The New “Deal” on TRIPS and Drugs - Third World Network

TWNT h i r d W o r l d N e t w o r kB r i e f i n gP a p e r 17www.twnside.org.sg October 2003<strong>The</strong> <strong>New</strong> “Deal” on TRIPS and Drugs: WhatDoes it Mean for Access to Medicines?by Cecilia OhOn 30 August 2003, WTO members reached an agreement to allow the export of affordable medicines tocountries which lack the means to produce them. Cecilia Oh examines the main provisions of this accordand finds that it may still pose obstacles to the supply of cheap drugs to nations in need.BackgroundIn November 2001, when Trade Ministers in Dohaagreed on a special declaration recognizing the rightof countries to take measures to protect public healthand promote access to medicines, over and above theobligation to protect intellectual property rights, it waswidely acclaimed. <strong>The</strong> Doha Declaration on the TRIPSAgreement and Public Health enshrined the principlesof the primacy of protecting public health and, inparticular, promoting access to medicines for all, andthat the interpretation and implementation of the TRIPS(Trade-Related Aspects of Intellectual Property Rights)Agreement would not prevent governments fromtaking such measures. It was declared a victory fordeveloping countries and civil society organizationsthat had fought for this right to health. Moreimportantly, it gave hope that developing countrieswould be able to take concrete steps to make cheaperversions of patented medicines available to the poorand sick in urgent need of them.<strong>The</strong> Doha Declaration had confirmed, among others,the right of developing countries to use compulsorylicences to override patents on medicines, in order toallow generic drug manufacturers to produce cheaperversions of patented medicines. <strong>The</strong> Ministers at Dohacould not, however, agree on how to solve the problemof how those developing countries without domesticpharmaceutical manufacturing capacity couldeffectively use the compulsory licences. This becamepopularly known as the Paragraph 6 problem, namedafter the paragraph dealing with this issue in the DohaDeclaration. <strong>The</strong> Declaration instructed WTO membersto find “an expeditious solution” to this problem byDecember 2002.On 16 December 2002, the Chair of the WTO’s TRIPSCouncil came up with a text containing a proposedsolution, which was accepted as a compromise byalmost all members except the US. <strong>The</strong> deadline wasthus missed. Negotiations then stalled on the proposedsolution, known as the December 16 text.Recently in Geneva on 30 August, WTO membersfinally adopted the December 16 text, together with anaccompanying statement by the Chair of the WTOGeneral Council. Ministers in Cancun will nowwelcome the “Decision on the Implementation ofParagraph 6 of the Doha Declaration on the TRIPSAgreement and Public Health”. However, the receptionto the Decision may be more muted than that whichgreeted the Doha Declaration in 2001. Civil societyorganizations have expressed reservations that theDecision and the Chair’s statement represent acompromise that may have the potential of pushingback the gains made at Doha.<strong>The</strong> Paragraph 6 Problem<strong>The</strong> TRIPS Agreement allows the grant of compulsorylicences (CL) to override patents, so that genericmanufacturers may produce their cheaper versions ofpatented drugs. Countries with insufficient or noTWN THIRD WORLD NETWORK is a network of groups and individuals involved in bringing about a greater articulationof the needs, aspirations and rights of the people in the Third World and in promoting a fair distribution of world resources andforms of development which are humane and are in harmony with nature.Address: 121-S Jalan Utama, 10450 Penang, MALAYSIA Tel: 60-4-2266728/2266159 Fax: 60-4-2264505E-mail: twnet@po.jaring.my Website: www.twnside.org.sg

domestic manufacturing capacity in pharmaceuticalsare faced with a problem because there are no genericmanufacturers to produce the drugs domestically. Anoption for these countries is to grant a CL for the importof such drugs.However, the supply of drugs for these countries toimport may be limited and insufficient because ofconstraints placed by the TRIPS Agreement on thecountries that have the capacity to produce and exportthe generic versions. <strong>The</strong> reason is that the TRIPSAgreement (Article 31(f)) requires that the productionof generic drugs under a CL be “predominantly for thesupply of the domestic market”. This restriction wouldmean that export of drugs produced under acompulsory licence is possible only if the“predominant” portion of the production output hasbeen supplied to the domestic market. This raises theconcern that the non-predominant portion may not besufficient for the needs of the importing country orcountries.