Word that the U.S. and Mexico are finalizing a renewable 16-year agreement to update the North America Free Trade Agreement (NAFTA) had Canadian officials heading back to the negotiating table Tuesday with hopes that all three countries could reach an agreement by week's end.

The good news for the biopharma and med-tech sectors is that the agreement could bring more certainty to the U.S. market and strengthen intellectual property (IP) rights. The bad news, at least for some drug companies, is that the U.S.-Mexico agreement would reduce the data protection for new biologics to 10 years.

The U.S. biopharma industry has been pushing for 12 years of data protection, in line with the Biologic Price Competition and Innovation Act (BPCIA), which created the U.S. biosimilar pathway. The concern is that reducing the exclusivity in trade agreements would open the door to amending the BPCIA to allow for a shorter data protection period in the U.S.

Such an amendment is already on the wish list of several U.S. politicians. After the BPCIA was signed into law in 2010, several lawmakers and President Barrack Obama routinely tried to reduce the biologic data exclusivity to seven years to speed biosimilar competition.

On the other hand, 10 years of data protection would double the protection innovative biologics currently have in Mexico and would add two years to the protection awarded in Canada – if Canada signs onto the agreement. The deal also would expand the scope of products eligible for the 10 years of data protection, according to a U.S. Trade Representative (USTR) fact sheet on the agreement.

While all the details of the agreement have yet to be finalized, the USTR touted the accord's strong IP protections, especially for biopharma companies, saying it includes the most comprehensive enforcement provisions of any free trade agreement (FTA).

"This deal, if finalized, will be the first FTA to require all of the following to protect U.S. rightsholders from theft of trade secrets, including by state-owned enterprises: civil remedies, criminal remedies, prohibition on impeding licensing of trade secrets, protections for trade secrets during the litigation process and penalties for government officials who wrongfully disclose trade secrets," the USTR said.

IP laxity

In the past, the USTR has called out both Canada and Mexico for laxity in enforcing IP rights. For instance, the USTR downgraded Canada on this year's Special 301 Report, making it the only G7 country on the Priority Watch List. The report cited Canada for its failure to resolve "key longstanding deficiencies in protection and enforcement of IP," including a lack of customs authority to inspect or detain suspected counterfeit goods shipped through the country and concerns about biopharma IP protections. (See BioWorld, May 1, 2018.)

The 301 report noted Canada's "weak patent and pricing environment for innovative pharmaceuticals" and took issue with the fairness of its Patented Medicines (Notice of Compliance) proceedings as amended last year. "Canada's long-anticipated proposal to provide for patent term restoration for delays in obtaining marketing approval appears to be disappointingly limited in duration, eligibility and scope of protection," according to the report.

The 301 report also raised "serious concerns" about the breadth of the Canadian Health Minister's discretion in disclosing confidential business information and about proposed changes to the country's Patented Medicine Prices Review Board. (See BioWorld, Dec. 7, 2017.)

The pricing policies, which were in the proposal stage when the report was issued, "would fail to appropriately recognize the value of innovative medicines in both the private and public markets and would make Canada's pricing policies an outlier among similarly situated countries," the USTR said in the report. It urged Canada to reassess the proposed changes to ensure its system would be transparent and contribute fairly to R&D for innovative treatments and cures.

In addition to taking on IP issues, the U.S.-Mexico agreement provides annexes for specific manufacturing sectors, including biopharmaceuticals, medical devices and chemical substances. Each annex includes provisions that exceed those in NAFTA and the Trans-Pacific Partnership for promoting enhanced regulatory compatibility, best regulatory practices and increased trade between Mexico and the U.S., according to the USTR.

All in all, "the updated agreement will support mutually beneficial trade leading to freer markets, fairer trade and robust economic growth in North America," the USTR said.

One of the original sticking points with modernizing NAFTA, which has been in force for nearly a quarter of a century, was that the U.S. wanted NAFTA 2.0 to have a five-year sunset to force periodic re-evaluation and updates. That was a nonstarter for Canada and Mexico, because of the uncertainty it would create for long-term investment, said Maryscott Greenwood, CEO of the Canadian American Business Council. The agreement reached between Mexico and the U.S. resolves the issue by including a 16-year sunset with the ability to extend the agreement.

Waiting for final details

In the U.S., the biopharma and med-tech sectors welcomed the advances being made in the trade talks, but before they celebrate, they want the final details.

"The administration's move to strengthen trade ties with Mexico is a positive step for continued growth in the med-tech industry," Ralph Ives, executive vice president of global strategy and analysis at Advamed, told BioWorld, adding that "we look forward to studying the specifics of these negotiations."

The Pharmaceutical Research and Manufacturers of America (PhRMA) had a similar response, as it encouraged "the administration to continue pushing for strong trade deals that protect and value the life-saving medicines our companies develop."

"We look forward to analyzing the final text of the agreement once completed to ensure it includes policies that protect against global free-riding, promote research and development and reward the innovation being pioneered by America's biopharmaceutical companies for patients across the globe," a PhRMA spokeswoman said.

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