TWN Info Service on WTO and Trade Issues (Oct15/16)
23 October 2015
Third World Network

EU commitment on access to drugs is an "empty gesture"
Published in SUNS #8114 dated 16 October 2015

Geneva, 15 Oct (Kanaga Raja) - The European Commission's current commitments on access to medicines have proven to be empty words and gestures, contradicted and undermined by a long history of including substantive TRIPS-plus provisions in European Union free trade agreements (FTAs), and other damaging EU trade policies.

This is one of the main findings of a joint report released by Medecins Sans Frontieres (MSF) and the global network Health Action International (HAI) on Wednesday.

The report called on the EU to develop a comprehensive access to medicines policy that ensures that its trade policy is consistent with its development, research and global health goals.

Amongst others, MSF and HAI called on the EU not to use FTAs with low- and middle-income countries (LMICs) to introduce TRIPS-plus intellectual property (IP) rules that extend monopoly protection, nor introduce new IP enforcement rules or investment protection to the detriment of access to medicines.

The two international CSOs further urged the EU to support the LDCs' request for an extension of the TRIPS transition period until LDCs graduate from being LDCs. The EU should also support LDCs' request for a waiver of Article 70.8 and Article 70.9 of the TRIPS Agreement for the duration of the TRIPS transition period.

The joint report was released as EU Trade Commissioner Cecilia Malmstrom was due to publish on the same day a draft review of the EU's trade and investment policies.

"The EU's long history on pushing LMICs to accept IP protection that exceeds international (TRIPS) obligations shows that the Commission's stated support for access to medicines have so far been empty gestures," said Tessel Meliema, Policy Advisor at HAI, in a press release.

"Instead of putting LMICs on trade watch lists and threatening them with financial sanctions for making use of TRIPS flexibilities to improve access to medicines, the EU should actively support these countries in making effective use of these policy flexibilities," Meliema added.

According to the press release, the European Commission's recent decision to support the world's poorest countries in their request for an indefinite extension from implementing IP rules on medicines until they are no longer classified as a least-developed country could, however, promise a new, more positive direction for EU trade policies under Commissioner Malmstrom.

In their report, HAI and MSF commend the Commission for explicitly recognising the need to address access to affordable, safe and effective medicines.

"However, looking at the Commission's current access to medicines commitments in more detail, these have proven to be empty words and gestures, contradicted and undermined by a long history of including substantive damaging TRIPS-plus provisions in EU free trade agreements, and other damaging EU trade policies."

The report identified the contradiction between the Commission's stated commitments to ensure access to medicines and the EU's trade policy.

For instance, it noted that despite the clear negative consequences that TRIPS had on access to medicines (such as HIV treatment in African, Asian and Latin American countries), the EU has since pushed for low- and middle- income countries (LMICs) to adopt even stricter levels of IP protection (TRIPS-plus rules) through bilateral and regional free trade agreement negotiations, IP dialogues and watch lists.

"TRIPS-plus rules exceed minimum WTO obligations and threaten access to affordable medicines," it said.

It noted that the damaging public health consequences of TRIPS-plus rules for people living in LMICs have been documented in numerous studies. For example, an impact assessment study demonstrated that an up to ten-fold price increase for key medicines occurred in Jordan when the United States imposed the TRIPS-plus rule of data exclusivity.

In addition, said the report, the Commission has pushed for stronger investment protection under EU free trade agreements since 2011, including investor-state dispute settlement (ISDS). Using ISDS, pharmaceutical companies can sue a government arguing that legitimate and WTO-compliant government measures to promote access to medicines will damage their IP-protected investments.

The report underlined that the lack of access to medicines is no longer just a problem in developing countries.

"European Member State governments currently face a looming access to medicines crisis as they struggle to afford new medicines with excessive price tags. Moreover, despite strong IP protection and continued strengthening of market monopolies in Europe, there has been a striking lack of medical innovation. Only few truly valuable medicines have been brought to market over the last decade."

With this in mind, MSF and HAI stressed that "the EU should seriously question whether strengthening IP protection and enforcement for pharmaceuticals through bilateral trade agreements is truly in the public interest."