<strong>The</strong> Agreed “Solution”<strong>The</strong> “solution” is essentially a waiver of the Article 31(f)limitation on exports, which lifts the requirement ofArticle 31(f) that pharmaceutical products producedunder a CL shall be “predominantly for the supply ofthe domestic market”. With this waiver in force, itmeans that a predominant portion or even the totalamount of production under a CL could be exportedto a country that wishes to import. WTO members alsoagreed to an accompanying statement by the GeneralCouncil Chair which spells out a number of “key sharedunderstandings” of how the Decision would beinterpreted and implemented. <strong>The</strong> Chair’s statementis widely known to be the US’ attempt to seek “comfortlanguage” that would assuage concerns of its powerfulpharmaceutical lobby that the Decision would allowgeneric manufacturers to gain a stronger foothold inthe profitable pharmaceutical market. <strong>The</strong> US had, inmid-August 2003, come up with its proposal for aChair’s statement that would enable them to agree tothe December 16 text — eight months after the USstalled negotiations by withholding consensus after(almost) all WTO members had agreed to it inDecember 2002.After hurried consultations in the few weeks before theend of August, members agreed to the final version ofthe Chair’s statement. <strong>The</strong> statement confirms thecommon understanding of members that the Decisionshould be used in good faith to protect public healthpurposes, and not for industrial or commercial policyobjectives. It also emphasizes the need to preventdiversion of medicines from the markets for which theyare intended, elaborating on the trade-diversionpreventionmeasures that are required to be taken bycountries using the Decision.Will it Work? And How?<strong>The</strong> objective of the Decision is to allow for countrieswishing to import generic medicines to do so from aforeign generic producer. Where a patent is in force inthe importing country on the drug in question, theimporting country government will have to issue a CLto enable the import of the generic version of thepatented drug. In the exporting country, the patentstatus of the drug is also relevant: if a patent is in force,then the generic manufacturer would have to obtain aCL to produce the drug and export it.In countries where there is no patent in force — forexample, least-developed country (LDC) membersneed not allow for drug patents until 2016 — theimporting country need not issue a CL. Similarly, in anexporting country where there is no patent in force,the production and export can take place without issueof a CL. However, there are very few countries in thissituation, India being a notable exception until 2005,when all countries will have to provide full patentprotection. This is the reason why it was of crucialimportance that a solution to the Paragraph 6 problemwas found quickly.<strong>The</strong>refore, in many cases, two CLs will have to beissued. Under the TRIPS Agreement and confirmed bythe Doha Declaration, WTO members have the rightto determine the grounds for the grant of compulsorylicences. <strong>The</strong> standard procedural conditions for thegrant of CL are set out in the TRIPS Agreement (Article31), which includes the conditions that an applicationfor a CL should be preceded by a failed attempt toobtain a voluntary licence from the patent holder andthe payment of compensation to the patent holder. <strong>The</strong>Decision now modifies some of these requirements andsets out another set of procedures to be complied with,when the waiver of Article 31(f) is required to allowfor generic medicines made in one country to beexported to another.A Compulsory Licence to ImportSo, when a developing country wishes to importgeneric medicines (and the said medicine is underpatent protection in the country), the importing countrywill have to do the following:(a) Notify the WTO of its intention to use the solutionas an importer (LDCs are not required to notify); thenames and expected quantities of the product(s)needed; its confirmation that it has established that ithas insufficient or no manufacturing capacity (see (b)below); and its grant or intention to grant a CL.(b) Establish insufficient or no manufacturing capacity.LDCs are automatically eligible, while otherdeveloping countries have to qualify to use the solution.Developing countries have to establish either that: i)they have no manufacturing capacity in thepharmaceutical sector; or that ii) the capacity iscurrently insufficient for the purpose of meeting itsneeds. <strong>The</strong> Decision suggests that countries make thisdetermination themselves, i.e., it is a self-determinationtest. Developed countries have “opted out” of usingthe solution and 11 high-income developing countries

