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TRIPS and pharmaceuticals: A case of corporate profits over public health With the obligations it imposes on member countries of the trade body to recognise and strengthen patent protection on pharmaceuticals, the World Trade Organisation's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is denying patients in the developing world access to life-saving essential medicines. The countries of the South now find themselves ranged against Northern governments and powerful pharmaceutical lobbies in their fight, at the WTO and beyond, to ensure public health takes precedence over corporate profits. by Cecilia Oh THE recent
International AIDS Conference in Durban, South Africa (9-14 July) has
put the spotlight yet again on the issue of affordability of essential
medicines. The issue of patented drugs and access to essential medicines
appears to be shaping up as a key controversy. The studies
and statistics presented at the Durban conference inform us that one year's
worth of the standard treatment of antiretroviral drugs costs between
US$4,000-6,000. This puts it out of the reach of most of the people in
the developing world, where most HIV infections are recorded. It is estimated
that the current cost of antiretrovirals would have to be reduced by 95%
before they can be affordable to all those who need them.(a) A key
factor in determining the cost of a particular drug is the patent on it.
Of the 50% of the patients in developing countries who lack access to
essential drugs, many die because the drugs are patented and therefore
too expensive. These patented drugs include treatment for tuberculosis
and AIDS as well as the Hepatitis-B vaccine. Public health activists and consumer groups warn that the World Health Organisation (WHO) estimates - one third of the world's population lacks access to essential drugs Ð will further increase. They are concerned that World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) (which developing countries have to implement as of 1 January 2000) will give rise to factors that will put access to essential drugs and healthcare out of the reach of millions of people in developing countries. The problem with TRIPS 'We
went to Geneva where we presented (our) document to the staff of the GATT
Secretariat. What I have described to you is absolutely unprecedented
in GATT. Industry has identified a major problem in international trade.
It crafted a solution, reduced it to a concrete proposal and sold it to
our own and other governments ... The industries and traders of world
commerce have played simultaneously the role of patient, the diagnostician
and the prescribing physician.'(b) The above
is a quote from an industry representative, describing the role of industry
in formulating the TRIPS Agreement. It is therefore not surprising that
commentators describe the negotiation of the TRIPS Agreement as one that
was forced by the developed countries against objections from many developing
countries. The aim was to universalise the standards of intellectual Property Rights (IPRs) protection that developed countries had already incorporated within their legal systems.(c) Thus, the TRIPS Agreement now requires all WTO members to adapt their laws to the minimum standards of IPRs protection. During the 1980s, the gradual erosion of the developed countries' supremacy in manufacturing and technology, due to the rise of the Asian countries as competitors, was a cause for concern. The industrial lobbies convinced developed-country governments on the need to link trade with IPRs, in order to prevent imitation and to increase returns on research and development. Monopoly rights granted by IPRs were regarded as crucial to prevent the developing countries from further undergoing the 'catching-up' process towards industrialisation based on imitating and copying technologies, as the developed countries themselves had done. In other words, IPR protection was a tool to guarantee the comparative advantage that had so far ensured the developed countries' technological supremacy.(d) Problems for developing countries Prior
to the negotiation of the TRIPS Agreement, over 50 countries (including
developed countries) did not confer patent protection on pharmaceuticals.(e)
Many developing countries regarded the absence of protection as necessary
to promote access to drugs at competitive prices. Therefore, conforming
to TRIPS provisions by recognising and strengthening protection of IPRs
on pharmaceutical products and processes will cause problems for developing
countries. Implementation of the TRIPS Agreement may lead to high drug
prices, low access and a weakening of national pharmaceutical industries(f),
due to factors described below. Twenty-year
protection: The minimum term of 20-year patent protection required by
the TRIPS Agreement effectively allows a pharmaceutical company a monopoly
over its patented drug. Free from competition, the company will be able
to keep the price of the drug high during the protection period.
