Wealth Health and International Trade in The 21st Century

Wealth, Health and International Trade in the 21st Century | 1
' ' ''

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The Trans-Pac|f|c Strateg|c Econom|c Partnersh|p Agreement and |ts
|mpact on enhanc|ng trade and cont|nu|ng hea|th and human deve|opment.
Dr. Usman Khan, Stephan Kreutzer and Chris Thomas
Matr|x lns|ght
Professor David Taylor
The Schoo| of Pharmacy, n|vers|ty of |ondon
Dr. Panos Kanavos
|SE Hea|th
Table of Contents
Executive Summary 3
Introduction 6
The world in transition 9
_ ' 16
Conclusions & Recommendations 26
_ ' ' 20
27
_, 37
'_ ' _ 21
Executive Summary
The nine nations currently discussing a revised version of the Trans-Pacific Strategic Economic Partnership Agreement (TPP)
intend to complete their negotiations before the end of 2012. The new TPP could serve as a model for a Free-Trade Agreement
(FTA) involving all the economies of the Asia-Pacific Economic Cooperation (APEC). Given that APEC now accounts for nearly
60 percent of world GDP, such a development would represent a significant extension of the global free market.
Free Trade and Free-Trade Agreements
There is compelling theoretical and empirical evidence that free trade is the most efficient and effective way to promote
global economic growth, through countries exploiting their comparative advantages and peoples worldwide having the freedom
to trade with one another. Yet FTAs have proven difficult to negotiate and implement, in large part because of concerns about
how such FTAs may negatively impact issues ranging from employment to access to health care.
Global vs. Regional FTAs
Western governments, including those in the United States and the United Kingdom, have historically been the strongest
proponents of the World Trade Organisation and the current Doha Development Round. As progress has slowed, however,
multilateral trade negotiations have ceased to be the drivers of global trade liberalisation, resulting in a greater focus
on securing regional agreements. Despite the 1994 North American Free Trade Agreement (NAFTA), the establishment
of the European Union to the east of the United States and the possible formation of an exclusively Asian free-trade area to
the west have focused the minds of American policymakers involved in the TPP on maintaining the United States position
within the global economy.
Mitigating the Unintended Consequences of FTAs
For richer and more developed countries, social and political drawbacks to free-trade policies are often linked to concerns
about short-term impact on employment as jobs are exported to lower-wage economies. Even if longer-term resolution is
provided for by opportunities for employment in more competitive sectors, the immediate impact may be very painful for the
individuals and communities involved. In larger and more developed economies, such as the United States and the European Union,
industries from textile manufacturers to carmakers have expressed fears about the possible impacts of the TPP. Additionally,
trade unions from most countries participating in the TPP negotiations have articulated fears about the ramifications of the
agreement on jobs. Programs such as the Trade Adjustment Assistance (TAA) programmes in Japan, Mexico, Australia and the
United States provide examples of the targeted interventions that have been established to address such concerns.
Free-Trade Agreements, Pharma and Health
The relationship between FTAs and the development, manufacture and use of pharmaceuticals introduces a range of additional
opportunities and risks, with the role played by intellectual-property (IP) protection lying at the heart of the argument and
the impact being felt most keenly by the poorer and less developed FTA countries. Concerns focus both on the provision of
IP protection and the timescales for which such protection lasts.
The entire world population will benefit from continued investment in biomedical and other forms of high-
technology research. The financial viability of the research-based pharmaceutical industry is even more dependent
on the existence of intellectual-property (IP) rights than other high-technology industries . U.S. Trade Representative
(USTR) negotiators have sought to ensure that all FTAs involving access to the American market, including the TPP,
respect intellectual-property rights (IPR).
From a research-investment perspective, the intellectual propertyrelated provisions in agreements such as the TPP
should go beyond the basic provisions set by the World Trade Organisation. The latter needed consensus agreement by
153 members, which may lag behind evolving public interests.
Critics of Intellectual Property Protection
Some observers, such as Oxfam and Mdecins Sans Frontires (MSF), believe that intellectual-property (IP) standards should
not be included in FTAs between developed and developing countries. These organisations claim that in seeking increased
IP protection, the United States and other nations with large manufacturing bases risk reducing poorer peoples access to
effective medicines, with approaches such as evergreening patents, enabling unreasonable IP extension. Further, critics
have suggested that in the future, the TPP will block the provision of low-cost anti-HIV medicines to people in countries such
as Vietnam that are currently being receiving assistance through programmes such as the U.S. Presidents Emergency Plan
for AIDS Relief (PEPFAR) (cf. Carter 2011).
Such allegations attract attention and concern, with the global response to AIDS/HIV in a number of African countries often
highlighted. But the evidence reviewed in this report categorically rebuts them. They are untrue and threaten to undermine
long-term public interests in better health and increased global wealth. Nothing in the TPP or any other FTA would stop
medicines that have exhausted their patent lives or other legitimate exclusive supply terms from becoming available as low-
cost generics. Rather, TPP will extend markets for pharmaceutical companies. Evidence indicates that there is a strong causal
link between larger markets and innovation.
Improving FTAs for Developing Countries
Appropriately structured FTAs could and should increase the availability of high-quality, low-cost, mature off-patent
treatments to all sections of all the populations in all participant nations. The evidence-based overview of health development
offered in this report shows that this is the single most important pharmaceutical careimprovement goal achievable in
developing countries.
In the special case of public-health emergencies involving phenomena such as outbreaks of new infections, poorer populations
may need preferential mass access to recently developed, patented treatments. Establishing effective arrangements to meet
such needs is now a more-recognised world community responsibility.
FTAs, Counterfeiting and Public Health
The potential impact of IP protection cannot be viewed in isolation. Corrupt, inefficient and/or inadequate medicine-
purchasing and -distribution systems and the direct and indirect effects of sub-standard pharmaceuticals are also
significant barriers to progress in areas where treatments could be universally available at affordable costs, as is now the
case with more than 90 percent of all essential medicines. As highlighted by initiatives such as the USTRs Trade Enhancing
Access to Medicines/TEAM approach, released in September 2011, the implementation of partnership-oriented FTAs
between nations at different development stages should foster progress towards better off-patent medicine supply and more
effective national and international strategies aimed at the prevention of non-communicable diseases.
For the purposes of this report and the future value of FTAs like the TPP, such observations suggest that as the 21st century
unfolds, the associations between health, wealth and development observed in the past will fade and be replaced by more
complex interrelationships. Understanding and overcoming the discrete challenges facing individual nations may increasingly
need to take into account their particular socio-economic structures and historical heritages.
Executive Summary
Conclusions
The appropriate implementation of FTAs, such as the new TPP currently being negotiated by the Pacific partners,
will benefit every social group in every participating country. There is inherent risk, as has been apparent with the Doha
Development Round, that TPP negotiations will fail to progress, and the TPP provisions around IP protection and access to
medicines may prove to be a particular challenge. With the 2012 deadline approaching, stakeholders should be encouraged
to recognise this and work together constructively to promote the increased health and wealth of nations as effectively and
efficiently as possible.
Within the pharmaceutical field, the challenge will be to recognise that all stakeholders must view FTAs as a partnership
where rights and responsibilities are negotiated, implemented and fully enforced. Providing the pharmaceutical industry
the IP protection it requires to invest in improved health outcomes must sit alongside sustainable programs to address
sub-standard medicines, assured means to exceptional health challenges such as AIDS/HIV, and a structured approach to
availability of low-cost mature off-patent treatments. The TPP provides an excellent opportunity to lead in the establishment
of the next generation of FTAs, which seek to meet each of these goals and, in doing so, fully aligning global free trade with
global responsibility.
The research for and production of this report was funded by the Pharmaceutical Research and Manufacturers of America (PhRMA). The corresponding
authors for this Matrix Insight report are Professor David Taylor of the School of Pharmacy, University of London, and Dr. Usman Khan, Managing
Director of Matrix Insight Ltd.
Executive Summary
Introduction
Over the next several months, representatives of the nine nations Australia, Brunei, Chile, Malaysia, New Zealand, Peru,
Singapore, the United States and Vietnam that have been working since 2009 to develop a new version of the Trans-
Pacific Strategic Economic Partnership Agreement (otherwise referred to as the Trans-Pacific Partnership, or TPP) hope
to complete their negotiations. These countries leaders intend for the new TPP agreement to serve as a model for the further
expansion of free trade throughout the Asia-Pacific Economic Cooperation (APEC) countries over the next decade see Box 1.
THE TPP
The Trans-Pacifc Strategic Economic Partnership was established as a regional free-trade agreement between Brunei,
Chile, New Zealand and Singapore in 2006. Following the United States' decision to join negotiations on fnance and
investment in 2008, four additional Asia-Pacifc countries - Australia, Malaysia, Peru, and vietnam - joined the
negotiations. Canada, Japan and Mexico have also expressed interest in joining the TPP and are currently consulting
with the existing nine TPP countries. The next (12thj full round of TPP talks will most likely take place in the United
States in mid-May 2012. Like many Free-Trade Agreements, the TPP goes beyond regulating market access in goods
and services and rules of origin. The provisions currently under negotiation regard intellectual property, competition
policy and public procurement, trade remedies, and cooperation on environmental issues. The current negotiations are
signifcant in the larger context of the Asia-Pacifc Economic Cooperation (APECj, which includes economic powers
such as The People's Republic of China. ln the long-term, the terms of the TPP agreement could be extended to include
the wider APEC membership. This would create the largest economic integration project in the world. The regulatory
framework contained in the fnal TPP could thus have repercussions on trade policy and other policies at a global scale.
