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Public health buffeted by free-trade winds

Australia's pharmaceutical benefits scheme is being challenged by lobbying from US industry, writes Patricia Ranald.

Giant US pharmaceutical and tobacco corporations are setting the agenda at negotiations over the Trans-Pacific Partnership free trade agreement (TPPA) between Australia, the US, New Zealand, Chile, Peru, Brunei, Singapore, Malaysia and Vietnam.

The eighth round of negotiations took place last month in Chicago, aiming for a framework agreement by the end of this year. Like all trade agreements, the negotiations are secret and we don't see the details of the agreement until after the deal is done.

The US pharmaceutical and tobacco corporations want to use the negotiations to increase their rights, at the expense of consumers and public health.

American pharmaceutical companies have lobbied the US government to propose expansion of their patent rights on medicines. These companies already have rights to charge monopoly prices for medicines for 20 years.

Extensions of patent periods and delays in the marketing of cheaper generic drugs benefit these companies, but disadvantage consumers, and would increase the cost of medicines to the public health system. Although the negotiations are held behind closed doors, leaked documents reveal that the US proposals tabled at the Chicago negotiations would have the following impacts on Australian patent law:

* Lowering Australian standards to allow more patents which make only slight changes to an existing medicine, thus enabling the repeated extension or "evergreening " of patents
* Removal of public rights to object to new patents before they are granted, which would make it easier for unjustified patents to be granted
* Removal of current Australian flexibility to disallow the patenting of medical procedures, which could impose huge future costs on hospitals

The 2010 Productivity Commission Report on Bilateral and Regional Trade Agreements found that expansion of patent rights under the Australia-US Free Trade agreement has already caused economic losses because Australia is a net importer of patented goods. It is clearly not in Australia's health or economic interests to agree to these proposals, and the impacts would be even more disastrous for developing countries.

In the US, where the national government does not have the same control over the price of medicines as the Australian government, the wholesale prices of medicines are three to 10 times the prices paid in Australia, and many people cannot afford to buy medicines.

The Australian PBS is based on the principle that everyone should have access to affordable medicines. Under the PBS, the wholesale price of prescription medicines is lower than in the US because health experts compare the price and effectiveness of new medicines with the price of cheaper generic medicines with the same health effects. The government then subsidises the retail price we pay at the chemist, currently $5.60 for pensioners and $34.20 for others.

US proposals aim to restrict the ability of governments to regulate the price of medicines through schemes like the PBS, by removing references to affordability of medicines, giving pharmaceutical companies more rights to challenge government pricing decisions, and allowing drug companies to advertise prescription medicines direct to consumers. Direct advertising is allowed in the US, but is banned in most countries, because health experts agree that it leads to the overprescribing.

Investor-state dispute settlement processes give a single company the right to sue governments for damages if a law or policy harms their investment. Under these provisions in the North American Free Trade Agreement between the US, Mexico and Canada, companies have sued governments for millions of dollars over health and environmental legislation. This gives unreasonable rights to corporations, and reduces the rights of governments to implement public interest legislation.

US companies, including tobacco companies such as Philip Morris, have lobbied the US government to include this proposal in the TPPA, and the US promoted it strongly at the Chicago negotiations. Philip Morris is an international company based in the US. However, it claimed to be a Swiss company in order to use a Swiss investment agreement with Uruguay to sue the Uruguayan government over restrictions on tobacco advertising. It has now rearranged its assets so it can claim to be a Hong Kong company in order to sue the Australian government for its tobacco plain packaging legislation under an obscure 1993 Hong Kong-Australia bilateral investment treaty.

These proposals on medicines and investor rights to sue governments met with criticism from some US state legislators, because some US states have price controls on medicines, and want more regulation of tobacco advertising. Public health and consumer groups such as Oxfam, Doctors without Borders and Public Citizen condemned the proposals. The American Medical Association, the American College of Preventive Medicine and other health groups called for the complete exclusion of alcohol and tobacco from the TPPA.

Health researchers from the Public Health Association of Australia have also criticised the US proposals in recent editorials published in Fairfax newspapers.

Australian government trade policy states that Australia will not support the expansion of intellectual property rights, proposals which undermine the PBS or the right of companies to sue governments through investor-state dispute processes. But there is still a danger that these will be traded away in the negotiations as governments are under pressure from the US to conclude the deal. Health and community groups are calling for the text of the agreement to be released before it is signed to ensure full transparency for public and parliamentary debate.

Dr Patricia Ranald is the convener of the Australian Fair Trade and Investment Network.

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