Ensuring access to affordable medicines: 10 proposals for clarification of TRIPS
Developing countries must be guaranteed the ability to take measures to protect public health and promote access to affordable medicines. The TRIPS Council discussions on the TRIPS Agreement and public health have been addressing growing concerns that TRIPS has hindered access to affordable medicines. The forthcoming WTO Ministerial Conference in Doha, Qatar in November will also afford WTO Members an opportunity to take measures to ensure that the TRIPS Agreement does not undermine public health policies. Below, outlined by Martin Jalleh, are the Third World Network’s recommendations for action by WTO Members, including proposals for clarification and interpretation and, where required, revision of the TRIPS Agreement.
THE TRIPS Agreement, in its present form, contains certain limitations or exceptions to patent rights that can be effected through national legislation, in order to curb abuses of intellectual property rights (IPRs) and anti-competitive practices. Two of the most important measures which can be used to offset the negative impact of patent monopolies are the right of governments to grant compulsory licences and the application of the principle of exhaustion of IPRs, which allows for parallel importation of patented products.
Although the TRIPS Agreement allows for these measures to be undertaken for the protection of public health, some developed countries have sought to restrict the scope of the provisions on compulsory licensing and parallel imports by giving a narrow interpretation of them. This has led to unease and uncertainty on the part of developing-country Members, who are now hesitant to undertake such measures in their national legislation. Equally disturbing is the fact that some developed countries, in conjunction with their corporations and industry lobbies, have been exerting political pressure on developing countries to prevent them from exercising their rights under TRIPS, and from enacting policies and laws on compulsory licensing and parallel imports for HIV/AIDS drugs and other medicines.
It is therefore necessary for the WTO Members to clarify and come to a common and agreed understanding of the TRIPS provisions. Compulsory licensing and parallel imports are clearly allowed within the TRIPS framework. Developing countries should be allowed the maximum flexibility in interpreting and implementing the TRIPS Agreement provisions, and should be allowed to do so without fear of litigation or other pressures. It is vital that interpretations allow full flexibility for developing countries to exercise their rights to provide affordable medicines to their people, rather than restrict the scope and ability of developing-country Members to adopt measures to ensure access to medicines.
Effective compulsory licensing
Compulsory licences are regarded as a crucial element in patent laws and are mechanisms used to promote competition and prevent abuse of patent rights and monopolies. The mere existence of such a legal provision may be enough to persuade patent holders of the need to act reasonably in cases of requests for voluntary licences, whilst strengthening the bargaining position of potential licensees. In the context of pharmaceutical patents, such licences constitute an important tool to promote competition and increase the affordability of drugs, without depriving the patent holder of reasonable compensation.
Provisions relating to compulsory licences or ‘non-voluntary licences’ are contained in Article 31 of the TRIPS Agreement. Article 31 makes specific mention of five possible grounds for the granting of compulsory licences: in cases of refusal to deal, in situations of national emergency and extreme urgency, to remedy anti-competitive practices, in cases of public non-commercial use and to facilitate the use of dependent patents.
Questions have arisen as to whether WTO Members may issue compulsory licences on other grounds not specified within the TRIPS Agreement.
The usefulness of Article 31 as a provision to balance against broad patent rights that hinder access to affordable medicines will be unnecessarily limited if other grounds (besides the five possible ones specifically referred to therein) cannot be accommodated. In order to effectively protect public health and promote access to affordable drugs, developing countries must be able to grant compulsory licences on a range of grounds, including the following: (a) in cases of failure to work or insufficient working; (b) for importation of a patented product; (c) for export of a patented product.
Another problem facing developing countries is the difficulties they face or may face in having to follow several procedural requirements or conditions prior to or in the process of granting compulsory licences. Sub-section (d) below provides a proposal to address this matter.
(a) Compulsory licence for non-working or insufficient working
The Paris Convention on the Protection of Industrial Property recognises the right to grant compulsory licences on the ground of failure to work or insufficient working (Article 5A). This provision of the Paris Convention is incorporated into the TRIPS Agreement. On this basis, failure to work, or insufficient working of, a patent should be a legitimate ground for the issuance of compulsory licences. From a developing-country perspective, the local working of a patent is desirable, apart from its being necessary for making products available and affordable, for the technology-transfer opportunities it presents and for the savings on foreign exchange due to reduced imports. However, the developed countries, particularly the EU and the US, have tried to press for a very narrow interpretation of the TRIPS Agreement, one which seeks to prohibit the grant of compulsory licences on the ground of non-working of a patent.
