TWN Info Service on WTO and Trade Issues (Dec06/04)

06 December 2006

Thailand announced on 29 November that the government has issued a 5-year compulsory licence for the domestic manufacture of a much cheaper generic AIDS drug - Efavirenz

In the meantime, imports of the generic drug from India under the same compulsory licence will start.  The cost of the drug for treatment will be USD 22 per month using the Indian generic version compared to the Merck price in Thailand which is USD 41 per month.  The cost of the locally produced drug is expected to cost around half of Merck’s. Payment equivalent to 0.5 per cent of the sales in Thailand for the generic version of efavirenz will be made to Merck.

See below news stories and press release on Thailand’s issuance of compulsory license

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Sangeeta Shashikant
Third World Network
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By Chee Yoke Ling, Third World Network (

1 December 2006

(Please note that this story is a modified version of what was first published in SUNS #6153 Friday 1 December 2006)

Thailand’s Ministry of Public health announced on 29 November that the government has issued a 5-year compulsory licence for the domestic manufacture of a much cheaper generic AIDS drug.

Coming just before World AIDS Day on 1 December the move was a victory for people living with HIV/AIDS, health activists and governments trying to treat citizens in the face of astronomical drug prices.

This is the first time Thailand has used a legal tool allowed under patent law and enshrined in the World Trade Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS). 

The antiretroviral drug, efavirenz, which is recommended by the World Health Organization (WHO) for HIV/AIDS treatment is commonly used and considered by doctors as one of the best components for first line therapy because it has less side effects and is more suitable for those co-infected with other diseases such as tuberculosis or liver infections. Although it has been in the market for many years, efavirenz remains very expensive around the world.

Originally developed by Dupont Pharma, the drug is now marketed by Bristol-Myers-Squibb.  Merck, another pharmaceutical giant, has marketing licence rights in a number of countries including Thailand and China.

According to The Nation, , “the so-called government compulsory licensing took effect immediately following [the] announcement and the Government Pharmaceutical Organisation (GPO) was expected to start mass production of a generic version of the drug in six months”.  In the meantime, imports of the generic drug from India under the same compulsory licence will start.  The cost of the drug for treatment will be USD 22 per month using the Indian generic version compared to the Merck price in Thailand which is USD 41 per month. The cost of the locally produced drug is expected to cost around half of Merck’s.

Payment equivalent to 0.5 per cent of the sales in Thailand for the generic version of efavirenz will be made to Merck.

Minister of Public Health Dr. Mongkol na Songkhla told The Nation, a daily national newspaper in Thailand that there were about 500,000 HIV-infected people who needed to use antiretroviral treatments yet only about 100,000 had access to the drugs because of the high prices - as well as insufficient budgets. "Of course, the company [patent holder/licensee] will do something to oppose this but we're doing everything according to not only the country's law, but also international law," said Mongkol.

Under the TRIPS Agreement, a compulsory licence can be issued to someone other than the patent holder to manufacture or import a product under patent.  When used by a government (or a contractor of the government) for public non-commercial use there is no need for prior negotiations with the patent holder. In this kind of compulsory licensing, commonly called “Government Use”, it is sufficient for the government to inform the patent holder, and to pay an “adequate remuneration”.

Compulsory licensing is an important legal tool to ensure access to affordable medicines and its importance and use were reaffirmed in the 2001 Doha Declaration on the TRIPS Agreement and Public Health. 

Thailand’s Patent Act 1999 in section 51 states that any ministry, bureau or department of the Government may, by themselves or through others, exercise the compulsory licensing right “in order to carry out any service for public consumption or which is of vital importance to the defense of the country or for the preservation or realization of natural resources or the environment or to prevent or relieve a severe shortage of food, drugs or other consumption items or for any other public service”. 

The Thai Network of People Living with HIV/AIDS (TNP+) and other HIV/AIDS activists hailed the Thai government’s decision. They have been at the forefront to advocate for the government to use the flexibilities in the TRIPS agreement.

In a march that ended at the Ministry of Public Health on Wednesday when the announcement was made, TNP+ in a press statement said, “This ground breaking decision sets an important precedent for the issuing of CL for other desperately needed but costly medication for other chronic diseases such as kidney disease and cancer”.

According to TNP+, the National Health Security Office formed a committee dedicated to investigating the possibility of issuing a compulsory license. “The compulsory licence will allow the Thai government to import a generic version of efavirenz from abroad until the GPO is able to produce its own generic version saving the Public Health System millions of baht a year,” the Network said.

