No progress on TRIPS and public health at WTO

WTO member states remain deadlocked over how countries may import patent-protected pharmaceutical products which they are unable to manufacture domestically to serve public health needs.

by Chakravarthi Raghavan

GENEVA: The WTO’s Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS), at its meeting in the week of 16 September, appears to have made no progress in finding an “expeditious solution” to the difficulties faced by member countries with “insufficient or no manufacturing capacities” in the pharmaceutical sector in using compulsory licensing to meet public health needs.

The Doha WTO Ministerial Conference, in paragraph 6 of its Declaration on the TRIPS Agreement and Public Health, directed the TRIPS Council to find an expeditious solution and report to the General Council before the end of 2002.

The problem arises from the fact that the compulsory-licensing right (Article 31(f) of the TRIPS Agreement) of countries to enable local production of patented pharmaceutical products to meet essential health needs can be used only to supply drugs “predominantly” for the domestic market. To countries with insufficient or no manufacturing capacity, this provides no solution, for even if they could issue a compulsory licence to import from a manufacturer in another country, that manufacturer could be precluded from exporting.

Trade diplomats said that there was a repetition of the positions of various protagonists put forward at the last meeting, and in some respects the discussions even went back to the pre-Doha talks.

A solution would involve importing generics (under compulsory licence) or low-priced patented pharmaceuticals (prices lowered because of the threat of compulsory licensing) into countries lacking manufacturing capacity.

There are four ideas on the table:

   *  amending Art. 31 (which deals with compulsory licensing);

   *  interpreting Art. 30 (with possible “limited exceptions to the exclusive rights conferred by a patent” rather than compulsory licensing as such) such that it would enable both the manufacture locally of a patented product in a country with capacity and its export to the country needing it;

   *  a waiver, to a country or group of countries, from carrying out their obligations under the TRIPS Agreement in this area, and

   *  a moratorium on raising disputes in this area.

Some countries have also suggested the use of a waiver as a temporary solution pending an Art. 31 amendment. (For a more detailed discussion of the four options, see “The problem with Paragraph 6”, TWE #283.)

The discussions have also focussed on the products that would be covered in any solution, the countries that could import and from where.

Developing countries generally prefer a more liberal approach: countries would determine for themselves whether they are eligible to import or export under compulsory licensing; and “pharmaceutical products” should be interpreted broadly, e.g., to include diagnostic kits and relevant equipment. Among developed countries, Norway supports this view.

India and a few others also said that the “products” should be interpreted to include the basic and active ingredients for a medicine or product, so that a country with insufficient or no manufacturing capacity could import these and then produce the actual product for sale on its markets.

Developed countries largely prefer clearer criteria of eligibility to exercise the right, to be based on income or market size, although least-developed countries would automatically be eligible.

In terms of sourcing imports and exporting a compulsorily licensed product (to a country with insufficient or no manufacturing capacity), the US seemed to advance the view that the imports and exports should be from South to South. The EC and others did not seem to take a position at this time, but left the impression that they were keeping their options open.

In the latest discussions, Lesotho came out in support of the waiver/moratorium approach, with the US backing and praising it. However, the Africa Group of countries made clear that it stood by its paper and position at the last meeting (supporting an amendment to Article 31(f) of TRIPS while leaving open also the Art. 30 approach).

The WTO secretariat has been asked to compile information on the use of waivers in the WTO.

Public health perspective

The World Health Organization (WHO) representative, an observer at the TRIPS Council, came out in favour of the Art. 30 approach. The WHO drew attention to a paper published by it (and available on the WHO website) saying that to give effect to paragraph 6 of the Doha Declaration from a public health perspective, the decisions should provide a stable international legal framework; transparency and predictability of the applicable rules in the exporting and importing countries; simple and speedy legal procedures in the exporting and importing countries; equality of opportunities for countries in need of medicines, even for products not patented in the importing country; facilitation of a multiplicity of potential suppliers of the required medicines, both from developed and developing countries; and broad coverage in terms of health problems and the range of medicines.

From the basic public health principle, the WHO said, it was clear that the people of a country which does not have the capacity for domestic production of a needed product should be no less protected by compulsory-licensing provisions (or indeed other TRIPS safeguards), nor should they face any greater procedural hurdles, compared to people who happen to live in countries capable of producing the product.

