Thursday, May 14, 2015

All the President's Trade Negotiators - Revolving Doors, Regulatory Capture, and Health Care Corporate Friendly Trade Agreements

This week's spectacle in Washington, DC was a nearly unanimous Democratic minority in the Senate blocking a proposal for expedited consideration of multinational trade agreements favored by the Republican majority, but also by the Democratic President and his trade negotiators (look here).  Democrats mainly based their actions on perceptions that the trade agreements favored multinational corporations  over people.

While trade agreements may seem to be another, albeit international species of wonkery, these agreements could have major effects on patients' and the public's health.  Since these concerns have been essentially ignored by the US medical and health care literature, (although they have appeared in UK journals, Australian, and New Zealand journals in English), they I will discuss them below. Worthy of further discussion is the possibility that these potential threats to health care and public health may arise not just from ideological disagreements, but also from health care corporations' increasing capture of government, facilitated by the conflicts of interest generated by the revolving door. 

Corporate Friendly Trade Agreements

The US has been negotiating two major multinational trade agreements, the Trans-Pacific Partnership (TPP) and the Transatlantic  Trade and Investment Partnership (TTIP) for years. 

In a March, 2014, commentary, renowned economist Joseph E Stiglitz summarized the objections to the these proposed trade agreements.  His greatest fears were that such agreements

will benefit the wealthiest sliver of the American and global elite at the expense of everyone else.

This seems surprising, since most people think of trade agreements solely in terms of their effects on tariffs, not a big concern for health care and public health professionals.  However, Stiglitz noted

Tariffs around the world are already low. The focus has shifted to 'nontariff barriers,' and the most important of these — for the corporate interests pushing agreements — are regulations. Huge multinational corporations complain that inconsistent regulations make business costly. But most of the regulations, even if they are imperfect, are there for a reason: to protect workers, consumers, the economy and the environment.

What’s more, those regulations were often put in place by governments responding to the democratic demands of their citizens. Trade agreements’ new boosters euphemistically claim that they are simply after regulatory harmonization, a clean-sounding phrase that implies an innocent plan to promote efficiency. One could, of course, get regulatory harmonization by strengthening regulations to the highest standards everywhere. But when corporations call for harmonization, what they really mean is a race to the bottom.

 In the US, and other developed countries, there are lots of regulations that have major effects on health care and public health.  Changes in these regulations, or their implementation, could have major effects again on health care and the public health.  So those interested in health care and public health ought to be concerned about how such trade agreements could affect such regulation.

International Tribunals Could Trump National Law
One of Stiglitz's concerns was  that the trade agreement would allow international tribunals that could override national law, particularly law promoting public health:

What we know of ... particulars [of the TTP] only makes it more unpalatable. One of the worst is that it allows corporations to seek restitution in an international tribunal, not only for unjust expropriation, but also for alleged diminution of their potential profits as a result of regulation. This is not a theoretical problem. Philip Morris has already tried this tactic against Uruguay, claiming that its antismoking regulations, which have won accolades from the World Health Organization, unfairly hurt profits, violating a bilateral trade treaty between Switzerland and Uruguay.

In fact, Philip Morris has also used such tribunals to overturn Australian laws meant to discourage smoking for public health purposes.  The details of the Philip Morris case summarized in May, 2015 in an article by Lauren Carasik in  Foreign Policy, show the major public health implications of such trade tribunals,

In 2011, Australia passed a tobacco-control law to discourage smoking. It required cigarettes to be sold in plain packages with prominent warnings, with brand information relegated to the bottom of the box. Touted as 'one of the most momentous public health measures in Australia’s history' by the country’s health minister, the law was meant to deter a habit that will ultimately kill 1.8 million current Australian smokers, according to a recent study. After the country’s highest court upheld the constitutionality of the anti-smoking law, tobacco giant Philip Morris claimed that it violated the company’s corporate rights and launched a suit using a little-known provision called investor-state dispute settlement (ISDS). The case is pending, as is a similar case against Uruguay. A similar tobacco-control measure in New Zealand is on hold pending the outcome of these cases.

