The Trans-Pacific Partnership will reportedly include an obligation for every country to provide at least 5 years of market exclusivity for new biologic drugs.  Technically, this counts as a loss for U.S. negotiators, who started with a demand for 12, lowered that to 8, reconfigured 8 into “5+3”, and at the VERY last minute—despite direct calls from President Obama to foreign leaders—were forced to acquiesce to 5 years.  The U.S. pharmaceutical industry says it’s very disappointed, but the outcome is good for the TPP and for consumers around the world.

It’s important to recognize that the exclusivity we’re talking about here has nothing to do with patent protection.  It is not a form of intellectual property.  Exclusivity is a regulatory policy that instructs the Food and Drug Administration not to approve generic, unpatented drugs they know are safe so that name-brand pharmaceutical companies can make more money. 

Those companies say that without a secured return on investment, they wouldn’t be able to invent new treatments.  But that’s what patents are for.  Regulatory exclusivity is a way to bypass the balances and limitations of patent law, which only protects new inventions not all expensive investments.  

They complain that it’s unfair for generic competitors to piggyback on all the expensive research and testing they did to secure FDA approval.  But that’s a problem with the expense of FDA approval.  Either lobby to make FDA approval cheaper or find a way to share costs.  Pharmaceutical companies are not entitled to the benefits they gain from regulatory inefficiency.

Biologics protection was a peculiar issue for U.S. negotiators to be spending so much effort on in the first place.  They spent a lot of negotiating capital trying to secure foreign regulations favorable to one part of one U.S. industry.  That doesn’t further the goal of free trade; in fact, it impedes that goal by diverting energy away from universally valuable efforts to open up Canada and Japan’s markets in agriculture.

The U.S. government may have wasted effort on biologic exclusivity, but at least they failed to hobble foreign countries with excessive drug regulation.  As a bonus, Congress is now free (if they wish—and they should) to roll back the 12 years of protection under U.S. law to something more reasonable.