1
The combined incomes of the APEC nations today represent approximately 60 percent of world GDP; hence, the prospect of
such progress has major global implications. For the participant countries, the TPP promises not only improved access to each
others markets, but also enhanced cooperation within a legal and regulatory framework designed to promote the balanced
pursuit of free trade and ongoing improvements in the welfare of all the populations involved. The planned TPP agreement
contains chapters on topics ranging from customs procedures and competition policy to intellectual-property (IP) law and
public-procurement rules. Its proponents also aim to address environmental and allied problems such as climate change in
ways that will not distort trade relationships.
For almost two centuries, economists have accepted that in the long term, free trade between nations provides the best path
towards increased wealth. Alongside what is an unusual level of unanimity in an often-divided profession, there is also
robust evidence that increased material prosperity is over time linked closely with individual and public health gains.
Historically, the gradual emergence of a world in which most people can expect to live to 70 years or more has been intimately
linked with economic and (indirectly, at least) trade growth (see Figures 1 and 2).
However, not all observers are convinced that an extended version of the TPP will in practice prove universally beneficial.
Critics of intellectual property law provisions in developing nations, which include patents for new medicines and data
protectionbased rights, may fear that these will disadvantage poorer consumers by making pharmaceuticals and other
products such as computer software unaffordable, or otherwise inhibiting rather than promoting the creative application
of scientific advances.
This will not be true if policy-makers and other stakeholders in health and health care are sensibly committed to the complementary
goals of both improving public health and developing better medicines for the future. But if well-meaning observers believe such
threats, they will serve as real barriers to desirable progress. (See, for example, recent reports suggesting that if Vietnamese
decision makers were to sign the TPP, communities in Vietnam would lose access to effective HIV treatment supplied by the
United States via PEPFAR, the Presidents Emergency Plan for AIDS Relief Huffington Post 2011.)
In more affluent nations, there are concerns that open competition with poorer communities will undermine the interests
of more vulnerable workers and industries by, in effect, pricing them out of the market. In America, concerns about such
adjustment costs have recently been apparent in the context of the South KoreaUnited States Free Trade Agreement
(KORUS), which went into effect in March 2012. Representatives of industries such as textile- and car-manufacturing have
argued that free trade is not fair trade if it results in jobs being exported (or stolen) from America.
Some commentators believe (albeit questionably) that the 1994 North American Free Trade Agreement (NAFTA) has resulted
in such outcomes, and has failed to help Mexico move forward as robustly as optimists had hoped. The overall evidence,
however, suggests that NAFTA has in fact been economically beneficial to all the countries involved and to Mexico in
particular (Burfisher et al 2001; Hillberry and McDaniel 2002). It also has not destroyed U.S. jobs but instead has caused a
change in the types of jobs available (Gould 1998). Of course, negative social impacts of NAFTA should not be ignored
when they can be proven to exist.
Against this background, this report analyses issues relating to the likely impacts of the TPP, including if it were to be
extended to include other major Pacific-nation economies. It particularly explores issues relating to health development and
the extent to which strengthened intellectual-property laws will protect rather than harm overall public interests in
countries that are likely to be importers rather than exporters of innovations.
The arguments put forward by those who doubt the benefits of free-trade agreements (FTAs) deserve careful, rational
Introduction
consideration. For instance, although in the long term open economies will almost certainly adapt and evolve in ways that
make them more efficient than protectionist policies would permit, the Princeton health economist Uwe Reinhardt recently
noted John Maynard Keynes caution that in the long run we are all dead. Such comments highlight the fact that many
people living in societies faced with making difficult internal adjustments will have to go through lengthy and painful
(Blinder 2007) periods of distress before compensatory benefits can be enjoyed. For the less fortunate, harvesting the positive
fruits of change may not be possible in their lifetimes.
In political and humanitarian terms, simplistically pursued free-trade policies are not always as attractive as economic analyses
suggest. Likewise, with regard to the benefits of intellectual-property law, commentators as celebrated as the Nobel Prize
winning Indian welfare economist Amartya Sen believe that in poorer communities, patents on life-saving medicines can do
more harm than good.
Realistically, no effective treatment for any social problem can ever be guaranteed to be side effectfree. The art of good
policy-making, like that of good medicine, involves taking informed risks and then, as specific circumstances
demand, taking further timely action to minimise harm and maximise benefit. The analysis offered here indicates that
the appropriately structured development of free tradebased partnerships between more and less developed nations like
those currently negotiating the TPP can benefit not only all the nations involved but also every social group within them.
So too will well-framed intellectual-property laws, implemented within an overall framework that incorporates a balanced
awareness of all the determinants of public health. Without extended trading relationships, opportunities for continuing
economic growth could throughout the world become increasingly restricted as multinational firms rely increasingly on
global supply chains. This would be likely to, at best, cause tensions and economic inefficiencies and, at worst, major conflict
and significant declines in public health. Forming trade-promoting partnerships, therefore, is an inherently worthwhile goal,
provided effective measures are taken to minimise the harm that may otherwise be done as resources shift to more productive
andbeneficial uses. Adequate funding of generally available health and welfare support systems has a part to play in achieving
this goal. So too do more specifically targeted interventions and international aid programmes.
Given this starting point, this report looks first at issues relating to health development and to the roles that both new and
established (off-patent, generic or branded) medicines can and will play alongside other forms of care and treatment in improving
current and future health. It then goes on to consider the origins of and reasons for free trade-based policies and international
actions aimed at its promotion, and to analyse specific issues relating to the TPPs social and economic goals. These centre on the
maintenance and wherever possible the further promotion of both individual and population well-being in participant nations.
Strengthening intellectual-property provisions designed to promote investment in the development of effective new medicines
and other forms of innovation has a vital part to play in promoting continuing human development in the coming century.
The establishment and maintenance of robust intellectual-property rights are essential to the future wellbeing of
people everywhere. However, the policies needed to protect global public interests in better health should also be sensitive to
the immediate needs of the most vulnerable sections of the world population.
This will first and foremost demand finding ways of providing good access to well-established therapies as affordably as
possible, given that in emergent economies, very significant differences in needs and abilities to pay are likely to exist between
social groups. On relatively rare occasions it will also demand politically and economically viable strategies for supplying
cutting-edge drug and/or vaccine technologies to people living in the least advanced, poorest settings, coupled with the
provision of health care that allows the potential benefits of medicines to be fully realised. Aid programmes such as PEPFAR
are not threatened by TPP, but they need to be complemented by more efficient healthcare systems.
Introduction
The world in transition
The last two centuries have seen demographic and epidemiological changes that transformed the life prospects of the majority
of humanity. Average global life expectancy is now 70 years, despite challenges such as the impacts of the global HIV pandemic
and the continuing poverty of much of sub-Saharan Africa, compared with about 60 years in 1970 and under 50 years in
1900. Such advances have been associated with the growth of global trading, industrial and agricultural development, and the
progressively increasing capacity of health-care providers to prevent and help combat disease.
The timeline in Appendix 1 of this report records some of the steps that have contributed to health and wealth development
in the modern era. It notes measures that have supported enhanced trading, and links them temporally to advances in
pharmaceutical and other forms of health care.
Before the second half of the 18th century, no nation or social group enjoyed an average life expectancy of much greater than
40 years. High rates of infant, maternal and child mortality first-year-of-life death rates of 200300 per 1,000 live births
were commonplace, even in better-off communities contributed to this situation. Mortality and morbidity due to infectious
disease were, in todays terms, prevalent amongst all age groups.
With scientific progress, diets and other aspects of daily living improved in more advantaged parts of Western Europe and
North America, and death rates first amongst working-age adults and older children started to fall. Birth rates, however,
remained high. This meant that population levels began to increase rapidly. In the late 1800s and early 1900s, this was followed
in nations like Britain and France by declines in mother and infant mortality. As demographic transition progressed, people
became more confident of infant and child survival, and women started to seek wider roles in society. Birth rates consequently
declined, and developed-world population levels re-stabilised in and around the middle of the 20th century.
Simultaneously, the chronic diseases of later life replaced infections as the main causes of death and disability. This
epidemiological transition radically transformed the health-care needs of people living in more affluent societies. As
populations age and become richer, cardiovascular-disease sickness and death rates rise, followed by increases in the prevalence
of conditions like cancer and Alzheimers disease. Such trends, along with other factors, drive up overall spending on health
care. Although the U.S. has in some ways proved an exceptional case, it is also associated with a rise in publicly funded relative
to privately purchased health-service provision.
The emergent national economies of South America and South and Eastern Asia are now passing through the demographic,
epidemiological and socio-economic changes characteristic of development. As judged by measures such as infant-mortality
rates (see Figure 3), even lower-income countries such as Vietnam and Peru are now only a few decades behind the nations of
Western Europe and North America. Their accelerated development is in addition reflected in the TPP-related national data on
indicators such as population aging, health expenditures and income inequalities presented in Figures 47.
