TWN Info Service on Health Issues (Feb09/02)
6 February 2009
Third World Network

Developing countries attack Dutch seizure of generic medicines
Published in SUNS #6633 dated 5 February 2009

Geneva, 4 Feb (Sangeeta Shashikant) -- Developing countries at the WTO General Council on 3 February launched a scathing attack on the action by the Dutch government in seizing a cargo of generic medicines in transit in Rotterdam (en route from India to Brazil) for alleged patent infringement.

The seizure of 500 kilos of Losartan Potassium, an active pharmaceutical ingredient (API) used in the production of medicines for arterial hypertension (a common and serious disease that often leads to death), was instigated by an administrative request lodged by the corporation which holds the patent of the API in Holland. The API is not patented in either India or Brazil.

The Dutch action was taken in line with procedures set out in the EC Council Regulation 1383 of 22 July 2003 which empowers the EU member states' customs authorities to detain goods in transit on suspicion of an infringement of intellectual property rights.

This case is the latest in a recent spate of seizures of several consignments of generic drugs of Indian companies by the Dutch customs authorities on the ground of alleged IP violations.

The strong criticisms at the WTO's General Council were made by Brazil and India, countries most affected by the Dutch seizure, and supported by more than 15 other developing countries. They fear that the Dutch action is an example of increasing attempts to put in place measures that go beyond the TRIPS Agreement and that result in extraterritorial enforcement of IP rights.

According to a diplomat, the EC response to the criticisms at the WTO was "defensive in an offensive way". The EC said that it was ready to engage bilaterally on the issue but also spoke of the need to enter into a "non-emotional" debate about it. The EC also said, jokingly, that if you get emotional, we have a non-generic medicine to treat that.

The heated discussion at the WTO's General Council follows an equally controversial session at the World Health Organization's Executive Board meeting last month wherein developing countries strongly criticized the WHO Secretariat for its report and draft resolution on "Counterfeit Medical Products".

The developing countries objected to the WHO's approach of attempting to deal with the quality and safety of medicines under the rubric of "Counterfeits" at the WHO's Executive Board meeting on 19-27 January. They feared that the real effect of the WHO documents would be to undermine the production and trade of good quality generic medicines, and consequently access to generic medicines.

The attempt by developed countries to make use of international agencies, standards and agreements to mandate the use of national customs, health, police, postal and other government agencies to enforce the rights of IP holders has become a controversial subject. This is especially since the effect may be to adversely affect the public's access to medicines as the actions proposed for IP enforcement is intended to protect the interests of multinational companies holding the patents while endangering the viability of generic drug producers.

The developed countries have been attempting to use various international forums such as the World Customs Organisation, World Health Organisation, the Universal Postal Union and WIPO to further their IP maximalist agenda.

On 3 February, the controversy surrounding this issue finally erupted at the WTO, the home of the TRIPS Agreement.

The incident that sparked off the outrage felt on this issue was the seizing by Dutch customs authority on 4 December 2008 of a cargo of 500 kilos of Losartan Potassium in transit in Rotterdam, en route from India to Brazil. Losartan Potassium, an active pharmaceutical ingredient, is used in the production of medicines for arterial hypertension. The substance was being exported by the Indian company Dr. Reddy's and imported by the Brazilian company EMS.

The cargo was detained on request of a company which allegedly holds the patent of Losartan Potassium in the Netherlands pursuant to procedures set out in the EC Council Regulation 1383, of 22 July 2003, wherein the EU customs are empowered to detain goods in transit on suspicion of an infringement of IPR.

Losartan is not patented in Brazil or in India. According to news reports, it is patented in the Netherlands by DuPont, while US-based company Merck and Co. holds the marketing rights.

According to reports, the cargo was held back by the Dutch authorities for 36 days after which it was released to return to India.

As a result of the Dutch authorities' actions, the medicines critically required by patients with hypertension (a common, serious disease that often leads to death) never reached Brazil.

This case is the latest in a recent spate of seizures of several consignments of generic drugs of Indian companies on the grounds of alleged IP violations.

Brazil and India have protested against the seizures at the WHO Executive Board meeting as well as at the recent World Economic Forum in Davos.

During the General Council meeting, the ambassadors of Brazil and India called on the EC to urgently review the relevant regulations and the actions of the EU's national authorities based on such regulations and to bring them in conformity with the letter and spirit of the TRIPS Agreement and the WTO system. Their call was strongly echoed by many other developing countries.

