WTO DEBATES PATENTS AND DRUGS ISSUE

By Martin Khor

Can governments override full patent rights by taking measures such as compulsory licenses and parallel imports to provide cheaper medicines to their public?  This issue was debated in a special full-day meeting of at the World Trade Organisation last week.  The developing countries came well prepared with their arguments and proposals.  The European Union seemed half-way sympathetic, but the United States took a hard-line position that developing countries could take health measures only under restrictive conditions.   Though the debate was conducted in a somewhat legalistic mode,  its results will be of immense interest to ordinary people whose access to medicines is at stake.  

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Protecting public health is the key priority, and the World Trade Organisation's rules on intellectual property must not be allowed to endanger that.

This was the clear message put forward by many developing countries when the WTO held a special one-day discussion on the controversial issue of patents and public health, on 20 June in Geneva.

Diplomats from many developing countries spoke up strongly on the need for the WTO to clarify and confirm that its member states are allowed to take measures, such as compulsory licensing and parallel imports, to locally produce or to import medicines, even if these medicines have been patented.

According to them, these actions are allowed in the WTO's agreement on trade-related intellectual property rights (TRIPS), and the WTO membership must confirm that member states can make full use of the flexibility in TRIPS and enact national laws enabling public health measures without being challenged by other members when they do so.

The unprecedented special discussion had been convened following a demand by developing countries led by the Africa Group and as a response to the growing public concern on how patents are causing medicine prices to shoot up.   The concern turned to outrage when  drug companies and the United States government  took action against developing countries that were trying to make medicines more affordable.

The main measures they use, which some developed countries and the drug companies object to, are compulsory license (where a permit is given to another company to produce a drug that has already been patented) or parallel imports (where importation is allowed of cheaper products made by the same company holding the patent, or of another version of the product made by another company).   Governments can use both measures without the permission of the patent holder, although compensation has to be paid.

At the WTO meeting, the United States took an opposite view from that of developing countries, stressing the importance of intellectual property rights, and that compulsory licensing and parallel imports can be used only under certain restrictive conditions.

The European Union appeared to be more amenable to the developing countries' position.  It tabled a paper that was more open to the use of  the two measures but it also insisted on maintaining restrictions on their use.

Although the discussion was conducted in terms that may appear overly legalistic to the ordinary person, the issues raised and the conclusions that will later be reached have a serious implication on the public:  whether or not patients and consumers will have adequate access to medicines, or whether patents and the TRIPS Agreement will continue to enable exorbitant prices to put medicines out of the reach of ordinary and poor people.

Reports of the positions taken by various countries were published in the SUNS (South-North Development Bulletin), which parts of this article rely upon.

The highlight of the meeting was the strong, coordinated and well argued positions taken by the developing countries.

Forty seven developing countries (including the Africa group of 30 countries, Brazil India, Indonesia , Philippines, Thailand, Peru and Jamaica) tabled a joint paper, calling on the WTO Ministerial Conference this November to act to ensure "that the TRIPs Agreement does not in any way undermine the legitimate right of WTO Members to formulate their own public health policies and implement them by adopting measures to protect public health."

They affirmed that "nothing in the TRIPs Agreement should prevent Members from taking measures to protect public health."   And where provisions are insufficient to protect public health, proposals can be made to modify the Agreement.

Elaborating on this key point, the 47 countries' statement says:  "Some provisions of the TRIPs Agreement may elicit different interpretations. This “room to maneuver” served the purpose of accommodating different positions held by Members at the time of negotiations of the Agreement.

"We strongly believe that nothing in the TRIPs Agreement reduces the range of options available to Governments to promote and protect public health, as well as other overarching public policy objectives. The TRIPs Council must confirm this understanding as early as possible. "

The statement adds:  "Each provision of the TRIPs Agreement should be read in light of the objectives and principles set forth in Articles 7 and 8. The protection of intellectual property rights, in particular patent protection, should encourage the development of new medicines and the international transfer of technology to promote the development of manufacturing capacities of pharmaceuticals, without restraining policies on access to medications.

"Compulsory licenses are an essential tool for Governments to carry out public health policies, as they may facilitate access to medicines through prevention of abuses of rights, encouragement of domestic capacities for manufacturing pharmaceuticals and in cases of national emergency or other circumstances of extreme urgency, or of public non-commercial use. Nothing in the TRIPs Agreement limits the grounds for Governments to issue compulsory licenses.

"Parallel imports can also be an important tool to ensure adequate access to medications…The TRIPs Council should confirm the unconditional right of Members to determine the way in which exhaustion of rights regimes are applied in their jurisdiction."

Many delegations spoke in support of this paper.  Zimbabwe's T. Chifamba, on behalf of the Africa Group, said there was mounting public concerns that the TRIPS agreement had hampered people's access to affordable medicines.  WTO members must affirm and confirm that TRIPS allows governments to adopt measures to protect health.

"This is the assurance and guarantee that governments need, to enable them to adopt such measures without fear of litigation (either at national level of at the WTO) or that bilateral pressures will be applied on them."

According to the African countries, compulsory licenses are an essential tool and nothing in TRIPS limits the grounds for governments to issue such licenses.  The Group affirmed that legitimate grounds include the non-working of a patent (by the patent holder); for the import of a product under patent protection, and for the export of a product under patent protection.

Brazil's Ambassador Celso Amorim said the debate in the WTO should confirm that TRIPS should not run counter to public health protection, as this would guide members to avoid threats of using the WTO's dispute settlement mechanisms to enforce "restrictive, imbalanced and indeed incorrect interpretations." 

