‘A Toxic Combination’– The health impacts of the TPPA

Newtown public meeting on the TPPA

Newtown public meeting on the TPPA

Notes of a talk given at public meetings in Newtown, Lower Hutt, Otaki and Wainuiomata organised by TPP Free Wellington and the Horowhenua TPPA Action Group, January 2016. Reprinted from Grant Brookes’ NZNO blog.

Kia ora koutou. Good evening. My name is Grant Brookes. I am a Registered Nurse, and the President of the New Zealand Nurses Organisation.

NZNO is the leading professional association and union for nurses in Aotearoa New Zealand, representing 47,000 nurses, midwives, students, kaimahi hauora and other health workers. NZNO embraces Te Tiriti o Waitangi and works to improve the health status of all peoples of Aotearoa New Zealand through participation in health and social policy development.

I was invited along tonight to give an expert opinion on the health impact of the TPPA. But I need to stress that my areas of expertise – in nursing, and health policy – are not sufficient, in themselves, to provide this. Having read the 599 pages which comprise the core of the agreement (excluding side instruments and some of the annexes), it is abundantly clear that legal expertise in the interpretation of international treaties is also required.

A full, peer-reviewed analysis of the health impact of the TPPA by suitably qualified experts is yet to be published for the New Zealand setting. But with these large caveats in mind, I will offer a few thoughts on the topic.

Let’s recap. Over the course of seven years of negotiations, attention on the health impacts of the Trans-Pacific Partnership Agreement in New Zealand focused heavily on a few aspects of healthcare provision – specifically the cost of medicines – and on a handful of regulatory issues in public health – especially tobacco control.

The potential health impacts of the TPPA are not limited to these matters. But I will talk about them, before touching briefly on some of the more far-reaching implications for health in the agreement. The complexity of the document is such that understanding the issues requires in-depth examination. So I hope you will bear with me as I go into some detail.

 

Health fears muted?

When negotiations concluded in Atlanta last October, government politicians rushed to declare that the health concerns which critics had been raising were fully addressed in the final agreement. By and large, media reports reflected this government line.

So for example, Patrick Gower told viewers of 3 News that “the TPP was nowhere near as bad as Labour made it out to be. The big fears have been muted: the PHARMAC model is looking intact and there are restrictions on tobacco corporations suing the Government.”

Meanwhile, Fairfax political reporters Jo Moir and Laura McQuillan announcedthat:

“New Zealanders will not face increased medicine costs as a result of the Trans-Pacific Partnership deal. Australian officials took an ANZAC approach to patent protections on biologics over the last three days and dug their heels in on the issue on behalf of Australians and Kiwis. Groser said Kiwis will not pay any more for medicine as a result of the TPPA and the “cost of the subsidy bill will not go up [by] any large extent”. It will cost roughly $4.5 million in the first year to set up the software to provide the additional information that negotiating partners wanted. After that operating costs will be about $2.5m a year – a “tiny rounding error” on what is a large health budget, he said.”

These TPPA boosters were able to point to clauses in the final text to support their claims. For example, they highlighted “ANNEX 26-A. TRANSPARENCY AND PROCEDURAL FAIRNESS FOR PHARMACEUTICAL PRODUCTS AND MEDICAL DEVICES”

That part of the agreement says that, “The Parties are committed to facilitating high-quality healthcare and continued improvements in public health for their nationals, including patients and the public.”

Alongside commercial affirmations about the “the need to recognize the value of pharmaceutical products and medical devices through the operation of competitive markets”, the text acknowledges “the importance of protecting and promoting public health and the important role played by pharmaceutical products and medical devices in delivering high-quality health care” and “the need to promote timely and affordable access to pharmaceutical products and medical devices”.

Significantly, the Annex says that, “The dispute settlement procedures provided for in Chapter 28 (Dispute Settlement) shall not apply” to PHARMAC, “with respect to PHARMAC’s role in the listing of a new pharmaceutical for reimbursement on the Pharmaceutical Schedule”.

Then there is “CHAPTER 29: EXCEPTIONS AND GENERAL PROVISIONS”.

“Article 29.5: Tobacco Control Measures” says that, “A Party may elect to deny the benefits of Section B of Chapter 9 (Investment) with respect to claims challenging a tobacco control”. In other words, tobacco companies can be barred from suing governments over their smokefree policies, via the notorious Investor-State Dispute Settlement (ISDS) process.

