South, including LDCs, don’t need restrictive TRIPS decisions

Rather than accept a narrowly framed ‘solution’ to the paragraph 6 problem, developing countries can avail themselves of existing legitimate strategies to supply generic pharmaceuticals to other countries in need, contends an international non-governmental advocacy group.

by Chakravarthi Raghavan

GENEVA: Developing countries, including the least developed countries (LDCs) from sub-Saharan Africa, would be able to get all the pharmaceuticals they need from other developing countries, and they do not need a TRIPS Council decision with all the restrictive conditions currently being considered.

The developing countries can use the very same instruments that the US, the EC, Canada and other industrial nations have been using - the permissible instruments and rights that WTO members have under Articles 30, 31(f) and 31(k) of the TRIPS Agreement and the Doha Ministerial Declaration on the TRIPS Agreement and Public Health - according to a note to the WTO’s developing-country members from the Consumer Project on Technology (CPT).

The CPT, a US-based international NGO and advocacy group campaigning on TRIPS and public health issues, has said in the 27 November note that through their various proposals, the US and EC are hoping to shrink the export opportunities of developing countries available under the TRIPS Agreement.

Meanwhile, a group of associations of generic manufacturers asked the WTO members to adopt an Article 30 approach similar to the amendment proposed by the EC Parliament and which they said is also the position of the French Presidency and the Belgian Parliament.

Art. 30 of the TRIPS Agreement allows “limited exceptions” to patent rights. Art. 31, on the other hand, permits generic versions of patented products to be produced under a compulsory licence issued by a member government under certain conditions, one of which (Art. 31(f)) is that this production must be supplied “predominantly” for the domestic market.

In a recent briefing to the media, an EC trade commission official distanced the EC position from that of the US, Switzerland and Japan (on the scope of the diseases to which the TRIPS Council decision would apply), but was insistent that Art. 31(f) be amended to reflect restrictive conditions on exporters and that this be made subject to the WTO’s dispute settlement process. While the EC favoured amending the TRIPS Agreement for this purpose, it was not ready to open up the entire agreement to an amendment process. At the same time, the EC wanted some changes in the TRIPS Council Chairman’s text too, and the countries that would not avail themselves of the solution - the OECD and some of the high-income developing countries - to be mentioned in the decision in order “to provide some certainty to the industry.”

The EC was also against the Art. 30 approach, on the argument that there were others opposed to it. The official also charged that some countries were “backtracking” by not wanting to accept restrictive provisions that could be cited in dispute procedures, but chose to mention only India and Brazil, even though at an informal TRIPS Council meeting on 26 November, 10 other developing countries - China, the Philippines, Indonesia, Argentina, Sri Lanka, Pakistan, Cuba, Thailand, Malaysia and Peru - supported the Art. 30 approach as the preferred option and Australia wanted this approach to be kept open.

Though the restrictions on exporting countries sought to be put under the Art. 31(f) amendment were of the kind that had been sought in the Uruguay Round but failed to be achieved, the EC was insisting that its position was not a “TRIPS-plus” approach.

Worse off

The CPT in its note said that “while everything will depend on the nature of the final proposal, under most recent draft proposals, and certainly every draft since November 19, the developing countries would be worse off, and the US and EU are giving up little, but are using the talks in an underhand way to hit the exports of developing country pharmaceutical firms.”

Through the “limited solutions” proposed for paragraph 6 of the Doha declaration, the US is trying to claim high moral ground for limits on compulsory licensing, and quite predictably use the limited solution to pressure countries to limit exports even in areas where the TRIPS Agreement now provides flexibility.

Citing the recent letter by Rosa Whitaker (Assistant US Trade Representative) to African governments (see TWE #294), the CPT says the US intends to create a “ghetto” for compulsory licensing that is very limited in scope and which will rarely be used.

The real opportunities for “fixing” the irrational and highly inefficient problems in Art. 31(f), asserts the CPT, are unilateral Art. 30 approaches, based upon the Amendment 196 approach recently adopted by the European Parliament, which itself is a modification of an Art. 30 export strategy adopted by Canada for pre-expiration exports.

