By way of providing context for our examination of U.S. trade policy as it relates to TPA guidance and the Doha Declaration on TRIPS and Public Health, the following is an overview of ongoing U.S. government efforts to address the wider issue of access to medicine and public health both related and unrelated to IP, as well as how the WTO first became involved in public health issues, and the origin of IP and public health in TPA. The U.S. government has supported innovation, competition, and access to medicine. The Federal government, primarily through the National Institutes of Health (NIH), conducts and supports medical research, investing annually over $28 billion. About 55 percent of NIH’s budget supports basic research. While basic research may not have an immediate impact on drug innovation, such “untargeted” research often ultimately leads to developing new medicines and technologies. In principle, U.S. intellectual protection laws are designed to support innovation. Patents are considered to be especially valuable for innovations in pharmaceuticals. According to the pharmaceutical industry, IP protection is crucial to its ability to offer new, innovative medicines. Research and development of new drugs is very risky and time- consuming. The industry faces high fixed or “sunk” costs associated with lengthy discovery and clinical trials. Moreover, a large proportion of new drugs never make it to market due to their lack of efficacy or inadequate safety. Thus, drug companies seek a relatively high return on the medicines they do bring to market. U.S. patents give companies a 20-year period during which they have an exclusive right to make, sell, and use their invention. They use this period when they cannot be undercut by competitors to charge relatively higher prices, thus allowing them to recoup their investments and earn profits. However, the effective life of a patent is typically much shorter than this 20-year period, since the preclinical and clinical testing phases necessary for securing FDA marketing approvals can take more than a decade. Public policy has also played a role in fostering generic competition to hold down prices. Generic drugs--copies of brand-name drugs--can enter the market after the brand-name’s patent or other market exclusivities expire and FDA approval is granted. Under the Hatch-Waxman Act of 1984, generic manufacturers do not have to repeat expensive research and clinical trials to obtain approval. Instead, they only need to show the FDA that their drugs are bioequivalent to the branded medicines. Because they do not incur the same research and clinical trial expenditures, generic firms can enter the market more quickly once patents have expired and sell drugs at lower prices. Generic entry may also put pressure on innovator companies to develop more new drugs. Governments have also taken collective and individual steps to provide medicines—particularly since 2001. At the global level, funds for combating HIV/AIDS through the Global Fund to Combat AIDS, Tuberculosis and Malaria, established in 2003, and UNAIDS, established in 1994, have grown considerably since 2001. Among other things, the United States established the President’s Emergency Plan for AIDS Relief, or PEPFAR, a 5-year, $15 billion initiative run by the Office of the Global AIDS Coordinator at State, which has supported HIV prevention activities, antiretroviral treatment and training, and HIV-related care and training at more than 15,000 project sites primarily in 15 focus countries, mainly in sub-Saharan Africa. More affluent developing countries, such as Brazil and Thailand, have themselves been taking more aggressive steps to combat AIDS and improve access, including universal access schemes paid for with public funds. Some of these government efforts have been undertaken with private sector support. The research-based pharmaceutical industry has engaged in private-public partnerships to address neglected diseases found in poor countries, such as tuberculosis and malaria. Research-based pharmaceutical companies have also instituted pricing schemes whereby the same drug is sold at different prices, depending on the consumer’s or country’s ability to pay. Ensuring that the supply remains in the intended market, not resold elsewhere, is critical to this strategy’s success, but can be problematic. Governments have also supported industry efforts to donate medicines outright—about $4.4 billion worth of medicines and other medical help over the 2000-2005 period, according to estimates by the London School of Economics. Despite government and industry initiatives, available data suggest that many people currently lack access to existing medicines. According to the World Health Organization (WHO), one third of the global population does not have regular access to essential medicines. This matters: WHO estimates that over 10.5 million lives a year could be saved by 2015 by scaling up access to existing interventions for infectious diseases, maternal and child health, and noncommunicable diseases. Indeed, WHO says unaffordable prices of medicine and the need for new medicines for diseases that disproportionately affect lower income populations are among the primary challenges in expanding access to medicines globally. According to WHO, in developing countries today, medicines account for up to 70 percent of health care expenditure. This compares to