By virtue of TRIPS protection, no generic equivalent can come into the
market until expiry of the 20 years, denying patients cheaper alternatives. Product
and process patents: The TRIPS Agreement extends the scope of patent protection
to both products and processes. Product patents provide for absolute protection
of the product, whereas process patents provide protection in respect
of the technology and method of manufacture. A process
patent system promotes a more competitive environment
and a check on prices, as compared to the monopoly system created through
product patents. With the TRIPS requirement for both product and process
patents, it will therefore be possible to apply for patent rights over
a product for 20 years, and thereafter, further periods of protection
could be applied for the processes
by which the product is produced.(g) Some
experts also caution that the 20-year protection can be (ab)used to extend
the monopoly through process patents as well as patents on usage form,
dosage form and combination form. In the US, for example, patents have
been taken on new combinations of drugs even when the product patent on
the basic drug - the active ingredient - has long expired.(h) Monopoly
protection would be extended through minor changes to the existing medicines
where the product patents have expired. Threat
to domestic pharmaceutical industry: Developing-country pharmaceutical
producers will find themselves pushed out of the market, having to compete
with the large transnational corporations (TNCs). For the smaller producers
in the developing world which specialise in and depend on manufacturing
cheaper generic alternatives, this would no longer be possible (until
the expiry of the 20-year period). The TRIPS Agreement further requires patents to be granted regardless whether the products are imported or locally produced.(i) This means that patent holders can merely import their product, without having to work the patent in the country granting the right. This will mean that a TNC can supply global markets under the patent monopoly, exporting the finished product instead of transferring technology or making foreign direct investment.(j) This rubbishes TRIPS supporters' argument that strict patent regimes will increase the flow of technology and investment into developing countries. Overriding patent rights Notwithstanding
the above, some provisions in the TRIPS Agreement do provide certain exceptions
to patent protection of pharmaceuticals. Parallel
imports: Parallel importing is a means by which developing countries could
lower drug prices. Where there are price differences for the same product
in different markets, it is possible to import the product from the cheaper
market for resale. The principle of IPR exhaustion allows any interested
party from country A to purchase a product legally sold in country B for
resale in Country A, without the consent of the patent holder. Compulsory licensing: The use of compulsory licences is not prohibited by the TRIPS Agreement, although it is not specifically referred to in the agreement. The government or court of law may grant a licence to a third party to use a patent, without the patent holder's consent, under specified conditions, such as in cases of national emergency or extreme urgency, or to remedy anti-competitive practices.(k) Experts consider compulsory licensing a crucial element in increasing the affordability and availability of drugs, while ensuring that the patent holder is compensated for the use of the patent. Battle lines drawn ... But some
developing countries have been reluctant to use these options for fear
of trade sanctions by the developed countries. A report
from Medecins sans Frontieres (MSF) details the US government's pressure
on Thailand to restrict its use of parallel imports and compulsory licences.
The Thai government passed a law banning parallel imports in 1992, under
the threat from the US to limit textile imports (parallel imports are
allowed again after amendments to the patent law which came into force
in 1999).(l) Although patent law in Thailand provides for compulsory licensing,
MSF reports that the Thai government - this time under threat of high
tariffs on imports of wood products and jewellery - passed ministerial
regulations in 1998 to restrict the use of compulsory licences.(m) Without
the life-prolonging AIDS drugs, hundreds of thousands of people in Thailand
will die. Already 300,000 have died. AIDS activists and health experts
have criticised the pharmaceutical companies for the lack of action on
their previous pledge to reduce drug prices. They insist that one crucial
method of improving access to drugs is compulsory licensing, and have
condemned the US government's policy of protecting big business over people's
lives. When
the South African government sought to enact the Medicines and Related
Substances Control Bill, the US government accused it of failing to adequately
protect American drug patents. The US objection was directed at provisions
in the law which would allow for compulsory licences and parallel importing.
Despite the considerable pressure exerted on the government and Parliament
of South Africa, the bill was passed in 1997.(n) The pharmaceutical industry
in South Africa, backed by the TNCs and the pharmaceutical lobby in the
US, filed a legal challenge to the new law. The US government, taking
its cue from its pharmaceutical lobby, began a process of negotiations
and threats to get the South African government to change its stance.
