PhRMA Comments on USTR Report on Pharmaceutical Trade Practices

The Office of the United States Trade Representative (USTR) issued a report, 2011 Special 301 Report, as part of its annual review of the global state of intellectual-property rights (IPR) protection and enforcement. The report was issued earlier this month and addresses IPR protection and enforcement, and specific initiatives by the United States, its trading partners, and international bodies, including measures relating to drug anticounterfeiting and market access to medicines.

USTR’s Special 301 review process examined IPR protection and enforcement among 77 trading partners and placed 12 trading partners on its Priority Watch List, and 29 countries on its Watch List. Placement on the Priority Watch List or Watch List indicates that particular problems exist in that country with respect to IPR protection, enforcement, or market access, and countries placed on the Priority Watch List are the focus of increased bilateral attention. The 12 countries on USTR’s Priority Watch List are: Algeria, Argentina, Canada, Chile, China, India, Indonesia, Israel, Pakistan, Russia, Thailand, and Venezuela. In 2011, USTR launched a new initiative to allow any trading partner appearing on the Priority Watch List or Watch List to negotiate a mutually agreed action plan designed to lead to that trading partner being removed from the relevant list.

The USTR report highlighted country-specific IPR problems and in certain instances, concerns with IPR protection of pharmaceutical products. The USTR report noted that the US is closely watching the efforts of China under that country’s “Program for Special Campaign on Combating IPR Infringement and Manufacture and Sales of Counterfeiting and Shoddy Commodities,” a program announced in October 2010 by China’s Premier Wen Jiabo to address a broad range of intellectual property violations. The Special Campaign was originally slated to end in March 2011, but it has been extended for another three months. It is led by China’s Vice Premier Wang Qishan, who chairs a national group, consisting of 26 member agencies and a coordinating office based in China’s Ministry of Commerce, to implement and monitor IPR enforcement, protection, and related issues.

The USTR report identified some positive results from pharmaceutical manufacturers relating to the Special Campaign, such as more outreach and enforcement by Chinese authorities in developing criminal counterfeit pharmaceutical cases, including those relating to manufacturing equipment. The report also pointed to ongoing US concerns with Chinese governmental policy and practices that favor indigenous innovation by requiring transfer of intellectual property ownership to a Chinese party as a condition for eligibility for government benefits.

Additionally, the USTR report noted problems with substandard bulk active pharmaceutical ingredients (APIs) that are used to manufacture counterfeit drugs. “For instance, in China, domestic chemical manufacturers that produce APIs can avoid regulatory oversight by failing to declare that the bulk chemical is intended for use in pharmaceutical products,” said the USTR report. “This factor contributes to China being a major source country for APIs used in counterfeit pharmaceutical products. Although China has taken some welcome steps, such as requiring manufacturers to register with the State Food and Drug Administration, more effective regulatory controls are needed to assist China and its trading partners in their efforts to address this problem.”

The USTR report further pointed to IPR issues in other countries. The report cited particular concerns regarding provisions of India’s Patent Law, which prohibits patents on certain chemical forms, absent a showing of increased efficacy, which the USTR said limits the patentability of certain innovations, such as temperature-stable forms of a drug or new means of drug delivery. Also, the report noted that the US is encouraging India to provide an effective system for protecting against unfair commercial use and unauthorized disclosure of undisclosed testing and data generated to obtain marketing approval for pharmaceutical products. In addition, the USTR report highlighted specific market barriers in Algeria and Indonesia regarding bans on imported pharmaceutical products and weak patent protection.

The Pharmaceutical Research Manufacturers of America (PhRMA) was largely supportive of the USTR report. “Effective protection of IP is a critical element of meeting President Obama's objective of doubling US exports over the next five years,” said PhRMA in May 2, 2011, statement. “For these reasons, PhRMA and our members place a high priority on addressing the harm caused by inadequate IP protection and by the market access barriers put in place by some US trading partners. PhRMA and our members appreciate the continuing efforts underway at all levels by USTR, the Departments of State and Commerce, and the effective advocacy of US overseas missions to promote compliance with international obligations.”

On a country-specific level, PhRMA agreed with USTR’s assessment to address IPR-related problems in Thailand, drug-importation issues in Indonesia, and substandard APIs in China. PhRMA said it agreed with USTR’s recognition that, “China needs to do more to stop the production of bulk pharmaceutical ingredients by companies that circumvent regulations designed to ensure inspection of these products. However, we believe that not highlighting China’s unfair commercial use of test data is a glaring omission.”

The USTR report also highlighted concerns about several industrialized trading partners, including Finland, Germany, Greece, Japan, Korea, New Zealand, Poland, and Taiwan. For example, in Japan, the US is continuing bilateral discussions to improve transparency and further reform in reimbursement procedures and regulatory systems to facilitate the introduction of innovative pharmaceutical products in Japan. The report also raised concerns about healthcare-reform legislation that was introduced in Poland in 2010, which would alter Poland’s pricing, reimbursement, and clinical-trials policies. The report also cited concerns with New Zealand’s Pharmaceutical Management Agency’s pricing and reimbursement regime and the overall climate for pharmaceutical innovation in New Zealand.