TWN Info Service on WTO and Trade Issues (Dec05/11)

9 December 2005

WTO approves 'permanent solution' to TRIPS and Health

The WTO General Council on 6 November approved an amendment to the TRIPS Agreement making permanent a decision originally adopted in 2003 relating to the problem of supply of generic versions of pharmaceutical products to countries with inadequate manufacturing capacity, due to limitations in the TRIPS Agreement when using compulsory license.

The General Council endorsed the proposal to transform the 30 August 2003 'waiver' into a permanent amendment of the TRIPS Agreement.

The amendment will be formally built into the TRIPS Agreement when two-thirds of the WTO's members have ratified the change. They have set themselves until 1 December 2007 to do this. The waiver will remain in force until then.

The WTO's decision was criticised by many civil society public health and development which view the procedural requirements in the system to be too cumbersome and impractical, thus rendering it difficult if not impossible to implement.

Below is a report on the adoption of the decision.

With best wishes
Martin Khor




WTO General Council approves 'permanent solution' to TRIPS and Health

By Kanaga Raja (SUNS),  Geneva, 7 December 2005

The WTO General Council late Tuesday 6 December approved an amendment to the TRIPS Agreement making permanent a decision originally adopted in 2003 to resolve the problem of supply of generic versions of pharmaceutical products to countries with inadequate manufacturing capacity, due to limitations in the TRIPS Agreement when using compulsory license.

The General Council endorsed the proposal to transform the 30 August 2003 'waiver' into a permanent amendment of the TRIPS Agreement despite repeated appeals by civil society public health groups to the WTO Members to reject an amendment of the TRIPS Agreement that incorporates the 30 August Decision in its entirety.

These groups also object to the reading by the Chair of the General Council of a Statement (that was read during the adoption of the August Decision) which preceded the adoption of the amendment by the General Council, as they are of the view that the Statement adds on more burdensome procedures and obligations, to the already onerous 30 August Decision.

The amendment itself is in three parts. Five paragraphs come under Article 31 "bis" (i. e. an additional article after Article 31). The first paragraph allows pharmaceutical products produced under compulsory licences to be exported to countries lacking production capacity by waiving the limitations that compulsory licenses must be predominantly for supply of the domestic market.

A further seven paragraphs are in a new annex to the TRIPS Agreement. These set out terms for using the system, and cover such issues as definitions, notification, avoiding the pharmaceuticals being diverted to the wrong markets, developing regional systems to allow economies of scale, and annual reviews in the TRIPS Council.

An "appendix" to the annex deals with assessing lack of manufacturing capability in the importing country. This was originally an annex to the 2003 decision.

The amendment will be formally built into the TRIPS Agreement when two-thirds of the WTO's members have ratified the change. They have set themselves until 1 December 2007 to do this. The waiver will remain in force until then.

At a press briefing following the General Council meeting, both the General Council Chair Ambassador Ms. Amina Mohamed of Kenya and the WTO Director-General Pascal Lamy welcomed the decision to amend the TRIPS Agreement.

On the other hand, a range of civil society groups reacted negatively to the approval of the amendment of the TRIPS Agreement.

At the media briefing, Amina said that the decision was a very important one, something that members have been waiting for a long time.

She noted that just the existence of the waiver in 2003 led to a drop in the prices of pharmaceuticals, and this was something that could not be argued with especially for a country like Kenya, which is heavily affected by the AIDS pandemic.

She said that until now countries could import generic drugs without recourse to the system as there were non-patent sources such as India. But that is about to change on the basis of legislation that was recently enacted by India.

In order to put the decision in place, the developed drug exporting countries would need to make some adjustments to their legislation, which would take some time. But it was encouraging to see that in the two years since 2003 developed countries are making the changes that are necessary in their legislation to allow for the exportation of drugs to countries that need them, she said.

Lamy also welcomed the decision saying that it was an important step in that it shows for the first time that the WTO can change its rules in order to adjust to necessities for developing countries.

Speaking also about the draft Hong Kong Ministerial text that was approved by members last Friday, Lamy said that this was the first time that consensus was achieved in the General Council in support of the draft declaration as the basis for negotiations at the Ministerial conference.

It succeeded in giving ministers a clear focus in terms of topics to be taken up in Hong Kong as well as provide them with a tool for gaining greater convergence at the Ministerial conference.

If the July framework led members to fifty percent of the way towards the conclusion of the negotiations, the work that has been captured in the draft Ministerial text probably moves members somewhere around fifty-five percent of the way, Lamy said, adding that the mission in Hong Kong is now to build on this.

Ministers now have a clear guidance on where to focus their attention - agriculture, industrial goods and the package of specific measures including cotton for developing countries, especially the LDCs, he said.

In a joint statement issued on 3 December just before the approval of the amendment to the TRIPS Agreement, a group of over fifty civil society organizations said that the proposals to amend the TRIPS Agreement "are flawed, and poor countries should not accept a permanent amendment that has not been shown to work in practice."

In 2001, the WTO signed the Doha Declaration on TRIPS and Public Health, which affirms the right of countries to prioritize access to medicines and public health over intellectual property rights. However, the Doha Declaration left unfinished the issue of how countries with insufficient or no manufacturing capacity can make use of these rights.

Indeed, most poor countries are not adequately equipped to do efficient domestic production of medicines, while those which have capacity require the economies of scale of a large, global market in order to reach prices that the poor can afford. However, under the TRIPS Agreement, there are significant limitations on exports of generic medicines made under compulsory license, the groups said.