The WHO said that among the solutions proposed, the limited exception under Art. 30 “is the most consistent with this public health principle.” This solution will give WTO members expeditious authorization, as requested by the Doha Declaration, to permit third parties to make, sell and export patented medicines and other health technologies to address public health needs.

The statement by the representative of the World Intellectual Property Organization (WIPO) (available on the WIPO website), according to some trade diplomats, seemed to incline towards the positions of the intellectual property rights holders, i.e., the pharmaceutical patentees and the international pharmaceutical manufacturers association.

WIPO spoke about the need to strike a balance between patents and access to drugs and healthcare, which it noted had received worldwide attention focussing on the HIV/AIDS crisis.

WIPO argued that some of the discussions involving the relation between the intellectual property system and access to healthcare appeared to be based on a misunderstanding or misconception of the patent system.

Patents, WIPO argued, performed an essential role in stimulating the development of essential drugs, including anti-AIDS drugs, by offering incentives for investing in expensive and long-term research and development of new drugs. Without patents, existing anti-AIDS drugs would not have been produced. Without patents, new and better drugs that are needed to overcome the increasing resistance of the AIDS virus would not be developed.

WIPO also went on to outline the various benefits (claimed by industry) and called for a proper balance between public health concerns and the interest of the patent owner, a balance which it claimed existed within the patent system.

The “myths and facts” arguments on the WIPO website on this issue, several Third World diplomats and outside observers said, presented more or less the same points as in the pre- and post-Doha presentations of the pharmaceutical industry.

Views of UK Commission

Apart from general, and critical, views on the global intellectual property system and its coming in the way of development, including some critical views from the UK patent judge, the recent report of the (UK) Independent Commission on Intellectual Property Rights (see “IPRs costly for Third World, don’t help reduce poverty” and “IPRs may need ‘re-scrutiny’, says UK minister” in TWE #289) has dealt with the Doha Declaration and various possibilities and options (pp. 42-49).

Referring to the compulsory-licensing right, the report has said that those countries that have the capacity to produce need to have laws that would provide:

   *  transparent, straightforward and fast procedures, with appeal procedures that would not suspend the execution of a compulsory licence issued;

   *  for fully exploiting the flexibilities in TRIPS for determining the grounds for compulsory licensing as well as for non-commercial use by governments, including production for export; and

   *  clear, easy-to-apply and transparent guidelines for setting royalty rates (which may vary).

The Commission has cited the New Zealand law in respect of non-commercial use of a patent by government through compulsory issue of a licence, to show that this particular right is much wider than thought: “[A]ny government department ... may make, use, exercise and vend any patented invention for the services of the Crown and anything done by virtue of this subsection shall not amount to infringement of the patent concerned.”

On the waiver approach, the Commission has pointed out that this route involves also annual or periodic reviews by the Ministerial Conference, thus introducing an element of uncertainty.

On the issue covered by paragraph 6 of the Doha Declaration, namely to enable countries with insufficient or no capacity to issue a licence and import, the Commission has said that compulsory licensing should be seen as a means to an end - “to help achieve the lowest possible cost of medicine in developing countries in order to facilitate access.”

This, the report says, requires that aside from legal and administrative aspects, compulsory licensing  will only be effective if the compulsory licensee sees the possibility of a reasonable return from his investment while also supplying at a significantly lower price than the patentee or his licensee.

Noting the TRIPS provisions about the full application of process and product patents from 2005, the report points out that the ready supply of generic substitutes for patented drugs will gradually disappear and “potential compulsory licensees would therefore have to charge a price closer to full economic cost (including start-up and manufacturing costs) as compared to the possibility of providing off-the-shelf generics at prices where start-up costs have been amortized to some extent.

“We therefore see the problem identified at Doha as being as much economic as legal. A quasi-legal solution as may be identified in the TRIPS Council is necessary, but by no means sufficient to solve the problem we have outlined ...”

Paragraphs 5(b), 5(c) and 1 did not, as sometimes assumed, refer only to compulsory licensing in situations of emergency or urgency, but to public health problems resulting from HIV/AIDS, TB, malaria and other epidemics.

