March 30, 2016
Genval, 30 March, 2016. – Disclaimer: This is the English translation of an interview made by Mihail Călin and originally published on 25 September 2015. The authentic Romanian version is available at the euro-health.ro News/Media website.
The Transatlantic Trade and Investment Partnership (TTIP) between the United States and the EU are surrounded by fierce controversy in Europe. Despite substantial potential economic gains, the agreement is seen by some as a threat to the health protection standards, consumers and the environment. Zoltán Massay-Kosubek, policy coordinator at the European Public Health Alliance explains the possible consequences of the Treaty on the health of Europeans: increased consumption of unhealthy products, extending the monopoly on medicines, lowering quality standards of health services and discouraging public health regulatiory initiatives.
“I do not doubt the good intentions of the negotiators, but the road to hell is paved with goodwill.”
What is the potential impact of TTIP on healthcare and public health?
I should mention first a very important aspect: the European Commission made a comprehensive study of the economic impacts of TTIP, but the fundamental problem is that the health impacts are not therein. In other words, the Commission negotiates without evidence on the possible health impacts, which is very unprofessional and irresponsible.
Worsening the burden of chronic diseases
TTIP could increase the trade of unhealthy products and indirectly their consumption, which would contribute to the burden of non-communicable chronic diseases (NCDs) related to them. I refer especially to the three main risk factors of NCDS: tobacco, alcohol and unhealthy food. TTIP could affect their consumption primarily by reducing tariffs, which is traditionally the purpose of all Free Trade Agreements (FTAs). Even if tariffs are relatively low between the EU and the US, they do not just protect markets but they have a secondary function, making targeted products more expensive, which could serve public health objectives. If e.g. alcohol is more expensive, it is less accessible, and consumption is linked to this. It is assumed that tariff rates are always low between the US and he EU, but this is not the case for processed foods for example, where rates are realtively high: approximately 13.5%; and we all know how advanced the US processed food industry is. Let me give an example outside the EU: there is a free trade agreement between Mexico and the US that eliminated tariffs; eliminating tariffs on soft drinks led to increased consumption of juices with high sugar content and therefore increased obesity in Mexico. However, the Mexican government has realized this, so they introduced taxes on those products which decreased the linked disease cases.
This is the tariff aspect of traditional trade agreements. But what I am more concerned about is the so-called right to regulate as TTIP can open up opportunities for corporate interest lobby groups to put pressure on Member States with possible impact on public health policies. Here, I would like to recall the two main horizontal problems: ISDS (the mechanism to resolve disputes between investors and state) which can shallenge progressive national legislation, and regulatory cooperation – which aims at creating a framework for cooperation on current and future legislation.
The threat of ISDS
The main danger of ISDS is financial compensation: the costs of this complex procedurmay have the effect of “freezing” both EU and national legislation. Countries can be more hesitant if companies threat them by this procedure and even if governments win at the end, the whole procedure will take time, resources, and money for lawyers. That is the main problem, and no reform of ISDS will change this.
As regards regulatory cooperation, it is even worse, because it can broaden the scope of TTIP, making the treaty a “living” agreement through a transatlantic regulatory body which would regularly meet to examine future laws. First, there is no democratic control over it and secondly, it is very important to see who would have the resources and the interest to follow its activities: only one sector will be able to monitor and contribute to the work of such transatlantic bodies and this is the corporate sector.
How do you comment the recent proposals of the European Commission to reform the ISDS?
The ISDS reform proposal is a step to the right direction, namely the transition from an ISDS system to an international court. We must be fair with the European Commission: the proposed text contains many improvements and progressive proposals, which we will be happy to discuss with the EC. But our problem is that TTIP is not the right context to this discussion. The new proposal is part of the TTIP negotiations and it is still not clear why we need a parallel court in transatlantic relations; both the EU and US legal systems are well developed. It is not clear either if foreign investors will be discriminated against local investors as there is no evidence between the existence of ISDS in an investment treaty and foreign investment flows. The free trade agreement between the US and Australia, which does not include ISDS, demonstrates that the flow of investment between the two countries has increased.
More expensive medicines for a longer period
What is the possible impact of the treaty on healthcare in Europe?
As regards oharmaceuticals, the fear is that the treaty could extend the patent protection of medicines in various ways (eg. data exclusivity period); this would mean that the cheaper drugs, the so-called generic medicines, which could be produced after the expiry of patents, could be available later, so drugs will be more expensive. Another consequence for the health sector is that the pharmaceutical industry will have undue influence on pricing and reimbursement of medicinal products in the Member States. In TTIP, they would like to have more information on this process, which we believe is an attempt to influence the Member States, because that would put pressure on them. Again, this would make the drugs more expensive.
