TWN Info Service on WTO and Trade Issues (June09/09)
15  June 2009
Third World Network

TRIPS and FTAs have adverse impact on access to drugs
Published in SUNS #6712 Thursday 4 June 2009

Geneva, 3 Jun (Kanaga Raja) -- The WTO TRIPS Agreement and the TRIPS-plus provisions in Free Trade Agreements (FTAs) have had an adverse impact on prices and availability of medicines, making it difficult for countries to comply with their obligations to respect, protect and fulfil the right to health, the UN Special Rapporteur on the right to health, Mr Anand Grover, said on Tuesday.

Similarly, lack of capacity coupled with external pressures from developed countries has made it difficult for developing countries and least developed countries (LDCs) to use TRIPS flexibilities to promote access to medicines. States need to take steps to facilitate the use of TRIPS flexibilities.

Furthermore, developing countries and LDCs should not introduce TRIPS-plus standards in their national laws. Developed countries should not encourage developing countries and LDCs to enter into TRIPS-plus FTAs and should be mindful of actions which may infringe upon the right to health.

These were some of the key recommendations made by the rights expert in his report (A/HRC/11/12) to the UN Human Rights Council, which began its regular eleventh session on Tuesday.

The Special Rapporteur recommended that developing countries and LDCs should review their laws and policies and consider whether they have made full use of TRIPS flexibilities or included TRIPS-plus measures, and if necessary consider amending their laws and policies to make full use of the flexibilities.

Developing countries and LDCs should also establish high patentability standards and provide for exclusions from patentability of medicines - such as new forms and new or second uses, and combinations - in order to address evergreening and facilitate entry of generic medicines. They should adopt the principle of international exhaustion and provide for parallel importation with simplified procedures in their national laws.

In addition, developing countries and LDCs need to incorporate in their national patent laws all possible grounds upon which compulsory licences, including government use, may be issued. Such laws provide straightforward, transparent procedures for rapid issue of compulsory licences. There is also a need to revisit the 30 August decision (of the WTO General Council) and provide for a simpler mechanism.

In presenting his report to the Council, the Special Rapporteur noted that nearly two billion people lack access to essential medicines, and massive inequalities still remain regarding access to health services and medicines around the world, which is partly due to high costs. Improving access to medicines could save 10 million lives a year, 4 million in Africa and South East Asia.

"It is clear that intellectual property (IP) rights have an impact on the enjoyment of the right to health as it directly affects affordability of medicines," said Grover.

The report by the Special Rapporteur explores the impact of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and "TRIPS plus" standards on access to medicines within the broader framework of the right to health.

Referring to the work done by former Special Rapporteur on the right to health, Mr Paul Hunt, and the Office of the UN High Commissioner for Human Rights (OHCHR) on trade and intellectual property issues relevant to the right to health, the rights expert found that these reports highlighted the need for TRIPS flexibilities to be implemented and noted the adverse impacts of FTAs on access to medicines.

The full use of TRIPS flexibilities can help countries meet their obligations to protect, promote and fulfil the right to health by improving access to affordable medicines. However, that use of TRIPS flexibilities has been variable and that there are growing instances of developing countries and LDCs adopting TRIPS-plus standards that may have an adverse effect on the right to health.

The rights expert stressed the need to revisit trade-related agreements in light of their impact on the right to health and in particular, on access to medicines.

He further noted that the right to health, enshrined in numerous international and regional human rights treaties and in many national constitutions, is an inclusive right, extending not only to timely and appropriate health care, but also to the underlying determinants of health, such as access to clean water and sanitation, adequate housing and nutrition as well as social determinants such as gender, racial and ethnic discrimination and disparities.

He emphasized that, if integrated into national and international health policy-making, the right to health can help establish laws, policies and practices that are sustainable, equitable, meaningful and responsive to the needs of those living in poverty.

According to the report, health trends indicate that despite progress made in the last 30 years, massive inequalities remain in access to health services and medicines around the world. "Diseases of poverty" (i. e. communicable, maternal, perinatal, and nutritional diseases) still account for 50% of the burden of disease in developing countries, nearly ten times higher than in developed countries.

There has been a resurgence of tuberculosis and malaria in the last decade: 58% of malaria cases occur in the poorest 20% of the world population and each year there are nearly 529,000 maternal deaths.