The use of the words “countries with insufficient manufacturing capacity” should be seen as requiring an economic interpretation. If production in a country is technically feasible but extremely costly, that country should be viewed as having “insufficient capacity” and allowed to issue a compulsory licence and import from a country with capacity.

While the Doha Declaration does not specify the countries that can act as suppliers, in order to maximize competition and achieve the lowest prices possible, “applying no restrictions on which WTO members may act  as supplier would seem to be the  logical  market-based solution.”

The Commission has also taken note of the several proposals on the table, and has said that the proposal for amending Art. 31(f) on compulsory licensing - which now deals with both public health and other grounds -  to provide specifically for public health problems, would be time-consuming. It notes the use of Art. 30 (limited-exceptions route) favoured by some developing countries and active NGOs, and the problems relating to export by a nation with a compulsory licence.

“The choice between various options will be worked out politically, but we strongly emphasize our concern that whatever the legal solution adopted by the WTO is, it should proceed upon the following principles:

“First, it should be quickly and easily implementable with a view to long-term solution. Second, the solution should ensure that the needs of poor people in developing countries without manufacturing capacity are given priority. Third, it should seek to ensure that conditions are established to provide potential suppliers the necessary incentive to export medicines that are needed.”

At the end of the TRIPS Council discussions, the Council chairperson (the ambassador of Mexico) said that “frankly” there is still a long way to go, with too much repetition of known positions. The Council is at the same point as it was before the summer break, he said, and more flexibility is needed on all sides. He said he would hold numerous consultations of different kinds before the November formal meeting. The process would be transparent and open to all members, with an informal meeting of the Council on the evening of 17 October, he said.

Other issues

On the subject of extending the higher level of protection of geographical indications of origin (Art. 23 of the TRIPS Agreement) beyond wines and spirits, namely protection even if there is no risk of misleading consumers or unfair competition, the discussions also showed a repetition of earlier positions.

The European countries and some developing countries (India, China, etc.) favour extension and want negotiations on this. The  US, non-European developed countries and some developing countries (Latin American Cairns Group members, Korea, Chinese Taipei) oppose the move on the grounds that the regular level of protection (Art. 22) is good enough. Some countries have also linked progress on this to the agriculture negotiations.

Bulgaria repeated its warning that if there is no response on this issue, its own position on other mandated subjects will be affected.

The chairperson noted that 35 delegations had spoken but that a lot of work still remains. He called an informal meeting on 10 November for further discussions.

On the issue of Art. 27.3(b) of TRIPS (relating to intellectual property protection  for plants and animals) and the related issues of biodiversity, traditional knowledge and folklore, the members had discussions in greater detail than at earlier meetings. However, trade officials said the positions are largely unchanged. There was some reference to the declaration of the recently concluded Johannesburg Earth Summit.

Developing countries generally favour a means of ensuring that the TRIPS Agreement is implemented in a way that would provide benefit-sharing, disclosure of sources of genetic material for example in patent applications, and “prior informed consent” before researchers can have access to genetic resources in a locality. This would ensure that there is no conflict between TRIPS and the Convention on Biological Diversity.

Many developing countries also want the TRIPS Agreement amended, for example, to require sources to be disclosed in patent applications. The EC’s new “concept paper” includes the idea of benefit sharing but as a requirement separate from patent processes.

Others say that the TRIPS Agreement is already adequate. The US in particular advocates the use of contracts, which are already possible under all countries’ existing laws.

On the issue of protection of traditional knowledge and folklore, databases of traditional knowledge are being or sought to be created, particularly in WIPO. These can be used by  patent examiners to determine whether a claimed invention is really new. Some communities want their traditional knowledge and folklore to be protected so they can control the use. There is also the issue of traditional knowledge being  a basis for benefit-sharing.

The discussions at the TRIPS Council centred around whether existing international agreements and domestic laws are adequate for protecting traditional knowledge - the US said they are; developing countries are not convinced. There was also some discussion about whether the TRIPS Council should wait for developments in WIPO and other organizations.                                              

The above is an abridged version of an article which first appeared

From Third World Economics No. 290 (1-15 September 2002)