The available figures show, for example, that nations such as Peru, Vietnam and Malaysia have higher numbers of children
relative to people aged 65 and over, while richer countries such as the United States, New Zealand and Australia tend to devote
more of their total wealth to health care. The differences in projected life expectancy between such countries are now relatively
modest. however, other (in some respects, arguably more significant) variations can be seen between countries with similar
aggregated wealth.
In the case of Singapore, for instance, that small trading nation has for the moment low numbers of both children and older
people relative to its working age population. This allows it to combine limited health spending with a high projected life
expectancy. By contrast, the United States has exceptionally high health spending relative to its wealth, and levels of income
inequality that are higher than those observed in Western Europe. Australia, although not as wealthy per capita as the United
States, also has despite the disadvantage experienced by sections of its indigenous population rather lower levels of
recorded income inequality and infant mortality than those observed in the United States. Figure 8 shows that HIV prevalence
amongst the TPP countries is actually highest in the United States higher even than in Vietnam (see Figure 7).
For the purposes of this report and the future value of FTAs like the TPP, such observations suggest that as the 21st century
unfolds, the relatively straightforward associations between health, wealth and development observed in the past will fade
and be replaced by more complex interrelationships. Understanding and overcoming the discrete challenges facing individual
nations may increasingly need to take into account their particular socio-economic structures and historical heritages.
Regulatory and legal systems will at the international level need to be designed to pursue as best as possible common world-
community interests, such as enabling people to access quality goods and services affordably, while at the same time incentivising
innovators to take the financial risks inherent in investing for the future. But at the same time, such provisions will need to
be implemented in ways that are sensitive to particular local needs and problems. The success of agreements such as the TPP
will depend on their capacity to support enhanced wealth and health generation in all settings and contexts rather than to
advantage one partner nation against another, or to pursue one legitimate public interest in favour of another.
A key set of practical concerns relevant to the future utility of the TPP -- as USTR
1
and other planners hope it will have
evolved by 2020 -- is linked to the role of medicine supply in economic and social development. As Appendix 1 indicates, drugs
such as opioids and health-care advances such as improved antiseptic practice in surgery played an undeniably important part
in relieving suffering and protecting individual wellbeing in the 19th century.
Early innovations, such as vaccination against smallpox and the subsequent development of other forms of immunisation, were
also beneficial to public health, as was, from the 1930s, the increasing availability of insulin for the treatment of people with Type
1 diabetes. Yet overall, even in the most advanced nations, access to medicines and high-tech health care did not have a strong
statistically discernible influence on community-wide health trends until the second half of the 20th century. Although even today
the importance of medicines alone should not be exaggerated
2
, modern pharmaceuticals have undoubtedly conferred valuable public-
health benefits in all those nations able to afford them and the infrastructures required to support their safe supply and effective use.
It is still the case, however, that, notwithstanding the worldwide health progress achieved, in large parts of the developing
world (including major pharmaceutical manufacturing nations such as India), access to medicines is still far from satisfactory.
Products as vital as insulin are not, for example, adequately and consistently available to many children and young adults
who develop Type 1 diabetes. Poor access to medicines, coupled with problems such as medicine counterfeiting, leads to many
avoidable deaths. The seriousness of such problems and the extended contribution that modern vaccines and medicines can and
should make to sustaining demographic and epidemiological transition in industrialising world regions, is now well appreciated
by not only political leaders but also by product and service providers such as research-based pharmaceutical companies.
Disagreements regarding topics such as the extent to which FTAs involving partner countries at differing development stages
should seek to strengthen intellectual-property rights in order to foster scientific progress often relate to concerns about
access to modern medicines in poor localities. In essence, commentators concerned with the wellbeing of less-advantaged
Access to health care
The world in transition
communities are seeking assurances that their interests in low-cost access to current treatments will not be sacrificed for
mainstream interest in long-term global economic growth and future prosperity.
Much of the rest of this report addresses aspects of this important topic and the task of what the Nobel Prizewinning
economist Kenneth Arrow has described as balancing the value of increasing the amount of knowledge available for use
in the future against the benefits of ensuring the optimally efficient use of the knowledge available in the present
(Arrow 1962). But before turning to a closer examination of free-trade theory and the TPP in particular, this section concludes
with a brief outline of the role of medicines in three key areas of health care: HIV treatment, the prevention and
management of cardiovascular disease, and the treatment of cancer.
Understanding these three areas casts light on the reasons strengthening intellectual-property protection for pharmaceuticals
across wide areas (such as all the countries with a Pacific coast) will benefit all the populations involved, given that sensible
allowances ought to be made for special local needs and exceptional public-health challenges.
1 The Office of the United States Trade Representative (USTR) was created in 1962. It has more than 200 professional staff and is empowered to enter into
direct negotiations with the governments of other countries with regard to the terms of FTAs and resolving trade-related issues and problems.
2 It is of note, for instance, that in order-of-magnitude terms, the harm to health and reductions in longevity caused by tobacco use alone were in countries like
Great Britain comparable to all the good done by medicines in the years between the 1950s and the late 1990s. Such observations have significant implications for
health policy in presently developing countries, including even those still experiencing relatively high infectious-disease death rates.
By the late 1960s, some senior health professionals had come to believe that the era of infectious disease was rapidly drawing
to a close. They hoped that by the early 21st century, people everywhere would be largely free of the burdens of early death
and long-term disability caused by conditions ranging from polio and measles to malaria, TB, Dengue fever, leishmaniasis and
the diarrhoeal infections.
This view was overly optimistic. Worldwide, such long established plagues still cause deaths in the order of 15 million
annually. But it was the impact of HIV/AIDS that from the early 1980s onwards most dramatically highlighted the reality that
infectious diseases still represent a major threat to human welfare.
HIV-infection rates remain highest in sub-Saharan Africa, where the virus may have originally entered the human population
a century or more ago. Infection rates are not as high in Asia and elsewhere, yet even in the nations currently negotiating the
revised TPP agreement, its recorded prevalence levels represent a significant and continuing threat to public health (Figure 7).
Against this, there is also robust evidence that people across the world today have extensive and rapidly improving access to
effective anti-HIV medicines, through the cooperative interventions of informed political and community leaders, international
agencies, governments, NGOs, academic institutions and generic and research-based pharmaceutical companies. Antiviral
products developed by the pharmaceutical industry and its partners in health improvement since the early 1980s (Figure 8) are
increasingly available to even the poorest sections of the world community.
' ',
Access to health care
From a realistic political and humanitarian perspective, there is little possibility of such progress being reversed and every hope
of it being further extended. A number of groups, however, including charities such as the UK-based organisation Oxfam, have
suggested that extensions in intellectual-property law introduced via mechanisms such as FTAs will undermine the established
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) arrangements (see Box 2) and lead to new
restrictions in HIV and other medicine supply in poorer communities.
TRIPS
The Agreement on Trade-Related Aspects of lntellectual Property Rights (TRlPSj is an international agreement
administered by the World Trade Organization's (WTOj TRlPS Council. lt regulates the application of intellectual-
property rights and was established in 1994 after the multilateral Uruguay round of trade negotiations. The creation
of TRlPS was a response to international tensions relating to the mutual recognition of intellectual-property rights. lt
establishes minimum standards of intellectual-property protection and makes them enforceable via the WTO's dispute-
settlement mechanism. At the time of their negotiation, they sought to strike a balance between long-term benefts and
possible short-term costs to society of intellectual property rights (lPRsj.
lts application within developing countries has been controversial. TRlPS allows for the use of compulsory licensing
and measures such as parallel importation in the pursuit of public-health objectives, and broad exclusions of certain
forms of innovation from patentability if it is thought that this will protect economic and social welfare. Ensuring that
medicines are potentially available at low-cost commodity prices cannot guarantee that there is suffcient access to
them. ln countries such as lndia, for example, heavy reliance on brand name-based local medicine supply coupled with
low public spending on health care has meant that access to effective treatments is often limited in poorer communities.
2
' ',
Such claims can be misleading. From a practical perspective, no new free-trade agreement could, for instance, lead to
intellectual-property rights being reinstated in communities where they have already been exhausted. Medicines that
have come to the end of their patent lives cannot be evergreened so that they will cease to be available as generic
products for their established indications.
It should, however, be appreciated that criticising the costs of research-based medicines might sometimes provide a diplomatic
way of raising other sensitive topics, such as governmental and professional failures to improve the organisation and funding
of basic health services for the poorest sections of the world population. Claims that intellectual-property protection for
innovative pharmaceutical treatments is (despite the fact that without IPR, such treatments could not have been developed)
a major cause of suffering may also be endorsed by fast follower generic-medicine manufacturers. It is in their commercial
interest to seek the earliest possible opportunity to produce legally permissible versions of new research-based medicines for
sale at relatively high levels of profit, given the limited research and market development costs they typically incur.
This report does not seek to explore issues relating to such concerns in further detail. But it is important to recognise that
in the past, pharmaceutical companies, along with many other public and private agencies, were slow to recognise
the fact that the emergence of the HIV pandemic represented a new, atypical challenge for all the stakeholders in
improving world health. Not only was the infection not amenable to control via immunisation, but also as effective drug
treatments began to become available, those most in need of them were in large part living in the worlds poorest countries.
It was in the developed world, however, that research and development costs could be retrieved.
