All the presidential candidates are opposed to the Trans‐Pacific Partnership, some because protectionism seems to sell well during elections and others because they generally oppose foreign trade. But the most immediate obstacle to passage of the TPP may be a counterproductive demand from one of the agreement’s most ardent congressional supporters.
Orrin Hatch (R‐Utah) is Chair of the Senate Finance Committee, which oversees trade policy, where he has been instrumental in securing trade promotion authority and building support among Republicans for the TPP. Hatch is also a committed advocate for the inclusion of strong intellectual property protections in trade agreements and has been very critical of one provision in the TPP that he doesn’t think goes far enough to provide regulatory exclusivity for biologic drugs. He’s made his support for the entire agreement contingent on whether the administration can fix that one provision.
Exclusivity (often called data exclusivity) is the practice of denying regulatory approval of a competitor’s drug until the original drug has had a numbers of years of monopoly status in the market. This is unrelated to whether the drug is covered by a patent.
The U.S. government provides 12 years of exclusivity, the highest of any country in the world, for a special class of drugs known as biologics. At Hatch’s insistence, U.S. negotiators officially pushed for a minimum 12 year term in the TPP.
But the TPP was never going to have a 12 year term for biologic exclusivity, because the other members were dead set against it. Japan and Canada currently provide 8 years, while the other TPP members provide either 5 years or zero. There was no interest from the other members to increase their own level of protection, so the United States wasn’t going to be able set an international standard of 12 years. Indeed, U.S. negotiators knew that they best they could really hope for was 8 years.
Even the 8‐year proposal met a lot of resistance. Australia was especially adamant that they would not increase exclusivity beyond the 5 years they currently impose. This made biologic exclusivity an especially intractable issue in the TPP negotiations, and the text we now have was agreed to under tremendous pressure to finish the deal and was reached in the closing hours of the negotiations.
The final compromise is a peculiar dual provision that gives TPP members two options. Under one option, TPP members are required to provide at least 8 years of exclusivity. Under the second option they can provide only 5 years of exclusivity as long as they also use “other measures” to provide a “comparable market outcome” to the first option. What makes the second option extra curious is that “market circumstances” may be relied upon to ensure that 5 years of exclusivity provides a comparable outcome to 8 years. This arrangement enables the U.S. government to claim they negotiated an 8 year term, while Australia can still claim that they didn’t agree to anything more than 5 years.
Senator Hatch has seen through this simple scheme and correctly describes the provision as requiring only 5 years. Because the requirement to provide a comparable outcome through “other measures” allows reliance on “market circumstances,” there is no requirement for government intervention aside from the 5 year minimum of regulatory exclusivity. The Obama administration is trying to say that 5 + 0 = 8.
The pharmaceutical industry has expressed disappointment at the outcome. They think they should have gotten 12 years, and Senator Hatch seems to agree. But the idea that the TPP could ever have had a 12‐year term is impressively wishful thinking.
Hatch and the pharmaceutical industry really ought to be happy that they got the 5+ deal in the TPP. That’s more than they had before and it shows that momentum is on their side in adding this new issue into the trade agenda. Creating a special provision that treats biologics differently than other drugs and offers some sort of additional protection sets a bar that can be expanded on in future agreements. The TPP’s dual provision provides a good starting point for U.S. business interests to further develop a more‐stringent international norm.
It’s been reported that Hatch may be trying to secure a commitment from the administration that it will pressure TPP members who provide only 5 years of exclusivity to adopt particularly effective “other measures” to achieve an 8‐year outcome when they implement the TPP. Even after implementation, the provision will serve as a mechanism for the U.S. Trade Representative to exert continued pressure on TPP members.
Hatch is essentially complaining that the TPP doesn’t do enough of a good thing. The idea that the agreement could be better is hardly a reason to oppose it altogether. That’s especially true in this case, where the “better agreement” that Hatch and the pharmaceutical industry were asking for was unrealistic.
The whole episode shows how the politics of trade agreements have gotten mixed up in regulatory issues that don’t have a direct connection to trade. A lot of the regulatory provisions in trade agreements were originally included at the behest of protectionists who wanted to put conditions on trade. That’s why trade agreements include labor and environment rules.
It’s a shame that supporters of free trade are now also putting so much emphasis on regulatory issues, elevating arcane regulatory tweaks above actual free trade. Senator Hatch’s inflexibility on biologics is only making it harder to achieve the real gains that come from trade liberalization. If Senator Hatch values free trade, he ought not oppose the agreement simply because it doesn’t do as much he would like to benefit one U.S. industry.
Live Now
Email Signup
Sign up to have blog posts delivered straight to your inbox!
Topics
Archives
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- June 2006
- May 2006
- April 2006
- Show More