"Thank you for the courage of the Public Health Ministry. It's remarkably brave," said Nimitr Tienudom, the manager of AIDS ACCESS Foundation, in a report of The Nation newspaper.

According to the international medical humanitarian organization, Médecins Sans Frontières (MSF), at least 12,000 people in the country are estimated to need efavirenz, but due to cost and supply difficulties, the number receiving the drug is significantly lower.

“Merck’s supply of efavirenz has not been reliable, and has resulted in treatment interruptions, forcing several hospitals to supply sub-optimal dual therapy,” said Dr. David Wilson of MSF in Thailand.

In welcoming this important move MSF also urged the government to issue such licenses for the production of other essential medicines. “Thailand is demonstrating that the lives of patients have to come before the patents of drug companies, and this policy needs to be expanded to essential drugs that are expensive and in short supply, such as the AIDS drug lopinavir/ritonavir, which currently costs over USD 194 and is far too expensive for Thailand,” said Dr. Wilson.

Thomas Cai of AIDS Care China, an HIV/AIDS community group based in the southern city of Guangzhou also joined the support for the Thai Government’s move.

On Tuesday, the China Treatment Advocacy Coalition comprising 27 independent groups of persons living with HIV/AIDS in China, issued a press statement as part of their continuous efforts which started 2 years ago to get Merck to reduce the price of efavirenz. 

According to the Coalition, among the approximately 30,000 people receiving free anti-retroviral therapy from the government in China, fewer than 3,000 are able to receive efavirenz due to high costs. Efavirenz is much more suitable for those who have liver infections, and a large number of HIV/AIDS patients in China have such co-infections, the statement explained.

However, the Coalition said that: “We have only seen delays and prevarications from [Merck], including in reply to our latest letter in October 2006. Therefore, we believe that it is our responsibility to report this situation to the press, and we hope that this media exposure will help to ensure that people with no access to medicine will all receive care and treatment”.

In the December 2006 AIDS Epidemic Update by UNAIDS/WHO, an estimated 8.6 million people were living with HIV in Asia in 2006, including the 960,000 people who became newly infected in the past year. Approximately 630,000 died from AIDS-related illnesses in 2006. The number of people receiving antiretroviral treatment has increased more than threefold since 2003, and reached an estimated 235,000 by June 2006. This represents about 16% of the total number of people in need of antiretroviral treatment in Asia.

Only Thailand has succeeded in providing treatment to at least 50% of people needing it, according to the Update.

Thailand’s achievement is possible because of generic drug production that underlies the country’s universal HIV/AIDS treatment programme.  According to MSF, before generic production by the GPO, the public drug manufacturer, the cost of HIV/AIDS treatment was more than USD 924 per patient per month, and only 3,000 people were getting treatment. Since the GPO’s generic version of HIV/AIDS triple therapy was available from 2002, the cost of treatment has fallen by 18 times. More than 85,000 people with HIV/AIDS are currently receiving treatment. 

With this latest move using a compulsory licence to enable the GPO to first import, and then locally manufacture, generic efavirenz Thailand has further strengthened its policy to ensure access to affordable AIDS drugs.

Thailand is the third country in the region to use compulsory licensing for cheaper antiretroviral drugs after Malaysia and Indonesia.  In 2003 the Malaysian Government issued a 2-year government use order for imports from India. As a result, treatment at government hospitals dropped by an average of 81% per patient per month. 

Indonesia issued a government use order in 2004 to manufacture two generic versions and this will run until the end of the patent term in 2011 and 2012 respectively. The Indonesia Government, as in the Thai case, awarded 0.5% of the net selling value to the companies concerned. The price of one of the drugs (lamivudine) fell from a retail average of USD 225 in 2000 to the current USD 28 under the government scheme that is supplied by the domestic production. The cheaper drugs are used to treat almost 50% of those in need of AIDS treatment in 2006 compared to 3.5% in 2003.

Studies by the WHO in 2005 and the World Bank last August have raised the alarm bells on rising AIDS drugs costs in countries including Thailand. Both the WHO and World Bank recommended that countries use the public health safeguards in TRIPS and the Doha Declaration.


Senior Advisor on Health Economics, Ministry of Public Health, Thailand
President of Intergovernmental Forum on Chemical Safety (IFCS)

30 November, 2006

What was the reason for issuing this compulsory license?
We have around 120 000 people on ARVs in Thailand. The first formulation that we use is the nevirapine-based, triple therapy, but about 20 to 25% of patients cannot really take these drugs, due to side effects, some of which are even fatal. These patients have to be switched to efavirenz, which is three times more expensive. So we need a cheaper drug because we cannot afford it. Since October 2003, the Thai government has had a policy of universal access to ARVs for all HIV positive patients who need it. Patients under the scheme get their drugs for free.