Paragraph 9 of the Chairman’s text is “cleverly and clearly” written to prejudice an Art. 30 approach, the CPT said. Though the paragraph is worded as without prejudice to the rights reaffirmed by the Doha Declaration on TRIPS, the US and others will be arguing that this means the items in paragraph 5 of the declaration, which do not address Art. 30.

The Chairman’s text singles out exports under Art. 31(f) as not being prejudiced.

In practice, once this crazy system is adopted, it will be much more difficult to take a “better deal” to a panel on an Art. 30 case. This defect could be “fixed” in paragraph 11 of the Chairman’s proposed text, and the reason it is not is that the US, the EC and the WTO secretariat do not want to do anything to legitimize an Art. 30 approach, the CPT says.

Available export options

Nevertheless, if the negotiations on paragraph 6 collapse, countries would find that there are plenty of available strategies for exports and, with the Doha Declaration fully intact and a well-advertised failure to get a decent solution to paragraph 6, plenty of high moral ground to use them.

Under paragraph 7 of the Doha Declaration, LDCs can do whatever they need to authorize exports, until 2016 at the earliest. Generic suppliers from anywhere can simply locate factories in these countries. This will do more for technology transfer and economic development in LDCs than anything else in the current drafts on technology transfer.

The TRIPS Agreement already has a green light for exports under a compulsory licence by using Art. 31(k), and it is quite flexible, says the CPT. Art. 31 (k) exempts members from the condition set forth in Art. 31(f) for purposes of remedying “a practice determined after judicial or administrative process to be anti-competitive.” Under Art. 31(k), there is no need for prior negotiation on reasonable commercial terms with patent owners. Everything including compensation can be done through an administrative process, and without any requirement for a full-blown anti-trust case; all that is needed is a simple and cheap administrative authority - there are many examples in the US itself on this.

Under Art. 31(k), there are also no restrictions on products. Typical Asian, US or European cases involve software patents (178 in one month last year), consumer electronics or biotechnology (such as the Anderson Gene Patent or the US licences on Monsanto Corn patents) or even tow-trucks. There are no restrictive or burdensome safeguards. The “refusal to deal” grounds can be used liberally.

The US, Canada, Europe and others, the CPT points out, have used Art. 30 for a variety of problems. The US has used Art. 30 for imports and exports of generic versions of patented products, without notice, without compensation and without safeguards, related to drug registration and testing.

Canada does too, and soon so will the EC. The European Parliament’s Amendment 196 is now a roadmap for the legal language for authorizing broader exports. After Doha and the Ministerial Declaration, an Art. 30 approach should clear a panel, despite US opposition.

Countries, the CPT advises, should use an Art. 30 exception and allow manufacturing if the medicinal product is intended for export to a third country that has issued a compulsory licence for that product, or where a patent is not in force and if there is a request to that effect of the competent public health authorities of that country.

The developing countries with a large market can also use Art. 31(f) for up to 49% of production, and this will allow a fair amount of spillover for several countries. Again, there need be no burdensome requirements or limitations on products or scope.

Furthermore, it will always be possible to have “offshore” production from non-WTO members, if the incentives are right. This happens now for lots of transactions highly regulated in the US or Europe.

The important message, the CPT says, is that there should be no desperation regarding the need for a “solution” in the TRIPS Council.

If the paragraph 6 negotiations fail, other strategies will be used. Some delegates may want to justify the time spent on this, but delegates “should avoid a ‘Bridge on the River Kwai’ scenario, where the bridge gets built even though it helps the enemy,” the CPT adds.

Corporate dictates

Meanwhile, three international NGOs closely monitoring the TRIPS Council talks, the CPT, Oxfam and Third World Network, accused the US, Japan, Canada, the EC and Switzerland for their stands in line with positions “clearly dictated by the demands of the big pharmaceutical companies.”

To try and limit the scope to a few small diseases is immoral, said Cecilia Oh for TWN. How is the US Trade Representative (USTR) competent to decide which disease amounts to a public health problem in any country? Not only HIV/AIDS, TB and malaria, but a whole host of other diseases including cancer, multiple sclerosis, asthma, diabetes and others are causing immense suffering in developing countries with medical treatment beyond their reach.