less than 15 percent in most high income countries, and about 10 cents of every health care dollar spent in the United States in 2005. Because of this imbalance in health care expenditure worldwide, WHO’s various projects on access to medicines and IP rights continue. The Group of 8 Industrialized Nations, the Organization for Economic Cooperation and Development (OECD), and the United Nations Conference on Trade and Development (UNCTAD) are among the other organizations that have also undertaken efforts to address aspects of the issue. The April 1994 Final Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations led to the establishment of WTO on January 1, 1995. The Uruguay round was the product of long and complex negotiations that not only liberalized manufactured goods trade in such sectors as apparel, but also added IP and services rules and obligations to the trading system. The WTO TRIPS Agreement was part of the Uruguay Round’s results and established minimum levels of protection that each government has to give to IP of fellow WTO members. The United States had fought hard to secure worldwide adoption of minimum IP protection and enforcement standards through TRIPS as home to the world’s largest and most innovative pharmaceutical industry. TRIPS extended patent protection for inventions of both products and processes, while allowing certain exceptions, for at least 20 years. It also required WTO members, when requiring as a condition of marketing approval the submission of undisclosed test data or other data (such as data submitted to health authorities for regulatory approval of pharmaceutical safety), the origination of which involves considerable effort, to protect such data, against unfair commercial use. When all of the WTO agreements took effect, developed countries were given 1 year to ensure their laws and practices conformed with TRIPS, but developing countries were given transition periods of 5 or more years. Even so, many developing countries complained about having to comply with the new requirements. The issue of IP and access to medicine came to a head at WTO in 2001 when the HIV/AIDS pandemic in sub-Saharan Africa was reaching catastrophic levels. Separately, South Africa attempted to use its laws to lower prices for imported medicines, but faced opposition from U.S. and other drug companies that felt its actions compromised their rights. Brazil and the United States, meanwhile, were in dispute over a Brazilian law that could make exceptions to patents if products were not manufactured in Brazil. Nongovernmental organizations (NGO) became involved in discussing the implications of TRIPS to public health. Shortly after WTO adopted the Declaration on TRIPS and Public Health, Congress passed the Trade Act of 2002, which granted the President Trade Promotion Authority (TPA) for reciprocal trade agreements to liberalize U.S. trade with foreign nations. TPA contains guidance from Congress concerning U.S. goals in negotiated trade agreements. One of the three goals for IP specified in TPA, “to respect the Doha Declaration on TRIPS and Public Health,” was added in response to an amendment by Senator Edward Kennedy. In his remarks about the amendment, Senator Kennedy explained that the Declaration on TRIPS and Public Health struck a balance between the legitimate interests of intellectual property protection and the preservation of public health. Senator Kennedy went on to assert that “his amendment directs our trade negotiators to support the declaration without reservation.” Senators Grassley and Baucus also asserted their support for the amendment and emphasized the importance of IP issues with respect to public health and innovation of new medicines. Congress otherwise provided no guidance at the time on how to interpret and apply this TPA objective. Recently, in response to the expiration of the President’s Trade Promotion Authority (TPA) on June 30, 2007, before the Doha round of global trade talks had been successfully concluded, there have been some calls to renew it. To help address public health problems affecting many developing countries, WTO members adopted the Doha Declaration (reprinted in full below) to stress the importance of implementing the TRIPS agreement in a manner supportive of public health. As part of a carefully worded compromise among competing perspectives, this statement was placed in the context of shared challenges and goals, such as promoting both access to existing medicines and research into and development of new medicines. The United States interprets the declaration as a political statement recognizing public health crises and affirming the importance of IP protection that neither changes existing TRIPS obligations nor creates new obligations, and does not assign public health greater priority than IP protection. Significantly, the declaration clarifies certain flexibilities explicit in TRIPS that allow WTO members to address public health crises. USTR argues that these flexibilities should be applied judiciously and subject to certain conditions specified in the TRIPS agreement. Some developing countries, however, believe these flexibilities provide broad discretion to ensure access to medicines when IP regulations present barriers to addressing not only health issues, but also social welfare. Differences over a narrower versus broader interpretations continued long after the declaration.