Proposal (1) - The following clarification shall be made: Members may issue compulsory licences for the exploitation of a patent where the patent fails to be worked or is insufficiently worked in the country.
(b) Compulsory licence for importation of a patented product
At present, only four developing countries - Argentina, Brazil, China and India (Korea and Mexico, now classified as OECD members, are two other such countries) Đ have strong enough national pharmaceutical sectors to be able to develop and manufacture new medicines through the process of reverse engineering. The compulsory licensing provision in the TRIPS Agreement could thus be meaningless for the rest of the developing-country Members of the WTO, which do not have the domestic manufacturing capacity.
This raises the question of whether these countries would be able to grant a compulsory licence for the importation of the patented medicine product. This may be, in fact, the only viable means to use a compulsory licence in cases where domestic manufacturing capacity does not exist, or the size of the local market does not justify local manufacturing, or where there is a need to promptly address an emergency situation. The compulsory licensee may import from a compulsory licensee or from other sources in another country.
Proposal (2) - The following clarification shall be made: Members may issue compulsory licences for importation of a patented product or a product directly made with a patented process, and for importation of a patented product or a product directly made with a patented process from a compulsory licensee in another country or a producer in another country where the product is not protected.
(c) The ability of a compulsory licensee to export
The TRIPS Agreement stipulates that a compulsory licence must be ‘predominantly’ for the supply of the domestic market (Article 31(f)). Therefore, exports are possible, although they should not constitute the main activity of the licensee with regard to the licensed product. In cases when a compulsory licence has been granted to remedy anti-competitive conduct, this limitation need not apply.
Proposal (3) - The following clarification shall be made: Members may issue compulsory licences that authorise the licensee to produce for the domestic market and to also export a portion of its production, and this portion can be significant and should not be unduly restricted (by Article 31(f)).
(d) Simplification of procedural conditions
The right of developing-country Members to grant compulsory licences is constrained by the procedural conditions (specified in Article 31) they have to meet prior to or in the process of granting the licences. These conditions can limit the ability of governments to respond speedily and effectively to public-health needs. Thus, a decision should be taken to ease the conditions on grounds of public health. Eventually a revision of Article 31 may be required.
Proposal (4) - A decision shall be taken at the WTO Ministerial Conference as follows: Members shall review the procedural conditions for the granting of compulsory licences with a view to simplifying and limiting the conditions to enable Members to better respond to public-health needs and situations.
Parallel importation measures
Parallel imports involve the import and resale in a country, without the consent of the patent holder, of a patented product that was put on the market of the exporting country by the patent holder.1
Parallel imports are of particular importance for public health interests, since the pharmaceutical industry generally sets prices differently throughout the world for the same medicines. Parallel imports would prevent market segmentation and price discrimination by patent holders on a regional or international scale. Parallel importation of a patented medicine from a country where it is sold at a lower price will enable more patients in the importing country to gain access to the medicines. Such a measure would also not prevent the patent owner from receiving remuneration for the patented invention in the country where the product is first sold. In this regard, parallel importation must be regarded as a legitimate measure which WTO Members are permitted to adopt to protect public health and nutrition as is provided for in Article 8 of the TRIPS Agreement.
The underlying concept for parallel imports is based on the principle of exhaustion of rights, which is premised on the fact that where the patent holder has been rewarded through the first sale or distribution of the product, he/she no longer has the right to control the use or resale of the product.2
Article 6 of the TRIPS Agreement allows each Member country the freedom to incorporate the principle of international exhaustion of rights in its national legislation and further states that Members are not subject to the WTO dispute settlement system for disputes relating to exhaustion of rights. It should therefore be properly clarified that parallel importing is allowed under the TRIPS Agreement.
Parallel importation can be undertaken where: (a) the patented product has been marketed in another country by the patent holder; or (b) the product is sold under a compulsory licence; or (c) the product is marketed in another country through legitimate means without the authorisation of the patent holder, such as where the product is not protected in the exporting country (i.e., in the case of a generic producer of medicines such as Cipla in India).
In order to avoid a possible discrimination complaint under Article 27.1 (which touches on non-discrimination in the enjoyment of patent rights) and benefit all sectors of the economy, it is recommended that parallel importing should be permitted within national legislation for patented goods in all fields of technology and not only for health-related inventions.
