TWN Info Service on Free Trade Agreements

01 December 2007

Health before trade, at any cost

In conjunction with the World AIDS Day, this article stressed the important to safeguard access to affordable medicines which are being threatened by Intellectual Property protection clauses in US free trade agreements (FTAs)

It points out that countries such as Malaysia, Indonesia and now Thailand have used compulsory licences to make or import the more affordable, equally effective, generic versions and this practice would be jeopardised under the US-style FTAs.

The article also shows that the stronger IP protection will not necessary increase innovation and foreign direct investment as claimed by US pharmaceutical companies and their supporters.

It urges more countries to follow Thailand in its recent decision to produce more generic AIDS medicines under compulsory licence and avoid FTAs that compromise public health.

The full article which was published in the Bangkok Post is reproduced below.



Best wishes,

Third World Network
2-1, Jalan 31/70A
Desa Sri Hartamas
50480 Kuala Lumpur
Tel: +603-2300 2585
Fax: +603-2300 2595
email: twnkl@po.jaring.my
websites: www.twnside.org.sg and www.ftamalaysia.org

------------------------------------------------------------------------------------------------------------

http://www.bangkokpost.com/News/01Dec2006_news21.php

Health before trade, at any cost

There is an absolute and vital need to safeguard access to affordable medicines _ which are being threatened by IP protection clauses in US free trade agreements

By CHEE YOKE LING, Bangkok Post 1 December 2006

World Aids Day is a time to review our achievements fighting this disease and to plan for the future. UNAids estimates that 39.5 million people were living with HIV in 2006 and more than 8,000 people with Aids die each day. Lack of medicines is a major factor. Patented versions of Aids medicines used to cost US$15,000 per patient, per year. Generic competition has reduced those prices to $132 per patient per year. In Asia alone, when faced with the high prices of patented Aids medicines, Malaysia, Indonesia and now Thailand have issued compulsory licences to make or import the more affordable, equally effective, generic versions.

Unfortunately, US free trade agreements (FTAs) will make medicines for all diseases more expensive again, in the name of doubtful short-term trade gains.

According to the World Health Organisation's (WHO) economic model, the full effect of the stronger intellectual property (IP) protection required by the United States in all its FTAs will not be felt for more than 15 years.

This means that even the Canadians and Mexicans who have the oldest USFTAs with some of these provisions, have not yet experienced the full increase in medicine prices that the WHO model predicts.
Peru's ministry of health forecasts that just one of the six provisions in USFTAs that raises medicine prices (data exclusivity) will more than double their medicine spending.

Canadian estimates show that if data exclusivity had been in force in Canada over the last five years, it would have cost an additional $600 million for prescription medicines alone.

Colombia predicted its generic medicine industry would lose 71% of its market share.

Many experts, including the United Nations Special Rapporteur on the Right to Health are openly concerned about the way that intellectual property and other provisions of USFTAs can make medicines unaffordable.

A WHO Commission on public health recommends that these types of provisions be avoided. Ten Latin American ministers of health and the African Union's ministers of health and ministers of trade have committed to this.

Who benefits from these USFTA provisions? Malaysia is currently negotiating a USFTA. As 98% of patents in Malaysia are foreign-owned, stronger IP protection would mean that more royalties will be paid to foreign multinational companies.

This would include US pharmaceutical companies such as Pfizer, Merck and Eli Lilly, which have publicly stated that they want these stronger IP provisions.

They are also on the US Trade Representatives (USTR) advisory committees that, according to the US government, serve to ensure that US trade policy and trade negotiation objectives adequately reflect US commercial and economic interests. These US pharmaceutical companies and their supporters argue that stronger IP protection will increase innovation and foreign direct investment (FDI).

We all want new, useful medicines to be developed. But it is not clear that stronger IP protection will deliver.

Pharmaceutical companies prioritise the development of medicines for people who can afford to pay for them.

Stronger IP protection does not address this market failure. This is why of the 1,223 new drugs marketed worldwide between 1975 and 1996, only 13 were developed to treat tropical diseases which mostly afflict the poor and only four were the direct result of pharmaceutical industry research.

Secondly, there is data showing that stronger IP protection has not increased innovation, such as in Europe.

Thirdly, innovation occurs even without IP protection, as Asia has proven with its rich history of traditional medicines developed over the centuries, long before anyone worried about intellectual property.

As for more FDI, studies show there is no robust theoretical link between stronger patent protection and new investment in manufacturing. There is also no empirical evidence that it leads to more FDI.
In fact, when Malaysian academics questioned 11 foreign pharmaceutical manufacturers, 97% said that Malaysian patent protection was strong but foreign investment into the pharmaceutical industry has still been negligible.

However, stronger IP protection may scare off generic manufacturers who are important investors in Malaysia.
Studies by the UN Development Programme, the UN Conference on Trade and Development and the World Bank have found that stronger investor protection in an FTA has not been proven to increase FDI.

As for trade, Thailand and Malaysia are currently both in trade surplus to the United States (by $12 billion and $23 billion, respectively).

A US free trade agreement typically requires zero tax on American exports.

However, current US legislation does not allow the USTR to offer cuts on US taxes on Malaysian or Thai exports by much if they sign USFTAs.

The benefits of a USFTA for developing countries are highly questionable. But in one area at least the loss will be clear. In the past year 960,000 more Asians were newly infected with HIV.

UNAids reports that the number of people receiving Aids drugs more than tripled since 2003, but this is still only about 16% of the total number of people needing treatment in Asia.

Only Thailand has succeeded in providing treatment to at least 50% of people needing it. A USFTA will be a setback.

We, therefore, strongly welcome Thailand's recent decision to produce more generic Aids medicines under compulsory licence.

More countries should move in this direction and avoid FTAs that compromise public health.

The writer is legal adviser of Third World Network, an international development network headquartered in Malaysia.