But why issue the compulsory license now?
For good reason, because after three years we have learnt a lot. At first we didn’t have much experience now we’ve done intense research and have found that the nevirapine-based formulation has about four times more serious side effects than the efavirenz one. And if possible, if we can afford it, we would hope that in the future we will be able to replace the nevirapine-based formulation with the efavirenz-based one.

What will be the impact of this compulsory license on your national policy of universal access to ARVs?
We will start by expanding the number of patients on the efavirenz-based ARV formulation and if we have a bigger budget and a further reduction in price, we should be able to cover all our patients. After the compulsory license, the price of efavirenz will be reduced by around half. Right now, it is only when patients can’t tolerate nevirapine that we switch them to efavirenz. But if the price of efavirenz goes down thanks to compulsory licensing, we will not have to subject these patients to the risk of nevirapine-based products in the near future. We will be able to start patients on the efavirenz-based formulation straight away.

How many patients will benefit from this compulsory license?
We have issued a compulsory license by the state which starts immediately and lasts for five years for up to 200 000 patients per year.

Is the compulsory license for both local production and import? At first, we will import from India and at the same time our Government Pharmaceutical Organisation (GPO) has just finished the development of the efavirenz formulation. They are in the process of testing the product, and if the production price is cheaper or at least not more expensive than the Indian product, we will shift to local production.

What kind of price reduction do you foresee?
The Government Pharmaceutical Organisation estimates this will result in a 50 % reduction in price. The current price from the originator company is around 1400 Bath per month which is almost US $40.



Brook K. Baker, Health GAP

December 3, 2006

On November 29, the Thailand Department of Disease Control, Ministry of Health, announced that it had issued a compulsory license for Efavirenz that would allow immediate importation at half the cost from India and subsequent local production by GPO.  The compulsory license would be effective through December 31, 2011 and would allow treatment of up to 200,000 Thais.  A modest royalty of .5% would be payable to the patent holder, Merck.  This license is the result of years of advocacy by Thai activists, including TNP+, and other NGOs trying to convince Thai officials to secure more affordable and diverse sources of life-saving medicines.

Within two days, Merck leapt to the defense of its patent by offering to discuss discount prices or voluntary licenses with the Government Pharmaceuticals Organization.  In doing so, Merck complained that it had received no prior warning's of the government's intention and further claimed that there had "been no process in terms of Thai law or international law, where the company has been consulted or where the company has been asked what they [sic] could do to assist."

To the contrary, neither Thai law nor international law requires prior negotiation for a voluntary license or for price discounts before issuing a compulsory license for government, non-commercial use (commonly called government or crown use) or for a health emergency such as that presented by HIV/AIDS.  Article 31 of the TRIPS Agreement specifically authorizes government use without negotiation, and the 2001 Doha Declaration on the TRIPS Agreement and Public Health confirms this procedure.  There's no way that Merck officials don't understand the legality of Thailand's stated intentions, but that doesn't stop Merck's disinformation team from suggesting that Merck has been treated unfairly and perhaps even illegally.

The U.S. and its drug companies have a long history of trying to prevent issuance of compulsory licenses by developing countries.  The infamous 1998-2001 Big Pharma lawsuit in South Africa, the 2001 U.S. WTO complaint against Brazil, and routine drug company and Congressional threats against Brazil when it has threatened to issue compulsory licenses are only the tip of the trade-threats iceberg.  The US Ambassador had written to the Thai government in 1999 that "the Thai government certainly don't want to be the cause of a trade dispute, which is what we have always told them would happen if compulsary [sick] licensing clause should be invoked."  The Ambassador continued that this would set "a worrisome precedent for the rest of the drug industry."

Well, the U.S. government "always" resisted compulsory licenses, pre-Doha, and it continues to do so now with backroom pressure and threats including those routinely presented in its Section 301 Trade Reports where it has in the past complained about Brazil's threatened issuance of compulsory licenses.

Brazil actually represents a cautionary tale because it has cried wolf three times by threatening to issue compulsory licenses for key, second-line antiretrovirals.  However, each time, the government has inexplicably backed down and accepted temporary price discounts that were inferior to prices that could have been obtained through local production or importation from India.  Rather than set a leading-developing-country example that could catalyze more widespread compulsory licensing throughout the Global South, Brazil set a negative example of caving into U.S.pressure.