The report compared the commitments outlined in the Commission's Communication on Trade, Growth and Intellectual Property - Strategy for the protection and enforcement of intellectual property rights in third countries (2014), against the substantive provisions in EU trade agreements and policies to assess the validity of the claim that it promotes and protects access to medicines.

It found that the Commission has a long history of including TRIPS-plus IP rules for pharmaceuticals in its bilateral and regional trade negotiations. Examples include agreements with trading blocs (e.g., Central America and the Andean Community), countries (e.g., India, Thailand, South Korea, Vietnam and Canada) and EU neighbouring countries (e.g., Ukraine and Moldova).

Prospective and retrospective impact studies confirm that these TRIPS-plus rules threaten access to affordable medicines and, over time, will be detrimental to public health in developing countries.

The European Parliament has, on several occasions, opposed the inclusion of TRIPS-plus measures in free trade agreements - most notably, in its 2007 resolution on TRIPS and public health.

"Recently, the European Parliament reiterated that full EU support for third countries' use of TRIPS flexibilities is essential."

According to the report, the inclusion of TRIPS-plus provisions in the negotiating text has caused immense public outcry in the EU negotiations for an FTA with India.

It said that more stringent IP rules in India would be particularly harmful because India has an invaluable role as 'pharmacy of the developing world' by producing quality, affordable generic medicines. As such, India provides over 80% of the world's generic antiretroviral medicines.

While some damaging IP provisions, such as patent-term extensions and data exclusivity, were removed from the negotiating text after strong civil society pressure, excessive IP enforcement provisions and the inclusion of IP in the definition of 'investment' under the ISDS mechanism remain serious concerns.

"As reports about the resumption of negotiations have recently emerged, the removal of the TRIPS-plus enforcement clauses and the exclusion of IP from the scope of ISDS are imperative to safeguard the lifeline of affordable generics from India for millions of patients in developing countries."

The report noted that the WTO Ministerial Conference adopted the Doha Declaration on TRIPS and Public Health in 2001. The Doha Declaration affirms that WTO rules on IP (TRIPS) should not prevent countries from taking the necessary measures to safeguard public health. Such measures are known as 'TRIPS flexibilities'.

All EU free trade agreements include a standard reference to confirm its adherence to the Doha Declaration in the preamble.

"Yet, such a reference is an empty gesture if, at the same time, the substantive provisions of the agreement include TRIPS-plus provisions that impact the price of medicines. In addition, the Commission uses other areas of its trade policy to pressure countries to refrain from making full and legitimate use of TRIPS flexibilities. This includes placing third countries on trade watch lists for fully legitimate exercise of TRIPS flexibilities."

TRIPS-plus measures, as they relate to pharmaceuticals, directly contradict the spirit and intent of the Doha Declaration on TRIPS and Public Health, said MSF and HAI.

The report cited some examples of Commission practices that show how the EU interferes with other countries that attempt to use TRIPS flexibilities to protect public health.

The Commission produces a 'priority country list' to assess third countries' performance on IP protection and enforcement, which is based on the EU's interpretation of TRIPS. These country-specific reports outline the perceived deficiencies in these countries' IP frameworks, which the EU believes should be remedied. These lists put undue pressure on third countries to change their IP laws and practices.

Closer examination of some countries' reports show that the Commission actually denounces IP measures that are perfectly legal under TRIPS and beneficial to public health, said the report, citing an example of such a measure as being the use of compulsory licensing.

A compulsory licence, or the mere threat of issuing one, is an effective tool to ensure a substantial decrease in the price of a medicine. Many developing countries, including Thailand, Brazil and Ecuador, have used this instrument to lower medicines prices to meet public health needs. High-income countries, such as the United States, have also used compulsory licensing as a tool to negotiate a lower price for medicines.

Pointing to practices in Canada, Argentina, Brazil and India, the Commission has also put countries on its 'watch list' for using different and often stricter (but TRIPS-compliant) standards for granting pharmaceutical patents.

These countries have adopted specific patent legislation aiming to prevent a widespread commercial practice known as 'evergreening' in which pharmaceutical companies obtain new patents for minor modifications of existing medicines that offer no additional therapeutic advances.

"Preventing such a practice by introducing stricter patentability criteria is perfectly legal under WTO law and very beneficial from a public health perspective because cheaper generics can enter the market faster," said the report.