The inclusion of ANNEX 26-A and Article 29.5 is testament to the efforts of those of us who have campaigned for years against the TPPA in the name of public health. But is it true, as media and politicians would have us believe, that these clauses are enough to safeguard health and mitigate the impacts of the TPPA on healthcare provision, and on public health regulation?

 

Healthcare provision – medicines

To answer that question, we have to understand how PHARMAC works.

The Pharmaceutical Management Agency (commonly known as PHARMAC) successfully manages the cost of medicines in New Zealand, through a range of mechanisms. For example, under the PHARMAC model, generally only one brand of each medicine is subsidised at any given time. If a prescriber writes a community pharmacy script specifically naming a different brand (which they can still do), the patient will pay the full price at the chemist, rather than the usual $5 per item. As a result, very few unsubsidised brands are prescribed. This means that PHARMAC can force pharmaceutical companies to compete, driving down prices.

New Zealand’s pharmaceutical budget of $800 million (or around $200 per person, per year) is low by international standards. The media reports were accurate when they said that this model will remain under the TPPA, and that one-off compliance costs of $4.5 million and increased operating costs of around $2.5 million a year represent a tiny proportion of PHARMAC’s budget.

However, tendering out the right to be the sole subsidised brand in this way is not possible if a single pharmaceutical company holds the patent for a particular drug. In that case, the company can effectively set the price at which New Zealanders can access that medication. Therefore, longer patents mean higher medicine costs – and potentially, much higher costs.

Currently in New Zealand, patents on most medicines expire after 20 years, while for a new class of medicines, known as biologics (sometimes called “specialty drugs”), patent protection lasts for five years.

The TPPA will result in longer periods, due to a host of provisions in “CHAPTER 18: INTELLECTUAL PROPERTY”, “Subsection C: Measures Relating to Pharmaceutical Products”

For example, a drug company will be able to patent “new uses of a known product, new methods of using a known product, or new processes of using a known product” (Article 18.37.1). This is what’s known as “evergreening” patents.

Consider what this means. For many decades, aspirin was used to relieve pain and fever. Then, in the early 1970s, studies found that aspirin was also effective in reducing the incidence of heart attacks and strokes. Under the provisions of the TPPA Intellectual Property Chapter, the drug company Bayer (the original patent-holder) could potentially have applied for a new patent for this new use for aspirin, and ratcheted up the price.

This is not an isolated example. The history of medical practice is full of drugs which were developed to treat one condition, and later put to new uses. In my field of psychiatry, for instance, first-line therapy for the treatment of bipolar mania is a drug called valproate – which was initially used to treat epilepsy. Prochlorperazine – initially used in the treatment of schizophrenia – is now more commonly prescribed in low doses for nausea (including morning sickness during pregnancy). Prazosin, an anti-hypertensive drug used to treat high blood pressure, has recently been found to be effective in reducing the severity of nightmares associated with Post-Traumatic Stress Disorder, and so on. Under the TPPA, all of these developments could potentially have resulted in higher medicine costs.

The greatest impact on PHARMAC, however, will probably come from extended market exclusivity for new kinds of medicine called “biologics”. This new class of drugs are derived from biological processes, instead of being created in the lab through chemical interactions. Biologics include so-called “specialty drugs”, some of which are enormously expensive. Perhaps the best known example is pembrolizumab, marketed under the brand-name Keytruda, which was the subject of a petition and extensive media coverage last year. This melanoma drug saves lives, but patent-holder Merck charges $300,000 per patient.

New York Times biotechnology correspondents Andrew Pollack and Katie Thomas have reported that last year, the “specialty medications accounted for one-third of all spending on drugs in the United States, up from 19 percent in 2004 and heading toward 50 percent in the next 10 years, according to IMS Health, which tracks prescriptions. The trend has led to a corresponding boom in the specialty pharmacy business, which by one estimate grew to $78 billion in sales last year from $20 billion in 2005” 

In Australia, meanwhile, monopolies on just ten biologic drugs listed on the Pharmaceutical Benefits Scheme cost taxpayers over $205 million in 2013-14. 

As mentioned previously, New Zealand laws currently give a five year monopoly to drug companies holding patents in biologics, during which they can name their price.