Proposal (5) Đ The following clarification should be made: Members shall be allowed to implement parallel importation policies and regulations in the following manner: importation of a patented product originating in any country, where the product was marketed in such a country by the patent owner or his licensee, or where it was sold under a compulsory licence; or importation of a product marketed in a foreign country in a legitimate manner, including in the case of non-authorisation by the patent holder, such as where the product was not protected in the exporting country.
· A commitment not to exert bilateral or regional pressures
There have also been attempts to exert pressure on developing countries to implement in their national IPRs laws unnecessarily strict standards of IPRs protection that go beyond what is required by the TRIPS Agreement (‘TRIPS-plus’ measures). There should be a commitment by all WTO Members to refrain from such action.
Proposal (6) - The following decision shall be incorporated in the Doha Ministerial Declaration: Members shall affirm their commitment not to exert bilateral or regional pressures on developing-country Members to forego their rights to adopt effective compulsory licensing and parallel importation measures and other measures to promote public health permitted under the TRIPS Agreement, or to pressurise or compel them to adopt measures and standards beyond their obligations in the TRIPS Agreement.
· A moratorium on dispute settlement cases
The threat of being brought before the WTO dispute settlement system can cause uncertainty, anxiety and unease. Such a situation prevents developing-country Members from having the level of comfort and confidence to exercise their rights adequately or fully within the flexibility of the TRIPS Agreement.
Proposal (7) - There shall be a decision incorporated in the Ministerial Declaration as follows: Members shall agree to abide by a moratorium on all dispute actions that are aimed at preventing or limiting developing-country Members’ capacity to promote access to medicines and protect public health, particularly with regard to the exercise of their rights to adopt compulsory licensing and parallel importation measures. The moratorium shall be with immediate effect, and shall be in force until a satisfactory resolution is achieved on the question of patents and access to medicines.
· An option to exclude medicines from patenting
An option should be available for developing countries to exempt or exclude medicines from patenting on public-health grounds. Such exemptions can be accommodated within the provisions of certain Articles (particularly Articles 27.2 and 27.3, which permit exclusions from patentability on certain grounds) of the TRIPS Agreement (with revisions where needed).
Proposal (8a) - The following clarification shall be made: Article 27.2 enables Members to exclude from patentability medicines or certain categories of medicines, including medicines that are essential, life-saving, vitally needed or used for treatment of poverty-related diseases.
Proposal (8b) - A decision shall be made at the Ministerial Conference that Article 27.3 be amended by adding a new sub-paragraph (c), which shall read as follows: Members may also exclude from patentability: ...(c) life-saving, vitally needed medicines and medicines for the treatment of poverty-related diseases.
· An overall balancing of rights
The imbalances and problems in the TRIPS Agreement need to be addressed. Many of the proposals to redress these problems are contained in the ‘implementation’ proposals in paragraphs 21 and 22 of the Draft Ministerial Text of the 1999 Seattle Ministerial Conference, and several of these proposals relate to the objectives and principles of the Agreement set out in Articles 7 and 8. The credibility of TRIPS would be enhanced if these proposals are adopted by Members, and if Articles 7 and 8 are effectively operationalised or improved upon.
Proposal (9) - A decision shall be made at the Ministerial Conference that Article 8 shall be amended as follows: No provision in this Agreement shall have the effect of preventing or limiting the right of any Member to adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socioeconomic and technological development.
· A tiered- or differential-pricing system
A tiered- or differential-pricing system may make a limited contribution to addressing the problem of access to medicines. To be effective and equitable, initiatives on tiered or differential pricing must be approached on a multilateral basis, with the participation of patent holders and generic producers in fair and transparent negotiations.
Proposal (10) - Discussions or negotiations on initiatives on tiered or differential pricing shall not prejudice the rights of countries to adopt policy options in TRIPS, namely the right to implement compulsory licensing and parallel import measures, nor should such initiatives be seen as an alternative to competition from generic drugs.
1. Correa, C. (2000), Integrating Public Health Concerns into Patent Legislation in Developing Countries, South Centre, Geneva.
2. Correa, C. (2000), Intellectual Property Rights, the WTO and Developing Countries: The TRIPS Agreement and Policy Options, Third World Network, Penang.
Martin Jalleh is a research officer with the Third World Network. A detailed version of the above recommendations can be found in the TWN report ‘TRIPS, Patents and Access to Medicines: Proposals for Clarification and Reform’.