[CTC] Administration, Hatch Hold High-Level Talks On TPP Biologics

Fri Mar 18 06:04:56 PDT 2016

Inside U.S. Trade - 03/18/2016
Administration, Hatch Hold High-Level Talks On TPP Biologics

March 17, 2016

The Obama administration has stepped up its talks with Senate Finance Committee Chairman Orrin Hatch (R-UT) on addressing his objections to the monopoly period for biologics in the Trans-Pacific Partnership, entering a new phase that involves high-level White House engagement.

U.S. Trade Representative Michael Froman told the U.S. Coalition for TPP on March 14 that he has had "constructive" discussions with Hatch and House Republicans.
Hatch discussed TPP at a March 14 meeting on Capitol Hill with Froman, White House Chief of Staff Denis McDonough, and National Economic Council Director Jeffrey Zients, according to a White House spokeswoman. That followed a Feb. 25 meeting between Hatch and Obama where TPP was one of several issues discussed, the spokeswoman said.

The intensified discussions mark a clear shift from the situation from roughly a month ago, when Hatch characterized the administration's engagement as lip service and a U.S. official said the ball was in the senator's court to come forward with more specific demands on biologics (Inside U.S. Trade, Feb. 12).

But the efforts to address Hatch's objections are still in their early stages, as the administration has not yet reached out to TPP partners like Australia and Chile to discuss tweaks on biologics that could be made without reopening the TPP text. Those countries are strongly opposed to making any changes on biologics, a message the new Australian trade minister reiterated in a meeting with Froman last month in Washington.

Froman has floated side letters as one way to address congressional objections on biologics and other TPP issues, while implementation plans have been cited by Hatch and Ways & Means Republicans as another tool (Inside U.S. Trade, Dec. 11, 2015).

Brian Pomper, a trade lobbyist at Akin Gump Strauss Hauer & Feld, this week said the intensified discussions between Hatch and the Obama administration on biologics are giving him hope that a deal could be reached relatively soon.

"There's no question in my mind that there can be a deal," Pomper said at a March 17 event organized by the Washington International Trade Association. "There can be some way to get some comfort to Chairman Hatch and everyone that TPP can move forward but it takes time."

He said he has "every indication" that this is starting to happen, and expressed the hope that an agreement can be reached in the "relatively short term." Pomper emphasized that he was speaking on his own behalf rather than for the industry and that his comments were based on publicly available information. He has lobbied on behalf of the Biotechnology Industry Organization on the TPP biologics issue, according to the Senate lobbying database.

Members of Congress have raised other problems with TPP, but an industry source said the administration will likely only have the bandwidth to fix one issue with trading partners.

The stepped-up administration efforts come as business groups and other supporters of the deal are making the case for a lame-duck vote on TPP with the argument that waiting until the next president takes office could delay the deal for years and ultimately doom it.

A business lobbyist said the fact that leading presidential candidates in both parties would likely seek changes to the TPP if elected bolsters the case for congressional action during the lame-duck session. A lame-duck vote would also represent a plus for establishment Republicans, who have historically supported free trade and will be looking for ways to salvage their longstanding policy positions as their support among the electorate has crumbled, this source said.

But the lobbyist noted that a lame-duck vote requires not only convincing Hatch to back that timing, but also Senate Majority Leader Mitch McConnell (R-KY).

McConnell has made clear he does not want a TPP vote before the election in part to protect Republican senators from industrial states up for re-election this year from having to take a tough trade vote. They are Sens. Rob Portman (R-OH), Kelly Ayotte (R-NH), Mark Kirk (R-IL), Ron Johnson (R-WI), and Pat Toomey (R-PA). If these senators lost, the Republican majority of the Senate would be in jeopardy.

In a related development, the administration this week publicly indicated it may be willing to accede to some of the demands made by the U.S. financial industry in the context of TPP. Specifically, Treasury Secretary Jack Lew on March 16 signaled that the administration could take a different stance on data localization requirements for financial services firms in future trade agreements than it had in TPP.

He said that TPP cannot be changed since the deal has been signed, but held open the possibility of a side agreement to TPP, although he downplayed the likelihood of that (see related story).

According to Pomper, both Hatch and the administration have "an enormous amount of goodwill to resolve this issue." He added that the brand-name pharmaceutical industry will support whatever deal is negotiated by Hatch. The industry is not negotiating with the administration directly, sources said.

Pomper said he did not know how the issue would ultimately be resolved, but predicted it may involve further clarifying the TPP obligation on biologics as well as ensuring that all of the agreement's commitments are enforced.

The latter could include giving Congress a greater role in certifying that TPP countries have met their obligations before the agreement can enter into force, as well as providing greater certainty regarding commitments that countries are slated to implement after a transition period, according to Pomper.

He said the clarifications to the TPP obligation on biologics could involve fleshing out what it means to provide a "comparable" outcome in the market to eight years of market exclusivity. That language is part of the second option for providing "effective market protection" of biologic drugs under Article 18.51 of the final TPP legal text, as opposed to the first option of providing at least eight years of market exclusivity.

The second option is for countries to provide five years of market exclusivity for biologics plus "other measures," while recognizing "that market circumstances also contribute to effective market protection to deliver a comparable outcome in the market."

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