According to former trade minister Tim Groser, patent terms for biologics will not change under the TPPA. His view is not shared by US Deputy Trade Representative Robert Holleyman, who told the US Chamber of Commerce 2015 Global IP Summit last year that: “TPP will require, for the first time in a trade agreement, Parties to provide an extended term of effective market protection for biologic medicines”. 

There has been speculation that pharmaceutical companies may pressure US representatives to renegotiate parts of the Intellectual Property Chapter, or seek other assurances, to “clarify” that. But to my eyes, it seems pretty clear that Article 18.52 of the TPPA, as it stands now, means that Robert Holleyman is right and that “effective market protection” for biologics will be extended to eight years.

Each additional year added to the monopoly period today would “add tens of millions of dollars” to New Zealand’s drug bill. But if prescribing trends here follow those predicted in the United States, then the TPPA’s extended market protections (patents, in other words) for biologics could be costing taxpayers (or patients, or both) hundreds of millions of dollars a year, within a decade.

 

Healthcare provision – DHB services

But while the cost of medicines has received the greatest attention, it is far from the only aspect of healthcare provision which could be affected by the TPPA.

As the executive director of the ASMS senior doctors union, Ian Powell, has recently commented, the TPPA could reach right into the heart of our health system:

“The Government appears to be sidling back to a market-driven approach to the provision of public hospital services… The Government’s health funding review, whose controversial recommendations were leaked to the media last year, underpins the draft updated health strategy. This strategy document clearly points to a competitive market model of health service provision…As the executive director of the ASMS senior doctors union, Ian Powell, has recently commented, the TPPA could reach right into the heart of our health system:

“Proposals currently being considered by the Government include opening up DHB services to competitive tendering.”

If these changes went ahead, then large parts of our health system could become subject to TPPA “CHAPTER 10: CROSS-BORDER TRADE IN SERVICES”. This chapter applies wherever a service is supplied on a commercial basis or in competition with one or more service suppliers.

Article 10.3 (National Treatment) says: “Each Party shall accord to services and service suppliers of another Party treatment no less favourable than that it accords, in like circumstances, to its own services and service suppliers”.

As Ian Powell points out, this “opens the doors to more involvement of multi-national health insurance companies… Multi-national companies can afford to make loss-leading bids to secure a contract, with the aim of making a profit over the longer term by cutting costs. As a country we really don’t want to be going down that track, especially under the deeply flawed Trans Pacific Partnership Agreement. The wrong move could prove very costly for New Zealand because once multi-national companies get their hooks into our public health service contracts, they may be very difficult to dislodge.”

 

Public Health – tobacco

The assurances from politicians and media commenatators that tobacco control will be unaffected under the TPPA, sadly, are also less reliable than they appear.

Analysis of the text by Louise Delany and George Thomson, of the Department of Public Health at the University of Otago, has revealed what the so-called “tobacco carve out” really means for public health. 

They identify a number of issues. Firstly, “Article 29.5: Tobacco Control Measures” is not compulsory, and the New Zealand government has not yet announced whether it is opting in to this exemption from ISDS provisions for policies to reduce smoking.

Secondly, while this Article means that tobacco companies can be barred from suing governments under ISDS provisions, the rest of the TPPA still applies. And the TPPA provides mechanisms to pursue complaints for breaches of its obligations, apart from the ISDS process. So for example, another government could still initiate complaints (perhaps acting on behalf of domestic tobacco interests) that New Zealand’s smokefree laws breach the TPPA.

In addition, “CHAPTER 25: REGULATORY COHERENCE” says that, “in the process of planning, designing, issuing, implementing and reviewing regulatory measures in order to facilitate achievement of domestic policy objectives… The Parties affirm the importance of… taking into account input from interested persons in the development of regulatory measures” (Article 25.2). And to be clear, “person means a natural person or an enterprise” (Article 1.3).

In other words, under the TPPA our government must allow interested enterprises – cigarette companies – to have input into the planning, designing, issuing, implementing and reviewing of our smokefree policies.