It was
only after intense campaigning by AIDS and health activists - successfully
embarrassing Presidential candidate Al Gore and marring his campaign efforts
- that the US retreated from its position and eventually reached a resolution
of the matter. From reports, it is understood that South Africa has made
clear its intention to use compulsory licensing and parallel importing
in a TRIPS-compliant manner, and that the offending provisions in the
act remain.(o) These
incidents of unilateral pressure have provoked outrage from many developing
countries. Commentators also point to the irony of the situation. The
US, like most developed countries, provides for compulsory licensing in
its national laws. The US also grants perhaps the largest number of compulsory
licences (more than a hundred such licences have been granted) to address
anti-competitive practices and for government uses. It would appear that in the battle between the right to health and the right to monopolies and profits, the battle lines have been drawn between countries of the South on one side, and the Northern governments and their industrial lobbies on the other. ... at the World Summit for Social Development The North-South
battle lines were clearly drawn during the recent UN World Summit for
Social Development, held in Geneva.(p) The G77 group of developing countries
had proposed to exclude essential and life-saving medicines from patentability,
in order to ensure access to such medicines. The developed countries -
including the US, the EU, Canada and Japan - vehemently rejected this
proposal, citing the need for patents to stimulate research and development.
In response to Canada's call to delete the proposal, the South African
delegate had said: 'When you are going to lose 25% of your productive
work force due to HIV/AIDS, you cannot be so blase with your comments'.(q) The final agreed text does not include the G77 proposal to exclude essential medicines from patentability, but affirms countries' right to 'freely exercise' their legal options in an unrestricted manner. This was a reference to the pressure exerted by the US and its pharmaceutical lobby on developing countries not to exercise their option to take measures (such as compulsory licensing and parallel imports) already available to them under the TRIPS Agreement to ensure access to essential medicines. Although some experts are of the opinion that this does not represent any change in terms of the developing countries' obligations to implement the WTO agreements, others believe that it is a point well worth making. It represents a moral victory for the developing countries, and it should also be seen as the first step to the real battle in the WTO. ... and at the WTO The exclusion
of essential drugs from patenting is expected to be discussed in the WTO,
in the context of 'implementation issues'. During preparations for the
WTO's Third Ministerial Conference, which took place in Seattle on 30
November - 3 December 1999, many developing countries raised the issue
of the imbalances and inequities inherent in the WTO agreements. The developing
countries had expressed dismay that having seen little of the benefits
of the Uruguay Round (of trade negotiations which resulted in the establishment
of the WTO), they were now being pressured to bear the considerable
burden of implementing their onerous obligations. With respect to the
TRIPS Agreement, developing countries were concerned over the costs and
the socio-economic and developmental implications of establishing the
strict IPR regimes required. In this connection, developing countries
had tabled proposals for the reform of the TRIPS Agreement. Of relevance
is a joint submission from the Like-Minded Group of developing countries
(comprising Cuba, the Dominican Republic, Egypt, El Salvador, Honduras,
India, Indonesia, Malaysia, Nigeria, Pakistan, Sri Lanka and Uganda),
which proposed that 'the list of exceptions to patentability in Article
27.3(b) of the TRIPS Agreement shall include the list of essential drugs
of the World Health Organisation'. This proposal has yet to be considered, given the failure of the Seattle Ministerial Conference to conclude with any decisions. In the meanwhile, the WTO General Council, in a Special Session, has agreed on a work programme to address the 'implementation issues' raised. During the first Special Session (23 June and 3 July 2000), some of the implementation issues and proposals raised by the developing countries were discussed, including the proposal for exclusion of essential drugs from patentability. The Special Session is scheduled to meet again in October 2000. Conclusion Judging
from the prolonged negotiations on the issue during the World Social Summit,
it can be expected that the proposal of the Like-Minded Group to exclude
patentability of essential drugs will generate heated debate. It is
a legitimate concern that the TRIPS Agreement does not adequately take
into account public health needs. The agreement has instead been described
as a 'charter of rights for patent holders'.(r) There are no specific
obligations towards the governments granting the patent rights. The interests
of the consumers and patients have also been ignored. In order to protect
the public interest of providing access to and availability of medicines
and healthcare, developing countries will have to consider a wide range
of factors. However, a key factor must be the implications of the TRIPS
Agreement and its patent protection for drugs and pharmaceuticals. In this
regard, developing countries must be allowed to exercise the options already
provided for in TRIPS and other international agreements, free from pressure.
National legislation putting into effect the compulsory licencing, parallel
importing and other options in a manner most conducive for the individual
health, economic and development needs of a country should be considered
of primary importance. This
report is based largely on information from the following documents: Endnotes a. Panos
HIV/AIDS Briefing No.7, July 2000, Panos London, UK Cecilia Oh is a research officer with Third World Network. (Aug-Sept 00)
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