The Trans-Pacific Partnership (TPP) – a controversial trade agreement between 12 countries encircling the Pacific – was ceremonially signed by the member countries in February this year.

Subject to vociferous, if at times ill-informed, public opposition, the TPP is by no means a done deal as each signatory nation must now get the agreement ratified by their government. That’s looking shaky in the US, a nation crucial for upholding the TPP deal and where Barack Obama’s pro-TPP Executive may run out of time to sign it off, and as the ill-tempered run-in to the US elections later this year has shown, both candidates for his job appear opposed to the agreement.

But should it pass those hurdles, one significant area it will affect is the marketing of pharmaceuticals in New Zealand – a contentious area for many years since the Government’s Pharmaceutical Management Agency, Pharmac, was established in 1993.

A reading of the full text of the TPP (released last November) revealed two main changes to the current framework for marketing prescription medicines in New Zealand:

Provision for a patent extension of up to five years under special circumstances; no such provision exists currently. Establishment of a government-operated (Medsafe) patent linkage system to notify patent-holders if anyone is seeking the original clinical data on a medicine to gain marketing approval for a generic. At present, patentees have no way of knowing if such inquiries have taken place.

Interestingly, Australia’s current laws and policies are already pretty much in line with the TPP requirements. An extension of up to five years is possible across the Tasman, though Australia’s Productivity Commission has released a proposal which seeks to shorten that term, while a system of notification around the risk of patent infringement exists but it’s not a government-run one.

A cursory examination of the TPP, then, might suggest that there’s not a huge impact on pharmaceutical marketing in Australasia. But dig a little deeper and the picture looks somewhat gloomier or rosier – depending on whether you’re a new medicine innovator or a generic manufacturer.

This is particularly the case where biologics are concerned. Biologics are medicines containing large protein molecules which are obtained from biological material. They are more costly and more difficult to make than traditional small-molecule drugs and the US Government differentiates them from other pharmaceutical products, giving them a lengthier – 12-year – market exclusivity period. That’s the period of time during which other organisations can’t access the original clinical data on the drug.

NZ and Australia have a five-year market exclusivity period and both governments resisted a US push to go for a 12-year period for biologics. But the TPP agreement does require member countries to either give biologics eight years’ clinical trial data protection or five years’ protection along with “other measures” and “market circumstances” to provide “effective market protection” and “deliver a comparable outcome in the market” – to quote the original text. The upshot of that article in the agreement is that “biosimilars” – the generic versions of biologics – will effectively be kept off the market for eight years in either case.

That’s good news for innovators: they get three more years’ protection, though that may still not be enough to recoup their R&D costs. If you’re a generic manufacturer, however, the brakes are on for a further three years. And for consumers, it means the cost of some medicines will be high for at least eight years – till biosimilars enter the market (if they do).

The wording in the TPP is also telling. It defines biologics more broadly as “any product that is, or contains, a protein produced using biotechnology processes for use in human beings for the prevention, treatment or cure of a disease or condition.” This definition captures a large number of medicines designed to treat cancers or immune system-related diseases, and the broader definition – in combination with the extended data protection period - means many medicines won’t make it to NZ pharmacies or hospitals, particularly in NZ where Pharmac only selects certain medicines in medicine categories for subsidisation.

Another article in the TPP provides for a review of the length of monopoly protection of biologics after 10 years in light of the evolution of “market circumstances” – yet another opportunity for the US to press member countries to extend market exclusivity, delaying the advent of biosimilars and keeping prices high and some medicines out of the market.

The TPP agreement also mandates the inclusion of Intellectual Property (IP) rights in what is known as the Investor State Dispute Settlement (ISDS) process. ISDS provisions enable foreign companies or investors to take action against a government or challenge laws or policies introduced by a government, if they believe those laws or policies diminish their profit in that market.

Placing IP rights within the ISDS framework means a pharma company could sue a TPP member nation for introducing laws that affected their patent rights or ability to market. And it happens: in Canada, pharma giant Eli Lilly sued the Government under the North American Free Trade Agreement (NAFTA) for US$500 million for passing laws that enabled Canadian companies to make generic versions of two Lilly drugs.

The TPP agreement does exempt government regulation of public health from “expropriation”, which allows for NZ’s compulsory licensing provisions and Australia’s Crown Use rights. But the exemptions are on the grounds that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent-holder. So a foreign pharma company could challenge a TPP member government or its policy, by asserting for example that the compulsory licence was issued on unreasonable grounds, or that the policy interfered with the company’s investment interest in that market.

The jury is still out of course on whether the TPP agreement will enter into law, but medicine innovators, generic producers, the medical community and consumers with an interest in the availability of medicines in NZ should all aim to be thoroughly familiar with the pharmaceuticals elements of the agreement – and the impact on their world should it finally be passed.

This article was first published in the National Business Review and was written by Zhi Ling Zeng and Jason Rogers, James & Wells.