This financial reality, coupled with factors such as disease denial and the stigma associated with the sexual transmission of HIV, for
a period undermined awareness of important humanitarian priorities and duties. Even though it would be wrong to suggest that
medicine-patenting has in itself been the major cause of harm (in the least-advantaged sub-Saharan countries, many drugs are never
patented because there is no local demand), failings arguably existed within the pharmaceutical companies that had created
HIV treatments and within governments and other agencies responsible for funding health and welfare programmes. To a
degree, the pharmaceutical industry became a scapegoat that was blamed for wider national and international shortcomings.
A key fact to stress here in the context of FTA-related concerns is that although HIV infection may have spread in Africa
because of development
3
, its emergence was very different from that of disorders such as coronary heart disease, Type 2
diabetes and breast cancer. These illnesses slowly become more prevalent as individuals and communities become wealthy.
There is, therefore, time for innovative medicines that are initially most needed in more advanced settings to mature and
become available as lower-cost generic products before they are required for widespread use in populations that have not yet
reached a similar level of development.
Future FTAs should, in as much as they impinge on health policies, encompass the lessons learned in the context of the HIV
pandemic and build further on the progress towards better prevention and care already achieved. What ought to be clear is
that agreements such as the TPP will not stand in the way of efforts to address exceptional public-health challenges
like the HIV pandemic, or block the supply of essential medicines at preferentially negotiated prices to communities
in most need. The opportunity for the TPP will be to include such provision within the integral structures of the
FTA rather than as an addition or adjunct to the trade-related provisions.
3 For example, the growth of trading and transport systems between capital cities and other commercial centres and previously isolated regions can create new
disease-transmission risks.
' ',
' ' '
heart disease and strokes
Preventing and treating cancer
As indicated above, as societies become wealthier, people in them start to afford luxuries such as an increased consumption
of tobacco and richer diets, leading to negative consequences to health such as an initial increase in the incidence of diseases
like lung cancer together with myocardial infarctions (heart attacks) and other manifestations of coronary heart disease. Such
trends are followed by a later rise in the prevalence of Type 2 diabetes. Although cultural and genetic variables influence such
trends and the balance between, for example, the incidences of strokes as opposed to those of heart failure, this can broadly
be said to be a universal pattern. Across the world as a whole, cardiovascular and cerebrovascular disorders now represent the
largest single cause of avoidable death and disability.
The ultimate solutions to such socially and environmentally driven biomedical problems lie in the establishment of ways of living
that reduce cardiovascular and other risks. This can be achieved through, for instance, stopping smoking, increasing exercise
rates and moderating fat, carbohydrate and sugar intake, coupled with the appropriate use of protective modern medicines.
Examples of relevant treatments range from the diuretics and beta-blockers first introduced in the 1950s and 1960s to the
calcium channel inhibitors, ACE inhibitors and statins first made available in the 1980s and 1990s. All of these important
innovations are now available off-patent. Used prudently as mechanisms of public-health protection, they could, in the future,
virtually eliminate the occurrence of vascular disease related harm in people under the age of 70. But significant barriers to
this opportunity being realised exist in both developed and developing countries. They range from lack of public education and
health-service investment to professional attitudes that are inadequately focused on facilitating affordable disease prevention.
Corrupt, inefficient and/or inadequate medicine-purchasing and -distribution systems and the direct and indirect effects
of pharmaceutical counterfeiting are also significant barriers to progress in areas where (as is now the case with more than
90 percent of all essential medicines) treatments could be universally available at affordable costs. As highlighted by initiatives such
as the USTRs Trade Enhancing Access to Medicines/TEAM approach, the implementation of partnership-oriented free-trade
agreements between nations at different development stages should foster progress towards better off-patent medicine supply and
more effective national and international strategies aimed at the prevention of non-communicable diseases.
Today the most important public-health priority for an increasing number of emergent economies is to move rapidly to offset
the hazard of unchecked increases in potentially avoidable vascular disease related disability and death rates through a pragmatic
combination of lifestyle-linked interventions and the effective use of already proven and cheaply available medicines.
Cancers have affected humanity throughout history. But as populations age and other forms of illness are overcome, oncological
conditions will automatically become more prevalent. Public hopes and demands for better cancer treatment will also grow,
yet progress in this area has been slower than was originally hoped. Researchers are having to answer far more complex and
difficult questions than those which had to be resolved during the development of medicines such as the first-generation
antibiotics and anti-hypertensives in the 20th century. Genetic-level analyses are also breaking disease groups down into
smaller and smaller sub-groups.
Research costs have therefore increased and the unit prices of new, relatively low volumesale, cancer treatments are necessarily
high, to the extent that even in richer countries such as the UK, their affordability within publicly funded health-care systems
is being questioned. This is a complex area. But in the context of the current Trans-Pacific Partnership negotiations, it
is important to highlight the fact that there is good reason to believe that the long-term gains for people everywhere of
developing better treatments for cancer will eventually outweigh by many times the costs of their development.
As and when current therapeutic challenges have been overcome, people affected by oncological conditions will for the remainder
of history be able to benefit from effective anticancer medicines. Understanding the genetic mechanisms involved in cancer should
in the long run also open the way to not only new prevention strategies, but also to technologies applicable in areas ranging from
food- and energy-production to environmental protection. From an FTA perspective, these observations underline the collective
importance of ensuring the global robustness of the intellectual-property provisions needed to ensure the ongoing financial viability
of cancer and other forms of advanced biomedical research in both privately and publicly funded settings (Box 3).
Tiered pricing and other special supply mechanisms already in place in contexts like that of HIV treatment might, as and when
more effective cancer treatments have been developed, facilitate the availability of such breakthroughs to all sections of the
global population, even though this would also be likely to demand major increases in other forms of health-care investment. In
the more immediate future, cancer-related welfare improvement is most likely to be achievable in poorer communities by increased
public investment in prevention and enhanced access to well-established, affordable forms of surgery and pain-management.
Pharmaceuticals, such as generically available hormone-based treatments, will also have an extended role to play.
ARE THERE VIABLE ALTERNATIVES TO IPR-BASED MEDICINE RESEARCH FUNDING?
There is one basic alternative to competition driven and adequately enforced intellectual property-based systems for
facilitating investments in high-cost, high-risk activities such as pharmaceutical research: the publicly funded research
and development of innovative products. Some medical and social commentators believe that the removal of private
proft incentives for the development of better medicines and vaccines would beneft the global community. But there
is no economic evidence that any such strategy would in practice deliver better outcomes. Failing to strengthen and/or
apply lP law to meet changing world and scientifc circumstances might instead harm not only people living in countries
like those of Europe and North America, but also populations everywhere.
lt is questionable, for instance, that public sector actors would be more effcient in allocating resources to research
scientists and others working in pharmaceutical R&D than private sector decision-makers for whom effciency is vital.
lt is also doubtful that if the possibility of private industrial proft were removed from their calculations, governments
would wish to give medical developments that will in time lead to end points such as increased survival in later life the
same degree of priority that is afforded to them under present arrangements.
There is no fxed way of deciding on a right" level of investment for the future. But well-designed lP regimens provide
incentives to put adequate levels of funding into productive research designed to beneft rich and poor societies alike
in the long run. The short-term costs that such systems might impose in contexts such as those of less-advanced
developing countries should be avoided by the establishment of effcient healthcare systems supported as necessary
by differential pricing strategies or other fnancial support mechanisms.
3
Preventing and treating cancer
_ '
In 1817, the English economist David Ricardo published his book On the Principles of Political Economy and Taxation, which
revolutionised trade theory by introducing the concept of comparative advantage. Prior to this, mercantilist thinking
had contended that seeking a positive trade balance in every sector was always desirable. This led national governments to
protect their domestic industries even if they could not produce as efficiently as those based abroad, other than in the case
of colonial possessions of the Imperial European powers. Political elites typically discouraged the large-scale importation of
inessential items as enthusiastically as they welcomed export revenues.
But comparative advantage posits that countries should always trade openly and respond to free-market competitive
pressures by specialising in the areas where they enjoy the greatest levels of efficiency relative to their competitors. This will
allow even weaker nations to do better than would otherwise be the case while, in overall terms, maximising combined global
output values. In the long term, free trade will also maximise welfare levels in every nation, rather than just the most efficient
winner countries.
As observed in the introduction to this report, however, critics of free trade are often concerned that it demands painful
readjustments that could well be judged by the groups affected to be unacceptably costly (Blinder 2007). Representatives of
sectors that are particularly vulnerable to low-cost competition will understandably seek protection through the application
of import taxes or, in other contexts, the use of subsidies to ensure their continuing competitiveness. They will naturally
argue that the costs to the wider community of continuing to support relatively inefficient domestic production will be
outweighed by the security- and stability-related social benefits of maintaining established jobs.
Politicians who depend on the continuing support of constituencies that are themselves dependent on inefficient industries
are particularly likely to be sensitive to such arguments. This may be especially so in countries that do not have comprehensive
welfare systems that moderate the impacts of unemployment and support the re-education of redundant employees. In the
case of the U.S., such factors may perhaps paradoxically on occasions have caused protectionist policies to be favoured,
despite a strong national consensus on the value of free-market competition.