So these examples suggest that national laws meant to promote the public health could be challenged in these trade tribunals by multinational corporations based on these laws' postulated effects on corporate profits, regardless of the laws' public health rationale or legality in their own countries. 

Furthermore, a letter to the Lancet(1) noted,

Investor state dispute settlement (ISDS) provisions allow investors to sue governments if policy changes or even court rulings substantially affect the value of their investment, yet do not allow governments to sue investors for breaching the right to health.   ISDS processes constrain governments' abilities to regulate on the basis of the precautionary principle, or even to implement health policies on the basis of established evidence. These processes can have a chilling effect on efforts to address key health issues, such as alcohol, the obesity epidemic, and climate change. In New Zealand, the fear of costly ISDS litigation is already constraining government regulation on tobacco plain packaging.

Thus, creation of such international tribunals could favor financial concerns of multinational corporations over individual countries' governments' attempts to promote health care or public health. So, while these undemocratic tribunals are touted as a way to reduce non-tariff trade barriers, an editorial in the British Medical Journal(2) asserted,

Yet these barriers are some of our most prized social and environmental standards, including regulations on food safety, pesticide residues, and toxic chemicals....

Not only would these tribunals we able to override national laws, their operation would lack procedural safeguards.  Demonstrating that opposition to these trade agreements is also multinational, an article in the UK Independent in October, 2014, noted,

Critics say the tribunals, held under the so-called Investor-State Dispute Settlement (ISDS) system, subvert democratic justice, giving power over foreign citizens to big companies. Hearings are held in private, in international courts at the World Bank in Washington DC, bypassing the legal system of the country being sued, meaning details are often impossible to uncover. In some cases the very existence of the case is not made public.

In addition, per the article in Foreign Policy,

Critics like Global Trade Watch, a division of Public Citizen, a consumer advocacy organization, say the ISDS system is anti-democratic. Sen. Elizabeth Warren (D-Mass.) called for the ISDS language to be stripped out of the deal, writing in the Washington Post in February, 'If a final TPP agreement includes Investor-State Dispute Settlement, the only winners will be multinational corporations.' The problem is that the ISDS system lacks many procedural safeguards fundamental to the rule of law. The tribunals, run by the World Bank and the United Nations, are three-judge panels composed of highly paid private lawyers picked from a limited pool by states and corporations; individual lawyers can switch between serving as judges and advocates on behalf of corporations in different cases. And there is no comprehensive code of judicial conduct guiding the panelists on matters such as conflicts of interest.

Although the panels adjudicate disputes worth millions or even billions of dollars, they are not accountable to any elected body. Moreover, there is no system of precedent binding judges to an established body of decision-making, making it difficult for the parties to discern the applicable standards and their likelihood of success. And finally, there are no appeals, either within the ISDS system or externally, on the merits of decisions. An annulment is only possible for limited procedural errors, and those proceedings are heard before a different panel drawn from the same pool of professionals.

Under the system, states are deprived of the right to resolve these disputes since corporations can proceed directly to the tribunals without exhausting domestic remedies. But this privilege is not reciprocal: Corporations are not subject to suit in the tribunals by those harmed by their actions. Foreign companies are thus granted expanded rights without corresponding responsibilities.

Finally, in May, 2015, the United Nations special rapporteur on promotion of a democratic and equitable international order suggested that the proposed international tribunals would undermine human rights and violate the UN charter (per this Guardian article).

Further criticism of the tribunals came from the UK Labour party Shadow Health Secretary (as of April, 2014) who felt it would leave British general practitioners "powerless to resist legal challenges from US health giants with huge financial resources in the event of a contractual dispute (per the Independent).

To summarize thus far:  international trade agreements being pushed by the US government could set up trade tribunals that could reverse national laws meant to protect health and safety.  Such tribunals would not follow the procedures used, for example, in US courts, and could not be held accountable by individual governments.  Various aspects of these tribunals, and recent actions involving tribunals already set up by earlier trade agreements suggest the process may be heavily biased in favor of the financial interests of multinational corporation, and against patients' and the public's health.  Thus, health care and public health professionals ought to be alarmed about new agreements that could set up new tribunals, or expand the reach of existing tribunals.