Brazil's Ambassador, Roberto Carvalho de Azevedo, said that the measure taken by the Dutch authorities clearly violates the freedom of transit, which is a right enshrined in GATT Article V, wherein only very exceptional circumstances warrant restrictions on that freedom. He added that Brazil was not aware of any such circumstance in the Losartan case.

He said that the decision to impede the transit of a cargo of generic medicines, which was not headed for the Dutch market, was "unacceptable" and "sets a dangerous precedent", adding that "whether or not the medicines were generic under the law of the country of transit is an irrelevant question".

The concept of generic must not be mistaken with counterfeit or pirated and that generic medicines are not substandard or illegal, said Brazil. The Dutch customs authorities' decision to block transit impeded Brazilian hypertension patients' access to safe and price-competitive generic medicines, and hypertension is a common, serious disease that often leads to death.

Brazil also expressed grave concern with the setting of a precedent for extraterritorial enforcement of IP rights, adding that such attempts have "critical systemic implications" and "affront fundamental canons of the multilateral trade system, in particular the well-established principle of territoriality", a fundamental pillar of the international IP regime.

It further said that extraterritorial enforcement of patent rights cannot be reconciled with the terms of the Doha Declaration on TRIPS and Public Health. The protection of public health and the promotion of the public interest are still part of TRIPS fundamental principles.

The undue interference of Dutch authorities with the transit of the generic medicines may have other serious systemic consequences, particularly that it could undermine countries' ability to address public health needs by cross-licensing arrangements, Brazil added. In this regard, it referred to the "Paragraph 6 system" (i. e. the 30th August Decision 2003/Article 31bis of TRIPS) which permits a Member without manufacturing capacity to import medicines from other Members under a compulsory cross-licensing arrangement.

Brazil asked: "What would happen to the Doha Declaration on TRIPS and Public Health and, in particular, to the "paragraph 6 system if the denial of transit to generic medicines becomes a systematic and widespread practice and if countries commence to create impediments to the legitimate trade of generic medicines based on the wrongful allegation that it violates national patent rights? In such cases, trade in generic medicines would be rendered virtually impossible."

Brazil stressed that the IP protection cannot supersede protection of life and the right to promote public health, which are more fundamental values.

Brazil also highlighted that application of enforcement procedures to goods in transit is being advocated in the World Customs Organization and in the World Health Organization. It added that in WCO, some countries were pushing for the adoption of standards that would give customs the authority to seize goods in transit suspected of infringing IP rights. Similarly, in the World Health Organization, the International Medical Products Anti-Counterfeit Task Force (IMPACT) initiative claims that national legislation should provide for enforcement procedures over goods in transit, it said.

Brazil cautioned that "neither the WCO nor the WHO are adequate fora for discussing IP rights enforcement", adding that in WHO, the focus should be on the quality, safety and efficacy of medicines, as well as on the issues of access, while the WCO should concentrate on developing methodologies to enhancing customs' performance, rather than venturing into TRIPS-plus norm-setting.

Brazil stressed that interfering with the freedom of transit for the sake of enforcing IP rights violated trade disciplines negotiated by WTO Members. IP rights can and should be enforced in a Member's own market and such enforcement, however, cannot reach goods that are not intended for that market.

Brazil called on the Netherlands and/or the European Communities to clarify the circumstances and legal basis for Dutch authorities' decisions and stressed that the Netherlands and the EC should bring their legislation into conformity with multilateral trade disciplines.

India's Ambassador Ujal Singh Bhatia recalled not only the seizure of Losartan Potassium but also other Indian shipments by the Dutch customs on grounds of alleged IP violations, adding that such instances cause great concern due to their systemic and far-reaching implications. He said that such acts represent a distorted use of the international IP system and circumscribe the flexibilities in the TRIPS Agreement.

India also stressed that the "WTO rule-based system provides for freedom of transit by the most economical and convenient routes and without unnecessary delays and restrictions", and that the acts of the Dutch authorities are therefore, "a denial of the rule-based system".

It further added that the concept of "territoriality" is a key stone in the edifice of the TRIPS Agreement and that there are no indications that the drug consignment was meant for the markets of the EC. Thus, the seizure and initiating procedures for destruction of such consignments violates this key principle.

India stressed that WTO Members have strived for a balance between public health concerns and protection and enforcement of IPRs, and that the Public Health decisions are a valuable part of the WTO acquis and need to be adhered to in letter and spirit.