European countries like the United Kingdom, with fewer internal resources than America, have in some respects tended to
be more consistently supportive of free trade, while also (at least since the end of World War II) favouring a welfare state
approach. There may nevertheless, in some contexts, be strategic arguments in favour of protectionist policies that are
founded on reason rather than political expediency and fears linked to limited social-support arrangements.
For example, there can be instances in which it is logical for individual states to maintain reserve-production capacities in case
low-cost externally sourced goods or services become unavailable. Similarly, there may be situations in which national leaders
wish to develop infant industries, or to permit their companies to build up advantages of scale and capitalisation. One well
described instance of this last is the aviation industry, where both the U.S. and the EU (and Canada and Brazil with smaller
aeroplanes) have sought to support their companies in their efforts to become and/or remain dominant providers.
But this last is an unusual case. Often, national elites have not proved as good at picking winners as they may have
been at subsidising less-efficient industries with which they had formed mutually beneficial alignments. Put more
firmly, there is a constant danger that protectionism will lead to corruption, as well as declines in overall global productivity.
With regard to the interests of less-developed nations, authors such as Ha-Joon Chang (2002) have argued that the so-called
Washington Consensus in favour of free trade is kicking away the ladder up which poorer countries need to climb in order
to become richer. Such commentators, in essence, believe that developed countries previously used unfair protectionist and
industrial policies to progress, and ask Why should todays developing countries not be allowed to do so?
Perhaps the best answer to this question is that if it were true that the richer countries of the world have achieved their
relative wealth through the past use of protectionist policies, then others should be free to follow that path today. Yet it is
improbable that this was actually case. The available evidence is that free trade benefits all countries, and that comparative
advantage remains as valid now as it was in the 1800s. More affluent countries may have achieved their favoured position
despite tendencies towards protectionism, rather than because of them.
Indeed, with the development of the global economy and the relatively free movement of capital, coupled with technologies
such as the Internet and institutions such as multinational companies and global investment funds, governments may today
have more reason than ever before to accept free trade and work together to ensure that welfare gains are maximised at all
levels within, as well as between, economies. Although protectionism might appear especially desirable during recessions and/
or periods of relative decline, the available evidence is that it cannot efficiently support the long-term pursuit of increased
prosperity (see, for example, Baldwin 1969; Messerlin 2006).
For both large advanced countries such as the U.S. and less-advanced but now rapidly developing economies such as that
of Vietnam, there is a strong case for continuing to pursue liberalised trading, while accepting that open competition will
on occasions demand structural adjustments. Any temporary or longer-term harm the latter might cause is likely to be best
offset by support for individuals and families, which is consistent with investing in the ongoing development of better-skilled
workforces and superior production technologies. This conclusion underlines the importance of government measures to
ease transitions from obsolete sectors to new jobs in more successful areas, which in modern America includes mechanisms
such as the U.S. Trade Adjustment Assistance (TAA) programme. The Obama administration has recognised this link by
asking Congress not to approve any future FTAs without renewing this programme. An additional example is provided by
Australian adjustment assistance programmes aimed at sectors most affected by trade liberalisation (e.g., textile, clothing and
footwear sectors) (OECD 2005).
Despite the strong global economic case in favour of appropriately regulated fair and free trading, developments during the
19th and early 20th centuries were often equivocal. For example, in northern Europe, the Zollverein customs union served
during the middle 1800s as a change driver, which successfully led on to the intranational political and fiscal integration of
German-speaking States. Yet it and similar developments in areas such as what is today modern Italy did little to transcend
wider international divisions and barriers to mutually supportive and beneficial progress across the continent.
Likewise, trading within the Empires of Britain and France became strongly focused on the pursuit of competing and narrow
national-level interests, rather than broader developmental objectives. As an example of this counterproductive trend, the
Anglo-Chinese opium wars of the middle 19th century were in England domestically legitimated by the claimed pursuit of
free-trade principles. But in reality, they could not be said to have reflected the humanitarian ideas and values of enlightenment
theorists such as Hume, Smith, Ricardo and Bentham. This changed remarkably with the conclusion of the Cobden-Chevalier
Treaty between France and Britain in 1860, which, for the first time, introduced the principle of treating each other as most
favoured nations and mutually extending benefits that would be granted to Third World countries.
The evolution of modern FTAs
_ '
After the end of the Second World War, a rather different dynamic began to emerge. Individual nation-states have, perhaps
inevitably, continued to pursue sectionally oriented trade-related and other interests. Yet following the 1944 Bretton Woods
Conference and establishment of the General Agreement on Tariffs and Trade (GATT)
4
in 1948, wider regional groupings
have emerged. The basis on which policies have been built appears gradually to have incorporated a better-informed awareness
of the interdependence of and need for constructive partnerships between nations.
The formation of the European Union, which accounts for almost 25 percent of world GDP, as a free-trade area from its
beginnings as the European Economic Community or Common Market in 1957 through to its present 27 Member State
configuration illustrates such trends.
By contrast, the economy of the United States presently represents some 22 percent of world GDP
5
. America was, for much
of the post-war period, committed to multilateralism rather that the pursuit of FTAs. But, perhaps in part in reaction to
the ongoing enlargement of the European Community (which became the European Union in 1993), this changed with the
Canada-U.S. Free Trade Agreement in 1987/88. NAFTA (the North America Free Trade Agreement) followed in 1994.
Today, the U.S. has trade agreements in force with eighteen countries. The FTAs with Colombia and Panama were signed by
President Obama on October 21, 2011, but have not yet been implemented. Lastly, the U.S. is currently negotiating the TPP
trade agreement, which is envisioned to be a high-standard, broad-based regional pact.
Many of the nations participating in the current FTA negotiations already have free-trade agreement ties with one another
through the Association of Southeast Asian Nations (ASEAN), the existing four-nation TPP or other existing bi- and
multilateral agreements. For example, Chile has bilateral FTAs with Australia, Malaysia, Peru, the U.S. and Vietnam, as well
as existing TPP ties with Brunei, New Zealand and Singapore. Out of the eight other nations involved in the current TPP
negotiations, the U.S. already has bilateral agreements with four: Australia, Chile, Peru and Singapore (see Table 1). It would,
therefore, be unwise to exaggerate the overall impact that any new agreement is likely to have in areas such as pharmaceutical
cost and price control given that, for example, the Australian Pharmaceutical Benefits Scheme (PBS) has continued to be able
to function effectively since the 2004 Australian-U.S. FTA, despite fears that it would not be able to do so.
6
TABLE
Exi sti ng Free Trade Agreements between current TPP Negoti ati ng Countri es
1
Australia Australia
Brunei Brunei
Chile Chile
Malaysia Malaysia
NZ NZ
Peru Peru
Singapore Singapore
US US
vietnam vietnam
Green: Existing bilateral FTA in place or part of multilateral FTA; White: No FTA connection. Source: ECLAC 2010;
|tto://eng||s|.v|etnamnet.vn/en/o0s|ness/20043/c|||e-|at|hes-fta-w|t|-v|etnam.|tm|
The benefits of free trade for the U.S. (and all other countries) have recently been reiterated in a report by the Center for
Trade Policy Studies (part of the Cato Institute) (Ikenson & Lincicome, 2011). This criticises those with a narrow focus on
exports as the sole benefit of free trade, which the authors say is indicative of a mercantilist perspective. They detail evidence
of the positive value of low-cost imports and argue that free trade is essential to Americas future prosperity.
Reducing Americas trade deficit with the rest of the world to a sustainable level is presently an important priority, which
will, in part, demand being able to increase exports of innovative IPR-protected goods to those nations that are now able to
produce many other items more economically than the U.S. Yet the basic logic underpinning the position of the Center for
Trade Policy Studies on imports remains robust.
4 The World Trade Organisation succeeded GATT in 1995. The WTO has successfully facilitated some forms of progress, but the need to establish consensus
between all of its 150-plus members has since the start of the Doha development round in 2001 been a perceived barrier to ongoing developments. Hence FTAs
such as the TPP may be regarded as an important step in the ongoing evolution of world trading relationships.
5 The U.S. domestic market accounts for some 40 percent of world pharmaceutical sales by value; however, it is estimated that India and Peoples China
now produce approaching 80 percent of the worlds pharmaceuticals by volume. The available data suggest that with circa 2 percent of GDP being spent on
pharmaceuticals, America currently allocates as much or more of its total wealth to medicine use than do nearly all other developed and developing nations. But
as a proportion of total health spending, U.S. outlays on pharmaceuticals are below both the OECD and world average figures.
6 The assertion that the PBC will not be negatively affected by any possible TPP treaty has recently been reaffirmed by the Australian government (Inside U.S.
Trade, 2012b).
The goals of the TPP
The origins of the TPP and current work on extending it are linked to the formation of ASEAN, the Association of Southeast
Asian Nations, in 1967, and APEC, the Asia Pacific Economic Cooperation, in 1989 (cf. Appendix I). This latter forum, whose
20-plus member economies include the Peoples Republic of China, the Russian Federation and the United States of America,
is committed to fostering continuing economic growth and prosperity of all the Pacific Rim nations. At a meeting in Bogor,
Indonesia, in 1994, the APEC country leaders agreed that they would seek to move progressively towards creating the worlds
largest free-trading and free-investment area by 2020 (ECLAC 2010).
