Scoop Election 08: edited by Gordon Campbell

Gordon Campbell on the latest risk to national sovereignty posed by free trade deals

July 18th, 2013

Remember the Trans Pacific Partnership trade deal, and those scary stories last year about how it would give foreign multinationals the right to sue the countries who sign up to it, if said corporates happen to feel disadvantaged by any laws or regulations that governments might pass, or if these multinationals feel annoyed about any rulings made by local courts? Tell it to the Canadians. Canada is currently being sued by a very large US pharmaceutical company called Eli Lilly, because Canadian courts have ruled that Lilly’s patents on two drugs have expired. Lilly disagrees, and is reportedly suing Canada for $500 million in compensation for its losses. The Globe &Mail story on the impending legal action is here.

Basically, the Canadian courts have ruled that the Lilly patents – on an ADD treatment called Strattera, and a schizophrenia treatment drug called Zyprexa – have run their course, this opening up the field for generics. Lilly disagrees and is suing Canada under the North American Free Trade Agreement [NAFTA] via that free trade treaty’s contentious chapter 11 provisions. The trade watchdog Public Citizen has summarised Lilly’s gambit in these terms:

Eli Lilly’s NAFTA investor-state challenge marks the first attempt by a patent-holding pharmaceutical corporation to use the extraordinary investor privileges provided by U.S. “trade” agreements as a tool to push for greater monopoly patent protections, which increase the cost of medicines for consumers and governments.

Yet this is not simply an argument about patents and medicines. It is a challenge to the integrity and sovereignty of the entire Canadian legal system:

The Canadian courts…[determined] that Eli Lilly had presented insufficient evidence (a single study involving 22 patients) when filing for the patent to show that Strattera would deliver the long-term benefits promised by the company. While the $100 million NAFTA investor-state compensation demand relates to revocation of the Strattera patent, Eli Lilly makes clear in its formal “Notice of Intent” to Canada that it is not only challenging the invalidation of its particular patent, but Canada’s entire legal doctrine for determining an invention’s “utility” and, thus, a patent’s validity.

In other words, Lilly is pushing for an entirely different legal standard to be adopted in Canada, and it is using NAFTA as a lever to achieve that goal. Keep in mind, as Public Citizen points out, that within the TPP negotiations, the Obama administration and its friends in Big Pharma have been pushing for even greater patent protections and extensions than those that exist in NAFTA:

Now, the Trans-Pacific Partnership (TPP) – a sweeping NAFTA-style deal under negotiation between the United States and ten Pacific Rim countries – threatens to not just replicate, but expand on the NAFTA provisions that provide the basis for such audacious challenges to countries’ patent policies.

Why is Lilly trying to flex its legal muscle in Canada? At base, it is seeking to shore up the sagging confidence among investors by achieving a landmark extension of its patents. Why the pressing need to do so? Right now, Lilly is looking down the barrel at a major revenue shortfall between the expiry date of its current array of patents, and the arrival onstream of its next generation of pharmaceutical products – potentially, to the tune of $8 billion, or over one third of its current revenues – as this recent industry analysis of Lilly’s competitive position spells out in some detail before concluding:

Unfortunately, an analysis of the most-heralded of these products suggests that the timing of peak sales for these drugs could substantially lag the loss of up to $8 billion, or some 36% in revenue, due to generic intrusion…

Along the way, the situation in New Zealand highlights the kind of money we’re talking about in this patented medicines vs. generics battle. According to Pharmac, both Zyprexa (aka olanzapine) and Strattera (aka atomoxetine) are available on our Pharmaceutical Schedule. Lilly’s Strattera brand happens to be the only version available here of atomoxetine, and this is currently fully subsidized in versions that cost either $107 or $139 for a month’s supply. In the case of Zyprexa though, there are generics available – and while those patients who prefer Zyprexa can still get it if they’re willing (and able) to pay a part charge of $101.20 for 28 tablets, a generic version of the same drug is available for only $3.85. No wonder the pharmaceutical companies are using the TPP to attack Pharmac over the agency’s preference for generics.

Equally, and given the size of the North American market, it is also unsurprising that an embattled and desperate Eli Lilly is taking Canada to court. There are lessons here for everyone about the perils that “free” trade agreements pose for small players, when they get in the ring with corporate heavyweights. The drug patents issue has been at the heart of this week’s TPP negotiating round in Kota Kinabalu, Malaysia as this report from World Trade Online (July 17, 2013) makes clear:

Part of the Intellectual Property Rights agenda on pharmaceutical patents may include a more formal discussion on a “principles paper” on access to medicines that was tabled at the last round of talks by New Zealand , Chile , Canada , Australia , Malaysia and Singapore , sources said.

