Squaring the circle - Public Health vs TRIPS monopolies

by Chakravarthi Raghavan

Geneva, 29 Mar 2001 - - The health issue and availability of essential medicines and drugs for the poor has moved up high on the international agenda, with a growing conflict involving public interest vs corporate profits and with developing countries and an array of public interest NGOs on the one side and the handful of global  pharmaceutical corporations and their home governments (the US and EU) on the other.

Caught in between are the secretariats of the World Health Organization (WHO) and the World Trade Organization (WTO) whose officials promoting global intellectual property rights and pharmaceutical companies  give the appearance of being caught somewhat by surprise at the way, and the speed at which,  the debate has heated up and caught public attention - - the conflict between public good vs private greed for profits,  trade rules vs ethical principles of  health and human rights, including right to essential drugs at affordable prices,  and the duties and responsibilities of a state and the international community.

While the issue, in relation to the plight of those in developing countries afflicted by the HIV/AIDS has been grabbing newspaper headlines and the focus of a sustained agitation (for lowering of the prices), two developments have helped move the issue up front - the campaign by the international NGO Medicines Sans Frontier and others against pharmaceutical companies and their litigation against the South African government’s laws enabling compulsory licensing and parallel imports, and the campaign by the British charity OXFAM, “Patent Injustice: How World Trade Rules Threaten the Health of Poor People”.

One trade negotiator of a developing country said earlier this month that the OXFAM campaign in just a couple of weeks had achieved what developing country negotiators before Marrakesh and since then had been unable to, namely force the WTO and WHO officials, and the trade establishments of the United States, the EU and other rich countries, and their leaders to sit up and take note.

The diplomat however hoped that while providing drugs to counter AIDS at cheap prices was important, it would be unfortunate if  the campaign merely ends up with that, and fails to tackle the more basic one.

The issue of TRIPS, pharmaceutical patents and ability of developing countries to ensure availability of drugs at prices that their public could afford is expected to be brought up next week at the meetings of the WTO Council on TRIPS, with a demand from African and other developing countries for a special meeting to address the issue, now largely being discussed only at NGO forums.

At the informal General Council of the WTO (on implementation issues) on 16 March, India drew attention to the pressures coming from outside on the issue of pharmaceutical prices and suggested quick actions on TRIPS, while Zimbabwe pointed out that the initiatives on TRIPS and pharmaceuticals were coming from outside, including from NGOs..

South Africa and Brazil are also expected to bring up at the May Health Assembly the issue of essential drugs, and TRIPS and public interest issues. And a meeting of Health Ministers of the Non-Aligned Movement in South Africa this week has thrown its full support behind these questions.

As late as end-January, on the sidelines of the meetings of the World Economic Forum at Davos, WHO Director-General and senior officials were consorting with the major pharmaceutical corporations and asking them to reduce prices of AIDS drugs for developing countries, and the subsequent announcements of the corporations that they would negotiate discounted prices for African countries were being viewed as a breakthrough in meeting a health crisis.

But the campaigns of MSF and Oxfam, and the momentum it has built up, appears to have surprised both WHO and the WTO, and the WHO is striving to see how it could be used to lower costs of medicines and the financing of health care in the developing countries.

The secretariats of the WHO and the WTO have convened a workshop to be attended by “experts” (8-11 April), to be held in Norway, to improve access of poor countries to essential drugs, and particularly through differential pricing.

The two secretariats stress that this is an experts meeting, not an intergovernmental one, and that the basic purpose is to understand more fully the two issues of differential pricing and financing of essential drugs, and that it would be for the various parties to decide what to do with the information and develop better understanding.

The differential pricing, WHO officials explain, has to take account of the purchasing power of the consumer and ensure lower prices in poorer countries.

One of the questions to be explored (at the workshop) is whether differential pricing is good for everyone - beneficial to the consumer in the poor countries but not be harmful to maintain incentives for innovation.

Some NGOs fear that the pharmaceutical corporations would agree, but on an autonomous basis without any governmental or intergovernmental interventions or supervision, to segment markets and charge differently in different markets, but in return secure what they could not in the Uruguay Round and TRIPS, namely ability to prevent parallel imports in any market.

The pharmaceutical industry was one of the prime forces (the US film and computer software industries were the others) behind the United States drive for the Uruguay Round multilateral trade negotiations and its trade agenda, that resulted in the drawing up of ‘minimum’ global norms and standards of patent rights under intellectual property protection, and securing of monopoly rights for the patent owners.

A very clever media campaign that dubbed as ‘pirates’ and ‘counterfeiters’ all those challenging and differing with the efforts to write global standards, silenced many of the civil society organizations outside, and more so because the actual demands, issues and the course of negotiations were highly secretive and became public only as a fait accompli, with the full implications sinking in only now - as developing countries are finding themselves obliged to implement and disputes have begun to crop up at the WTO (and in the case of South Africa in its domestic courts).

