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Row
over European seizures of low-cost drugs
A global controversy
has arisen over the seizure in European ports of low-cost generic medicines
in transit from India to other developing countries,
which adversely affects access to affordable medicines.
Martin Khor
A NEW threat to the
health of people in developing countries is being caused by European
customs authorities seizing legitimate low-cost generic medicines being
shipped from India
and China
to other developing countries.
This has deprived patients
from having access to medicines that treat many ailments including AIDS,
heart ailments, Alzheimer's disease, psychological problems and high
blood pressure.
The medicines were
being shipped mainly from India, where they were produced by
generic drug producers, to Latin American and African countries. En
route to their final destinations, the drugs were seized in airports
in the Netherlands and Germany when the planes were in transit,
on the grounds that they could be 'counterfeit' products.
Often, the customs
actions were instigated by complaints from big European companies alleging
that the medicines may be counterfeit and violate their intellectual
property.
However, it turns out
that the medicines were not counterfeit products nor in violation of
patent laws, but were legitimately produced by Indian companies and
being imported by Brazil, Peru, Colombia, Mexico, Nigeria and other
developing countries at prices much lower than the branded drugs.
Outrage
The seizures have caused
outrage among the governments exporting and importing the drugs and
health groups. They are concerned that sick people are being deprived
of low-cost medicines, and that some European governments are blocking
legitimate trade between developing countries in order to unfairly promote
the commercial interests of their big drug companies.
According to the Wall
Street Journal of 6 August, there have been over 20 cases since late
last year when customs officials in the Netherlands
and Germany
have held up the Indian medicines, saying they violated European patent
laws, even though the drugs were not intended for sale there.
India is preparing to lodge a formal
complaint at the World Trade Organisation (WTO) aimed at stopping the
European actions. 'We see this as an attack on the Indian generics industry,'
said Rajeev Kher, a commerce official preparing the WTO case.
The complaint is expected
to claim that the European Union (EU) has allowed its giant drug companies
to misuse customs regulations on counterfeit drugs in order to stop
the trade in legitimate generic medicines.
The European countries
are said to be especially misusing the European Commission's Regulation
1383/2003, which allows the seizure of medical shipments if they are
suspected of containing counterfeits or infringing intellectual property
laws (see box).
On 7 August, the Indian
Commerce Minister Anand Sharma said his government had protested to
the European Union that its action is 'absolutely wrong'.
The Federation of Indian
Chambers of Commerce and Industry said the country's pharmaceutical
companies had been 'severely hit'. The Indian companies are incurring
extra costs by making use of transit hubs outside of Europe and to hire lawyers to defend them against the European
actions.
A group of 16 non-governmental
organisations have also protested against the Dutch and German actions.
Seizures
The Wall Street Journal
report details some of the seizures which are at the centre of the uproar:
* In October 2008,
Dutch customs at Amsterdam airport seized
a shipment of a generic blood-thinning drug, clopidrogel, which was
en route to Colombia.
The drug was produced by the Indian firm Ind-Swift, and the seizure
was made on behalf of the European company Sanofi, which consented to
the release of the drugs only in May this year. Ind-Swift has re-routed
all its shipments through Malaysia and Singapore at double the cost.
* In November 2008,
Dutch officials seized two shipments en route to Peru (of the Alzheimer's disease medicine rivastigmine
and the anti-psychotic medicine olanzapine) from Indian company Cipla.The
rivastigmine medicines, seized on behalf of Novartis company, were detained
for five months before being allowed to proceed to Peru.
The olanzapine medicines, seized on behalf of Lilly, are still held
in the Netherlands.
* In December 2008,
Dutch customs seized blood pressure drug losartan which was en route
to Brazil, and held
it for 36 days before returning it to India.
* In February 2009,
the AIDS medicine abacavir which was bound for Nigeria
was seized in Amsterdam
and was released after a complaint by the United Nations, which was
the recipient.
* In May 2009, the
generic drug amoxicillin (used in treating many bacterial infections)
was seized in Frankfurt airport en route from India to Vanuatu. It was released after the
company GSK holding the patent informed the customs that there was no
trademark infringement.
There has also been
at least one case reported of generic drugs from China
being seized at a European port.
Criticism at WTO
At a WTO meeting on
8 June, India and
Brazil
criticised the European Union for the actions which were confusing legitimate
generic medicines with counterfeit fakes, and which were undermining
poor countries' ability to obtain cheaper generic medicines.