Another concern is the administrative authorization procedure of human medicines, which is very different in the US and EU. In the EU, before the end of the data exclusivity period, you can file a generic application, so that you can use data immediately, when the protected period expires, and your product can be already on the market. In the US, you can start the procedure only after the expiry of the protection period, and the difference is that during the administrative procedure, no generic products can be on the market. The difference is a few months or a year, but as regards access to affordable medicines, every day counts.
What makes TTIP different to other agreements? There were no controversies around FTAs in the past.
No, we were not aware of the impact of trade agreements. TTIP is somehow different because of its size: it became a problem, generated questions and when the public health community began to examine the potential of its impact on public health. We have formulated our concerns about TTIP but they are valid to other trade agreements, too. The difference is the size, because the EU agreements with South Korea or Singapore are smaller, but the problems and the questions are the same, because all agreements have the same nature. There is also a positive difference: it is fair to say that negotiations TTIP are more transparent than in other FTAs. TTIP reached a previously non existing level of transparency. However, I do not want to be misinterpreted here: TTIP is not transparent enough, but if you compare the current level of transparency with zero transparency, there is still a difference in TTIP.
What is the status of the agreement with Canada?
The agreement with Canada is closed, meaning that it was negotiated, the parties finalised the text and then they will go to the European Parliament and Member States for approval. It will take about two years before CETA can be implemented, if adopted by the EP and Member States. The main concerns we have about TTIP are present in CETA, too as it also contains a chapter on regulatory cooperation and ISDS, and public health is less incorporated into the text than we wanted.
What other examples have proven the health impact of trade agreements?
There is a case between Canada and the US related to the same trade agreement mentioned earlier called NAFTA (North American Free Trade Agreement): a product of the pharmaceutical company Eli Lilly was refused to enter the Canadian market and the company challenged the decision and won an ISDS case. The Canadian competent authority had doubts about the validity of clinical trials linked to the product of the company, but in this case, the company has managed to overcome the situation and if I am not mistaken, the question of compensation is still pending. Another well known example is in the field of tobacco control: in the case of Australia, Philip Morris International used an investment agreement between Singapore and Australia to attack legislation on plain tobacco packaging.
So multinationals can use premises in the country where they like to launch a legal case?
Yes, this was the case with PMI as the trade and investment agreement was formulated ambigously enough so that the multinational corporation could use the agreement between Australia and Singapore to sue the government, although its core activities were not located in Singapore. That is why we are worried about CETA, because if we can remove ISDS of TTIP, US companies could move into Canada and use text of CETA to invoke ISDS. The European Commission is however aware of this possibility and try to negotiate text to prevent forum shopping (seeking the most favourable court).
Issues of quality and affordability of healthcare
What would be the impact of TTIP on European health care systems?
As regards health systems, the situation is more complicated. Here, there are legal precedents and it is true that the Commission always excludes publicly funded services from its bilateral and multilateral trade agreements. Moreover, I do understand that either the EU or the US is committed to make the same exclusion in TTIP so I am less worried here. However, the problem is that the privatisation of social and healthcare services is already happening in some Member States and the aforementioned protection in TTIP will not apply to those private services, so TTIP could increase the competition logic on this part of services. In other words, we want to protect all services delivered for the general interest and apparently the protection in TTIP is limited only to publicly funded ones. Meanwhile, we all know that our publicly funded national health systems are unsustainable, so there will be changes, and it is possible that private services will become increasingly important in the future.
But apart of the dangers of liberalization or privatization of health services, why should be patients worried about this?
I can name two specific concerns for patients: access to services and quality of services. In most of the Member States, if there are mandatory standards related to they quality of services – nursing or social – it does not matter whether it is financed by public or private sources because everyone should comply with the standards. But the problem is that this is not the case in all Member States, especially in the poorer eastern ones. It is a limited problem, but it is still there. Regarding affordability of services, we can take the example of elderly care: there are now privately funded ‘luxury’ services where people can pay for a good quality services. This is not a matter of concern of course but what is really worrying is the overall situation at population level. While understanding that the state might be unable to maintain all similar services will lead to the intervention of private money, and private companies will seek profit for their services provided for the elderly. Consequently, because they operate on the basis profit, they might require a fee to enter into these establisments which would not be affordable for the elderly with low purchasing power, therefore they could not afford private services. That would mean that for them, no public services would be available and private services would not be affordable eithe. This is already happening, but TTIP could worsen this problem.