Intellectual Property Rights vs Access to Health Care

Another set of problems affecting patients' and the public's health  are provisions in trade agreements favoring corporate "intellectual property" over access to drugs, devices and health care.  Stiglitz wrote in 2014,

America has been fighting to lower the cost of health care. But the TPP would make the introduction of generic drugs more difficult, and thus raise the price of medicines. In the poorest countries, this is not just about moving money into corporate coffers: thousands would die unnecessarily. Of course, those who do research have to be compensated. That’s why we have a patent system. But the patent system is supposed to carefully balance the benefits of intellectual protection with another worthy goal: making access to knowledge more available. I’ve written before about how the system has been abused by those seeking patents for the genes that predispose women to breast cancer. The Supreme Court ended up rejecting those patents, but not before many women suffered unnecessarily. Trade agreements provide even more opportunities for patent abuse.

To date, most of the details of the proposed trade agreements have been kept secret, but as noted on the PLoS Medicine blog in December, 2013, by Reshma Ramachandran and David Carroll,

Last month, Wikileaks posted the complete Intellectual Property (IP) Chapter of the secretly-negotiated Trans-Pacific Partnership Agreement (TPP) confirming public health advocates’ worst fears of the agreement’s impact on patients worldwide.

In particular,

The Wikileaks posted text revealed that the USTR and Obama Administration have decided to aggressively prioritize the interests of multinational pharmaceutical and medical companies over patients worldwide and at home. In fact, according to emails submitted to Intellectual Property-Watch under the Freedom of Information Act, the USTR has actively solicited the input of industry groups, giving them special access to the negotiating text while consumer and health groups have had to resort to requesting special meetings with negotiators. 


Indeed, the recently leaked TPP chapter reflect these corporate interests as evidenced by the still-included provisions. In the text, the USTR has proposed a number of provisions that will further strengthen patents and data exclusivity for pharmaceuticals. Such provisions will bar the entry of generic competition into the market allowing for brand-name drug companies to retain their monopoly market and set drug prices at exorbitantly high prices. These provisions include:

- Lowering patent standards allowing for “evergreening” or the granting of patents for newer forms of existing medicines including new formulations or minor modifications even in the absence of a therapeutic benefit

- Mandating that surgical, therapeutic, and diagnostic methods must be patented making medical practitioners in TPP member states liable for infringement and restricting their choices for treatment

- Imposing data exclusivity on all pharmaceuticals, including biologics with the minimum period for this class to be set at 12 years (despite the fact that the White House is publicly in favor of a 7 year data exclusivity period and the FTC has stated that there is no need for any data exclusivity period at all) thereby not allowing drug safety regulators from accessing clinical data to grant market approval for generic and biosimilar drugs

-  Adjusting patent term periods to account for “unreasonable delays” including patent prosecution periods ranging from two years to more than four years extra further delaying generic drug entry into the market

- Adjusting patent term periods for regulatory approval periods allowing for patent extensions for both new pharmaceutical products as well as methods for producing or using new pharmaceutical products halting any potential innovation

- Linking patent status and drug marketing approval causing drug regulatory authorities to take on the additional task of early patent enforcement, allowing for bogus patents to be a barrier to generic drug registration Such proposals go beyond current U.S. and international law including the World Trade Organization’s Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

Additionally, the TPP has the potential to jeopardize millions of lives in the participating countries by driving up the costs of medicines significantly. Even in the United States, there has been a public outcry from physicians regarding the high cost of medicines. Earlier this year, over 100 oncologists came together to write a perspective piece in the journal Blood calling the prices of brand-name cancer drugs “astronomical, unsustainable, and perhaps even immoral.” The United States health care system has in fact greatly benefited from the entry of generic competition. On May 9, IMS Health released a report entitled Declining Medicine Use and Costs: For Better or Worse?, which found that many Americans had forsaken much needed doctor visits, medicines, and other treatments as they struggled to afford health care. In light of this, it is appalling that U.S. negotiators would continue to push provisions that would further exacerbate the cost burden of healthcare for patients not only abroad, but at home. 

