Crampton on TPP and drugs


I don’t think that the extensions to drug patents hinted at under are for the good. But it isn’t obvious that they aren’t.

Let’s run the story.

Most new drug development happens in the US and EU, with more coming in now from China as well. It is ridiculously expensive to develop new drugs. Some of that is because the FDA makes things harder than they need to be, but a lot of it is real cost. The US has pretty strong drug patent protection to encourage investment in new drug development: nobody will spend hundreds of millions, or more, on drug research that might lead to one or two commercially viable breakthroughs if they can’t reap the rewards on the ones that pan out.

On that story, New Zealand and others have been free-riding pretty hard. Don’t get me wrong – this is great for New Zealand. We get a pile of generics out of India when they come off-patent here and the drug system saves tons of money. But we’re contributing rather less to the general “let’s develop more new drugs” effort. Price controls on pharmaceuticals do discourage new development (and here’s similar EU evidence), and newpharmaceutical innovation saves lives.

You could imagine an international convention, agreed to by everybody, that would reduce global free-riding on research done in the EU and US in order to get more new drugs developed. We in New Zealand would pay more than we’re paying now, but we’d also be paying a fairer share of the development costs of new drugs. Optimal pricing should still involve poorer countries paying less than richer ones, but you’d also have expected things like iPads to sell for less in New Zealand than in the US on the same kind of grounds – so that part might disappoint.

But think about the rhetoric on “doing our part” on global warming, and wonder why the same “doing our part” arguments haven’t been made about pharmaceutical innovation to save lives.

It’s a fair point.

Overall like Eric I don’t want want longer patent terms for drugs, but the cost to NZ may not be hugely significant. We’ll have to wait to see the costings, if or when there is a deal.

I’m still undecided on TPP, and getting nervous about the rhetoric. I’m a huge supporter of freeing up trade, but this is starting to sound like a very modest deal, rather than the gold plated one we were told was the aim of it.

Some of the US demands in the intellectual property chapter would be bad for New Zealand. We have resisted them to date, which is good. But as part of the final stage negotiating we may compromise on the IP chapter in order to make gains elsewhere. Now that may be okay if we get a really really good deal elsewhere, but not if we don’t.

The two key chapters appear to be dairy and IP. So broadly there are four scenarios. They are.

  1. Good dairy access, no compromise on IP chapter – a great outcome – sign it quickly
  2. Poor dairy access, no compromise on IP chapter – a modest outcome – worth signing
  3. Poor dairy access, significant compromises on IP chapter – don’t sign.
  4. Good dairy access, significant compromises on IP chapter – the difficult balancing act

So scenario 1 is what we want. Scenario 3 is what we should refuse to sign up to. Scenario 2 is disappointing but still a gain for NZ so ok.

Scenario 4 is more tricky. The devil will be in the detail. If we really got eventual unrestricted access to the US, Canadian and Japanese markets then we probably have to accept some painful concessions elsewhere. But if the dairy gains are relatively modest, then compromising on the IP chapter may turn the TPP into something I can’t support. Ultimately I’ll reserve judgement until I read the impact analysis, but I’m worried that scenario 1 is looking rather remote.

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