Sometimes it seems that the US is demonized during the discussions and the US health standards are considered being lower to the European ones. Is this true? Why are Europeans more worried about TTIP than Americans?
Firstly, I would like to stress that US civil society is very concerned about TTIP.
Secondly, it is obvious why Europe is more vulnerable: as the US is the leading world economic power, it has a higher bargaining power, too. The fear is that the US can negotiate a treaty which serves US interests better than European ones.
Thirdly, in the field of health, it is well known that the US follows a different approach, as regards addressing public health protection: in the US, you have to prove that a substance or a product is dangerous, after which it can be prohibited or restricted. However, the EU follows the precautionary principle, which means that you have to prove that a product is safe, then you can put it on the market. So there is a difference regulatory approach and the way TTIP would address this difference is potentially harmful. That is why I am worried about regulatory cooperation, as trade competitiveness means that products complying with stricter rules are more expensive. Removing those differences would mean lowering the standards to the lowest denominator level, which can eliminate costs on the short term, but the long term costs will outsource them. For example, fast-food will be cheaper, but in 20 years later, the occurance of cardiovascular diseases or cancer would increase which would mean that you simply postponed the costs. And at that point it would be too late to make corrections.
The good part of transatlantic cooperation
Do you see any good part in TTIP? I think it all started with good intentions.
They say that the road to hell is paved with good intentions, so goodwill alone is not sufficient. It is important to note that we do not doubt the good intentions of the negotiators, but we fear that the lack of an appropriate health impact assessment and disregarding public health concerns would mean that despite the good intentions, the end result will not be the one negotiators want.
There are potential benefits of transatlantic cooperation in the field of pharmaceuticals and medical devices, for which there will be separate chapters. In both cases, the aim of TTIP is to avoid unnecessary duplications in the market auhtorisation process, while maintaining or even improving the high level of standards. As regards pharmaceutical products, the European Medicines Agency in the EU and the Food and Drug Administration in the US are already cooperating to avoid the duplication of clinical trials by data sharing and recognition of inspections conducted by the competent authorities. However, this cooperation is taking place at technical level, and the further cooperation of competent authorities does not require an international treaty. In addition to that, while avoiding duplication and reducing costs have the potential to make savings for companies, it is unclear how patients will benefit from it, as it is not guaranteed that the price of medicines will decrease.
Another issue is the availability of clinical trials data for public health research. Research is essential for innovation, but if TTIP will allow pharmaceutical companies to treat this information as a trade secret, there is a risk that they may not be available for research which would be negative for both innovation and the development of new drugs and treatments.
It is estimated that TTIP will result growth and savings for both economies. There was also an impact assessment demonstrating how every European would benefit fro increased trade and cooperation, which is important after the crisis. Would TTIP have positive impacts on the health of Europeans?
There was a belief in the past that more trade is generally good, because the products will be cheaper, more accessible for consumers. But in light of the available evidence, this is not true, and the picture has been changed. Of course there are positive aspects of the intensification of trade for sectors outside of public health, but many researchers admit that studies on the economic benefits of TTIP are too optimistic. Studies focus only on economic gains which are not so significant to resolve the crisis in Europe. My main concern is that if you talk about potential savings, you should also calculate the costs in order to be fair. For businesses, there could be some savings by eliminating regulations, because any burden imposed by the authorities represents a cost for a company. However, usually there is a very good reason to have regulation on place putting burden on companies. If in the US and the EU, there is a duplication of completing a form or other administrative procedure, it may be just bureaucracy, but we must acknowledge that regulations could have benefits for the public interest and to the entiry society. To conclude, the projected benefits present only one side of the problem, and they are not sufficiently sensitive to the possible costs of TTIP.
“There is no place for experiments.”
But concerning TTIP, you can realise in due time that it has negative impacts on public health or on other sectors. Can the EU get out of it? It is an understanding forever? Is it reversible?
It is a very dangerous approach, because if you conclude an agreement, it would be very difficult legally and theoretically impossible to change it. I think it is irresponsible to put the entire population to an experiment. Moreover, some health consequences will be realised in the long term and we simply can not afford to wait for 5-10-20 years to notice the increasing burden when correction is already imposible. We are in the negotiation phase, this is the appropriate time to discuss those issues.Author : Zoltán Massay-Kosubek