G’day. The complex politics of the FTA have just got seriously murky with Latham’s shock decision to make Labor’s – and therefore the Senate’s – support for the neccessary legislation conditional on legislation to protect our cheap drugs system and Australian content in our media. I’ll have a go at working through the politics tonight and publish some of your thoughts. But today, an update from Webdiary’s FTA analyst Brian Bahnisch on what Latham’s conditions are all about. His previous pieces include The U.S. Free Trade Agreement – always a silly idea, now a deadly trap for Australia and Latham to go for the FTA dud: big business, big media win again.

 

As is often the case, Michelle Grattan has the most information on Latham’s shock play, see Who will blink first? The transcript of Monday Night’s Four Corners program A bitter pill is also a must read. After Brian, I’ve lifted with permission a sensational Crikey item in today’s sealed section (worth subscribing to) which explains just how rich and powerful the big US drugs are, the ones Howard wants to let get their foot in the door on Australia’s best practice drugs subsidy scheme.

***

Saving our world-best cheap drugs scheme from US multinationals, if we can

by Brian Bahnisch

The die has now been cast and the news has now come through that President Bush has finally signed the FTA agreement. This may be premature, but it could present an interesting legal case.

The US has an agreement duly entered into by Australia’s government. The enabling legislation in this context is domestic housekeeping this end. Professor Peter Drahos made it quite clear on Radio National’s PM program that as a nation our obligations now lie in what we have undertaken as represented in the FTA text. Under challenge in a trade dispute, this is all that matters, not any laws that we may have passed in Australia at whatever level of government. (MARGO: Can this be true? I thought international treaties had no domestic operation without legislation enacting them into law. That’s certainly true of human rights treaties an Australian governmnet signs. In America, both houses of Parliament had to approve the FTA deal before Bush could sign it. Could a constitutional law expert buy in here?)

In a trade dispute, a panel of three trade lawyers, only one of whom is appointed by us, hears the case extrajudicially and in secret, without reference to our laws or our democratically derived policies and practices. That decision is then legally binding on the parties.

Our loss of sovereignty could not be more clearly illustrated.

I’m not sure whether Labor fully appreciates this point. Certainly some of the Government ministers don’t. When One Nation Senator Len Harris asked a question in the Senate yesterday about this procedure, Senator Robert Hill’s reply on behalf of the Minister for Trade demonstrated that he was totally unaware of the real situation.

Of the two laws required by Labor, the one designed to bring the control over TV content rules back under the control of the Parliament seems a no-brainer. But even here the Government seemed to be accepting government control, via government regulation, rather than parliamentary control via legislation. I’m sure Labor and the Government will work that one out.

On the matter of generic pharmaceuticals, it seems to be a case of who blinks first. On Latelinelast night one felt confident that Julia Gillard would stare them down if it was left to her. She put the Labor case with exemplary clarity.

There are many patents in a pharmaceutical product – the Drahos study says up to 100. Overseas there has been a practice of “ever-greening”, of effectively extending to life of the patent in the branded drug. This is done by changing one of the patents within the product, often on blatantly spurious grounds and then defending the inevitable challenge in the courts.

The patent holder expects to lose, but the purpose is really to extend the life of the patent, as the profits so gained dwarf the legal costs. Labor wants to attach a significant penalty to an unsuccessful defense of a spurious patent, as a disincentive for claims that are purely strategic and lack substance.

In the FTA it appears that our government authorities will be obliged to undertake patent checking work on behalf of the patent owners in a manner that is unprecedented internationally.

This is where it gets tricky. I don’t have the legal knowledge to assess whether Labor’s proposal has merit or is doable. Lawyers will no doubt disagree.

It is worth noting that Labor’s amendment was unanimously recommended by JSCOT (The Joint Senate Committee on Treaties) including all Government members.

And the stakes are high. The Drahos study believes the new procedures in the FTA, which involve a generic company supplying a notice of intent to develop a generic version and a certificate showing that no patents will be infringed, will slow the appearance of generics “by about three years or more”. On five existing drugs due to come off patent in 2006-2009 the extra cost to the PBS will be $1.1 billion. Over time, they say, “this amount would be multiplied many times as these delays applied to more and more drugs.”

Here are two more quotes from Drahos:

Australia’s concessions in the IPR [intellectual property rights] chapter come at a time when there is an emerging view within the US that IPR protection has gone too far.