At an earlier stage, ASEAN policies had been aimed at excluding non-Asian countries such as Australia, New Zealand,
Canada and the U.S. from a free-trade relationship with its members, but this position was strongly opposed by Japan
and America. The significance of both the APEC Bogor Agenda and the TPP should be appreciated in this context. The
formation of a purely Asian bloc, which would have split the Pacific region down the middle and excluded the U.S. and its
NAFTA partners from what is currently the worlds most dynamic region, would have been an extremely undesirable result
from a North American viewpoint (ECLAC 2010). Conversely, notwithstanding all their current dynamism and economic
growth, a strategic alignment away from the NAFTA countries is also not in the long-term interests of Southeast Asian or
Australasian countries.
As described in Box 1 on page 4, the actual formation of the TPP dates back to discussions between the leaders of New
Zealand, Chile and Singapore, which took place at the 2002 APEC leaders meeting. Brunei subsequently became involved in
this group of relatively small and affluent nations, and the agreement between them came into force early in 2006. It sought
to liberalise trading and investment it aimed to reduce all trade tariffs between the four nations involved to zero within a
decade and rapidly gained recognition as a possible model for the future. Vietnam, the U.S., Peru, Malaysia and Australia
began negotiating to join the TPP in 2009.
Although not an official APEC initiative, the TPP is well placed to serve as a model for the development of a Pacific-wide free-
trade partnership, which could include a wide range of provisions for supporting social and economic development. For the
U.S., gaining greater commitment to the appropriate application of intellectual-property law is one important long-term goal,
alongside more immediate opportunities for increasing both agricultural and high-technology product exports. (The Asia-
Pacific region is already the largest world market for U.S. exports in general, and receives two-thirds of all U.S. agricultural
exports, USTR 2011.) American negotiators have indicated that they wish the TPP to go beyond WTO provisions on sanitary
and phytosanitary (SPS) issues (Inside U.S. Trade 2011), and to ensure that the cross-border transfer of data over the Internet
is not impeded.
Other countries also want opportunities to further increase their agricultural and manufactured good exports to markets such
as the U.S., to obtain good value imports, and to be able to receive inward and make outward investments freely and securely.
For the current TPP participants, it may be strategically attractive to negotiate a relatively ambitious set of terms with like-
minded partners, before seeking other countries involvement. The TPP might also be regarded as a way for America and other
Pacific nations to order the hodgepodge of bilateral FTAs they have in the past negotiated. But it will probably be the extent
of the future new involvement of larger countries such as the Peoples Republic of China, Japan and Indonesia that will be the
ultimate determinant of its value.
'_ ' _
' '
Despite the powerful reasons for continuing world development through innovative free-trade partnerships aimed at shared
welfare improvement, attempts to forge agreements such as the TPP are always likely to generate controversy. Many of the
reasons for this have already been touched on in this report. Special interests of all types, from labour groups located in more
prosperous countries who fear loss of employment because of free-market competition to activists committed to, wherever
possible, minimising the patent and allied forms of protection available for new medicines, are naturally going to advocate the
policies they favour. So too will the owners of commercial entities.
IPR ISSUES AND THE TPP
Inte||ectua|-property |aw is a high|y comp|ex e|d that cannot be exp|ored in detai| here, however, issues of particu|ar
re|evance with regard to the current TPP negotiations inc|ude.
Pre-grant patent opposition systems allow a third party to formally oppose a patent application once it is published by
the respective patent authority but before it has been granted. ln some countries, this system also allows for quasi-
judicial proceedings involving all the relevant stakeholders where oral arguments, research, documents and other
evidence can be presented. A negative aspect of such systems is that they can allow countries or competitors to
delay the introduction of a patent for a considerable period, with potentially negative consequences for research and
innovation. The Obama administration opposes the inclusion of such a system in the TPP agreement (lnside U.S. Trade,
July 1, 2011j.
Data protection is a provision that hinders governments from using an innovative manufacturer's effcacy and safety data
for granting approval for generic versions of the innovative product for a certain period of time. Data protection is explicitly
different from patent rights, and is supported by TRlPS rules. FTAs, including the prospective TPP agreement, include
such data-protection systems to guarantee incentives for the biopharmaceutical sector to develop and launch new drugs.
Patents usually expire after 20 years, although the term is 25 years for pharmaceuticals in Australia. lnnovation patents,
however, are granted for 2 to 8 years in Australia. Countries' frameworks also vary in terms of what kinds of innovation
are patentable. The fact that Singapore, New Zealand, Chile and Peru already have FTAs in place with the U.S. means
that some degree of harmonization has already been achieved. The U.S. seeks to build on this by extending similar
provisions to all countries participating in the TPP.
Another topic that requires informed understanding is the use of brand names for medicines. This can have important
advantages, particularly by enabling patients to identify their treatments. ln many industrialised nations, it is now
commonplace to prescribe and supply drugs under their generic names. ln developing countries, however, generic"
manufacturers often market their products under brand names and in ways that may compete with the originators'
products, which have undesirable consequences in poorer settings.
4
From a health perspective, it would be highly undesirable if, as some observers claim will be the case, the introduction of U.S.-type ISDS
procedures in weaker Pacific Rim nations were to undermine governmental attempts (in line with the WHOs Framework Convention
on Tobacco Control) to take action to protect populations from the harm caused by tobacco smoking
7
. Similar points may be made about
the supply and marketing of diabetogenic-processed foods and soft drinks containing high levels of fructose and/or other sugars.
Any occurrence, however, would be an unintended consequence of policy, which competent administrations and the appropriate
framing of relevant provisions should be able to avoid. In the ISDS case, the intended purpose of such provisions is to assure
investors that possibly perverse or unfair governmental decisions can be legally challenged. Given the potential importance
of foreign investments in economic development, few, if any, actors objectively seeking to promote enhanced welfare in poorer
nations would regard this goal as undesirable.
Agencies such as the WHO and the UK Department for International Development (DfID) have also argued that there
are circumstances under which the exercise of intellectual-property rights will disadvantage poorer populations in need of
effective medicines (cf. WHO 2008, DfID HSRC 2004). But once again, this is not the purpose of patents or other related forms
of protection such as, say, the data-protection provisions contained in the orphan drug legislation originally introduced in the
U.S. via the 1983 Orphan Drugs Act.
In this last field, similar legislation has since been introduced in countries and regions such as Japan, Singapore, Australia and
the EU. In order to incentivise research into rarer indications, these provisions permit innovators to enjoy an additional period
of exclusive supply (seven years, in the case of the ODA) if they develop and conduct appropriate clinical trials to validate a
new use of an older medicine or present such a drug in a more effective form. Yet, contrary to what is sometimes claimed, this
does not stop generic medicine producers from supplying low-cost versions of any off-patent product for its original uses. It is
also the case that the relevant European Directive confers 10 years of data protection, giving an additional incentive that TPP
and other FTA negotiators might in the future reasonably likewise wish to provide or improve upon
8
.
Even in countries like America and Britain, which (despite the fact that by volume, up to 80 percent of all drug production may
now take place in Asia) host significant pharmaceutical research and development facilities, medicines are often regarded as
unduly costly. Pharmaceutical products typically account for only $1 in every $10 spent on health in such developed countries.
But their price may seem particularly difficult to bear because, for many patients in the U.S., drugs are their largest visible out-
of-pocket outlay. In health-care systems like the NHS, criticising factors such as labour costs is politically very difficult; this
may lead pharmaceutical cost control to attract relatively high levels of media and related attention.
The existence of these and other factors together mean that there is a significant danger that, worldwide, the utility of IPR
protection for pharmaceuticals and, to a lesser degree, other products proposed in FTAs such as the TPP, is at risk of being
significantly underestimated. Instead of correctly being seen as granted because they serve public interests and are essential
to continued health improvement, IPRs such as patents are in danger of being regarded as an inherently undesirable cause
of harm. Such misperceptions represent a threat to worldwide future public-health interests. For this reason this report now
turns to a consideration of the modern role of patent and other forms of IP law in the development of pharmaceuticals, such
as new medicines and vaccines for both rich and poor world populations.
7 Typically, smoking increases as countries start to get richer, and only becomes associated with factors such as lack of education and social deprivation later in
the development process.
8 in a related context, the data submitted by pharmaceutical companies to agencies such as the U.S. Food and Drug Administration (FDA) for the purpose of
obtaining a marketing approval for a new drug are regarded as commercial property for a limited period of time. Application rights remain exclusive to the
innovator for 10 years. This is normally, but not always, rather less than the residual post-licensing marketing patent term available to pharmaceutical innovators.
Since TRIPS is relatively ambiguous on this matter, FTAs often fill the gap by defining relevant rights. But critics of such IPR provisions may, for either
altruistic or commercial reasons, claim that they are conferring unduly extended advantages that go beyond the boundaries that international law (the consensus
achieved in forums like the WTO) has defined.
'_ ' _
' '
_ .'
century access to medicines
As with provisions such as the right to possess exclusive trademarks, the origins of patent law can be traced back across
world history for two to three millennia. The aim of measures that grant inventors temporary monopolies over the supply of
useful innovations they have created has been not only to enable those who have invested time and resources to recover past
costs. More importantly, from a social-policy perspective, they have been aimed at encouraging the publication of existing
knowledge, and to create an environment in which ongoing investment in generating new knowledge will take place.