Public Citizen particularly criticized the provision for patenting procedures,

Medical procedure patents raise healthcare costs. Health providers, including surgeons, could be liable for the methods they use to treat patients. Essentially, except for when a surgeon uses her bare hands, surgical methods would be patent eligible subject matter under the U.S. proposal.
Additional concerns about the potential of new trade agreements to increase the price of medicines and health care, and limit access to them, came, per Ramachandran and Carroll, from Doctors Without Borders, the American Association of Retired Person, and the International Federation of Medical Students.  More recently, such concerns were stated by amfAR re access to and costs of HIV medications (reported on Vox), and were restated by Doctors Without Borders (reported by the National Journal).

Perhaps more US health care professionals and public health advocates would be speaking out if they understood the problem.  However, concerns about how new proposed trade agreements could affect health care and public health have been notably anechoic in the US.  I could find absolutely no discussion of them in any moderate or large circulation US health care or medical journal.  There has been discussion in English language medical and and health care journals, but in journals that are relatively obscure, or published outside of the US, for example, see articles by Greenberg and Shiau(3), and Thow et al(4).  Note that the former wrote,

academic public health has failed to appreciate the serious risks of the TPP[A] and has not responded to its threats. 

Keeping concerns that the new trade agreements could threaten patients' and the public's health out of public discussion may be just the latest example of what we have called the anechoic effect, because it looks like it may be no accident that these proposed trade agreements favor multinational corporations over patients' and the public's health.  There is evidence that at least the US governmental process for negotiating these agreements was heavily influenced by the interests of these corporations, but not by the interests of patients or citizens. 

Revolving Doors, Regulatory Capture Generate the Momentum

There are thus strong reasons for health care and public health professionals to oppose the rush to approve the new trade agreements (the TTIP and TPP).  Despite these concerns, and the increasingly vocal opposition from many US legislators, the current administration has forged ahead with its proposal to "fast-track" their approval, only to be suddenly blocked, and by its supposed compatriots in the Democratic party.  There are lots of explanations for this, but two that got only a little notice but seem particularly germane to Health Care Renewal are the influences of the revolving door and cultural regulatory capture.

The case for these was best made by a November, 2013 article in the Washington Post by Timothy B Lee,

the U.S. negotiating position also had an unmistakeable bias toward expanding the rights of copyright and patent holders.

Those positions are great for Hollywood and the pharmaceutical industry, but it's not obvious that they are in the interests of the broader U.S. economy. To the contrary, critics contend that the rights of copyright and patent holders have been expanded too much. Those concerns do not seem to have swayed the trade negotiators in the Obama administration.

Two major factors contribute to the USTR's strong pro-rightsholder slant. An obvious one is the revolving door between USTR and private industry. Since the turn of the century, at least a dozen USTR officials have taken jobs with pharmaceutical companies, filmmakers, record labels, and technology companies that favor stronger patent and copyright protection.

A more subtle factor is the structure and culture of USTR itself. In its role as a promoter of global trade, USTR has always worked closely with U.S. exporters. That exporter-focused culture isn't a problem when USTR is merely seeking to remove barriers to selling U.S. goods overseas, but it becomes problematic on issues like copyright and patent law where exporters' interests may run directly counter to those of American consumers.

Lee provided extensive examples of how US trade officials transited the revolving door to and/or from the pharmaceutical industry.

On May 3, 2004, the United States and Australia signed a bilateral trade agreement. The agreement included a section on intellectual property that had numerous provisions favorable to pharmaceutical manufacturers. For example, it barred generic drug makers seeking approval for their drugs from citing safety or efficacy information originally submitted by brand-name drug makers for a period of five years after the information is submitted, making it more difficult for generic drug makers to enter the market.