As Delany and Thomson comment: “The obligation to allow industry stakeholders a place at the table when control measures are being developed is highly retrograde. This provision is inconsistent with Article 5.3 of the Framework Convention on Tobacco Control (the World Health Organization treaty, of which NZ is a signatory). This requires the removal of such tobacco industry influence on the policymaking of states…

“The outcome of the TPP for tobacco control is that governments will continue to be vulnerable to pressure from the tobacco industry over tobacco control measures. No matter how ill-founded industry legal arguments may be, they may result in a perceived need for caution, may lead to expensive disputes, and lead to delay or permanent postponement for such measures.”

 

Other Public Health issues

“We may think that barring big tobacco from using the ISDS clauses has put the issue to bed”, comments Public Health Association Chief Executive Warren Lindberg. “It hasn’t”. He goes on to mention that “there remain plenty of other multinationals prepared to further their own interests at the expense of smaller economies like ours – such as big pharma, big food and big energy.” And there are no exemptions at all to protect Public Health from these others.

The real problem for Public Health in the TPPA lies at the heart of the document, in “CHAPTER 9: INVESTMENT”. The scope of this chapter is very broad. It states, “Investment means every asset that an investor owns or controls, directly or indirectly, that has the characteristics of an investment, including such characteristics as the commitment of capital or other resources, the expectation of gain or profit, or the assumption of risk.”

The chapter says that governments must not “expropriate or nationalise a covered investment either directly or indirectly… except… on payment of prompt, adequate and effective compensation” ( Article 9.7). The banning of “indirect expropriation” can potentially mean that governments can be sued for any “action or series of actions” which has an “economic impact” affecting an investors “expectation of gain or profit” (Annex 9-B Expropriation).There might appear to be a Get Out of Jail Free clause, for “regulatory actions by a Party that are designed and applied to protect legitimate public welfare objectives, such as public health”. But the footnote makes it clear that, “For greater certainty and without limiting the scope of this subparagraph, regulatory actions to protect public health include, among others, such measures with respect to the regulation, pricing and supply of, and reimbursement for, pharmaceuticals (including biological products), diagnostics, vaccines, medical devices, gene therapies and technologies, health-related aids and appliances and blood and blood-related products.” In other words, they do not include the vast bulk of what we consider Public Health regulations.

So it is easy to see Coca-Cola suing any government trying to bring in a sugar tax to tackle obesity, for example, on the basis that lost sales were an indirect expropriation of their investment. Tighter regulation of casino operators to reduce the harm from problem gambling, although hard to imagine under the current government, could be the subject of a future claim for compensation from offshore investors. Japan’s Kirin Holdings, which owns breweries responsible half of New Zealand’s beer output, would be in prime position to sue if government regulated to reduce alcohol consumption and harm.

Even policies such as the removal of GST on fruit and vegetables, designed to promote consumption of fresh, healthy foods in place of processed foods, could see our government targeted by multinational food and beverage manufacturers.

The TPPA, therefore, will put a chill on almost any effort to regulate for Public Health. Little wonder that World Health Organisation Director-General Dr Margaret Chan has spoken of the “particularly disturbing trend [involving]… the use of foreign investment agreements to handcuff governments and restrict their policy space.”

 

Social determinants of health.

I’d like to conclude by looking briefly at some of the health issues which have not been a major focus of attention so far, but which are possibly the most far-reaching of all. They are the impacts of the TPPA on the social determinants of health.

In 2005, the New Zealand Public Health Advisory Committee said: “It is increasingly accepted that the health of the population is not primarily determined by health services or individual lifestyle choices, but mostly by social, cultural, economic and environmental influences.” 

The World Health Organization Commission on the Social Determinants of Health lists some of these influences: “the conditions of early childhood and schooling, the nature of employment and working conditions, the physical form of the built environment, and the quality of the natural environment in which people reside… The poor health of the poor, the social gradient in health within countries, and the marked health inequities between countries are caused by the unequal distribution of power, income, goods, and services… This is the result of a toxic combination of poor social policies and programmes, unfair economic arrangements, and bad politics.” 

The Commission has drawn attention to the role of agreements like the TPPA in creating this toxic combination. “A key recommendation from the Commission is that caution be applied by participating countries in the consideration of new global, regional, and bilateral economic (trade and investment) policy commitments”.