Brazil said that trade in generic
medicines is perfectly legal and generics must not be mistaken for counterfeit
or pirated products. The European customs authorities' actions have
hampered the access of the developing world to affordable life-saving
generic medicines.
India complained that seizures have
continued to take place at European ports, despite its protests at the
WTO months ago. The seizures have an adverse systemic impact on legitimate
trade in generic medicines, South-South commerce, and universal access
to medicines.
China,
Cuba, Colombia,
Ecuador, Egypt,
Argentina, Venezuela and South Africa also spoke against the
European actions.
The European Commission,
the EU's executive arm, responded that it is fully committed to ensuring
access to medicines, but it must continue to allow its customs authorities
to act against counterfeit products. It claimed its customs regulation
is in line with WTO rules.
Martin Khor is Executive
Director of the South Centre, an intergovernmental policy think-tank
of developing countries, and former Director of the Third
World Network.
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EC Regulation
1383/2003
Nirmalya Syam
THE EC Regulation
empowers EU customs authorities to take action in respect of any
shipment suspected of infringing any intellectual property right
(IPR) in the EU even if the goods are in transit and not intended
for sale in the EU markets. The Regulation empowers customs authorities
to take an extensive range of measures in respect of such suspected
goods like suspension or detention of the goods to inform the
rights holder of the possible infringement (Article 4.1).
Generally the
rights holder has to initiate proceedings for determining whether
there has been any intellectual property (IP) infringement within
a given period. Goods that are found to infringe an IPR on the
basis of an infringement determination procedure can be confiscated
(Article 16), destroyed or disposed outside the channels of commerce
(Article 17). However, the EC Regulation also allows Member States
to do away with the need to determine whether a suspected consignment
of goods infringes an IPR in an EU country.
Article 11.1
states that Member States may provide for a simple procedure to
be used with the rights holder's agreement, which will enable
customs authorities to have the seized goods abandoned for destruction
by customs without any need to determine whether there has been
any IP infringement. Under such an arrangement, the rights holder
may simply request destruction of the seized goods without initiating
a process for determining infringement.
The TRIPS
provisions
Is such a regulation
consistent with the WTO's Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)? The preamble of TRIPS recognises
the need for providing effective and appropriate means for IP
enforcement, and also the need to ensure that those measures do
not create barriers to legitimate trade. Article 7 of TRIPS states
that protection and enforcement of IPRs should be in a manner
conducive to social and economic welfare. Hence, IP enforcement
provisions of TRIPS must be read in the context of this objective
of promoting legitimate trade and promotion of public policy objectives.
Thus, TRIPS not
only requires States to make available effective IP enforcement
procedures, but also regulates the manner in which those procedures
are to be applied. Article 41.1 states that IP enforcement procedures
'... shall be applied in such a manner as to avoid the creation
of barriers to legitimate trade and to provide for safeguards
against their abuse'.
In order to ensure
that adequate safeguards are available against the abuse of the
IP enforcement procedures, TRIPS requires that enforcement procedures
must be fair and equitable (Art.41.2, Art.42), must follow due
process, and parties to an IP infringement dispute must be given
access to judicial review.
In respect of
border measures, TRIPS only requires States to adopt procedures
to enable rights holders to apply for seizure by customs authorities
if the goods are being imported or exported (Article 51). Footnote
13 to Article 51 of TRIPS states that 'It is understood that there
shall be no obligation to apply such procedures ... to goods in
transit.' This footnote clearly obliges WTO Members (including
Member States of the EU and the EU itself) not to apply border
measures to goods in transit.
This reading
is supported if one looks at the language used in the second sentence
in Article 51 which states that Members may apply border measures
for other forms of IP infringement besides trademark counterfeiting
or copyright piracy. Therefore, it can be concluded that States
are not expected to apply border measures to the movement of goods
in transit. This interpretation is supported on a harmonious reading
of TRIPS Article 51 and its explanatory footnote 13 with the general
requirement under Article 41.1 and the preambular intention of
TRIPS.
Cross-border
movement of generic medicines in transit cannot be suspected of
infringing any IPR in the country of transit because they are
not intended for that country and do not threaten the interests
of rights holders there. However, under the EC Regulation goods
in transit can be seized on the basis of suspicion and possibly
destroyed without any determination as to whether they are legitimate.
This not only contravenes due process requirements but also violates
the freedom of transit.
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The above is extracted
from an article which appeared in South Bulletin (No. 41, 22 September
2009)
*Third
World Resurgence
No. 228/229, August-September 2009, pp 4-5
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