Thailand must resist Merck's price-cut/hands/cuff offer, an offer that might bring temporary price discounts, but at the cost of yet again disincentivizing generic production and yet again demotivating developing country utilization of a key TRIPS flexibility.  In fact, Thailand must go further and ensure that the compulsory license it issues here includes a direct right to reference Merck's registration data or a right to otherwise rely on the fact of registration to establish the safety and efficacy of generic equivalents.  In this regard, it is important to re-establish the principle that the issuance of a compulsory license or government use order implicitly permits registration of the licensed product as well.  (The U.S. is attempting to undermine this principal in its free trade agreement negotiations with Thailand where an absolutist form of five-year data exclusivity and registration/patent linkage might undermine the right to obtain marketing approval for a drug produced pursuant to a compulsory license; simultaneously, the U.S. is also attempting to restrict the grounds upon which licenses can be granted.)

It is no secret to Merck that its supply chain in Thailand has been erratic, threatening patient safety, nor that it has been charging prices nearly double those available from WHO-prequalified generic competitors. If Merck could figure out how to file a lawsuit, it would, like its bedfellows Pfizer and Novartis have done in the Philippines and in India (challenging government action allowing early registration and strict definitions of pharmaceutical patentability respectively).  Since Merck can't find even minimally plausible grounds for a lawsuit, it will instead seek to mislead the public that it is the wronged party and then try to get its USTR and Congressional bullyboys to apply pressure on the post-coup Thai government.  Hopefully even a military government will see that the future health of tens of thousands of PWAs in Thailand is dependent on competitive sources of low-cost generic medicines of assured quality, whether imported or produced locally.




Andrew Leonard (How the World Works)

Nov. 29, 2006 | Thailand's Ministry of Public Health indicated today that it would grant the application of the Government Pharmaceutical Organization for a compulsory license to manufacture a generic version of the AIDS retroviral drug Efavirenz. (Thanks to the Consumer Project on Technology for the link.)

The reason: AIDS sufferers in Thailand are beginning to demonstrate resistance to the existing government-manufactured AIDS drug GPO-vir, but can't afford the high priced Efavirenz, marketed by Bristol-Myers Squibb under the name Sustiva. So in the interest of public health, Thailand plans to take advantage of the right granted to it by the World Trade Organization's TRIPs (Trade-Related Aspects of Intellectual Property) agreement to break Bristol's patent.

Bristol-Myers Squibb and the rest of Big Pharma would rather Thailand (or any other nation) did not exercise its TRIPs rights. They have thus lobbied long and hard for the U.S. to incorporate increased protections for their intellectual property that go above and beyond TRIPs in the bilateral free trade agreements that the U.S. has been industriously negotiating with other nations in recent years. Thailand, partially as a result of its status as a popular stop on the global sex tour circuit, has more than its share of AIDS sufferers, which may explain why Big Pharma's demands have been a major sticking point in a bilateral free trade agreement that the U.S. and Thailand have been negotiating since June 2004. Public health advocates (including the country representative in Thailand of the World Health Organization, who was later transferred after publicly criticizing the proposed FTA) have long argued that signing such an agreement would hurt the ability of Thailand to properly care for its citizens.

How, specifically, would this happen? If you look at other FTA agreements that the U.S. has recently concluded, notably with Australia and Singapore, there are three main ways that the U.S. attempts to restrict the ability of a nation to issue a compulsory license.

1) TRIPs allows any nation to declare a compulsory license without declaring a reason. The Singaporean and Australian agreements limit the use of such licenses to antitrust remedies, public non-commercial use, or national emergencies.

2) For a generic drug manufacturer to enter a given market with a particular drug, it must receive regulatory approval to market that drug. Recent bilateral FTAs negotiated by the U.S. require that the patent holder give consent for marketing approval.

3) In order to get marketing approval a generic manufacturer must also present test data proving its safety and effectiveness. Typically this is done by using the test data already amassed for the original patented drug. TRIPs forbids this only in cases of "unfair commercial use." Bilateral FTAs require varying periods of test data exclusivity, no matter what the circumstances.

Taken together, these provisions are carefully designed to hamper a country like Thailand from doing exactly what it announced it would do today.

Compulsory licenses, Big Pharma and TRIPs frequently pop up in the pages of How the World Works. But in the context of post-coup Thailand and the post-midterm-election United States, the topic takes on newly relevant dimensions. The ousted prime minister of Thailand, Thaksin Shinawatra, was widely seen as a gung-ho free trader who was pushing Thailand too far too fast in the direction specified by global corporate interests. Even before the coup, negotiations on the FTA had reached a standstill, a casualty of Thailand's ongoing political crisis. (Which makes the post-coup announcement by the U.S. that it would not resume negotations until a democratically elected government took power something of a face-saving gesture.)

