Dr Joshua Freeman: Free trade deal sold us a monopoly

A good example is a new hepatitis C drug, developed after years of high-risk, publicly-funded, university-based scientific research. Photo / iStock

Trans-Pacific Partnership agreement over pharmaceutical intellectual property rights is step in wrong direction.

The final intellectual property chapter of the Trans-Pacific Partnership, leaked last week, shows many of the more extreme demands of the pharmaceutical industry have been beaten back. Much of the credit for this belongs to health organisations that vigorously campaigned to raise public awareness about how the deal would affect access to medicines.

These campaigns almost certainly helped IP negotiators resist US demands. Nonetheless, major concerns remain. Until we have an independent health impact analysis of the whole agreement it's hard to tell the full consequences across all the chapters, but the broad issues can already be discerned. Sure, the chapter is less bad than it might have been, but it's still a significant step in the wrong direction.

It's strange that an agreement allegedly about free trade and market competition contains a chapter devoted to locking in and extending legally enforced monopolies. The usual mantra is that this drives innovation. But is it true?

A recent paper in The Journal of Economic Perspectives concluded "there is no empirical evidence they (patents) increase productivity and innovation".

Similarly, former chief economist of the World Bank and Nobel laureate Joseph Stiglitz has said: "There is no evidence that the strengthening of intellectual property rights along the lines advocated by the US Trade Representative would lead to higher productivity. There is every reason to believe they would impede, not promote, innovation and progress."

He goes on to say: "Overly restrictive intellectual property rights actually slow new discoveries, by making it more difficult for scientists to build on the research of others and by choking off the exchange of ideas ... most of the important innovations come out of our universities and research centres ... funded by government and foundations."

A good example is a new hepatitis C drug, developed after years of high-risk, publicly-funded, university-based scientific research. The drug is now sold under patent monopoly for $84,000 a course while the actual production costs sit at around $70-140. While it's true the drug company invested around $500 million for clinical trials, it's estimated this investment would have been recovered with just a few weeks of sales (patent monopolies last 20 years).

So it's reasonable to ask whether it's a good thing that the TPP not only locks in existing pharmaceutical monopoly periods in New Zealand, but extends them. One concern is the introduction of "patent term extensions". The Ministry of Foreign Affairs and Trade "factsheet" assures us this is nothing to be concerned about, but this is directly at odds with experience in Australia since extensions were introduced in 1998.

A 2013, an Australian government review concluded that the cost of these extensions ballooned from A$6 million dollars in 2001-2002 to A$160 million by 2005-2006. It also found that reducing extensions by just one year would save A$45 million and abolishing them altogether would save A$244 million.

These figures aren't trivial, particularly when compared to the US Department of Agriculture paper which concluded that even if all agricultural tariffs in TPP countries were completely eliminated, the GDP gains for New Zealand by 2025 would be 0.01 per cent (or roughly $23 million).

Another big concern is the ambiguous wording around monopoly times for the ultra-expensive and revolutionary new class of medicines known as biologics. We can be certain this ambiguity will be ruthlessly exploited by the pharmaceutical industry. Bland assurances that monopoly times for biologics won't change should therefore be viewed with deep skepticism.

The MFAT "factsheet" also emphasises that New Zealand law will require minimal changes to comply with the agreement, but fails to mention current policy settings on intellectual property are now locked in place. Whatever evidence emerges from here on about the legitimacy of these monopolies, there is no going back.

What's more, pharmaceutical industry powers have been extended - potentially significantly - and it would be dangerously naive to assume the industry will hold back from leveraging those new powers to maximum effect.

Dr Joshua Freeman is a clinical microbiologist in Auckland.