On the face of it, there are chapters in the TPPA apparently protecting these social determinants of health. To address the quality of the natural environment in which people reside, the TPPA has “CHAPTER 20: ENVIRONMENT”. For employment and working conditions, there is “CHAPTER 19: LABOUR”. The unequal distribution of power, income, good and services – within and between countries – could be seen as covered by “CHAPTER 21: COOPERATION AND CAPACITY BUILDING” and “CHAPTER 23: DEVELOPMENT”.

But what do these chapters actually say?

World Health Organisation has called climate change “the greatest threat to human health this century”. The TPPA Environment Chapter says nothing about climate change. On the contrary, ISDS processes like the ones in the TPPA are being used right now to challenge government action protecting the climate.

Last November, US President Obama announced that the Keystone XL pipeline, designed to facilitate the extraction of oil from vast tar sands in Northern Canada, would not go ahead. Climate campaigners around the world breathed a sigh of relief. NASA climate scientist James Hansen had earlier saidthat if Keystone XL went ahead and all the Canadian oil reserves were extracted and burnt, then it would be “essentially game over” for Earth’s climate. Yet investors in the TransCanada pipeline company are suing the US government for $15 billion compensation, alleging that their investment has been expropriated as they were denied the right to cook the planet to death. 

What the Environment Chapter does say is that, “The Parties recognise that flexible, voluntary mechanisms… market-based incentives, voluntary sharing of information and expertise, and public-private partnerships, can contribute to the achievement and maintenance of high levels of environmental protection… Therefore… each Party shall encourage…  the use of flexible and voluntary mechanisms to protect natural resources and the environment.” (Article 20.11)

The so-called Environment Chapter is actually about the removal of environmental regulation and empowering investors to sue governments for tackling climate change.

“CHAPTER 19: LABOUR”, meanwhile, commits Parties to respect the rights upheld by the International Labour Organisation: “freedom of association and the effective recognition of the right to collective bargaining; the elimination of all forms of forced or compulsory labour; the effective abolition of child labour… the elimination of discrimination in respect of employment and occupation.” (Article 19.3)

That sounds fine, except that the ILO Committee on Freedom of Association has repeatedly found that labour laws in the United States fail to uphold rights enshrined in ILO conventions, including those in a recent case brought by twelve Charge Nurses at the Oakwood Heritage Hospital in Michigan.

Nurses in Los Angeles protest US labor laws denying freedom of association, 2006.

Nurses in Los Angeles protest US labor laws denying freedom of association, 2006.

 

ILO rights, such as freedom of association and the right to collective bargaining, have not been adequately reflected in US law since 1947. If the US has denied basic labour rights for 70 years, does anyone think they will start honouring them because they’ve signed the TPPA?

In New Zealand, the Employment Contracts Act introduced by the previous National Government in the 1990s was also found to be in breach of ILO conventions. The government essentially ignored the ruling. It is arguable that today’s Employment Relations Act, as repeatedly amended under the current government, also breaches the labour rights proclaimed in Chapter 20 of the TPPA.

 

On closer inspection, the three Chapters which might be seen as addressing the social determinants of health have two things in common. Firstly, they all contain a clause stating: “No Party shall have recourse to dispute settlement under Chapter 28 (Dispute Settlement) for any matter arising under this Chapter.” In other words, they’re toothless.

Secondly, they’re short – taking up just 21 pages, in total, in the 599-page agreement. In other words, they’re little more than window-dressing.

But they do contain a revealing statement of the ideology on which the TPPA is based.

Article 23.3 in the Development Chapter declares: “The Parties acknowledge that broad-based economic growth reduces poverty, enables sustainable delivery of basic services, and expands opportunities for people to live healthy and productive lives.”

“Economic growth reduces poverty” – this is the same tired, old story we’ve been told for the last 30 years. Repackaged time after time, who remembers these versions? “A rising tide lifts all boats”, “the best way to get a bigger slice for the poor is grow the pie”, “support the wealth-creators and the wealth will trickle down”.

Meanwhile, as deregulation and trade liberalisation rolled onwards over these 30 years, the unequal distribution of power and income grew worse. Social determinants of health – in schooling, working conditions, and the quality of housing and the natural environment – deteriorated. Health inequalities have grown dramatically. Non-communicable diseases and diseases of poverty have mushroomed.

As mentioned at the outset, I am not qualified to give a comprehensive expert opinion. But I can confidently say this: the health impacts of the TPPA will be more of the same.

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