The lead American negotiator was Ralph Ives, who was promoted to Assistant USTR for Pharmaceutical Policy soon after the negotiations concluded. He was aided by Claude Burcky, Deputy Assistant USTR for Intellectual Property. Less than three months after the Australia agreement was signed, the Sydney Morning Herald reported that both men would take jobs at pharmaceutical or medical device companies. Their new employers stood to benefit from some of the pro-patent-holder provisions of the treaty. Ives took a job at AdvaMed, a trade group representing medical device manufacturers. Burcky moved to the pharmaceutical and medical device company Abbott Labs.

Since then, Abbott has hired two other USTR veterans, Andrea Durkin and Karen Hauda, according to the women's LinkedIn pages. Another USTR official, Kira Alvarez, has gone through the revolving door twice over the last 15 years. Her LinkedIn profile indicates that she served at USTR from 2000 to 2003, spent four years at the pharmaceutical giant Eli Lilly, and then returned to USTR in 2008 as Deputy Assistant USTR for Intellectual Property Enforcement. She was there for five years before she took a job at AbbVie, a pharmaceutical firm that spun off from Abbott earlier this year.

According to his official biography at the site of the Biotechnology Industry Associaiton, Joseph Damond 'was chief negotiator of the historic U.S.-Vietnam Bilateral Trade agreement' during his 12 years at USTR. He then spent five years at the Pharmaceutical Research and Manufacturers of America before moving to BIO. Justin McCarthy went through the revolving door in the other direction. According to a USTR press release, McCarthy was responsible for intellectual property issues at the pharmaceutical company Pfizer from 2003 to 2005 before he was hired at USTR. He now works at a lobbying firm.

Lee also suggested that the US Trade Representative has been culturally captured by industry through its use of advisory panels made up of industry members, but not, for example, clinicians, public health advocates, or interested members of the public.

The agency has established 16 industry trade advisory committees to provide advice about the complex issues USTR deals with in the course of its negotiations. As the name suggests, the ITACs are designed to gather feedback from industry groups. There are no public interest groups, academics, or other non-industry experts on ITAC 15, which focuses on "intellectual property" issues.

And that matters because groups with ITAC seats have access to confidential information about the U.S. negotiating position that isn't available to the public. Sherwin Siy, an attorney at the advocacy organization Public Knowledge, has had multiple meetings with USTR representatives during the course of the TPP negotiations. But he says it was difficult to give USTR meaningful feedback because he didn't know what positions U.S. negotiators were advocating.

'They're willing to sit in a room with us and listen to our objections and our issues and be very polite,' Siy says. But 'whether or not that actually means anything is at best a black box.'

When USTR wants technical advice on transposing U.S. law into international agreements, it naturally turns to the industry representatives on the ITACs. And it stands to reason that the advice the agency receives in response would be a bit one-sided. Where U.S. law is ambiguous, industry groups naturally gravitate toward interpretations of U.S. law that favor their employers' interests. And because public interest groups and independent experts aren't allowed to see proposed language (aside from occasional leaks), the agency may not even realize that it is exporting a warped interpretation of U.S. law.

The pro-industry cultural bias has caused consternation among even well-known libertarians, as Lee noted,

'USTR sees itself as an advocate for U.S. exporter interests,' says Bill Watson, a trade expert at the Cato Institute. 'It's trying to negotiate market access for particular U.S. industries that ask for it. That bias leads USTR to think that because U.S. companies want more IP protection abroad, it's in their interest to negotiate that.'

So it seems quite clear that the US agency that negotiates the new international trade agreements may be staffed by people who came from affected industries, including pharmaceutical, device and biotechnology companies, and privileges advice from such companies.  Thus the agency appears to suffer from conflicts of interest due to the revolving door, and from regulatory capture induced by its bias in favor of advice from industry over that from clinicians, public health advocates, or interested members of the public.  This suggests why it appears that this government agency has actively been promoting trade agreements that favor industry interests over patients' and the public's health.