The six-country paper is not a formal legal text, but could represent an effort to spark a discussion after an initial U.S. proposal on access to medicines was summarily rejected last year by TPP members, sources said. The U.S. has been in a “period of reflection” on its own approach, and countries have spent the last two rounds of talks discussing their respective systems for pharmaceutical patent protection. Sources in Malaysia said a more formal discussion on the six-country paper could begin to move the IPR group towards finding common ground on access to medicines.

While this is a significant development – especially in the light of the flat rejection of the earlier US negotiating proposal on medicines patenting – it is also only the glimmering of a plan to resolve the impasse. And it is emerging in tentative form, mere months before the entire TPP round is supposedly due to be completed. On this and other points, the TPP still seems to be spinning its wheels.

(Eli Lilly’s office in Sydney did not return my call for comment on the Australasian situation regarding Strattera and Zyprexa. Patent conditions differ between countries, often based on the date on which the patent has been filed.)

Anadarko (Almost) Wins A Round
Talking of major US corporates embroiled in legal actions over attempts to protect their share value, the US courts have almost entirely dismissed a securities fraud class action suit brought by shareholders of the oil company Anadarko, over allegedly misleading statements made by the company in order to minimize its liabilities in the immediate wake of the Deepwater Horizon oil spill in the Gulf of Mexico, and thereby shoring up its share price. As Bloomberg News summarises the situation:

U.S. District Judge Keith P. Ellison in Houston dismissed most of the investors’ allegations yesterday while finding they had sufficient reason to sue over a statement by an Anadarko senior vice president, Robert Daniels, after the spill that the company had no involvement in design or procedures at BP’s Macondo well. “The court finds that one statement in the complaint, made by defendant Daniels, is adequately pled” under the federal law governing securities-fraud claims, Ellison said in his ruling. “Full dismissal is therefore not warranted.”

Those of the ‘glass half full’ persuasion will feel that Judge Ellison has merely focused the grounds for the legal action. However, by narrowing the case down to just one contentious corporate statement – and by rejecting the orchestrated litany of deception alleged by the shareholders in their original brief – Judge Ellison has not only limited the culpability of the company, but (almost certainly) slashed the likely size of any eventual penalty faced by Anadarko.

ENDS

Share and Enjoy: These icons link to social bookmarking sites where readers can share and discover new web pages.
  • Scoopit
  • Digg
  • del.icio.us
  • Reddit
  • NewsVine
  • Print this post Print this post
    1. 7 Responses to “Gordon Campbell on the latest risk to national sovereignty posed by free trade deals”

    2. By Toby on Jul 18, 2013 | Reply

      We are fast heading to a world controlled by corporate interests and it scares the sh*t out of me.

      Excellent piece.

    3. By Sridhar on Jul 18, 2013 | Reply

      Let the Nats sign TTPA with a clause that if MNCs are not happy with the way things work out in NZ they can sue good chap John Key, not NZ govt.

    4. By Gordon Campbell on Jul 18, 2013 | Reply

      Eli Lilly in Sydney have since rung and confirmed that Strattera is still currently under patent in Australasia.

    5. By Jackp on Jul 18, 2013 | Reply

      Toby and Sridhar, right on. Can’t the public see what is happening? Corporate interests control governments now. This is why I am so against Key’s Sky City Convention, he extended their license for 38 years and if there is a law change, Sky City will sue the taxpayer while Key is having Mai Tais in Hawaii.

    6. By Clarke on Jul 18, 2013 | Reply

      Jackp – The reality is that a future government can simply pass legislation that would annul the contract with Sky City and disallow any damages claim, in exactly the same way that the Key government has disallowed any future court action from the parents of disabled children.

      However the big question is whether any future government would actually have the balls to do this, but given the attendance of Labour front benchers in the Sky City corporate box – in a display of utterly craven stupidity – I suspect the answer would be no. Unless it was the Greens, of course.

    7. By Will on Jul 18, 2013 | Reply

      I would like to know how much of this is being driven by purposeful secret meetings vs organically occurring due to the mutual interests of transnational corporations.

    8. By Wayne on Jul 18, 2013 | Reply

      Gordon,what is the problem here? Nations in free trade deals usually have third party dispute resolution provisions. For instance NZ took Australia to task over apples. On your view we would have had to sue in Australia, well hello, how do you think that would have gone.

      Its not as if Eli can stack the court, it is simply third party arbitration. And as in all litigation, you win some and you loose some.

      So I don’t think the Nations negotiating TPP will worry about the fact that there will be third party arbitration to resolve transnational trade and investment disputes. In fact they would be stupid not to include it.

    Post a Comment