Assessing the impact of TRIPS-plus provisions on Public Healh: Lessons from Latin America

1. Assessing the impact of TRIPS-plus provisions on Public Healh:Lessons from Latin America WTO Public Forum CSEND Roundtable Geneva, 30 September 2009 David Vivas Eugui dvivas@ictsd.ch

2. Assessing the impact of TRIPS-plus Background • Objectives of the project: “Developing methodological tools and undertaking national assessments that can assist developing countries currently engaged in negotiations or implementation of FTAs to better understand the costs and benefits of these deals and explore mitigating and policies will be needed to ensure, in the case of health, access to medicines.” Partners: ICTSD, PAHO/WHO, UNDP, CINPE/UNA, Fundacion Plenitud

3. Assessing the impact of TRIPS-plus Some methodological aspects • A partial equilibrium model at the macro level. • What are we measuring? • The level of exclusivity; • impact over average prices; • impact on public and private spending in medicines; and • impact on consumption and competition. • Origin: PAHO/WHO model (2004), peer reviewed by group of experts invited by ICTSD, WHO, UNDP, WBI, and UNCTAD (2008).

4. Assessing the impact of TRIPS-plus Some methodological aspects • Limitations of the model: • Applicable to the aggregated market • If the model is applied to therapeutic groups results can greatly vary, especially in areas were strong needs and dynamic research are present. • Availability of quality data is essential for quality outcomes. • Model does not measure : • the impact over innovation. • market and government failures.

5. Assessing the impact of TRIPS-plus A model applicable to TRIPS and TRIPS-plus

6. Assessing the impact of TRIPS-plus How many applications of the model so far? • Costa Rica: 2005, (OPS) • Guatemala: 2005, (OPS) • Thailand: 2006 (Thai Health Ministry) • Jordan: 2006 • Bolivia: 2006 (OPS, IFARMA) • Colombia: 2005 (OPS, IFARMA), 2007, 2009 (Misión Salud, IFARMA) • Uruguay: 2008 (WBI) • Costa Rica: 2009 (CINPE/ICTSD) • Dominican Republic: 2009 (Fundacion Plenitud/ICTSD)

7. Assessing the impact of TRIPS-plus The case of Costa Rica: parameters • TRIPS and CAFTA already implemented. • Some flexibilities were incorporated into the domestic legislation • There is a universal health care coverage clause in the Constitution (almost inelastic demand). • Applicable only to the institutional market. • 10 AI (Active ingredients) are protected through patents and 6 will fall into the public domain, yearly. It is foreseen that 4 products will be protected yearly through test data. • The price differential found between products under exclusivity and products in competition was 3.1. • Period covered 2008-2030. • Four scenarios (TRIPS baseline, TRIPS-plus pro-competitive, intermediate, and restrictive). • Source of data: national procurement entities and national IP office.

8. Assessing the impact of TRIPS-plus The case of Costa Rica: findings • By 2030, the price will increase between 18% and more than 40% yearly for covered active ingredients. • There will be a need for increased public spending from about 2.008 to 3.357 million USD by 2030, depending on the scenario. • Strongest impact per measure: patentability criteria (about 55% of the impact), data exclusivity (about 40%), linkage, and patent term restoration (about 5%). • Concentration in the supply is putting at risk the sustainability of the universal access and procurement system. • If the public budget is not increased, consumption will decrease by 24% in the worst-case scenario. • By 2030, there will be a reduction between 24% to 27% in market share for the local generic industry.

9. Assessing the impact of TRIPS-plus The case of Dominican Republic: parameters • TRIPS implemented and CAFTA implementation is in process. • Applicable both to the institutional market and the private market. • 8 AI are protected and 6 are expected to fall into the public domain, yearly. • Period studied covered 2007-2027. • It is foreseen that 4 products, annually, will be protected through test data. • Strong mitigation measures are included in the scenario (increase of social security coverage from 20% to 80% by 2012, plus consumer subsidies). • Price differential found between products under exclusivity and products in competition was 2.9. • Source of data: procurement entities (atomized), private studies, and IP office.

10. Assessing the impact of TRIPS-plus Dominican Republic: findings • There will be a modest price increase of 9% to 15% in absolute terms over covered AI by 2027. • Strongest impact per measure: data exclusivity (80% of the impact) • Huge price differences between private and public markets (80% of the purchases today are out -of -pocket). • If the public budget does not increase, consumption will decrease by 8% in the worst-case scenario. • There will be a reduction of 14% in the public market share and 24% in the private market for local generic industryby 2027. • Information asymmetries and government imperfections, have a higher impact on prices than regulatory changes in intellectual property.

11. Assessing the impact of TRIPS-plus Some preliminary lessons and recomendations • The more concentration in the supply plus high standards protection of intellectual property rights, more need to generate a concentration in the demand in order to be able to negotiations prices. • Do not underestimate the effect of Information asymmetries and market and government imperfections on prices • Using TRIPS as well as US-CAFTA flexibilities can make a difference • We need to explore value of regional procurement: A potential deal between Haiti and Dominican Republic enable the use of regional procurement system in line with the P.6 Decision.

12. Assessing the impact of TRIPS-plus Some preliminary lessons and recomendations • Mitigation policies can have a positive effect. Some of the most effective ones include: • Social security systems • Subsidies to consumers • Strategic use of government procurement • Competition policy and law • Medicine and drug regulation (regulation of medical prescription and pharmacy practices) • Information to consumers about prices and competitive products • There is a need to improve institutional capacity in IP offices, sanitary regulatory authorities, procurement entities, and social security. • Is there any MFN effect in relation to the Peruvian FTA?

13. Thanks The studies are available at: www.ictsd.org