By Dr Thomas Faunce, Senior Lecturer ANU Medical School, Lecturer ANU Faculty of Law

So why is the most powerful and righteous nation on earth seeking to negotiate a preferential trade agreement with Australia? The answer lies not only in the abundant greed, cartelism and collusion of the election-funding American pharmaceutical industry, but in unprecedented anger amongst the United States domestic public at the resultant crisis in its prescription drug market. Forty million US citizens are unable to afford essential medicines, necessitating, for many, car trips to Canada or Mexico to buy cheaper generics and a search by the producers for rosier markets. Last week the US Congress enacted the Medicare Prescription Drug, Improvement and Modernisation Act 2003 (US). This provides a $400 billion drug subsidy over 10 years to ease concerns of elderly retirees about spiralling drug prices.

An additional factor was the fierce resistance to pharmaceutical globalisation plans put up in international trade fora by developing nations (with the assistance of Medecins Sans Frontiers). This occurred chiefly at the meetings of the World Trade Organisation (WTO) concerning the Agreement on Trade-related Intellectual Property Rights (TRIPS) at Doha, Qatar in 2001 and recently at Cancun, Mexico.

TRIPS was one of the 28 agreements in the Final Act of the Uruguay Round of Multilateral Trade Negotiations leading to the WTO in 1994. TRIPS requires that all signature countries adhere to minimum levels of intellectual property protection (including pharmaceutical patents). It imposes severe penalties for non-compliance, using the dispute resolution mechanisms of the General Agreement on Tariffs and Trade (GATT). TRIPS was the brainchild of senior executives at 12 US corporations including, in particular, the pharmaceutical giant Pfizer.

At Doha, the representatives of many developing and least developed nations successfully lobbied for an equity clarification of TRIPS. This permitted compulsory licenses for the production, or importation, of cheap generic drugs without consent from the patent holder, where necessary to protect public health (such as to combat the HIV/AIDS plague). This practical application of appeals to the international human right to health was not restricted to situations of national emergency.

In 1998, 41 pharmaceutical companies commenced litigation, partly based on TRIPS, against the South African Medicines Act. This had sought to ensure affordable generic medicines for their HIV-infected population. President Nelson Mandela was named as first defendant. In April 2001, the action was withdrawn after a campaign by members of the international civil society including Medecins Sans Frontiers. Other nations (for example Brazil and Venezuela) brought and won similar cases based on their constitutional rights to health.

Frustrated by such public health inroads into the lucrative TRIPS pharmaceutical patent arena, these US corporations began to forum shift. Their strategy was to negotiate tougher intellectual property regimes outside TRIPS, in private FTAs. Thus, the US-Australia FTA is merely the last in a burning necklace of bilateral coercive corporate colonisation arrangements that includes recent FTA negotiations with 34 countries in the Free Trade Area of the Americas Agreement, five Central American countries, the Dominican Republic, the Southern African Customs Union, Morocco, Bahrain and Singapore.

What may Australiaís health system lose from this FTA? With a flourish of his executive pen, and without the necessity of full Parliamentary scrutiny or agreement, our Prime Minister could thereby unilaterally renounce fifty years of effort to achieve an egalitarian health system in this country. Ben Chifleyís tenacious attempt to introduce a Federal scheme for cheap medicines required a successful constitutional referendum and survival of two High Court challenges, to take root and gradually blossom into our current world-respected Pharmaceutical Benefits Scheme (PBS). It was shored up by the great social justice initiatives of Medibank (also unsuccessfully litigated in the High Court) and Medicare.

As well as our PBS, many other allegedly 'protectionist,''non-tariff trade barriers' in our health system are likely to be challenged by this FTA. These include our quarantine laws, capacity to label genetically-modified food, restrict genetically-modified crops, or control foreign investment in, and ownership of, our hospitals, health insurance and pharmaceutical industries. The relevant ideology holds that Australia should embrace US investment, goods and services as equivalent to its own, for the greater glory of liberalisation in our market (not theirs), increased profits for their large corporations and reduced attempts by government to achieve equity in our social infrastructure.

The Australian Government has already made similar commitments under GATS to 'liberalise' dental services and private insurance. This has meant signing away, for example, regardless of public detriment, most of its capacity to regulate the numbers of dentists, what they charge, or their corporate arrangements.

The recently enacted Medicare Prescription Drug, Improvement and Modernization Act 2003 (US) requires the US Secretary of Commerce, Secretary of Health and Human Services and Trade representative to conduct a study of whether drug pricing practices of OECD countries create non-tariff barriers to trade in pharmaceuticals. Of most concern is a provision specifically obligating them to report within 90 days of enactment, on whether the US-Australia FTA negotiations present an opportunity to achieve the objectives of the Bipartisan Trade Authority Act 2002 (US) to achieve the 'elimination of government measures such as price controls and reference pricing which deny full market access for US pharmaceuticals.' Our PBS, based on reference pricing, is thus undoubtedly in the cross-hairs of the US FTA negotiators.

Under the Patents Act 1990 (Cth), Australia already has levels of intellectual property protection comparable with most developed economies. The prescribed period was increased in 1994 to 20 years to fully comply with TRIPS. As a result of American tariff pressure exerted under section 301 of the US Trade Act, in 1998 the Commonwealth government added additional data exclusivity protections for first registrants and the right of a pharmaceutical patentee to apply for an extension to compensate for approval time. Currently, the maximum extended period (five years), is not infringed by an application for a generic productís inclusion on the Australian Register of Therapeutic Goods.

One likely FTA strategy, is that US negotiators will attempt to undermine PBS reference pricing by restricting market approvals for generic pharmaceuticals prior to the end of extended drug patent terms. Mr Deady, Australiaís chief negotiator, admitted at a recent Senate Estimates hearing that the US do have 'some ambitions' in this area. Such so-called 'paragraph 4' restrictions would prevent a generic drug company from 'springboarding' the launch of its considerably cheaper drug on the back of the original patent-holdersí safety data. This inhibition would undermine one of the key aspects of the PBS, which is to ensure that not only the most effective, but the cheapest drugs are rapidly made available to the Australian public. Reference pricing under our PBS will also be threatened if regional bilateralism has destroyed the domestic regulatory capacity of our trading partners and potential generic suppliers.

Another possible FTA technique involves 'investor state' provisions, as in Chapter 11 of the North American Free Trade Agreement (NAFTA).These allow corporations and private investors to directly sue governments in the event that their legislation, regulations and administrative decisions adversely affect the value of a foreign investorís assets. Under NAFTA at March 2003, the total of such claims against Canada was $11 billion, the US $16 billion and Mexico $500 million.

Both parties hope to sign the US-Australia FTA before their respective 2004 election campaigns. The US negotiating tactic, of waiting till the 11th hour to put a proposal about our PBS on the table, is only a ploy. The Australian FTA negotiators in Washington are about to be bushwhacked over our PBS and their capitulation will become a signal that the same tactic can be used against nations with similar 'fairness-first' reference pricing arrangements.

Australia, like most developed nations, is entering an era dominated by gene-based pharmaceuticals linked with genetic tests. Our population is ageing and will become more reliant on such drugs, beset by expense-ridden patents like aggressive antibodies. With the additional need to combat population-based threats of infectious disease epidemics and bioterrorism, does it make sense for our government to be now mortgaging our healthcare to the board room bankers of foreign corporations who lack genuine interest in our communal and cultural future beyond whatever impacts on their short-term profit margins?

If this Federal Government is bushwhacked into signing an FTA with the US, it will be renouncing indefinitely the sovereign rights of future Australian governments to improve by regulation the quality and equity of our public health system.