Australia has signed onto a set of US standards in the FTA at a time when there is considerable doubt in the US about the suitability of those standards for a truly dynamic and effective knowledge economy.

It would be naïve in the extreme, as Tony Abbott seemed to imply on Lateline, that it was business as usual. Because there had never been a problem in the past, there would not be in the future.

The stakes involved on this one appear very significant in terms of the value of the benefits of the entire FTA. It is true that Labor’s proposed law may turn out to be unworkable and may be struck down in a trade dispute eventually. If we are going to have an FTA such a law seems the minimum any prudent government should enact to protect the public interest.

When this proposal from Labor hit the deck, Howard was apparently confused and uncertain at first, before coming out strongly against the proposal. Perhaps Howard needed time for his minions to contact his imperial masters for direction.

What significance should we read into the fact that two of the top American trade negotiators who worked on the FTA have recently landed plum jobs with big pharmaceutical companies?

***

Crikey: the power of Big Pharma

If John Howard toughs it out over Labor’s PBS amendment, the major risk for the Government is that this becomes an excuse to air all the dirty linen, connections, donations and practices of Big Pharma which critics argue represent the darkest side of globalisation.

For instance, does anyone fancy doing an analysis of which former Howard staffers are now working for Big Pharma. From Crikey’s list of former Howard staffers we have the following:

• Paul Cross: fromer Michael Wooldridge’s office, now at drug giant Merck Sharpe & Dohme.
• Mark Elliott: former John Howard adviser, now at Pfizer as Corporate Communications Manager.
• Catherine McGovern: former Nick Minchin staffer, now at Glaxo Smith Klein.
• Craig Regan: formerly worked in John Howard’s office, now works at Pfizer.
• Kieran Schneeman: former McGauran chief of staff, now the chief executive of Medicines Australia.
• Ken Smith: formerly worked in Michael Wooldridge’s office, now at Pfizer.

In July, Fortune magazine listed the world’s largest corporations revealing just how well Big Pharma rakes in the cash: names, $US profit in 2002, revenue:

Pfizer (US), $3.9b, $45.9b

GlaxoSmithKline (Brit), $7.45b, $35.0b

Bayer (Germ), $1.5b, $32.3b

Novartis (Switz), $5.0b, $24.9b

Roche Group (Switz), $2.3b, $23.2b

Merck (US), $6.8b, $22.5b

Bristol-Myers Squib (US), $3.1b, $20.9b

Aventis (France), $2.2b, $20.2b

Astrazeneca (Brit), $3.0b, $18.9b

It makes our tiny pharmaceutical companies look like a real joke. International pharmaceutical companies are no stranger to influencing the Pharmaceutical Benefits Advisory Committee (the people who decide what drugs make it on to Australia’s coveted Pharmaceutical Benefits Scheme).

Several years ago Big Pharma used their clout with John Howard and Michael Wooldridge to remove key players in the PB Advisory Committee responsible for keeping down the prices of Australian drugs.

Jonathan Holmes reported, “that’s not mere paranoia. In January 2001, all but two of the Pharmaceutical Benefits Advisory Committee were either dismissed or resigned in protest. A few weeks earlier, the Prime Minister had met with major pharmaceutical companies. A background briefing paper for that meeting was leaked to 4 Corners reporter Liz Jackson”.

At the time Jackson was following the story for 4 Corners and put together this in 2001 in the must read program, Paying the Price. One victim of the boardroom sweep was Professor David Henry (PBAC 1991-2000) the man who pioneered Australia’s radical system for evaluating the cost-effectiveness of drugs in the early 1990s. Committee decisions based on Henry’s system can cost the pharmaceutical industry hundreds of millions of dollars and worse still for the industry, it is being copied around the world – another motivating force examined by Jonathan Holmes in his 4 Corners report on Monday.

According to Jackson, Australia’s PBS dates back to 1948 when the then-Labor government decided the new drug penicillin would be made available to all Australians free of charge, in a flush of national pride following Australian Howard Florey’s role in discovering the new wonder drug. Ever since Australians have been largely protected from the high cost of drugs.

Meanwhile a subscriber writes:

No doubt you are already onto this, but it may be worth an close look at which pharmaceutical companies are contrbutors to the Liberal Party. Does that explain the current reluctance of the Government to adopt Iron Mark’s protection mechanisms?