On 30 August 2003, the Members of the WTO finally agreed on a mechanism with many procedures for allowing trade in compulsory-licensed medicines. The procedures have been criticized by generic industry experts and activists alike for being too burdensome and unworkable in practice, the statement said.

"However, the US and the EU are pressuring developing countries to accept that the flawed August 30 agreement be locked in as a permanent amendment to the TRIPS Agreement - despite the fact that the mechanism has not been used since its introduction more than 2 years ago and its workability is uncertain," the NGOs said.

Following the August Decision, the statement added, the African Group submitted a formal proposal that removes many of the procedural requirements and this proposal received wide support from civil society as well as developing countries as a basis to rethink the mechanism that was agreed to on 30 August 2003.

"Unfortunately, although the African proposal enjoyed much support, in the current negotiations, this proposal does not seem to have been discussed at all. Instead, developing countries are presently being pressured to agree quickly to an amendment that includes the entire August Decision and a re-reading of the Chairman's statement - a solution differing significantly from the original African Group proposal - just so that WTO members have something to harvest at Hong Kong after four years of negotiations."

The current 30 August 2003 mechanism needs to be tested and shown to work, before it is turned into a permanent feature of the TRIPS agreement. If the mechanism proves ineffective in achieving its stated goal - enhanced access to affordable medicines for countries with insufficient or no domestic manufacturing capacity - then WTO members should return to the drawing board and agree to a mechanism that is more effective, the NGOs said.

For now, the 30 August 2003 mechanism is a waiver that according to paragraph 11 only terminates "on the date on which an amendment to the TRIPS Agreement replacing its provisions takes effect for that Member", thus effectively it is a permanent waiver for Members to use, the NGO statement said, adding that the issue is too important for countries to quickly agree to an amendment just to be able to claim that the WTO system still works and can deliver for development.

In a statement issued on 6 December, Medecins Sans Frontiers (MSF) expressed alarm over the decision of the WTO to amend the TRIPS Agreement based on a mechanism that has failed to prove it can increase access to medicines.

MSF said that the so-called 'August 30th decision,' which was designed in 2003 to allow production and export of generic medicines, has long been viewed by itself and public health groups as overly cumbersome and inefficient. Yet to date there is no experience using the mechanism - not one patient has benefited from its use - despite the fact that newer medicines, such as second-line AIDS drugs, are priced out of reach of poor patients.

MSF said that it is already being confronted with steep price increases in its projects today - paying five to 30 times more for second-line AIDS medicines to treat patients that need newer drugs.

Delaying the amendment would have been a far better option, as it would have ensured the possibility of testing and improving the mechanism in practice, MSF added.

Robert Weissman of Essential Action, a US-based public interest group, said that public health today has again been subordinated to the interests of "Big Pharma".

Promoting access to medicines for all - the promise of the Doha Declaration - demands that attention be paid to who will supply these drugs. The key issue is whether efficient generic suppliers will be able to export drugs globally and achieve economies of scale that will drive down prices and promote access.

The "solution" to the export issue to be made permanent by the agreement today is a "very-difficult-to-manage" approach to a not-very-complicated problem. It will be hard to achieve economies of scale under the amendment, at least until countries figure out how to maneuver around the amendment's obstacles, Weissman said.

The bottom line result: there will be less competition, higher prices for medicines, and less access to essential medicines - all with very real life-and-death consequences.

Meanwhile, in a letter addressed to US Trade Representative Robert Portman on 5 December, three US members of Congress, Henry A Waxman, Sherrod Brown and Thomas H Allen, called for immediate clarification of the US government stance on access to generic medications at the Hong Kong Ministerial conference. They said that the positions reportedly taken by the US threaten access to affordable generics, both for developing nations and the US itself.

At issue, the Congressmen said, is the ability of countries to import generic versions of a patented drug. The US has stated that it will not take advantage of a process that would allow it to import generics under a compulsory license, even if the public health requires it. In addition, it has reportedly pushed for provisions that could make it harder for all countries, including the poorest, to access generics in this manner.

The three Congressmen noted that in August 2003, WTO members established a temporary mechanism by which countries could issue compulsory licenses to manufacturers in other nations and then import the drugs. While this addressed an important gap in the Doha Declaration, the mechanism has been criticized by public health organizations and experts as placing undue burdens on countries' abilities to issue such licenses, they said.

Specifically, the August Decision involves a separate process for every country and every drug, diminishing economy of scale and reducing the incentive of generic manufacturers to produce for other governments. Furthermore, the August Decision mechanism has not been employed, and there is therefore no evidence yet of whether it can work to provide effective and speedy access to generic drugs.

The Congressmen said that despite the August 2003 proposal's apparently unwarranted complexity, the lack of evidence that it will be effective, and the concern of developing nations most directly affected, US and European negotiators have reportedly insisted that it be incorporated into the TRIPS Agreement as a permanent amendment. They also reportedly urged that the Chairman's Statement from 2003 be incorporated into the agreement. Though they appear to have relented on this demand, they have reportedly insisted that the statement be read again at the upcoming Hong Kong Ministerial.

"Furthermore, we understand that the USTR maintains the position that the US will not avail itself of the opportunity to issue a compulsory license for importation even in the event of a crisis. We believe that this is an untenable position, especially in light of the current threat of an avian flu pandemic."

The letter requested clarification of the US government's position on compulsory licensing for importation. "Specifically, we would like to know why the US reportedly wishes to make permanent a system that has been criticized as overly burdensome and has not yet been shown to be effective."

In addition, the Congressmen requested an explanation of why the US should foreclose the possibility of using the importation mechanism.