The inability of populations to access medicines is partly due to high costs, said the report. In the context of HIV, as of 2007, only 31% of people living with HIV who needed treatment received it. In addition, it is estimated that people living with HIV will become resistant to their first-line medicine regimens and will need second-line treatment which can currently cost between 9 and 19 times as much as first-line medicines.

IP law has an impact on the right to health, as it protects pharmaceutical products. Patents create monopolies, limit competition and allow patentees to establish high prices. In regard to medicines, a product patent enables a patentee to set high prices.

Generic competition in the field of pharmaceuticals has the potential to significantly lower prices and increase access, said the report, pointing out that in 2001, when the HIV crisis was at its peak and the need for antiretrovirals (ARVs) was the most acute, it was the availability of cheaper generic ARVs from developing countries that led to a reduction in prices from over $10,000 per patient per year to less than $350 per patient per year for a first-line combination therapy. Today, generic competition has helped reduce prices of first generation ARVs by more than 99%.

The importance of generic medicines continues to be underscored today by their prominence in international medicine supply programmes. However, the continued supply of generic medicines is now in doubt, said the report.

For developing countries including those that manufacture and supply generic medicines, the deadline for TRIPS compliance and the introduction of product patents came in 2005. With this deadline, there is concern that the ability of companies to patent new pharmaceutical products on a near-global scale could inhibit further competition and prevent the price reductions needed to make antiretroviral therapy more widely available.

Developing countries and LDCs should be enabled to take steps to modulate the implementation of TRIPS on access to medicines including by encouraging competition and being able to access affordable generic versions of patented medicines, the rights expert recommended.

The rights expert also noted that the WTO TRIPS Agreement was one of the most controversial agreements, as developed countries pushed for extensive IP protection and the harmonization of IP norms. Developing countries argued that extensive IP standards would hinder their development prospects as they were not well-equipped to reap the benefits of such standards. Developing countries eventually gave way, under the pressure of developed countries as they were ultimately dependent on them for trade.

From a right-to-health perspective, said the rights expert, developing countries and LDCs should be enabled to use TRIPS flexibilities. Their national laws should incorporate the flexibility to: make full use of the transition periods; define the criteria of patentability; issue compulsory licences and provide for government use; adopt the international exhaustion principle, to facilitate parallel importation; create limited exceptions to patent rights; and allow for opposition and revocation procedures.

In addition, countries need to have strong pro-competitive measures to limit abuse of the patent system.

The importance of the transition period is underscored by the fact that the absence of product patents on medicines can help establish local manufacturing capacity, promote generic manufacturing and facilitate the import of affordable medicines from other countries, said the report, adding that developing countries that have been successful in the use of the transition period in any of these respects may present good examples for LDCs to consider in adapting to their own needs and circumstances.

With regards to patentability criteria, the report said that from a right-to-health perspective, the "evergreening" of patents by pharmaceutical companies is of particular concern.

Evergreening refers to the practice of obtaining new patents on a patented medicine by making minor changes to it. For example, patents are obtained on new uses, forms, combinations and formulations of known medicines in a bid to extend the period of the patentee's monopoly. Such evergreening delays the entry of competitive generic medicines into the market.

The freedom to set high patentability criteria and exclude certain inventions is an important tool that countries can use to address evergreening and ensure that patents are granted only to genuine inventions in the pharmaceutical field. Thus, countries can deny patents on new uses, forms, formulations or combinations of known medicines, said the rights expert.

He noted, for example, that India and the Philippines exclude from patentability new forms of known substances unless they are significantly more efficacious and new (or second) uses and combinations of known substances. Reducing the number of patents granted on medicines can limit the impact of patents on access to medicines and facilitate the early entry of generic competition.

Countries with little or no manufacturing capacity face difficulties in utilizing compulsory licences to import generic medicines. The report noted that this difficulty was recognized by the Doha Declaration, pursuant to which the WTO General Council provided a framework to address this issue through the decision of 30 August 2003.

However, countries have faced difficulties in implementing the 30 August decision as it entails complex administrative procedures. Even though a number of potential exporting countries amended their national laws to incorporate the 30 August decision, their regulations have added further administrative requirements that make it difficult to implement.

The first and only case of export of a patented medicine under the 30 August decision occurred in 2008 to Rwanda, five years after the adoption of the decision. "The case of Rwanda highlights the need to revisit the decision."

