation. This a totally different process and it would add up time and only benefit pharmaceutical companies.”

Villardi also sees this as an attempt to split the Mercosur negotiators who have been unified in their rejection of added IP rights that would be detrimental to access to health.

ABIA and one of its partners in the fight, Fundación Grupo Efecto Positivo (FGEP), our campaign partner in Argentina, have put numbers to their argument against any TRIPS-plus measures. In studies using the Intellectual Property Rights Impact Assessment (IPRIA) simulation model developed by the International Centre for Trade and Sustainable Development (ICTSD), FGEP calculated what it would actually cost to have data protection and extended exclusive monopoly rights – those measures still in the 27 February draft. The research looked at a basket of 17 antiretroviral and antiviral drugs included in the Federal Office of AIDS and sexually transmitted diseases’ catalogue and calculated five scenarios, including: the Status Quo scenario (SQS), the Patent Term Extension scenario (PES), the Data Protection scenario (DPS) and the Total Exclusivity Scenario (TES). An additional scenario contains a roll-back of existing pro-rights holder legislation. Download FGEP’s impact analysis of the EU-Mercosur Agreement.

The problem: the massive over-expenditure could jeopardize the future sustainability of the access to medicines, the researchers concluded.

If EU-Mercosur negotiators would indeed agree on a combination of the various additional protections as in the TES, public spending would need “to increase over 30% on the cost expected for the status quo scenario”. The problem: the massive over-expenditure could jeopardize the future sustainability of the access to medicines, the researchers concluded.

The results by the Brazilian Oswaldo Cruz Foundation and Shuttleworth Foundation look pretty similar. Again, the combination of TRIPS-plus provisions comes with a hefty price tag for the administration and the taxpayers: For the selected antiretroviral drugs, the additional expenditure for the Ministry of Health would be close to 900 million Euro between 2015-2050 – with data exclusivity for 5 years. For hepatitis C, there would be additional expenditures of 10.8 billion Euro in the accumulative from 2016-2051, an average of 308 million Euro per year for 5 years data exclusivity. Even if the negotiators forget about compensation for lost time during marketing approval and only agree on data exclusivity, the annual added cost could be as high as 16-24 million Euro, depending on how long protection would last.

The combination of TRIPS-plus provisions comes with a hefty price tag for the administration and the taxpayers.

The Brazilian study pointed to the existing difference between the ARV and the hepatitis medicine market. Access to ARV was improved by an intensive use of TRIPS flexibilities, for example the removal of patent protection for a number of drugs. The hepatitis C market on the other hand had been “almost 100% under exclusivity between 2006 to 2016,” and recent patent opposition effects have not played out fully yet. Therefore, public expenses for hepatitis C had been increasing and “treatment has not been available to all in need,” a preview to what could happen if TRIPS-plus regimes set in. An additional cost calculated is that of reduced sales from domestic generic drug providers.

Both studies implore the Mercosur negotiators to stay firm in the rejection of TRIPS-plus regimes that in the end could mean the deterioration of access to health in their countries.

Support from EU health activists 

Support for the Mercosur activists comes from NGOs in Europe. Alex Lawrence, spokesperson for Health Action International, told Intellectual Property Watch: The reference to the Doha declaration that is part of the draft FTA text is “lip service” as long as the EU simultaneously pushes for clauses that undermine the Doha Declaration and hinder the use of flexibilities.

“The TRIPS agreement was intended as a ceiling, not a threshold,” Lawrence underlined. In the Doha Declaration on TRIPS and Public Health, WTO member states in 2001 acknowledged member states‘ right to use health safeguards in order to protect public health.

As long as the EU simultaneously pushes for clauses that undermine the Doha Declaration and hinder the use of flexibilities, any reference to the Doha declaration that is part of the draft FTA text is “lip service”.

“Longer patent term protections means longer-term monopolies and longer periods during which patent holders can demand arbitrarily high prices,” Lawrence warned. The delay to market for generic and biosimilar medicines hurts competition, he pointed out. He questioned the rationale of extended patent protection in other countries: “Rather than compensating for delivery of innovation, as was originally intended, patents have become a speculative mechanism, more geared toward financial gain than societal improvement,” he said.

Losing breathing space 

Beside the activists, and a slowly growing number of policymakers, academics have for some time questioned the rationale of the evermore rigid TRIPS-plus regimes. Henning Grosse-Ruse Khan, researcher at the Max Planck Institute for Innovation and Competition in Munich, proposed to reconsider TRIPS itself. Articles 7 and 8 in the agreement, he says, “limit the ability of the WTO members to modify their IP-related treaty obligations inter se”. TRIPS should, Grosse-Ruse Kahn argued, be much more understood as a constitutional frame for IP commitments in bilateral and regional treaties.

Grosse-Ruse Khan in an interview pointed out that the particular TRIPS-plus provisions as fought over in Mercosur and other agreements was one thing. In general, the concern should be the export of ever more detailed IP systems. “Generally long periods of data exclusivity will not necessarily benefit access to medicine,” he told Health Policy Watch. “But the broader point is that countries who push for IP provisions in FTAs should be mindful of the potential detrimental effects which exporting their legal regime might have on the functionality of the legal regime of the other country which needs to implement that.”

On the other side, the countries at the receiving end of “these legal transplants,” he said, might also want to look very carefully into whether these provisions make sense domestically and whether they still have room to manoeuvre and implement them in a way that suits their domestic situation.” This is something Mercosur negotiators obviously did, given the additional provisions on patent oppositions and limitations and exceptions they tried to introduce.

Advancing a ‘healthy’ IP agenda 

The simulation studies are very important for the Mercosur negotiations, Villardi said, adding. “The results came at a time when the pressure was high on the Mercosur negotiators.” Without the arguments and support the research delivered it would be much more difficult for them to reject the TRIPS-plus advances. The EU, as it negotiates with other countries at the same time, wanted to make sure they set the bar very high with Mercosur, Villardi said. But Mercosur wanted to set a low bar, so IP will not be a problem in other agreements in the future.

The EU in its agreement with India already had made concessions, he said and adds: “We feel that Mercosur maybe the negotiation where we have more chance to see really a good outcome for the IP text so this can be a reference for other countries. So we hope this can help access to health more broadly. It is not only about us fighting something that will happen in our region, but a fight for the whole world on advancing or not advancing the IP agenda.”

This story is part of Make Medicines Affordable supported series on The role of civil society in TRIPS Flexibilities implementation. IP-Watch retains editorial independence over the articles in this series.