The Australia–USA Free Trade Agreement (AUSFTA), which entered into force on 1st January, 2005, contains many remarkable provisions of interest to generic drug companies. The AUSFTA selectively exports US generic drug laws of great import to generic drug manufacturers, and is uniquely intrusive into domestic pharmaceutical and political spheres. The AUSFTA is important both in its own right, and as a model for future US free trade agreement negotiations.
BeckerE.PearR. (2004) ‘Trade pact may undercut inexpensive drug imports’, New York Times, 12th July.
3.
In Australia's case, the modification is made to the government's decision to list a drug for reimbursement at an agreed price under the Pharmaceutical Benefits Scheme (PBS).
4.
World Trade Organization, Trade Related Intellectual Property Agreement (1994). The ‘TRIPS Plus’ provisions of AUSFTA are listed in Table 2.
5.
While generic drug industry trade organisations submitted testimony in both Australia and the USA, the brand-name drug industry was much more active and effective, as demonstrated by the provisions of the AUSFTA.
6.
See, for example HarveyK. (2004) ‘Patents, pills and politics: The Australia–United States Free Trade Agreement and the Pharmaceutical Benefits Scheme’Australian Health ReviewVol. 28, pp. 218–226. DrahosP.HenryD. (2004) ‘The free trade agreement between Australia and the United States: Undermines Australian public health and protects US interests in pharmaceuticals’, British Medical Journal, Vol. 328, pp. 1271–1272). See also the submissions to the Australian Senate by the Generic Medicines Industry Association Pty Ltd., the Doctors Reform Society, the Public Health Association of Australia, Inc., the Australian Nursing Federation, Catholic Health Australia, the National Center for Epidemiology and Population Health, the Australian Consumers’ Association and Dr Ken Harvey, all available at http://www.aph.gov.au/Senate/committe/freetrade_ctte/indes.htm.
7.
Pharmaceutical Research and Manufacturers of America (2003) ‘PhRMA “Special 301” submission to the Office of the United States Trade Representative: Australia’, available at http://www.ustr.gov. ColebachtT. (2003) ‘Bush wants end to medicine subsidies’, The Age, Melbourne, 24th October, p. 5. Hearing of the US Senate Finance Committee (2004), ‘The Administration's international trade agenda’, Witness: Ambassador Robert Zoellick, US Trade Representative. McClellanM. B. (2003) ‘Speech before the First International Colloquium on Generic Medicine’, 25th September, available at http://www.fda.gov/oc/speeches/2003/genericdrug0925.html. SerafiniM.W. (2004) ‘Drug prices: A new tack’, National Journal, Vol. 36, p. 16 (‘So Hastert and Kyl championed the novel idea that the key to lowering US prescription drug prices is to persuade foreign governments to raise their prices … The idea of trying to level the international playing field on prescription drug pricing originated with the U.S. pharmaceutical industry. But Hastert and Kyl played significant roles last fall in persuading the Bush administration to embrace this strategy … The result was the United States’ first free-trade agreement that included modest concessions on pharmaceutical price controls’.) Of course, increased prices for brand-name drugs would be good news for generics makers, permitting them to increase their own prices while still undercutting the competition.
8.
See OuttersonK. (2004), ‘Free trade against free riders?’Pharma Pricing & ReimbursementVol. 9, pp. 254–255.
9.
International Trade Administration (2004) ‘Pharmaceutical price controls in OECD countries: Implications for US consumers, pricing, research and development, and innovation’.
10.
The estimate was A$1.5bn over 2006–2009. Productivity Commission (2001), ‘International pharmaceutical price differences: Research report’, available at http://www.pc.gov.au/study/pbsprices/finalreport/pbsprices.pdf (assumes that the top five PBS expenditure drugs are delayed). For a higher estimate, see BurtonB. (2004) ‘Australia's free trade deal with US hangs in balance on drugs’ British Medical Journal, Vol. 329, p. 7461.
11.
BeckerE.PearR. (2004) ‘Trade pact may undercut inexpensive drug imports’, New York Times, 12th July (statements of Dr Mark B. McLellan, former head of the Food and Drug Administration (FDA)and current administrator of Medicare and Medicaid; and Joseph M. Damond, Associate Vice President of PhRMA). MaherS. (2004), ‘US drug makers pressure Canberra’, The Australian, 29th December (statements of US Senators Rick Santorum and Jon Kyl).
12.
AUSFTA (2004) Annex 2-C, paragraph 2(f).
13.
Burton (2004) op. cit. at p. 7461.
14.