Ambassador Bhatia added that it was ironical that while on one hand, the WTO has taken steps to promote access to affordable medicines and remove obstacles to the proper use of TRIPS flexibilities, on the other hand, some Members seek to negate the same by seizing drug consignments in transit.

He emphasized the importance of generic drugs, adding that their essentiality may vary in inverse proportion to the level of development of a country. Barriers to legitimate trade of generic drugs will seriously impair the efforts of organizations like Medecins Sans Frontieres (MSF), Clinton Foundation, Bill and Melinda Gates Foundation and a whole lot of other organizations engaged in providing medicines and improving public health in the least developed parts of the world.

He also drew attention to the emerging trend of efforts "to implement the protection and enforcement of IPRs in a maximalist manner and thereby upset the delicate balance between rights of IPR holders and the public policy objectives under the TRIPS Agreement".

India said that a coordinated approach is being witnessed in several international fora like the World Customs Organisation, World Health Organisation, Universal Postal Organisation etc. to promote the IP maximalist agenda and noted with dismay the efforts by some Members to link safe and efficacious but low cost generics with counterfeit medicines, which is essentially an IPR issue.

"There is an attempt to enlarge the definition of counterfeits beyond its definition in the TRIPS Agreement, to set maximalist enforcement norms, and to include TRIPS plus provisions in RTAs," said India.

It added that these are "subtle and concerted ways of circumscribing the flexibilities of the TRIPS Agreement", and that they not only "run counter to the spirit of the TRIPS Agreement which is a minimum standards agreement but is counter to the understanding given to developing countries when the TRIPS Agreement was being negotiated".

India cautioned that "Efforts to enshrine new, maximalist TRIPS plus provisions in other forums will seriously undermine the delicate balance in the TRIPS Agreement and raise systemic issues".

It called on the EC to "urgently review the relevant regulations and the actions of the national authorities based on such regulations, and bring them in conformity with the letter and spirit of the TRIPS Agreement and the rules based WTO system".

Many other developing countries spoke at the General Council in support of Brazil and India.

Nigeria registered its "expectation that the balance between public health concerns and enforcement of IP rights should be respected" and that the "importance of generic drugs for countries that have no capacity to manufacture pharmaceutical products cannot be over-emphasized".

It urged countries "to ensure that the enforcement of IP rights is not used to impede legitimate trade" and specifically "to avoid taking measures that would adversely affect the freedom of transit by the most convenient and economical routes". It also encouraged the Netherlands and/or the EC to clarify the circumstances and legal basis of this case.

Pakistan stressed that recent "IP maximalist" attempts and "forum shopping" have triggered a dangerous trend that could undo most of what WTO members have gained so far. It called particular attention to the application of extraterritoriality of IPRs, which it said was alarming for developing countries which are producing mostly the generic drugs.

It added that the action was against the spirit of the Doha Declaration on TRIPS and public health and called on members to respect TRIPS provisions and maintain a fair system devised through multilateral negotiations rather than defining their own standards and applying them at the cost of other members.

According IP Watch (3 February 2009), the EU Ambassador Eckart Guth responded that the Dutch seizure is allowed by the TRIPS agreement and is based on provisions in EU customs law that allow the customs authorities to temporarily detain any goods if they suspect that these goods infringe an intellectual property right. As soon as the goods were eventually determined not to be headed for the EU market, they were returned to the owner.

Guth said it would have been preferable for Brazil and India first to raise the issue bilaterally in order to clarify facts "before triggering a highly emotional debate." Guth also referred to TRIPS Article 51, which allows customs authorities to suspend the release of goods, and he said that under EU law, companies whose goods are wrongly detained are eligible for reimbursement.

"Let me make it very clear that the EU has absolutely no intention to hamper any legitimate trade in generic medicines or to create legal barriers to prevent movement of drugs to developing countries, nor have our measures had this effect," Guth said. "We are absolutely committed to all the efforts that are being made to facilitate access to medicines."

In addition to Brazil and India, those voicing their concerns about how the customs authorities' actions could hamper access to medicines were Argentina, Bolivia, Burkina Faso, China, Costa Rica, Cuba, Ecuador, Egypt, Indonesia, Israel, Nigeria, Pakistan, Paraguay, Peru, South Africa, Thailand and Venezuela.

Some sources say that there is another unsavoury twist to the story. They say that there was a possibility that the IP holders in the Netherlands forced the Indian company to agree to return the goods to India (rather than to send them on to Brazil) on the ground that they would otherwise be destroyed in the Netherlands. +