As the poor developing countries battled the rich and powerful, nations of the world in virtually secret talks among a few (developed and developing countries) for nearly 8 long years in the Uruguay Round (UR) negotiations under GATT-auspices, where the influence of the majors and their corporation reigned supreme, and the IMF and the World Bank pressuring the developing world under the banner of ‘free trade’, the rest of the international system seemed to stand aside, unable or unwilling to confront the United States and the prevailing economic orthodoxy of neo-mercantalist liberalism..

At the WHO itself, after the departure of Hafdan Mahler as Director-General in the mid-1980s, the viewpoints of the big pharmaceutical corporations got a footing. And only after 1995, the WHO, under Nakajima, began looking at the problem of essential drugs and prices and TRIPS. And when Nakajima was replaced by Mrs. Gro Harlem Brundtland, she started with the view that health and intellectual property interests were reconcilable and the two organizations could work together. Within  WHO, she promoted  a round-table with the pharmaceutical industry for drugs to combat Third World health issues.

The initial low-profile approach of the WHO under Mrs. Brundtland, and some of her flashier initiatives like those on tobacco which attracted international media attention, seemed to project a different view of the WHO on essential drugs and prices and IPRs.

But the World Health Assembly nevertheless adopted a resolution asking the WHO to monitor this issue.

More recently, a 3 March 2001 policy brief from the World Health Organization says of the TRIPS agreement and the standards set by it as those derived from the standards of developed countries and “not necessarily appropriate for countries struggling to meet health and development needs.”

How to reconcile innovation and market incentives and profits with products at prices affordable by the poor is the issue to be faced, health officials say. A WHO official, in the context of the WHO/WTO workshop thought a high-volume sales and low profits margin approach made economic sense, and wondered why the pharmaceutical firms don’t adopt this and how to persuade them to do so.

The simple economic answer of course is that this approach cannot prevail in an internationally assured monopoly situation - and that is what the TRIPS has ensured for the pharmaceutical companies - and the tendency in such a market is to have high-profits and low-volumes.

Until, WTO and TRIPS, the conflict between public good and public interest was settled in each country, with a public policy approach and standards and norms for IPRs that balanced public and private interests.

The WTO upset this balance with global norms and standards, and resulting in loss of public welfare, and forcing free trade exponents like Jagdish Bhagwati and T.N.Srinivasan to say that TRIPS has no place in the trade organization.

This is the view that had been taken earlier by NGOs with their ‘Shrink or Sink’ campaign against the WTO.

On the issues raised by free trade economists like Bhagwati and Srinivasan or the NGOs, the WTO officials take the position that they cannot express a view or take positions on matters that are within the domain of member- governments, and that the TRIPS itself was a heavily negotiated and carefully-balanced text, and the issues and problems are within the domain of the members.

The WHO has publicly praised Brazil’s policy that has enabled it to ensure that HIV medicines are available at cheap prices and is provided to all patients. The WHO has also publicly said that the national measures of South Africa regarding medications represent a “good public health policy.”

The WHO did not intervene in the litigation against the South African government launched by the pharmaceutical companies in courts in that country, taking the position that this is a domestic matter, but that the WHO has provided technical assistance to South Africa over this dispute.

On the US complaint against Brazil at the WTO, which has been referred to a dispute panel (under the automatic processes that govern WTO dispute settlement - from the complaints stage to the adoption of rulings of a panel, subject to any modifications on law by the Appellate Body), the official WHO position is again that it is a dispute between two members at the WTO and it could not express any view.

But it will be anomalous if not only the WHO, but also other UN system organizations that have praised the Brazilian policy of supply of AIDS drugs and asked other countries to adopt similar policies, were to remain silent and on the sidelines in the trade disputes.

And though in both the South African and Brazilian cases, there is focus on the effect of their policies on availability of retroviral drugs for AIDS, the two governments themselves underscore that their IPR legislations cover a much wider ground and need to be looked at (and safeguarded) on that basis.

Till very recently, the WHO also took the view of some of the global corporations that the generic products at low prices offered by several of the developing country firms may be sub-standard.

But it has recently begun to change its view - after it was shown that the Indian pharmaceutical firm, CIPLA, which has offered African governments AIDS drugs at very cheap prices, and has agreed to provide it at cheaper prices via Medicines Sans Frontier, in fact produces and supplies generic drugs to some major pharmaceutical corporations who then sell it under their own brand names.

The WHO officials note that at the request of their members (and the WHA resolution) the WHO has looked at the intersection between TRIPS and health, but that since WHO member-governments are also WTO members, solutions have to be found by governments and see how the safeguards (of TRIPS) could be used to ensure access to medicines at affordable prices.-SUNS4866