James Love of the CPT said that at Doha, the rich nations told the developing world to trust them to fix the problem in the TRIPS Agreement on exports of medicines to countries lacking manufacturing capacity. Now the rich nations were trying not to honour this commitment, offering a deal so prejudicial and limited that it would be less than nothing.

“The suggestion that the WTO should be bargaining over disease is appalling. And it is shocking that the US and others are explicit about excluding asthma, diabetes, cancer and other serious public health problems. Are poor people only supposed to get sick from a short list of diseases? Maybe the TRIPS Council should meet in a hospital and interview patients to find which diseases deserve to be included in this solution.”

Oxfam’s Celine Charveriat said the developed countries are showing such bad faith on this issue that “it is difficult to see how we can proceed with the so-called Doha Development Agenda if the rich countries fail to deliver on the Doha Declaration to ensure medicines are available to all.” The interests of millions of sick people in the developing world are at stake, Oxfam added.

Six associations of developing-country generic manufacturers have sent a joint letter to WTO delegations asking trade negotiators to agree upon a “solution” to paragraph 6 that is consistent with Amendment 196 to the EC Directive on Medicines Act that was recently approved by the European Parliament.

This amendment, as pointed out by many public health groups, would allow every country to deal effectively with abuses of patent rights for any healthcare product. The amendment says: “Manufacturing shall be allowed if the medicinal product is intended for export to a third country that has issued a compulsory licence for that product, or where a patent is not in force and if there is a request to that effect of the competent public health authorities of that country.”

Under such an approach, any WTO member country would have the widest set of choices in finding suppliers in those cases where an abuse of patent rights is contrary to the public interest, states the joint letter dated 26 November. The World Health Organization, the UK Commission on Intellectual Property Rights, the Belgian Parliament and the French President have all supported an approach to the export issue that is consistent with the EU Parliament position.

In most countries, the sale of medicines is regulated by governments in every significant pharmaceutical market, providing the patent owners with unique opportunities to safeguard their interests in the markets where the products are used by patients.

The EU Parliament approach would have the decisions regarding the need to authorize non-voluntary use of a patent in the country where the medicines are used, which is appropriate, say the generic producers. The approach would rightfully have the compensation for patent owners determined in the countries where the medicines are consumed, the most rational way to ensure that compensation is related to the patient’s ability to pay, a fundamental principle also in various “differential pricing” schemes.

The positions of the EC’s Trade Directorate-General and the USTR seek to undermine the value of the Doha declaration: firstly by creating the impression that each paragraph of the declaration is limited in scope by paragraph 1, secondly by creating a set of irrational and protectionist limitations on trade between countries of different incomes, and finally by imposing burdensome procedural requirements and safeguards on importing and exporting countries.

“There is no evidence,” the associations of generic manufacturers said, “that compulsory licensing has been over-used by any country, and in those cases where governments determine the public interest is served by issuance of a compulsory licence, they should have the practical ability to do so, not undermined by a deliberate and discriminatory regime of inefficiency that is masked as a free trade instrument.”

There is also no evidence that generic products have been inappropriately diverted to countries where patents are in place. As the recent problems with anthrax medications illustrated, both rich and poor countries may find themselves in need of supplies of imported generic products for a wide range of illnesses. The increasingly aggressive pricing of products such as Ceredase (alglucerase) and Glivec (imatinib) further illustrates the importance of preserving effective public health safeguards for all national governments.

The signatories  of the letter are: Latin American Association of Pharmaceutical  Industries  (ALIFAR), Asociacion de Industriales de Laboratorios Farmaceuticos (Asilfa), Industria Farmaceutica Dominicana, Republica Dominicana  (INFADOMI), Asociacion de Industrias Farmaceuticas de Origen y Capital Nacional (ADIFAM), the Indian Pharmaceutical Alliance and the Indian Drug Manufacturers’ Association. (SUNS5245)                                        

From Third World Economics No. 295 (16-31 December 2002)