See, for example, HarveyK. (2004), ‘Will the Australia–United States Free Trade Agreement undermine the Pharmaceutical Benefits Scheme?’Medical Journal of AustraliaVol. 181, pp. 256–259. Dr Harvey is a former member of the PBAC. See also DrahosP. (2004) ‘The FTA and the PBS: A submission to the Senate Select Committee on the US–Australia Free Trade Agreement’, p. 3.
15.
Hearing of the US Senate Finance Committee (2004), ‘The Administration's international trade agenda’ (Witness: Ambassador Robert Zoellick, US Trade Representative).
16.
VaileM. (2004), ‘Free trade agreement with the United States’, media release, 8th February, 2004 (MVT08/2004), available at http://www.tradminister.gov.au/releases/2004/mvt008_04.html). See also AbbottT. (2004) ‘Australia–United States Free Trade Agreement (AUSFTA), Implementation of the obligations to improve transparency of the Pharmaceutical Benefits Scheme (PBS) through an independent review mechanism, Hearings before the Pharmaceutical Benefits Advisory Committee (PBAC)’, 25th July (statement of The Hon. Tony Abbott, MP, Minister for Health and Ageing).
17.
DrahosP. (2004) ‘The FTA and the PBS: A submission to the Senate Select Committee on the US-Australia Free Trade Agreement’, p. 1.
18.
OuttersonK. (2005) ‘Pharmaceutical arbitrage: Balancing access and innovation in international prescription drug markets’Yale Journal of Health Policy, Law & EthicsVol. 5, pp. 193–286.
19.
't HoenE. (2002) ‘TRIPS, pharmaceutical patents, and access to essential medicines: A long way from Seattle to Doha’Chicago Journal of International LawVol. 3, p. 27. See also ReichmanJ. H. (1997) ‘From free riders to fair followers: Global competition under the TRIPS agreement’, New York University Journal of International Law and Politics, Vol. 29, pp. 11–93; SchererF. M. ‘A note on global welfare in pharmaceutical patenting’, World Economy, Vol. 27, pp. 1127–1141.
20.
Drug Price Competition and Patent Term Restoration Act of 1984, Pub. L. No. 98–417, 98 Stat. 1585 (codified as amended in scattered sections of 15, 21, 28 and 35 U.S.C.) (hereinafter the Hatch–Waxman Act). Under the Hatch-Waxman Act, the FDA also influences the patent process, since the Hatch–Waxman Act extends the patent for half of the period that a drug is undergoing clinical trials, plus the full amount of time spent in the FDA approval process. 35 U.S.C. ss. 155, 155A and 156 (2000).
21.
See, for example, Médecins sans Frontières (2004), ‘MSF Briefing note: Access to medicines at risk across the globe: What to watch out for in free trade agreements with the United States’, pp. 4–6, available at http://www.accesmedmsf.org/documents/ftabriefingenglish.pdf; Vivas-EuguiD. (2003) ‘Regional and Bilateral Agreements and a TRIPS-Plus World: The Free Trade Area of the Americas (FTAA)’, Quaker UN Office, pp. 16–18.
22.
US Free Trade Agreement Implementation Bill2004, The Senate, The Parliament of the Commonwealth of Australia, Canberra.
23.
Federal Trade Commission (2002) ‘Generic drug entry prior to patent expiration’, pp. 13–23.
24.
Pub. L. No. 108–173, 117 Stat. 2066 (2003), (partially codified at 21 USC s. 355(j)). The Congressional Research Service prepared a summary of the Act, which provides some guidance on Congress’ intent in amending the Hatch—Waxman Act. See Congressional Research Service (2003) ‘Prescription Drug and Medicare Improvement Act of 2003, Bill Summary and Status, s.1, 108th Congress’, 13th June.
JaegerK. (2004) ‘Statement of Kathleen Jaeger, Generic Pharmaceutical Association’, US House Ways & Means Committee Hearings on the US–Australia Free Trade Agreement.
28.
AUSFTA (2004), Art. 17.10(1)(c); JaegerK. (2004) ‘Statement of Kathleen Jaeger, Generic Pharmaceutical Association’ US House Ways & Means Committee Hearings on the US – Australia Free Trade Agreement.
29.
Letter to Robert B. Zoellick from RangelCharles B.McDermottJimLevinSander M.WaxmanHenry A. (2004) 15th July (US-Morocco FTA); Médecins sans Frontières (2004), ‘MSF Briefing note: Access to medicines at risk across the globe: What to watch out for in free trade agreements with the United States’, pp. 4–6, available at http://www.accessmedmsf.org/documents/ftabriefingenglish.pdf); Vivas-EuguiD. (2003) ‘Quaker U.N. office, regional and bilateral agreements and a TRIPS-plus World: The Free Trade Area of the Americas (FTAA)’, pp. 16–18.