It may be that top US executive branch officials, all the way up to the President of the US, have been very ill-served by relying on an agency subject to such conflicts of interest and regulatory capture.


We have frequently written about the revolving door phenomenon, and its effect on government agencies and officials who regulate and control many aspects of health care. Recently, we wrote about how the revolving door risks corruption, and can lead to regulatory, and even state capture.

In 2011, we even wrote about how the revolving door may affect US trade negotiations, and thus important aspects of aspects of global health care.

Government officials affiliated with all major political parties have been known to transit the revolving door.  The recent cases we have documented have tended to be more about the party that currently controls the executive branch, of course.  But now, we seem to have documented how the revolving door has lead to a supposedly liberal president proposing trade agreements that seemed heavily biased towards corporate rather than popular interests, and thus suffered an embarrassing defeat at the hands of his party compatriots in the legislature.  The president seems to have been particularly ill-served by employees of the executive branch whose previous or potential revolving door transits have made them sing the tunes of industry rather than of the people they are supposed to be serving.  This suggests that in the long run, nobody but the participants in the revolving door ultimately benefits from their rotary transitions.

Instead, as we have said many times before, the constant interchange of health care insiders among government, large health care corporations, and the lobbying and legal firms which represent them certainly suggests that health care, like many other sectors, seems to be run by an amorphous group of insiders who owe allegiance neither to government nor industry.

However, those who work in government are supposed to be working for the people, and those who work on health care within government are supposed to be working for patients' and the public health.  If they are constantly looking over their shoulders at potential private employers who might offer big checks, who indeed are they working for?

Attempts to turn government toward private gain and away from being of the people, by the people, and for the people have no doubt been going on since the beginning of government (and since the Constitution was signed, in the case of the US).  However, true health care reform  would require curtailing the severe sorts of conflicts of interest created by the revolving door.

Real heath care reform would require  multiyear cooling off periods before someone who worked in the commercial world can get a job in a government whose work has direct effect on his or her previous employer or industry sector, and before someone who worked in government whose work had direct effect on a particular economic sector can accept a job for a company in that sector.

ADDENDUM (19 May, 2015) - This post was republished in OpEdNews.

ADDENDUM (29 May, 2015) - This post was republished in OpenHealth News.


1.  Freeman J, Keating G, Monasterio E at al.  Call for transparency in new generation trade deals. Lancet 2015; 385: 605-605, link here.
2.   Hilary J.  The Transatlantic Trade and Investment Partnership and UK healthcare.  Brit Med J 2014; 349: g6552, link here.
3.  Greenberg H, Shiau S. The vulnerability of being ill-informed: the Trans-Pacific Partnership agreement and global public health.  J Pub Health 2014; 36: 355-357, link here
4.  Thow AMT, Gleeson DH, Friel S. What doctors should know about the Trans-Pacific Partnership agreement.  Med J Aust 2015; 202: 165-167, link here.


James Gaulte said...

As usual you have authored an impressive brief.

But I wonder what evidence did Stiglitz have to conclude that "most" of the regulations were in fact put in place to protect consumers,the economy and the environment rather than those regs themselves being the product of regulatory capture and cronyism.

The insights of Public Choice theory and the simple "Mafia Rule" have considerable explanatory power but I wonder if Stiglitz might be selectively using them.The more you look for it the more you seeing Baptists and Bootleggers lurking behind laws,regulation and even international agreements.
That being said your points about the possible health risks of some aspects of the agreements are well taken and are cause for concern.

Don Levit said...

The article seems to support government overreach in lieu of private corporations' overreach
The two sectors are so interconnected and entangled that we the people are left not to pick, but to resign to one poison or the other
Any system which encourages individuals to maximize their gifts, talents, and abilities is to be encouraged and vice versa
Don Levit

Anonymous said...

Thanks for taking the time to make all that available. I find the way these trade agreements subvert the rights of a people to govern themselves to be extremely concerning.

Afraid said...

Is Obama getting ready for some after white house speaker fees?