In the United States, advocates of free trade -- even those who will concede that bilateral agreements are less desirable than comprehensive multilateral agreements worked out in the context of the WTO -- are distraught because they see the Democratic takeover of Congress as spelling doom for future FTAs. As they wring their hands and invoke the holy aegis of Ricardo, they have been wont to call Democrats "protectionist."

But a close look at what really goes in the bilateral FTA sausage factory makes the name-calling a little suspect. One way to look at these FTAs is to see them as devices by which the U.S. secures increased protection for pharmaceutical industry products in exchange for granting improved access to U.S. markets for manufactured and agricultural goods. This is hardly some kind of perfect world of "free trade" where tariffs and borders disappear and everyone lives happily ever after off of their comparative advantage.

Is it really protectionist for Democrats to say, let's reexamine this equation, and reevaluate the question of which sector of the U.S. economy should benefit from how trade agreements are negotiated?

Should, for example, the pharmaceutical industry be gaining a global advantage at the expense of concessions that may make life for manufacturing workers in the U.S. more difficult? Isn't what the U.S. is doing protecting the pharmaceutical industry from competition?

Unfortunately, Democrats bashing globalization on the campaign trail rarely delve into the nitty-gritty details of FTA agreements in order to make a case for their opposition to how trade is currently practiced. If they did, and laid out carefully how the tradeoffs benefit some American industries while hurting others, while simultaneously having a negative impact on public health in the developing world, it might get a little more difficult to bash them as protectionist.



MSF Welcomes Move to Overcome Patent on AIDS Drug in Thailand Thailand today for the first time announced it will issue a compulsory licence for use by the government to improve access to a key HIV/AIDS medicine, efavirenz.  The international medical humanitarian organization Médecins Sans Frontières (MSF) welcomes this important move and urges the government to issue such licenses for the production of other essential medicines.

The drug efavirenz, which is recommended by WHO for HIV/AIDS treatment, is currently patent protected in Thailand, and the monopolistic situation has affected both supply and affordability in the country.  The price the patent holder Merck charges in Thailand (1,500 baht/month – US $41) is double of what Indian generic manufacturers charge for the drug (800 baht/month – US $22).  In addition, on several occasions, Merck has been unable to supply the drug in Thailand.

“Merck’s supply of efavirenz has not been reliable, and has resulted in treatment interruptions, forcing several hospitals to supply suboptimal dual therapy,” said Dr. David Wilson of MSF in Thailand.

The compulsory license will apply both to import and local production of the drug. Thailand is developing its own generic production capacity for efavirenz through the country’s public drug manufacturer, the Government Pharmaceutical Organization (GPO). Production in Thailand of efavirenz is expected to begin next year.  In the meantime, the compulsory licence will allow Thailand to import generic efavirenz from India, halving the costs for this drug and expanding procurement options to ensure sustainable drug supply.

It is estimated that at least 12,000 people in Thailand currently need efavirenz, but that due to cost and supply difficulties, the number receiving the drug is significantly lower.

Generic production is the cornerstone of Thailand’s universal HIV/AIDS treatment programme. Before generic production, the cost of standard HIV/AIDS treatment in Thailand was over 33,330 baht per patient per month (US $924), and only 3,000 people were getting treatment. In 2002, Thailand launched a generic version of HIV/AIDS triple therapy, resulting in an 18-fold drop in the cost of treatment. Thanks to this, over 85,000 people with HIV/AIDS are today receiving treatment.  UNAIDS reports that Thailand is the only Southeast Asian country to have over half the number of people on AIDS treatment who need it.

Both the World Health Organization (in August, 2005) and the World Bank (in August, 2006) have predicted dramatically rising drug costs in Thailand due to the fact that patients need to switch to newer and more expensive drugs in cases of resistance and toxicity.  Both organisations recommend the use of public health safeguards enshrined in the Doha Declaration on TRIPS* and Public Health.

“Thailand is demonstrating that the lives of patients have to come before the patents of drug companies, and this policy needs to be expanded to essential drugs that are expensive and in short supply, such as the AIDS drug lopinavir/ritonavir, which currently costs over 7,000 baht a month (US $194) and is far too expensive for Thailand,” said Dr. Wilson.

*World Trade Organization Agreement on Trade-related Aspects of Intellectual Property Rights