South Africa is currently implementing a much-needed patent law reform process and has published a new draft patent policy. The Commission has submitted its comments to the South African government and has argued in favour of introducing TRIPS-plus measures and against the use of TRIPS flexibilities as proposed in this draft policy.

The report said the proposed South African draft policy could play a key role in ensuring that the five million HIV-positive people in South Africa can access the latest generation of anti-retroviral medicines.

"Yet, the EU argues in its submission that South Africa should consider TRIPS-plus measures, including patent term extensions, stronger IP enforcement and the introduction of data exclusivity. The South African government is under no legal obligation under TRIPS to implement any of these measures, which would increase medicine prices."

The EU also uses technical assistance programmes as a way to export European IP standards, even to least- developed countries (LDCs), which are not obliged by WTO law (TRIPS) to implement these IP standards.

When the EU combines technology transfer with a package of IP-related technical assistance, it pushes countries to implement levels of IP protection that are wholly inappropriate for their level of socio-economic development.

For example, in Bangladesh, an LDC with an average income of little over US$3 a day, the Commission implemented an IP programme worth 1.2 million euros. Given its LDC status, Bangladesh is not obliged by the WTO to do so, and should therefore not spend scarce resources on implementing TRIPS IP provisions.

"It may be difficult for LDCs to refuse IP-related technical assistance, particularly if it is bundled with a large package of much-needed technology transfer. Unfortunately, the EU provides little transparency about the content of its IP programmes," said MSF and HAI.

In 2010, they noted, the EU funded the drafting of Uganda's controversial IP Enforcement Counterfeit Goods Bill. This proposed law caused an outcry because it threatened access to life-saving generic medicines by defining counterfeiting so broadly that it criminalised the production and importation of generic medicines.

The financing of this project was part of Uganda's implementation of the economic partnership agreement (EPA) between the EU and East African countries.

Uganda, being an LDC, was (and still is) under no obligation to implement TRIPS, let alone implement TRIPS- plus IP enforcement standards as envisaged in the (now rejected) draft Counterfeit Goods Bill.

According to the report, these examples show that there is a need for greater transparency in the EU's IP-related technical assistance programmes, as well as an urgent need to align EU trade policies with development objectives.

"It is important to clarify whether the EU IP support programmes also include training in the full use of all TRIPS flexibilities, including transition periods available to LDCs, compulsory licences, public health friendly patentability criteria, patent oppositions and limitations and exceptions to patents."

The report also highlighted that pharmaceutical companies increasingly use 'tiered pricing' strategies to show their commitment to access to medicines. This refers to the practice of selling drugs to different countries at different prices depending on their economic status.

"However, it is a misconception that tiered pricing is the most effective access to medicines strategy. It is first and foremost a commercial strategy that allows pharmaceutical companies to maximise their profits in all countries, because prices are determined according to the highest price a country, or a segment within a country, is prepared to pay. Moreover, for many medicines, including cancer medicines, pharmaceutical companies do not provide any access programmes."

While emerging upper-middle classes are now firmly on the pharmaceutical industry's radar as promising growth markets, tiered pricing strategies that target these discrete populations of high-income patients are particularly harmful when deployed in middle-income countries.

Under tiered pricing regimes, these countries, home to 73% of the world's poor, are being charged prices that only a fraction of the population can afford, while the poorest and most vulnerable people are left behind.

The Commission states that it is a major contributor to health-related aid. However, policy coherence for development is clearly lacking between EU health-related development goals and trade policies, said the report.

The conflicting interests between supporting and protecting public health in partner countries and promoting the European pharmaceutical industry's interests in free trade agreements and European partnership agreements have largely proved to favour the latter.

"While health-related aid from the EU can provide substantial benefits to public health systems and capacity building around the world, high medicine prices can seriously undermine the benefits that such assistance may create."

According to the report, the EU urgently needs a comprehensive, overarching access to medicines policy that encompasses all relevant policy areas, including public health, international development, research and trade.

"This will ensure that the economic interests of the EU do not undermine, or take primacy over, the protection of public health in developing countries and beyond."

It is worrying to see that the Commission interprets sound policy coherence as restricting or ending participation or funding in specific EU-funded programmes if a third country consistently "breaches" IP rights. Moreover, it is doubtful whether such a unilateral penalty system is supported under WTO rules.