In Europe, patents were, in a proto-modern form, initially granted in the 1400s. In the U.S., the first Patent Act was introduced
in 1790. It allowed patents to be granted for 14 years
9
. Since that time, innovation in areas such as the development of new
medicines has become vastly more complex and time-consuming. Nevertheless, the duration of patent terms and other forms
of IPR have not increased nearly so significantly.
Currently, under the WTOs Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, patents should be
available for a minimum term of 20 years in all member nations. But in the case of medicines, the trials needed to confirm their
safety and efficacy can uniquely reduce the on the market period of protection to a half or less of this period. Interestingly
enough, many developing countries have already fully implemented TRIPS, despite transition periods lasting until 2016. This
is supported by the fact that only a well-working IP regime provides pharmaceutical companies with the secure environment
they need to invest in developing countries and transfer technology (Maskus 1998).
A radical shortening of the duration of the patent-protected or other forms of exclusive-supply terms available to innovators
relative to the effort and resource investment needed to market new medicines is one of the reasons the unit cost of innovative
drugs for cancer and other indications has risen markedly in developed world markets in recent decades. Casual observers
may automatically associate the concept of lengthened or otherwise strengthened patent or other exclusive-supply terms for
innovative medicines with higher unit prices for innovative treatments. But in reality, this can be a false causality assumption:
Other factors, such as levels of competition and the levels of return regulatory and allied bodies regard as permissible, are
often sidelined in the debate over medicine prices, despite their crucial role.
Other key facts, which need to be communicated effectively in order to promote a balanced awareness of why intellectual-
property rights are unusually important in the context of effective new medicines development, include:
Research-based pharmaceutical manufactures today spend some 1520 percent of their gross turnovers on research
and development. This is several times the equivalent level observed in other major industries. Although they are
the result of highly advanced research and extensive safety testing, new medicines are, once proven and licensed
normally, relatively easy to copy. By contrast, other high-technology goods, such as new airliners, are often much
more complex to assemble and supply. Regardless of the patents and design copyrights that the makers of such
products may possess, they are effectively impossible for others to reproduce in their entirety; and
Much of the value of a medicine lies in the knowledge on the basis of which its use has been authorised, rather
than the cost of its physical ingredients. In economic terms, even sophisticated pharmaceutical products such as
biologicals tend to have low marginal/variable costs of production relative to the fixed/sunk costs incurred in
their development. Once again, this means that without appropriate intellectual-property law, it would never be
viable for private investors to fund pharmaceutical research, because lower-cost copyists would be in a position to
undercut the legitimate prices of innovators even while still generating supra-normal profits.
9 Other important forms of IPR include copyrights of various types (which in part date back to the introduction of printing and the subsequent development
of the book trade) and trademarks. In advanced developed countries, off-patent medicines are often provided as non-branded commodities, or true generics. In
less sophisticated settings, brand names and associated product and producer identifiers are still often used as guarantees of a medicines quality, but this may be
linked to relatively high levels of counterfeiting and with problems of inadequate access to good quality medicines in poorer communities
If the world is to have better medicines and vaccines (see Hotez 2011) to treat not only post-transitional health problems
like cancer, but also parasitic conditions such as malaria and schistosomiasis, as well as bacterial and viral disorders such as
TB and HIV, ensuring the existence of IPR rights adequate to sustain pharmaceutical research is essential. New forms of
public-private partnership may create fresh opportunities for research funding, but as argued in Box 3 on page 13, it would
be foolhardy to assume that direct public financing could ever effectively substitute for intellectual property rightsenabled,
market-driven resourcing of therapeutic innovation.
Nevertheless, some non-governmental lobbying organisations including Oxfam (Oxfam 2007) and Mdecins Sans
Frontires (MSF 2011) strongly oppose free-trade agreements between developed and developing countries, including
the TPP (Box 5). The reasons for this largely relate to the inclusion of IPR-related provisions. Representatives of MSF
have, for instance, claimed that the U.S. is ignoring past commitments to improving public health and demanding aggressive
intellectual-property provisions that go beyond what international trade law requires (MSF 2011).
MSF and linked organisations have complained of secretive negotiating processes, which they appear to believe will
eventually enable Western pharmaceutical companies to evergreen medicine patents by allowing them to make serial
small changes to their products. Reflecting the ideas of theorists like Ha-Joon Chang (Chang 2002), Oxfam has also
argued that FTAs ignore the special and differential treatment that developing countries require in order to move up the
development ladder (Oxfam 2007).
There can be no doubt that there is a powerful humanitarian case for improving access to essential/effective medicines
and vaccines for all of the worlds people; however, the validity and relevance of the arguments that IPR is a barrier
to achieving this important end point is at best questionable. Apart from the economics-based case in favour of free
trade and movement of investment capital between richer and poorer nations, points to be emphasised in the context
of the TPP include:
Singapore, Brunei, Australia and New Zealand are consistently amongst the top 30 nations in terms of GDP-
per-capita (World Bank 2011). There is no ethical reason to argue that their populations should not contribute as
much per capita as the average American, either directly or via public and private insurance, does to pharmaceutical
research and development for worldwide benefit. Chile (which is a member of the OECD) and Malaysia are roughly
at the same level as Argentina and Russia. While Peru (which already has a comprehensive IP system) and Vietnam
are less affluent, they are growing rapidly and enjoy advanced cultures. It would be wrong to suggest that the bulk
of their populations are living at the levels of health or material disadvantage experienced in much of sub-Saharan
Africa or by the hundreds of millions of Indians who (notwithstanding that nations successful pharmaceutical
sector) still lack adequate access to any form of modern medicine; and
From an evidence-based public-health perspective, poorer communities in areas such as South-eastern Asia are
most likely to need better access to high-quality, low-cost generic drugs for relatively common disorders combined
with better basic health care and improved vaccination programmes, rather than the latest medicines for later life
conditions. As argued earlier, the AIDS pandemic created exceptional needs. But even in this instance, the maturation
of the anti-HIV medicines market is now creating a more normalised flow of off-patent products for satisfactorily
controlling this condition at both the individual patient and population levels.
_ .'
Finally, it is once again worth highlighting the reality that neither the TPP nor any other FTA is likely to extend intellectual-
property protection for medicines in ways that will stop them being available for generic use for their established indications
when their original patents or period of exclusivity expire. It is a myth to suggest that patents can be evergreened through
the introduction of minor molecular or other changes to existing products.
NGOS CONCERNS AND CRITICISMS OF THE TPP NEGOTIATIONS
The British based charity Oxfam has, as described in the main text of this report, comp|ained of a |ack of transparency
regarding the TPP negotiations and expressed dismay that whi|e representatives of pharmaceutica| companies are on
the advisory board of the U.S. Trade Representative, NGOs are not. It might be argued against this that negotiations
|ike those the TPP may embody in the future may require an environment that permits at |east temporary condentia|ity.
Even if nothing e|se, short-term protection from pub|ic scrutiny cou|d a||ow negotiators to agree on compromise
positions without fearing a |oss of "face." In addition, Oxfam has argued that LDCs need specia| protection from
internationa| competition in order to catch up with the economica||y advanced industria|ised nations.
Medicins Sans Frontieres (MSF} has a|so criticised the U.S. government for adopting an approach in the TPP
negotiations that seeks to go beyond TRIPS standards for internationa| trade and associated |aw and a|so terms that
America has in the past found acceptab|e. In MSF's view, this [eopardizes keeping drug prices in deve|oping countries
at a |eve| unaffordab|e for poorer peop|e, a|beit that rea|istica||y their need for the IP-protected therapies is in a|| but the
most atypica| e|ds |ike|y to be sma||. MSF wants to maintain or restore the ba|ance between the universa||y re|evant
|ong-term va|ue of IP-protection systems and short-term pub|ic hea|th concerns MSF c|aims is embodied in TRIPS.
Neither Oxfam nor MSF has c|ear|y stated its positions on questions such as whether or not a thresho|d |eve| of
nationa| wea|th at which a country shou|d no |onger need "specia| treatment" exists. Moreover, they ignore the fact
that out-of-patent drugs are a|ready avai|ab|e for the treatment of many common diseases in deve|oping countries.
If they remain undu|y cost|y, such prob|ems might be more |ike|y to be addressed by exp|oring constructive|y topics
such as how barriers to "true generic" supp|y to those popu|ations |east ab|e to afford any form of hea|th care
shou|d be removed, rather than advocating measures that curtai| IPRs and are more |ike|y to se|ective|y favour the
wea|thy |iving in emergent economies.
Pub|ic Citizen a|so argues that enhanced inte||ectua|-property protection based on options such as extended
data-exc|usivity terms wou|d have "disastrous" effects on the U.S. hea|thcare system, as we|| as on deve|oping
countries. This view is not, however, consistent with the avai|ab|e evidence and trends, such as current|y observed
dec|ines in the abso|ute and re|ative costs of many forms of medicine in nations such as America.
5
_ .'
Conclusions & Recommendations
There is compelling evidence that the international implementation of FTAs with terms that build on those contained in
initiatives like the current or likely future TPP will, in the medium to long term, serve public interests in economic growth
and the efficient supply of existing and new goods and services. Provided that rationally planned and commensurate actions
are taken to protect the interests of vulnerable groups in the U.S. and elsewhere who could otherwise be unduly affected by the
impacts of free-market competition and also those of poor populations that may on occasions need preferential access to
products like new medicines policy-makers should accept the inherent desirability of dynamic progress towards enhanced
regional and world trade. It is desirable that leaders such as President Obama should seek faster and more substantive
progress than that achieved in the last decade via the WTO.
