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TPP: Big Pharma’s Big Deal

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We still don’t know all the details of the Trans-Pacific Partnership (TPP) trade deal tentatively agreed to on Oct. 5 by negotiators from 12 Pacific Rim countries, but already critics are slamming it for many reasons, including its generous concessions to the pharmaceutical industry.

Doctors Without Borders claims the TPP will “go down in history as the worst trade agreement for access to medicines in developing countries.” [1] That’s because the TPP will extend patent protection for brand-name drugs, thereby preventing similar generic drugs (which are far less costly) from entering the market. This will drive up the prices.

Judit Rius Sanjuan, legal policy adviser for Doctors Without Borders, told vox.com that TPP creates patent-related obligations in countries that never had them before. People in “Peru, Vietnam, Malaysia, and Mexico” will be especially affected, she said. “They’ll face higher prices for longer periods of time.” [2]

Ruth Lopert, a professor at George Washington University, told Bloomberg News that provisions in the TPP agreement will affect health-care budgets and drug access in all signatory countries, but especially the poorest. “She said as many as 40,000 people in Vietnam, the poorest country in the agreement, could stop getting drugs to fight HIV because of provisions that will boost the price of [pharmaceutical] therapy.” [3]

Other countries like Canada will also be hit with higher costs. The Council of Canadians says that if the TPP is ratified, “[p]harmaceutical patents will be extended, delaying the release of more affordable generic drugs and adding $2 billion to our annual public health care bill.” [4] In the U.S., many people already cannot afford to pay for the expensive medicines that could save their lives, and they try to access generics available elsewhere.

Extending patent rights for life-saving drugs is an obvious gift to Big Pharma. Conor J. Lynch at opendemocracy.net has called it “a clear corporate handout that would greatly affect international access and most definitely cause preventable deaths. The clear objective here is to increase industry profits, plain and simple. This is not surprising, that’s what private industry does, but there is a serious moral dilemma here.” [5] That moral dilemma is made even more apparent by recent findings.

Tax Cheats

In an ironic coincidence, the TPP agreement was reached on the same day that a damning report on corporate tax-avoidance – Offshore Shell Games 2015 – was released by Citizens for Tax Justice and the US Public-Interest Research Group Education Fund. The report reveals the extent to which top U.S. companies use tax havens like Bermuda, Luxembourg, Cayman Islands, and the Netherlands to set up “tax haven subsidiaries” that are usually little more than a post-office box.

Of the top 30 Fortune 500 companies with the most money held in offshore tax-havens, nine are pharmaceutical companies: Pfizer ($74 billion held offshore), Merck ($60 billion), Johnson & Johnson ($53.4 billion), Proctor & Gamble ($45 billion), Amgen ($29.3 billion), Eli Lilly ($25.7 billion), Bristol Myers Squibb ($24 billion), AbbeVie Inc. ($23 billion), and Abbott Laboratories ($23 billion). [6]

Concerning Pfizer, the world’s largest drug maker (declared profits of $22 billion in 2013), the report states: “The company made more than 41 percent of its sales in the U.S. between 2008 and 2014, but managed to report no federal taxable income for seven years in a row. This is because Pfizer uses accounting techniques to shift the location of its taxable profits offshore. For example, the company can transfer patents for its drugs to a subsidiary in a low- or no-tax country. Then when the U.S. branch of Pfizer sells the drug in the U.S., it ‘pays’ its own offshore subsidiary high licensing fees that turn domestic profits into on-the-books losses and shifts profit overseas.”

Overall, the study found that the 500 largest U.S. companies hold more than US$2.1 trillion in accumulated profits offshore. “For many companies, increasing profits held offshore does not mean building factories abroad, selling more products to foreign customers, or doing any additional real business activity in other countries,” but simply establishing a PO box.

Some companies use the money supposedly “trapped” offshore as “implied collateral” in order to borrow funds at negligible rates for investing in U.S. assets, paying dividends to shareholders, or repurchasing stock.

Of course, as the report makes clear, “Congress, by failing to take action to end this tax avoidance, forces ordinary Americans to make up the difference. Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.”

The report finds that, through a variety of tax-avoidance measures, an estimated US$620 billion in U.S. taxes is collectively owed by the 500 largest companies with headquarters in the U.S.

Corporate Coup

Now the TransPacific Partnership – which is being called “NAFTA on steroids” – would award Big Pharma and other multinationals even more corporate “rights” in more countries, including the controversial investor-state dispute settlement (ISDS) mechanism by which they can sue signatory governments for regulatory changes that affect their profits.

As the Canadian website rabble.ca notes: “The Canadian government is currently being sued through NAFTA by Eli Lilly, an American pharmaceutical company, for invalidating the firm’s patent extensions on two mental health drugs. A Canadian Federal Court decided in 2010 that the patent extensions had not delivered the promised benefits and the drugs should therefore be opened up to generic competition. Generic drugs significantly reduce the cost for end users, but Eli Lilly cried foul and launched an ISDS claim against the government, demanding US$500 million in compensation for lost profits. The case is still in progress, but regardless of the outcome we can expect the TPP to lead to similar ISDS disputes. Powerful multinational pharmaceutical companies will use any available means to cling to over-priced drug monopolies. Greater intellectual property protections in the TPP will give these companies an even stronger quasi-legal basis to sue governments and crowd out generic [drug] competition.” [7]

The final text of the TransPacific Partnership agreement won’t be available for at least a month, likely weeks after the Canadian federal election on October 19. The details will undoubtedly reveal more generous concessions to the multinationals. It will be up to the elected legislators in all twelve countries to approve or reject the TPP. In Canada, NDP leader Tom Mulcair has pledged to scrap the deal if elected as Prime Minister, explaining that the Stephen Harper government had no mandate to sign it during an election campaign when it is merely a “caretaker” government.

The U.S. website zerohedge.com calls the Trans-Pacific Partnership “a Trojan horse” and “a coup by multinational corporations who want global subservience to their agenda.” In no uncertain terms, it adds: “Buyer beware. Citizens beware.” [8]

Footnotes/Links:

[1] http://www.theaustralian.com.au/business/latest/tranpacific-partnership-deal-reached/story-e6frg90f-1227558154056

[2] Julia Belluz, “How the Trans-Pacific Partnership could drive up the cost of medicine worldwide,” Vox, October 5, 2015.
http://www.vox.com/2015/10/5/9454511/tpp-cost-medicine

[3] “Pacific Deal Rewrites Rules on Trade in Autos, Patented Drugs,” Bloomberg News, October 5, 2015.
http://www.bloomberg.com/news/articles/2015-10-05/pacific-deal-rewrites-rules-on-trade-in-autos-patented

[4] Council of Canadians, “Tell party leaders: Reject the TPP,” October 6, 2015.

[5] Conor J. Lynch, “Trans-Pacific Partnership’s Big Pharma giveaway,” Open Democracy, February 14, 2015.
http://www.opendemocracy.net/conor-j-lynch/transpacific-partnership%E2/80%/99s-big-pharma-giveaway

[6] http://ctj.org/ctjreports/2015/10/orrshore_shell_games_2015.php//executive

[7] Hadrian Mertins-Kirkwood, “Trans-Pacific Partnership a big win for corporate interests,” Rabble.ca, October 6, 2015.

[8] Tyler Durden, “Trans-Pacific Partnership Deal Struck As ‘Corporate Secrecy’ Wins Again,” Zero Hedge, October 5, 2015.
http://www.zerohedge.com

Joyce Nelson is an award-winning Canadian freelance writer/researcher working on her sixth book.

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