In general, said MSF and HAI, no country can, nor should, impose penalties on other countries based on a unilateral interpretation of TRIPS.

The Commission's claims that IP enforcement is an effective tool for removing falsified and substandard medicines from the market, however, is a misconception, the report said.

"IP enforcement does not address health and safety concerns of substandard and falsified medicines. It can, however, create unnecessary barriers to access to affordable generic medicines."

It is important to clarify that 'falsified medicines' refer to mis-labelling of ingredients, while 'substandard medicines' are medicines that do not meet applicable safety, efficacy and quality standards. Neither of these two categories have anything to do with IP infringement.

The report said, 'Substandard medicines' are genuine medicines that are produced by authorised manufacturers, but do not meet quality specifications. They can therefore be both originator and generic medicines and an IP enforcement framework has no relevance or use for combatting substandard medicines.

Crucially, the term 'counterfeit', which may involve commercial trademark disputes, should not be used in relation to medicines because it is an overly-broad term that conflates IP issues with quality assurance and regulatory problems.

The Commission's conflation of the various categories wrongly asserts the relevance of IP enforcement when addressing the problem of 'substandard' and 'falsified medicines'.

"Unfortunately, the Commission uses its trade relations with LMICs to push them to embrace the flawed argument that stricter IP enforcement is the best remedy to protect patients from poor-quality medicines."

Instead, said the report, the Commission should use more accurate and precise terms, such as 'falsified' or 'substandard', for medicines. It should also address the problems they separately pose through improved regulatory measures in exporting and importing countries.

The conflation of categories has also been instrumental for the introduction of new and stronger TRIPS-plus IP enforcement rights (e.g., in the in-transit area at the border) on medicines in the EU, which increases the risk of abuse and over-enforcement by rights holders and potentially deters generic competition.

EU customs officials have previously seized medicines in transit in the EU on the grounds of alleged patent (or in one case in Germany, trademark) infringement in the EU, even though both the sending country (particularly, India) and the receiving country did not have patents on the relevant product.

"Such seizures of goods-in-transit represent an unacceptable expansion of the territorial enforcement of a patent (or trademark) that limits the free movement of generic medicines and generic competition. IP enforcement on goods in transit - even if limited to criminal trademark infringement (counterfeits) - bears the risk of impeding generic competition and does not address the real problem of falsified and substandard medicines."

The report said that in the upcoming revision of its Trade and Investment Policy, the EU must ensure that its public health, development, research and trade policies are consistent with, and beneficial for, access to affordable medicines for citizens in the EU and low- and middle-income countries alike.

It called on the EU to develop a comprehensive access to medicines policy that ensures that its trade policy is consistent with its development, research and global health goals.

To achieve this, the EU should:

* Support generic competition to allow broad access to medicines in LMICs. In particular, the EU should actively support governments that use available legal measures, including TRIPS safeguards and flexibilities, to protect and promote public health. The EU should immediately stop targeting countries, like India, that have implemented progressive TRIPS-compliant IP policies that promote access to medicines through its watch list of 'priority countries'.

* Refrain from implementing financial sanctions, as envisaged in its new strategy on IP Enforcement in Third Countries, upon countries that make use of WTO-compliant rules.

* Engage in meaningful technology transfer that allows developing countries to build a sound technology base. It must not offer these programmes in tandem with IP-related technical assistance.

* Provide full transparency of the content of its IP-related assistance programmes for LMICs. It should also ensure that parallel IP assistance efforts do not undermine health-related development projects.

* Avoid using the term 'counterfeit' when discussing concerns about the quality, safety and efficacy of medicines. The EU should instead focus upon the categories of substandard and falsified medicines and ensure the right tools are used to combat concerns with these categories.

* Ensure transparency in the development of its trade and investment agenda. If public interest and consumer organisations are not aware of what is negotiated, they cannot engage in public debate and scrutinise the EU trade and investment agenda. Without real transparency of negotiations, EU trade agreements are pieced together in an undemocratic and opaque process and lack real representation of public interests and consumer groups.

* Generate more data of better quality on the economic and social impact of IP protection and enforcement - particularly, on the potential negative impact of high levels of IP enforcement on generic competition and public health.