US must stand up for life-sciences innovation provisions in the USMCA

The revised NAFTA agreement — now the U.S.-Mexico-Canada Agreement (USMCA) — has been making progress, and Canada is now proceeding with ratification of the deal. However, a challenge standing in the way of full ratification is objections to some of the life-sciences, copyright, and other intellectual property (IP) provisions established in USMCA’s Chapter 20.

One provision under consideration addresses data protection for biologics. A “biologic” is a large molecule drug made from complex biological processes — much more complex than the simple chemical compounds used for more common drugs we take as pills. Their complexity means these drugs tend to be newer and more advanced, but also more difficult and expensive to develop. Extended protection of the clinical trial data demonstrating the safety and efficacy of biologic drugs, which the USMCA obliges member nations to provide at a 10-year minimum term, helps facilitate biologic drugs’ development, offering additional protection for a biologic beyond patents on the molecular compound or biofabrication process alone. It works by delaying the ability of a knock-off drug to use the innovator’s clinical trial and related data to qualify for sale.

Ten years may seem like a long time, but research indicates that drugs commonly take more than 12 years to recoup the investment in research that makes them possible. The United States already exceeds the ten-year minimum requirement by offering data protection for 12 years. However, Canada and Mexico fall below this standard; Canada offers data protection for only eight years, and Mexico offers no biologic-specific data protection. Establishing this 10-year requirement would level the playing field for innovation in all countries, help attract additional life-sciences research and development into Canada and Mexico, and spur more life-sciences investment in the United States. 

While the United States already observes stronger data protection than would be required under Chapter 20, the provision has drawn some criticism. Some unions, medical, and faith-based groups, as well as civil society organizations, recently sent a letter to Congress opposing additional market exclusivity for biologics. They argue that the USMCA would “entrench and expand prescription drug monopoly protections, thwart competition and thus undermine efforts to expand access to affordable medicines.”

This argument is deeply misguided, and it threatens future life-sciences innovation. The market for biosimilars (essentially a generic of a biotech drug) is not the same as for generic versions of simpler, old-style drugs. It costs far more to develop and seek approval for a biosimilar, and cost reductions will be around 30 percent (estimates range from 8 to 43 percent) — not the steep discounts we see with generic pharmaceutical drugs. And while competition between biologics and “biosimilars” is indeed useful, what matters most is competition between proprietary biologics. Such competition is far more beneficial than competition with knock-off drugs because it is driven by innovation, creating new-to-the-world medicines and bringing more effective and patient-friendly delivery mechanisms to the fore. Reasonable data protection rules give companies developing new biotech drugs the right incentives to keep making these highly risky, yet beneficial, investments. Thanks to IP protections and a vibrant American life-sciences innovation ecosystem, competition among proprietary biologics is robust.

America’s robust IP protections for biologic drugs are one key reason why the United States leads the world in life-sciences innovation. IP protections ensure continued innovation that leads to important medical advances and cures. These also create good jobs and support U.S. competitiveness and exports. And as part of the USMCA, they facilitate commerce between two of our most important trading partners.

The United States must stand up for innovation in the debate over the USMCA. It must make the case that Chapter 20 is beneficial not just for the United States, but for Canada and Mexico as well. Without U.S. leadership, American, and by extension, global life-sciences innovation could diminish, taking medical advances, economic growth, and good jobs with it. The U.S. must stand up for life-sciences innovation throughout North America and forge ahead with USMCA ratification now.

Stephen Ezell is Vice President for Global Innovation Policy at the Information Technology & Innovation Foundation (ITIF) in Washington, D.C.; Richard C. Owens is a Munk Senior Fellow with the Macdonald-Laurier Institute and adjunct professor at the University of Toronto Faculty of Law; and Alberto Saracho is Executive Director of Fundacion Idea in Mexico City, Mexico.