Some interest groups question the value of including terms relating to intellectual-property protection in free-trade agreements
between developed and developing countries. A number of lobbies relating to industries as diverse as entertainment and
computing also have interests in this topic. In the particular area of pharmaceuticals, the opponents of more robust intellectual-
property protection typically say they fear that this would reduce access to affordable treatments in poorer communities.
The analysis presented here, however, indicates that conferring robust intellectual-property rights is, in the pharmaceutical
and other technological-development contexts, in the global publics long-term interests. Without adequate mechanisms
for directly and indirectly securing the private and public funding of medicines and vaccines, research and development
communities across the world will lose future benefits that would far outweigh the development costs involved, whether these
are incurred mainly in the U.S. or are distributed more fairly.
Appropriately structured FTAs could and should increase the availability of good-quality, low-cost generic treatments to
all sections of all the populations in all participant nations. This is, in many poorer community settings, the most important
pharmaceutical-care improvement goal presently achievable, albeit that to deliver maximum benefit, it will need to be accompanied
by the provision of health-care infrastructures able to support efficient and effective medicine use.
In the case of public-health emergencies involving challenges such as outbreaks of new infections, very poor populations may in
addition need mass access to recently developed, still IP-protected, treatments and/or medical technologies. There is no reason FTAs
such as the version of the TPP currently under discussion should stand in the way of arrangements being made to allow access to
these more advanced drugs. This conclusion applies whether the latter are to be based on private charitable interventions, differential
corporate pricing strategies and/or public funding like that facilitated for HIV by the U.S. governments PEPFAR initiative.
Unfounded suggestions to the contrary may attract sympathetic attention, but they threaten to distort policies by misleading
politicians and the public and, therefore, require rebuttal. So too do false claims about research-based pharmaceutical companies being
permitted to extend indefinitely patent terms to the detriment of public interests in better health. It should be clearly understood
that this is not the case. It should also be remembered that through their initially patented or otherwise protected products, research-
based pharmaceutical companies generate enduring benefits to an extent that few, if any, other human agencies can match.
There are perceived and genuine conflicts of interest between groups such as generic-medicine manufacturers and research-based
pharmaceutical companies. This may, at the present stage of world development, be linked to differing sectional sets of national and
regional commercial objectives. But over and above such concerns, developed and developing countries across the modern world
have good reason to work constructively together to promote both increasing global wealth and shared good health.
The creation, in the coming decade, of an enlarged Pacific free-trade area could serve as a powerful mechanism for achieving
further human development. To the extent that the present TPP negotiations will contribute to this end, they should be welcomed
and supported, even though no effective intervention is likely to be automatically free of unwanted impacts. With regard to the
current TPP negotiations, stakeholders genuinely wishing to help facilitate optimum levels of welfare gain should not give
way to potentially corrupting protectionism, or risk undermining the provision of incentives sufficient to drive investment into
research for the future. They should instead cooperate to identify fair and economically viable ways of protecting those presently
in vulnerable situations, without losing sight of the most important long-term goals to be achieved for people everywhere.

Invention of the stethoscope by Rene Laennec 1816
Morphine starts to be more widely used following its initial
extraction from raw opium in Germany in 1804.
1817 David Ricardos On the Principles of Political Economy and Taxation is released,
outlining the benefits of free trade and the theory of comparative advantage.
First successful blood transfusion performed by James Blundell 1818 German Customs Union (Zollverein) founded, excluding Austria-Hungary after
1866 and dominated by Prussia
Ignaz Semmelweis identifies cadaverous particles as the cause of
puerperal fever and used chlorinated lime as a disinfectant.
1847
1860 Cobden-Chevalier Anglo-French Free Trade Treaty signed
Joseph Lister promotes the need for improved hygiene during
surgery through publishing his book Antiseptic Principle of the
Practice of Surgery.
1867
Robert Koch and Louis Pasteur postulate the germ theory of
disease.
1870s Franco-Prussian War and the unification of the German State, announced in the
Palace of Versailles in 1871
First cholera vaccine 1879
18841885 Berlin Conference regulates African colonisation and trade by European powers.
Wilhelm Conrad Roentgen discovers X-rays in 1895. Shortly
afterwards, Felix Hoffman synthesises aspirin, and diamorphine is
marketed under the trade name of heroin.
1890s
Sir Frederick Gowland Hopkins discovers vitamins and their
importance for health.
1906
19141918 World War I
1919 League of Nations established and the Treaty of Versailles signed
Insulin first used to treat diabetes, and vaccines for diphtheria,
whooping cough, tuberculosis and tetanus developed
19201928
Alexander Fleming publishes a paper on the antibacterial effects
of penicillin.
1929 Wall Street Crash, leading to worldwide economic depression
1930 Smoot-Hawley Tariff Act introduced in U.S., raising tariffs on more than
20,000 imported goods and indirectly causing years of beggar-thy-neighbour
protectionism (accompanying World War II) across the world.
First yellow fever and typhus vaccines. Sulfonamide-based
antibiotic medicines are marketed in Germany and elsewhere.
Bernard Fantus initiates the first blood bank in Chicago.
19351937
19391945 World War II
1944 United Nations Monetary and Financial Conference (Bretton Woods conference)
establishes international exchange-rate management system and reduces
worldwide tariffs
First influenza vaccine. Dorothy Crowfoot Hodgkin determines
the chemical structure of penicillin, which begins to be more
widely available.
1945 Charter of the United Nations signed, establishing the United Nations
World Health Organisation (WHO) created 1948 General Agreement on Tariffs and Trade (GATT) established, with the goal of
worldwide trade liberalisation
The first cardiac pacemaker is developed by Paul Zoll. Antipsychotic
medicines begin to be marketed, and the Salk polio vaccine is
developed.
1952
James Watson and Francis Crick describe DNA. 1953
Medical and Pharmaceutical Advances Year Free -Trade Developments
Medical and Pharmaceutical Advances Year Free -Trade Developments
Early diuretic medicines are developed, and angiotensin-converting
enzyme (ACE) is identified.
19561957 European Economic Community (EEC) established
Sir James Black begins developing the first beta-blocker for use as
an hypertensive.
1960 European Free Trade Association (EFTA) established
Dr. Christiaan Barnard performs first human heart transplant. The
first mumps vaccine is launched.
1967 Bangkok Declaration, establishing ASEAN
First vaccine for rubella 19701971 Bretton Woods agreement collapses as the U.S. abolishes the convertibility of the
dollar into gold
The first H2 antagonist for the treatment of peptic-ulcer disease
and the first ACE inhibitor become available.
19751976
The eradication of smallpox is announced by the World Health
Organisation.
1980
The virus responsible for AIDS is identified, and synthetic human
insulin starts to become more widely used for the treatment of
diabetes.
19821983 AustraliaNZ Closer Economic Relations Trade Agreement (ANZCERTA)
Statin-based medicines first marketed for the reduction of
cholesterol levels
19871989 U.S.Canada FTA signed, and Asia-Pacific Economic Cooperation (APEC)
established
1991 Treaty of Asuncion founds the Southern Common Market (MERCOSUR/
MERCOSUL), now a full customs union between Argentina, Brazil, Paraguay and
Uruguay
1992 Maastricht Treaty signed, establishing the European Union and laying the
foundations for a single European currency
Human embryo cells cloned 1993
1994 NAFTA comes into force between U.S., Canada and Mexico.
1995 The World Trade Organisation (WTO) is created in Geneva, subsuming GATT.
Dolly the Sheep becomes the first animal cloned from an adult cell. 1996
Herceptin is marketed for the treatment of breast cancer. 19981999 The Euro is introduced as the official currency of 11 EU countries.
First working draft of the human genome is completed 2000 U.S.Vietnam Bilateral Trade Agreement
Imatinib is introduced for the treatment of chronic myeloid
leukaemia. It represents an early step towards the development of
more personalised medicines.
2001 WTO Doha Declaration allows developing countries to violate trade rules if their
citizens public health takes precedence, though pushes for more trade liberalisation
(and marks the beginning of the yet-to-be-completed WTO Doha Round).
2003 U.S.Singapore, U.S.Chile, Singapore-Australia Free Trade Agreements signed
2004 U.S.Australia FTA signed
2005 Trans-Pacific Strategic Economic Partnership (P$) signed (NZ, Chile, Singapore
into effect in 2006 and Brunei into effect in 2009)
First HPV vaccine approved 2006 U.S.Peru, Peru-Chile FTA signed
2008 Australia-Chile, Peru-Singapore FTAs signed
2008 U.S. announces it will join the P4 negotiations, leading to TPP talks
Malaria vaccine in advanced trials 2011
2012 TPP negotiations due for completion

. _
FlGURE 1
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SOURCE: www.ganfyd.org/index.php?title=Preston_curve
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SOURCE: World Bank
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SOURCE: World Bank
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SOURCE: World Bank
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. _
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SOURCE: World Bank
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. _
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SOURCE: CRA 2011
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. _
_,
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Wealth Health and International Trade in The 21st Century

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