30.
For Australian concerns about evergreening, see LokugeB.FaunceT.DennissR. (2003) ‘A backdoor to higher medicine prices? Intellectual property and the Australian–US Free Trade Agreement’, The Australia Institute. See also Bulow, J. ‘The gaming of pharmaceutical patents’, in Innovation Policy and the Economy, Vol. 4.
31.
DrahosP. (2004) ‘The FTA and the PBS: A submission to the Senate Select Committee on the US-Australia Free Trade Agreement’, p. 2.
32.
Letter from US Trade Representative Robert Zoellick to Australian Trade Minister Mark Vaile, 17th November, 2004.
33.
US Free Trade Agreement Implementation Bill 2004, Amendment (2), The Senate, The Parliament of the Commonwealth of Australia, Canberra (codified as new section 26C of the Therapeutic Goods Act 1989).
34.
TRIPS requires patent laws to not discriminate on the basis of technological field. The US argument would be that Australia's amendment discriminates against the field of drug patents, since the provision does not apply to non-drug patents. This raises the interesting question as to whether the entire US Hatch–Waxman apparatus violates TRIPS non-discrimination rules.
35.
US Free Trade Agreement Implementation Bill2004, Amendments (1) and (3), The Senate, The Parliament of the Commonwealth of Australia (codified as new section 26B(1)(a) and 26D of the TGA).
36.
DrahosP. (2004) ‘Dealing with evergreening’.
37.
Eldred v Ashcroft, 538 U.S. 916 (2003).
38.
AUSFTA side letter.
39.
BeckerE.PearR. (2004) ‘Trade pact may undercut inexpensive drug imports’, New York Times, 12th July. ShafferE.BrennerJ. (2004) ‘The US–Australia Free Trade Agreement can preempt drug reimportation bills’, 12th July, available at http://www.cpath.org. The debate was primarily about imports from Canada, yet one has to ask why the USTR insisted on blocking cheap imports from Australia when Congress was considering permitting imports. By placing the provision in a free trade agreement, USTR locked in the law for Australia, safe from Congressional legislation. One commentator suggests that the AUSFTA provision actually commits the USA to forgo re-importation from any country. WeissmanR. (2004) ‘Patent provisions in Australia FTA’, IP-Health list-serve, 7th July.
40.
See, for example, Senate Select Committee on the AUSFTA Roundtable on the PBS, 21st June, 2004; personal communications with Ruth Lopert, DoHA.
41.
A remarkable number of the AUSFTA pharmaceutical provisions are apparently already provided in Australian law. The Australian FTA Implementation Bill covered only a limited range of issues raised in the AUSFTA, namely the issues of patent scope and the new ‘26B Certificate’, which a genetics company must provide when applying for marketing approval. The scope of lock-in appears to have been great.
Indeed, the US planned to call the first meeting of the Medicines Working Group in early 2005 to complain about Australian attempts to reduce drug prices; however, as of May 2005, a date for the public meeting had not been announced. MaherS. (2004), ‘US drug makers pressure Canberra’, The Australian, 29th December.
44.
AUSFTA (2004) Art. 21.5–21.11.
45.
AUSFTA (2004) Annex 2C.
46.
This Committee advised USTR on pharmaceutical intellectual property issues in the AUSFTA.The Committee includes several representatives from PhRMA or PhRMA member companies, but no representative from generics manufacturers or healthcare consumer interests. The GPhA did not testify before the Committee on Ways and Means Hearing on AUSFTA, but submitted a written statement only: List of witnesses to appear before Committee on Ways and Means, Full Committee, on hearing on Implementation of the United States—Australia Free Trade Agreement, 16th June, 2004.
47.
WTO (2001) ‘Declaration on the TRIPS Agreement and public health’, DoHA WTO Ministerial, WT/MIN(01)/DEC/2, (20th November, 2001).
48.
Pharmaceutical Research and Manufacturers of America (2003) ‘PhRMA “Special 301” Submission to the Office of the United States Trade Representative: Australia’, available at http://www.ustr.gov.
49.
ColebachtT. (2003) ‘Bush wants end to medicine subsidies’, The Age, Melbourne, 24th October, p. 5.
50.
Senate Committee Report (2004), ‘Final Report on the Free Trade Agreement between Australia and the United States of America’, The Parliament of the Commonwealth of Australia, p. 103.
This column lists the provisions of the FTA Bill, which implements the AUSFTA. As can be seen, most of the provisions of the AUSFTA are not covered by the FTA Bill. In a few instances, citations to existing law are given (ie Therapeutic Goods Act of 1989, §25A(2)), but references to existing Australian law have not been made systematically.
