EU for ‘differential pricing’ over compulsory licensing

by Chakravarthi Raghavan

Geneva, 31 May - The European Union Council of Ministers appear to have endorsed and given the green signal to the EU’s executive commission to pursue the idea of ‘global tiered pricing’ to ensure affordable pharmaceuticals in affected developing countries, and present a position at the forthcoming TRIPS Council on a restricted view of the rights of countries in terms of compulsory licensing.

This is the view favoured by the transnational pharmaceutical lobby, and is also being promoted by the WTO secretariat which, at its website has provided an explanation of the TRIPs Agreement, and in a part there relating to patents and compulsory licensing has said that the right of governments to issue compulsory licences subject to procedural safeguards set in Art.31 is further qualified by the provisions of Art.27.1

The WTO Council for Trade-Related Intellectual Property Rights, during its meeting 18-22 June, is holding a special discussion on intellectual property issues relevant to access to medicines, probably on 18 June.

The role of the secretariat in providing an interpretation of the TRIPs provisions is expected to figure at the Council session.

Meanwhile, the WTO secretariat has posted on its website the Report of the WHO-WTO sponsored workshop on differential pricing and financing of essential drugs, held at Hosbjor in Norway on 8-11 April, and jointly sponsored by the secretariats of the World Health Organization and the World Trade Organization.  The executive summary of the report and a press release have both suggested that while the purpose of the workshop itself was not to seek agreed conclusions, there was “a large measure of common thinking among the participants that differential pricing could and should play an important role in ensuring access to existing essential drugs at affordable prices, especially in poor countries, while allowing the patent system to continue to play its role of providing incentives for R&D into new drugs.”

However, at the May meeting of the World Health Assembly, at a briefing session for delegates, several of the NGOs and health activists, some of whom had been present or represented at the Hosbjor workshop had challenged this view. The representative of Oxfam, whose report on TRIPS and affordable medicines, had reignited this entire debate, had said that tiered or differential pricing, under certain conditions, may make a contribution for availability of medicines at accessible prices, but should not be seen as an alternative to generic competition or reform of the WTO’s TRIPs Agreement.”

The EU’s position, expected to be articulated at the special discussion, and that of the pharmaceutical lobbies, seems to be one of holding out the possibility of ‘differential pricing’ (with changes or interpretations to TRIPs for restricting parallel imports or exports as a corollary) to persuade the African countries that this is a better way to bring down prices in their countries than pursuing compulsory licensing route.

The EC’s position paper, as well as the EC’s note to its 113 committee on a draft communication, in a footnote appears to have quoted out of context from the panel report on the EC complaint against Canada relating to generic drugs, as proving the link between Art. 27.1 of the TRIPs agreement and Art. 31.

In fact the issue before that panel, relating to generic drugs and the socalled ‘Bolar exception’ related to the rights for patentees under Art. 27.1 and the exceptions under Art. 30. In its arguments, Canada distinguished between Art 31 and Art 30, and took the position that compulsory licensing under Art. 31 was subject to the non-discrimination rule even though it was not specifically said in the text.

While the panel has adverted to this, to say that the non-discrimination applied to Art. 30 too, the Article 31 and any limitations on compulsory licensing was not before that panel. And the findings of the panel, adopted by the DSB could neither be viewed as a ruling or finding of the panel or the DSB, nor be a precedent for deciding the scope of compulsory licensing.

The EU Council of Ministers in an omnibus resolution on a programme of action on HIV/AIDS, malaria and tuberculosis in the content of poverty reduction appears to have endorsed its Executive Commission’s approach in this behalf.

The Council has recognized that lack of affordable pharmaceuticals is a serious problem in many developing countries and especially for the poorest people, and effective solutions require international cooperation and participation of both public and private sectors.

The Council agreed with the Commission on need for a much broader application of effective global tiered pricing for the benefit of affected developing countries, involving close cooperation of the pharmaceutical industry, and developing countries, international organisations as well as US, Japan and other developed countries and for setting up a mechanism to make this operational.

In what may be the real hidden agenda that the pharmaceutical industry has been pursuing, but failed to get in the Uruguay Round, the EU Council says such a tiered pricing needs reinforcement “of safeguards against the diversion of low-priced pharmaceuticals destined for specific markets and price erosion in the markets of developed countries.”

The EU Council resolution then goes on to reinforce the importance of IPRs in promoting investment in new medicines, the right of WTO members to invoke relevant provisions of TRIPs to address national health policy issues, and the discretion vested under TRIPs for issuing compulsory licenses, “in certain exceptional circumstances”. The EU ministers welcomed the discussions to take place in the TRIPS council in June and supported the Commission’s intention to pursue ‘consensus-building’ process on links between TRIPs and public health.

This seeming public health and public interest approach however seems to contain many positions and safeguards in reality aimed at strengthening the position of the transnational pharmaceutical industry, and block decisive and quick actions at the TRIPs Council and Doha, firstly, to provide clear and authoritative interpretation of existing rights, and secondly, change if necessary TRIPs to restore the imperative of public health over profits and trade. The EC position paper on compulsory licensing, and the Commission’s intended draft communication to the TRIPS Council (reported in SUNS #4904), namely that the rights of WTO members to issue compulsory licences, subject only to procedural safeguards, is qualified by the provisions of Art.27.1 of the TRIPS agreement (about patentability).

However, this view is challenged by legal experts in the field of patents and intellectual property rights, though the experts all caution that in the WTO trading system and its decision-making process, it will be decided by three panellists, guided by the secretariat, and the appellate body in a dispute.

Though the WTO agreement has specifically reserved the sole right of providing authoritative interpretation in the hands of the Ministerial Conference, and in between its meetings with the General Council, the way the dispute system operates and the ‘negative consensus’ rule of adoption of panel rulings has meant that three panellists and the appellate body in fact have been providing interpretations, and in the process changing the balance of rights and obligations inside individual agreements and of the WTO as a whole.

In a posting at its website the WTO secretariat has taken the position (not found in the actual words of the Article 31 itself) that the procedural safeguards before issuance of compulsory licenses are “aimed at protecting the legitimate interests of the right holder,” and that the conditions for issue of licences set in of Art 31 “should be read together with the related provisions of Article 27.1, which require that patent rights shall be enjoyable without discrimination as to the field of technology, and whether products are imported or locally produced.”

While undoubtedly any provision of the agreement needs to be read along with others, it is disputable whether the rights of patent holders under Art. 27.1 is qualified by Art.31 (which would be the normal way of interpretation) or the other way round, as the WTO secretariat has presented in its website.

Several developing countries are now expected to raise at the TRIPs Council a whole range of issues including the role of the secretariat in these matters. – SUNS4906

The above article first appeared in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief Editor.

[c] 2001, SUNS - All rights reserved. May not be reproduced, reprinted or posted to any system or service without specific permission from SUNS. This limitation includes incorporation into a database, distribution via Usenet News, bulletin board systems, mailing lists, print media or broadcast. For information about reproduction or multi-user subscriptions please contact: