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TWN Info Service on WTO and Trade Issues (Dec05/10)

9 Dec 2005


Rushing through a "permanent solution" for TRIPS and Health

On Tuesday 6 November, the WTO's TRIPS Council and General Council adopted a decision to amend the TRIPS Agreement in relation to the issue of supply of medicines for countries with no or inadequate drug manufacturing capacity.

This is the "permanent solution" to the problem identified in paragraph 6 of the 2001 Doha Declaration on TRIPS and Public Health.

Below is a report giving the background to the process that led to the decision and amendment.

It was written for the SUNS just before the decision was made at the TRIPS Council and General Council.

Another report of the proceedings of the Councils will be sent to you shortly.

With best wishes
 Martin Khor
TWN

PLEASE VISIT THE TWN WEBSITE FOR PREVIOUS TWN INFO ARTICLES, AND ALSO FOR NEW REPORTS AND ANALYSES OF WTO AND TRADE ISSUES

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Rushing through a "permanent solution" for TRIPS and Health

By Sangeeta Shashikant, Geneva, 6 December 2005

Intense and rushed formal and informal consultations have been taking place since last Friday 2 December to find agreement among WTO Members on the content of an amendment to the TRIPS Agreement, which is to constitute a "permanent solution" for facilitating the supply of medicines to countries with insufficient or no drug manufacturing capacity.

This is in relation to paragraph 6 of the Doha Declaration on TRIPS and Public Health of 2001, in which the TRIPS Council was directed to resolve this problem of supply.

The amendment being discussed over the past few days is based on the Decision adopted by the WTO General Council on 30 August 2003. That decision, involving essentially a waiver of a limitation in Article 31(f) of the TRIPS Agreement together with several conditions and procedures for its use, was a "temporary solution", and efforts have been made to find a "permanent solution" in the past two years.

Just before the 30 August 2003 decision was adopted, a statement was read by the Chairman of the General Council comprising some "shared understandings." This statement contained further conditions and procedures. The reading of this statement was a condition by the US for agreeing to the temporary waiver.

The "permanent solution" that is being discussed basically constitutes converting the temporary waiver contained in the Decision (together with the conditions for the use of the waiver contained in the Decision) into an amendment of the TRIPS Agreement.

As part of the package being discussed for adopting the "permanent solution", the content of the 30 August 2003 Chairman's statement is also to be read out by the Chair of the General Council just before the "permanent solution" is adopted by the Council.

By Sunday, members had almost reached agreement on the final package in relation to the amendment. Several delegations are still waiting to receive the "go-ahead" from their capitals on this package. A decision is expected to be taken by the TRIPS Council late on Tuesday afternoon, to forward the proposed amendment of the TRIPS Agreement to the General Council. The General Council, which is to convene right after, is expected to adopt the amendment.

One of the contentious issues still outstanding is a request by the Chairs of the General Council and the TRIPS Council that there be no statement by any delegation (not even to thank or congratulate the Chairs) before or after the adoption of the decisions at both the Councils. Some delegates believe that this is a curb on their rights, and also sets a bad precedent. It is believed that a few delegations would like to exercise their right to make a statement.

It is understood that the aim of the Chairs' requests is to avoid reservations or "own interpretations" being put in by members on the amendment and the Chairman's Statement. In August 2003, the Philippines made a statement at the TRIPS Council before the adoption of the decision, expressing its own understanding.

The Decision is essentially a waiver of the TRIPS Article 31 (f) limitation that compulsory licenses should be predominantly for the supply of the domestic market. Patent experts and public-interest health groups have criticized the Decision for containing numerous procedures that exporters and importers of generic medicines have to comply with, making the system difficult to use and creating barriers to access to medicines.

The Chairman's statement adds further burdensome obligations that many experts say are a disincentive for generic producers.

The TRIPS Council has been mandated in paragraph 11 of the Decision, to initiate work on the preparation of an amendment to the TRIPS Agreement.

There had not been much movement towards an amendment of the TRIPS Agreement since last December when the African Group submitted its proposal for an amendment. This proposal sought to simplify the Decision by dropping many of the procedural barriers and disregarding the Chairman's statement. This proposal is widely supported by civil society and other developing country members as a basis to rethink the mechanism established by the Decision.

In recent months, the EU and the US have been engaging the African Group in consultations and many informal proposals have come out of these consultations, but with no concrete agreement among members. One sticking point in those consultations was how to treat the Chairman's statement.

Developing countries generally do not want this statement mentioned anywhere in the amendment, while the US had been pushing for such a reference to be made, in order to strengthen its legal status.

Consultations on this matter took a new turn recently when the Chair of the General Council, Ambassador Amina Mohamed of Kenya, made personal appeals to delegations to agree on amending the TRIPS Agreement. Following this appeal, it was proposed to delegations that the basis of the amendment would be the Decision in its entirety and a re-reading of the Chairman's statement, with no reference whatsoever to the statement in the amendment.

The African Group looked favourably on this proposal as it is very keen that there be a decision on an amendment to the TRIPS Agreement prior to the Hong Kong Ministerial. The implication is that the Group has effectively dropped its original December 2004 proposal of amending parts of the Decision.

The interest shown by Ambassador Amina Mohamed as well as by the Chair of the TRIPS Council and the keenness of the African Group, put significant pressure on other developing country delegations to engage on the proposal that was being put forward to them by the two Chairs and to quickly reach an agreement on some sort of an amendment of the TRIPS Agreement, to reflect the Decision.

Many of these delegations felt they were being unnecessarily pressured to agree to a "package", wherein the main document had only been given on Friday afternoon (with other documents, such as a new Chairman's statement and a "choreography" for the adoption of the amendment being given on Sunday). Moreover, they needed time to consult their capitals.

Some delegations are also of the view that there is no urgency to decide on an amendment, especially since the waiver in the Decision will stay in effect, as "it shall terminate for each Member on the date on which an amendment to the TRIPS Agreement replacing its provision takes effect for that Member" according to paragraph 11 of the Decision.

Some of these delegations are also of the opinion that the mechanism in the Decision should first be tested as to whether it facilitates access to medicines, before making it a permanent feature of the TRIPS Agreement.

This view is also widely held by civil society, particularly by the health-related NGOs, which called it a "bad deal on medicines". In a joint statement sent to the delegates on Monday, 31 NGOs have stated that an amendment to the TRIPS agreement should not be made until there is certainty that the mechanism established by the amendment will promote access to medicines to countries with no manufacturing capacity. The number of NGO sign-ons to the joint statement has increased to 53.

They added that the mechanism set up in the Decision has not been tested and its workability is uncertain, thus it should not be made a permanent feature of the TRIPS Agreement, particularly since the lives of millions of people depend on an effective mechanism.

According to one African delegate, the proposed amendment provides predictability and certainty to exporters and importers. On why there was need for an amendment to be made before Hong Kong, another African diplomat said the matter should not be discussed in the Hong Kong Ministerial as there is a strong possibility that a worse outcome will emerge if such technical details are left to Ministers to agree on, as they are not familiar with the issue and there could be pressure applied by developed countries during the Ministerial.

The proposed amendment would add a new Article (Article 31 bis) to the TRIPS Agreement following the original Article 31. Article 31 bis contains 5 important waivers that were in the Decision. In particular, it waives an exporting country from being limited by the condition of "predominantly for the supply of the domestic market" (Article 31 (f) of the TRIPS Agreement), in cases where a compulsory license is issued for the purposes of production of a pharmaceutical product and its export to an importing country which has insufficient or no manufacturing capacity.

However, to use Article 31 bis Members have to follow certain procedures and these are laid out in an Annex to the TRIPS Agreement (the system). According to a legal expert, the Annex is an integral and thus an operative part of the TRIPS Agreement.

Further, under Article 31 bis, if a compulsory license in granted in the exporting country for a product, remuneration shall be paid to the patent holder in that country. Where a compulsory license is granted for the same product in the importing Member under the system established, the importing Member is waived from having to pay remuneration.

It also provides that regional groupings where "at least half of the current membership of which is made up of countries presently on the UN list of least developed countries" the limitation of Article 31 (f) shall not apply "to the extent necessary to enable a pharmaceutical product produced or imported under a compulsory license in that Member to be exported to the markets of those other developing or least-developed country parties to the regional trade agreement that share the same health problem". Generally, it is understood that this provision mainly applies to regional groupings in Africa.

Besides that, Article 31 bis and the Annex is without prejudice to the rights, obligations and flexibilities that Members have under the TRIPS Agreement including those reaffirmed by the Declaration on TRIPS and Public Health.

The fifth waiver is that Members shall not challenge any measures taken in conformity with the provisions of Article 31 bis and the Annex under Articles 1(b) and 1(c) of Article 23 of the GATT, which are provisions on non-violation complaints.

Currently there is a moratorium on the applicability of these provisions to the TRIPS Agreement. This issue has yet to be resolved among members; therefore, some developing countries raised the fact that this provision should not prejudge the resolution. During the consultations, it was proposed that the Chair of the General Council will make a short statement on this matter.

The Annex, which basically reproduces parts of the 30 August 2003 decision that are not in Article 31 bis, contains definitions of "pharmaceutical product", "eligible importing member" and "exporting member" that qualify to use the system established by the amendment.

It also outlines procedures that the eligible importing member has to follow, such as notification to the TRIPS Council on ( a) the names and quantities of the product needed, ( b) confirmation that it has established that it has insufficient or no manufacturing capacity in the pharmaceutical sector for the product in question,

( c) confirmation if there is a patent, it has granted or intends to grant a compulsory license in accordance to Article 31, 31 bis and the Annex of the Agreement.

For the exporting country, the compulsory license issues must contain conditions that:

( i) only amounts necessary to meet the needs of the eligible importing Member may be manufactured under the licence and all this production shall be exported to the Member which has notified its needs to the TRIPS Council;

( ii) products produced under the licence shall be clearly identified as being produced under the system through specific labelling or marking. Suppliers should distinguish such products through special packaging and/or special colouring/shaping of the products themselves, provided that such distinction is feasible and does not have a significant impact on price; and

( iii) before shipment begins, the licensee shall post on a website information on the quantities being supplied to each destination and the distinguishing features of the product referred to.

The exporting Member shall also notify the TRIPS Council of the grant of the licence, including the conditions attached to it. Information shall include the name and address of the licensee, the products for which the licence has been granted, the quantity for which it has been granted, the country to which the product is to be supplied, the duration of the licence, and the website address.

The Annex also provides that Members shall take measures to deal with the problem of diversion of products. It recognizes that the desirability of promoting technology transfer and capacity building in the pharmaceutical sector to overcome the paragraph 6 problem. It further provides that the TRIPS Council shall review annually the functioning of the system with a view to ensuring its effective operation and shall annually report on its operation to the General Council.

An Appendix to the Annex outlines how the assessment of manufacturing capacities will be undertaken in the pharmaceutical sector. LDCs are deemed to have insufficient or no manufacturing capacities in the pharmaceutical sector. Other eligible importing Members with insufficient or no manufacturing capacity has either to establish it has no manufacturing capacity in the pharmaceutical sector; or where it has some manufacturing capacity that it is currently insufficient for the purposes of meeting its needs. When such capacity has become sufficient, the system shall no longer apply.

How to treat the Chairman's Statement of 30 August 2003 has been the main sticking point during recent months' informal consultations between the African Group, the US and the EU.

The US has until recent days been insisting on referencing the Chairman's statement in some way in the text of the amendment. The African Group rejected this as it feared this would elevate the status of the Chairman's statement. Many other developing countries, including India and Brazil, had also made clear that they could not accept any permanent solution that elevated the status of the Chairman's statement.

The Decision when it was adopted in 2003 did not have any reference to the Chairman's statement. It was the Secretariat, that on it own initiative added an asterisked note in subsequent versions of the Decision document linking the Decision to the Chairman's statement.

In the recent days' consultations, the understanding is that there would be no mention of the Chairman's statement in the amendment (either in the main text or annex). However, a new Chairman's statement, with similar substantive contents to the 2003 Statement, will be read by the Chair of the General Council prior to the adoption of the amendment.

While agreeing to this approach in principle, the US had in the past few days' consultations tried some ways to make reference to the Chairman's statement in other related documents.

One of its proposal was that the preamble of the Decision of the General Council on the Amendment of the TRIPS Agreement would include that "the relationship between the statement of the General Council Chairman and the amendment will be the same as the relationship between the 30 August 2003 Statement of the General Council Chairman and the General Council Decision of 30 August 2003". This was not agreeable to other members.

During the consultations, the WTO Secretariat produced a draft decision of the General Council on the amendment. It contained a footnote at the end of the sentence "Recalling the paragraph 11 of the General Council Decision of 30 August 2003 on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health".

The footnote stated "Document WT/L/540 and Corr 1". The former is a document number for the August Decision (which contains a footnote on the Chairman's statement), while the latter refers to a recent information note issued by the Secretariat, with a new and corrected version of that footnote.

The footnote had been objected to by many developing countries as it had not been present in the original Decision document that was adopted by the General Council in August 2003. They have been insisting that the footnote be removed. In the last few days' consultations, they rejected the reference (in the new draft decision) to the two documents as these contain the controversial footnote.

In a draft document prepared by the WTO Secretariat containing the TRIPS Council Decision to submit the proposed amendment of the TRIPS Agreement to the General Council for adoption, a reference to forward the Chairman's statement was included as well. The developing countries also insisted that this reference be removed. Another controversial issue that was hotly discussed was how to manage the reading of the Chairman's statement at the TRIPS and General Council.

According to diplomatic sources, the US does not want any Member to make any statement either prior to or after the Chairman's statement is read. This is to avoid a situation in which developing countries could place on record their own understanding or interpretation of the amendment or the new Chairman's statement.

In August 2003, the Philippines made a statement prior to the approval of the texts at the TRIPS Council. It said that "while the Chairman's Statement 'represented several key shared understandings of Members', it did not represent all the understandings shared by the membership." It then went further to provide what it believed to be Members' understandings on the key aspects of the August Decision.

During the consultations, a document was given to members outlining a so-called "choreography" containing 9 steps to be followed to adopt the amendment. The 9 steps are as follows:

1. The Council for TRIPS would agree, without other statements before or after its agreement, to forward a proposal to the General Council containing the draft Decision on the Amendment and the text of the Statement to be read out by the Chairman of the General Council prior to the adoption of the Decision by the General Council.

2. The proposal would be introduced in the General Council by the Chairman of the Council for TRIPS.

3. Representatives of the 11 partial opt-out Members would then make statements in the General Council regarding their intention to use the system as an importer, only in situations of national emergency or other circumstances of extreme urgency. If they do not make such a statement, it would be expected that they would have sent a letter in advance to this effect.

4. The Chair of the General Council would then state that "it is understood that paragraph 4 of Article 31bis in the proposed amendment is without prejudice to the overall question of the applicability of subparagraphs 1(b) and 1(c) Article XXIII of GATT 1994 to the TRIPS Agreement and to the different positions of Members on this subject".

5. The Chair of the General Council would then read out the Chairman's Statement.

6. The Chair of the General Council would then propose that the General Council take note of the statements and, in the light of the Chairman's Statement she had just read out, adopt the draft decision.

7. The General Council would then so agree.

8. The Chair of the General Council would then state that Members have asked her to state, on their behalf, that Members reaffirm the statements they made after the adoption of the General Council Decision of 30 August 2003, and propose that the General Council consider this done. The General Council would then so agree.

9. No further statements would be made and the meeting would be closed.

Some observers as well as diplomats commented that it was strange that the WTO was now turning to "choreography" to ensure that its members obediently follow procedures that request that they give up their right to make their views known before and after adopting an important decision.

It is not known, at press time, whether this choreography will be followed.

 


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