Explaining Brazil's suceessful handling of its AIDS crisis, Amorim said local production of medicines was often crucial in developing countries to ensure they were readil;y available at affordable prices.  He also called for affirmation of the principle of parallel imports which is crucial for less developed and smaller economies.

India's Ambassador S. Narayanan said the real concern is that TRIPS in its current form may be misinterpreted by promoting one aspect (private rights and producers of technological knowledge) at the expense of the other (public policy objectives and users of technology).

He added that there are "huge implications" of conferring a patent on a drug: there are no alternatives available during the patent period; generic competition is prevented; as a result the price of the patented drug is exorbitantly high; and patents are now for 20 years with this life often extended by "selection patents or "evergreen patents" (small additions or new uses being attached to the drug to extend its patent life).

He said it was necessary to provide "absolute legal certainty" on the flexibility available under Article 31 of TRIPS (dealing with compulsory licensing).  The TRIPS Council should reaffirm that countries can resort to Article 31 on any grounds. 

Also, flexible and broad interpretation should be given to terms in the requirements for issuing a compulsory license (such as "reasonable commercial terms" for compensating the patent holder;  and "within a reasonable period" for efforts to obtain a voluntary license); as well as to the stipulations for compulsory license to import and export products.

Among the developed countries, Norway seemed the most sympathetic to developing countries.  It said the recent practice of "differential pricing" (or discounts being provided by drug companies to developing countries for AIDS and other medicines) should not be used as an argument for not interpreting TRIPS "as flexibly as possible in the area of public health."

The European Union submitted a paper which also appeared to be sympathetic to a flexible interpretation.  It agreed WTO members are fee to determine the grounds for granting  compulsory licenses.  Thus, a number of grounds, including public health, may legitimately be cited.

However the EU also affirmed that "procedural safeguards" are important.  These are safeguards that have to be respected when compulsory licenses are issued, for example that a voluntary license be requested before a compulsory one is issued and that the patent holder be paid adequate compensation. 

(Developing countries had asked for flexibility in interpreting such requirements which hinder their ability to make use of compulsory licenses rapidly and effectively).

The EU also agreed that a WTO member can grant a compulsory license to import goods that are under patent, as long as the imports are produced in a country where they are not patented or where the patent has expired. 

It pointed to another interpretation that would allow a Member to issue a compulsory license to a manufacturer in another country, under certain conditions.  However, said the EC, it is uncertain if this interpretation would stand scrutiny by a WTO panel or Appellate Body.  The EC is ready to discuss this issue further.

The United States, in contrast, took a "hard line position" in favour of patent holders by taking a non-flexible interpretation of TRIPS in relation to public health.

In its view, Article 31 (on compulsory licensing) must be read in the light of Article 27.1 (which prohibits discrimination in the enjoyment of patents rights). 

(Article 27.1 states that patent rights shall be enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced).

The US position contrasts with that of developing countries which stressed that compulsory licensing and other provisions of TRIPS should be viewed in the context of Article 7 on the objectives of TRIPS (that includes technology transfer, the mutual advantage of producers and users of knowledge, social and economic welfare) and Article 8 on its principles (including the right of members to protect public health and promote the public interest and to prevent the abuse of intellectual property rights). 

The US added that compulsory licensing could not be used as a mechanism for directing industrial development.  It claimed the non-discrimination clause in Article 27.1 was built on provisions in the WTO system that are against local content, import substitution and local production requirements.

(Many developing countries claim that these requirements are needed to assist their industrial development.  The US position seems to be that compulsory licensing cannot be used to promote industrial development.  This interpretation will confirm the fears of critics of TRIPS that developed countries want to use the agreement to protect their corporations from competition from developing countries whose industrial development would be hampered by TRIPS).

Further, on parallel imports, the US said whilst that Article 6 denied the use of the WTO's dispute settlement system to deal with the issue, it did not authorise parallel imports.

This position is directly counter to that taken by the 47 developing countries which states that "Article 6 should be implemented in a way to ensure the broadest flexibility for Members to resort to parallel imports."   This is needed when governments want to import medicines that are selling at lower cost in other countries, and such parallel imports are especially important in  countries where local manufacture of the drugs is not feasible.

The Thai delegation answered some of the points raised by the US.  Its representative said that due to the lack of clarity in TRIPS, developing countries seemed reluctant to take measures they could be entitled to, and this was very unfortunate.

Thailand said it should be confirmed that each member is free to decide the grounds for compulsory licensing under Article 31, and insisted that this Article be read in the light of Articles 7 and 8.

Rejecting the US position, Thailand said the provisions of Article 27.1 did not restrict the grounds for granting compulsory licenses.  The obligation to consider applications for compulsory licenses in Article 31 overrides the non-discrimination provisions of Article 27.1.

Thailand also said that the meaning of Article 6 is that each member is free to adopt its own scheme of exhaustion of intellectual property rights, and thus it permits parallel imports.  The WTO should put beyond doubt the measures governments might take to tackle the problem and if necessary to amend the TRIPS.

The debate on 20 June showed that a large number of developing countries came well prepared to argue the case for interpreting (and even amending) TRIPS in a way that clearly allows them to take national measures to make medicines affordable to the public. 

However, major battles lie ahead, as it is clear that the United States is still taking a pro drug industry perspective, insisting on a restrictive view of what developing countries are and are not allowed to do to provide medicines at affordable prices.

The WTO will continue discussing the issue, with the next meetings fixed for 25 July (in an informal meeting of the TRIPS Council) and for 19 September (where another full day of special discussion on TRIPS and drugs will take place as part of a formal TRIPS Council meeting).

About the writer: Martin Khor is Director of the Third World Network.