The report found that the use of anti-competition law can be an important tool to promote access to medicines. TRIPS Article 31, for example, allows a relaxation of certain restrictions, such as prior negotiation with patentees and predominantly domestic use, relating to compulsory licences which may be useful to remedy anti-competitive practices.

There is a need for countries to adopt and effectively apply pro-competitive measures allowed under TRIPS to prevent or remedy anti-competitive practices having a bearing on the use of patented medicines.

The rights expert also found that developing countries, while attempting to implement TRIPS flexibilities in order to address public health concerns, have experienced pressures from developed countries and multinational pharmaceutical corporations.

The report illustrates the cases of South Africa, Thailand and India experiencing pressures in this regard. In 1996, South Africa adopted a new National Drugs Policy with the goal of "ensuring an adequate and reliable supply of safe, cost-effective drugs of acceptable quality to all citizens of South Africa".

Following the principles of the Policy, the South African Government amended its existing Medicines Act to improve access to medicines. In response, South Africa was placed on the United States Special 301 Watch List and 39 pharmaceutical companies filed a suit, challenging the amendments, contending that they would destroy patent protections by giving the Health Minister overly broad powers to produce or import cheaper versions of drugs still under patent. Worldwide public outrage eventually led to a change in the US position and to the withdrawal of the lawsuit by the pharmaceutical companies in 2001.

Thailand also faced pressure following its attempts to lower prices of medicines through compulsory licensing. Between 2006 and 2007, Thailand issued compulsory licences for HIV and heart disease medicines in order to meet its obligations to provide universal access to medicines. In 2007, Thailand was placed on the Special 301 Priority Watch List.

The report also highlighted India facing pressure for its attempt to use safeguards. In 2005, India included strict patentability criteria in its patent law to address the evergreening of patents. This provision was challenged by a pharmaceutical company in the Madras High court alleging it was a violation of TRIPS and of the constitutional equality provision. The amendment was upheld, among other grounds as a fulfilment of the right to health obligations of the Government.

The experiences of South Africa, Thailand and India provide examples of difficulties countries have had to overcome to implement TRIPS flexibilities. Although they were successful in their attempts, there is fear that pressure from developed countries and pharmaceutical companies will thwart future actions, said Grover.

The report underscored that few LDCs have local manufacturing capacities or any technological base to fully take advantage of TRIPS or TRIPS flexibilities. In this regard, concrete steps towards the specific obligation under Article 66, paragraph
2, of TRIPS of developed countries to provide incentives to promote and encourage technology transfer to LDCs in order to enable them to create a sound and viable technological base should be encouraged.

Turning to the issue of FTAs and their imposition of TRIPS-plus standards, the report said that many countries have signed or are currently engaged in negotiations on extensive trade agreements, including bilateral investment treaties (BITs), FTAs, economic partnership agreements (EPAs) etc. Such agreements have extensive implications for pharmaceutical patent protection, which can directly impact access to medicines. Some developed countries, for example, have negotiated FTAs which reflect their standard of IP protection.

These agreements are usually negotiated with little transparency or participation from the public, and often establish TRIPS-plus provisions. These provisions undermine the safeguards and flexibilities that developing countries sought to preserve under TRIPS. Studies indicate that TRIPS-plus standards increase medicine prices as they delay or restrict the introduction of generic competition, said the report.

"As FTAs can directly affect access to medicines, there is a need for countries to assess multilateral and bilateral trade agreements for potential health violations and that all stages of negotiation remain open and transparent."

The report noted that TRIPS-plus provisions in FTAs differ from agreement to agreement, but their purposes are by and large to: extend the patent term; introduce data exclusivity; introduce patent linkage with drug registration and approval; and create new enforcement mechanisms for IPRs.

With respect to TRIPS-plus IP enforcement, the Special Rapporteur expressed concern over reports of IP enforcement measures that have resulted in multiple seizures at some ports of shipments of generic medicines heading to developing countries and LDCs. Such regulations impose a far higher standard of IPR enforcement than that required by TRIPS, which requires that IP enforcement measures should not create barriers to legitimate trade.

"In effect, such actions can bring to naught TRIPS flexibilities exercised by developing countries and LDCs, and de facto impose IP protection on LDCs that are not yet required to comply with TRIPS as generic medicines they need do not reach them. In particular, the use of compulsory licensing or the 30 August decision to export and import medicines is effectively negated," the rights expert said. +