countries in their use of the Decision.<strong>The</strong> Chair’s statement would seem to be the last (andsuccessful) in the series of attempts to restrict the useand effectiveness of the solution. In the early stages ofnegotiations on the Paragraph 6 problem, the US hadsought to put limits on the scope of diseases to becovered under any solution. When this was rejected,an attempt was made to restrict the circumstances inwhich the solution may be used.Developing countries also rejected the proposal for aChairman’s understanding that the solution be usedonly in circumstances of national emergency or extremeurgency. <strong>The</strong>n, there was the attempt to pressure somecountries against using the solution, questioning theireligibility. It had been reported that a number ofdeveloping countries have been informed by the USthat they are considered ineligible, even though theDecember 16 text had clearly made eligibility a matterof national decision.Put it to the TestIt now remains to be seen whether or not developingcountries will make use of the solution, and if it will infact make access to affordable medicines a reality. <strong>The</strong>Decision will have to be tested as to whether countrieswill try to use it and whether it can be used successfully.This means that developing-country governments willhave to issue the necessary compulsory licences for theimport of generic medicines. Generic manufacturers inother countries will have to respond to this call bymaking applications for compulsory licences toproduce and export. In some cases where productpatent protection is not yet in force, such as in India,generic manufacturers may produce and exportwithout the need for compulsory licences until 2005.In the cases where compulsory licences are required,governments will have to issue compulsory licencesfor production and export by their genericmanufacturers to produce and export. Developedcountrygovernments can prove their good faith bygranting compulsory licences for export whenrequested by their generic manufacturers.<strong>The</strong> Decision also confirms that it does not prejudicethe existing rights and flexibilities available under theTRIPS Agreement, including the extent to whichpharmaceutical products produced under compulsorylicence can be exported under the present provisionsof Art. 31(f). <strong>The</strong> TRIPS Agreement currently allowsexport of the non-predominant portion of productionunder CL (theoretically, anything up to 49% ofproduction) without these additional conditions.Where a CL for remedying anti-competitive practicesis granted, the total production output (i.e., 100%) canbe exported, without any of the additional conditionsspecified in the Decision. <strong>The</strong>refore, it would appearthat where a member seeks to export under thesecircumstances, it need not meet any of the terms andconditions specified under the Decision. WTOmembers should therefore explore the means of usingthese rights and flexibilities as an alternative or inconjunction with the Decision.<strong>The</strong> Decision represents only one aspect of the broadframework that the Doha Declaration provides tosafeguard against unaffordable prices for much-neededmedicines. <strong>The</strong> Doha Declaration affirms the right ofWTO members to employ other measures to facilitatethe protection of public health and promote access tomedicines. <strong>The</strong> implementation of these measures indeveloping countries is far from complete. <strong>The</strong>refore,countries should take urgent measures to adopt andadapt their national patent laws, so as to make full useof the flexibilities in the TRIPS Agreement, as affirmedby the Doha Declaration. This includes not only theadoption of rules and guidelines to facilitate the grantof compulsory licences on public health grounds, butalso to provide for the appropriate institutional andadministrative framework that is necessary for theeffective implementation of public-health-sensitivepatent laws. <strong>The</strong>re are also other TRIPS-consistentmeasures, including the use of parallel imports,government-use provisions and exceptions to patentrights, that may be used to mitigate the effects ofpharmaceutical patents, and the use of these measuresshould be properly explored by developing countriesas alternatives.<strong>The</strong> Doha Declaration also granted the right to notprovide for pharmaceutical patents to LDC membersuntil 2016. <strong>The</strong>refore, these countries should becautioned against enforcing or providing for patentson pharmaceutical products until 2016 at the earliest.LDCs should use this flexibility to enable them tostructure their patent laws and data protection rulesso as to better protect public health and promote accessto affordable medicines.<strong>The</strong> negotiations leading up to the Doha Declarationand the recent Decision have highlighted the effects ofpatents on the prices of and access to medicines. <strong>The</strong>implications of the TRIPS Agreement on public healthand access to medicines are now better understood.International public opinion will have to be the judgeof whether the declarations and decisions in the WTOhave had a real impact on improving people’s accessto affordable medicines. If it is judged that these havenot been effective, it may be that pressures will thenbegin for more far-reaching changes.(This paper first appeared as a Briefing Paper of the ThirdWorld Network for the 5th Ministerial Conference of theWorld Trade Organisation (WTO) held in Cancun inSeptember 2003.)CECILIA OH is a representative and Legal Advisor ofthe Third World Network based in Geneva.