Global Politics of Pharmaceutical monopoly power
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- Title
- Global Politics of Pharmaceutical monopoly power
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THE GLOBAL POLITICS
OF PHARMACEUTICAL MONOPOLY POWER
THE GLOBAL POLITICS
OF
PHARMACEUTICAL
MONOPOLY POWER
Drug patents, access, innovation and the application of
the WTO Doha Declaration on TRIPS and Public Health
Ellen F.M. ’t Hoen, LL.M.
AMB
2009
The author has made an on-line version of this work available under a Creative
Commons Attribution-Noncommercial-Share Alike 3.0 license. It can be accessed at
www.msfaccess.org
ISBN 97890 79700 06 6
© 2009 Ellen F.M. ’t Hoen
AMB Publishers – PO Box 7 – 1110 AA Diemen – the Netherlands
info.amb@xs4all.nl
Table of Contents
List of abbreviations and acronyms
Timeline of events
Acknowledgements
Executive Summary
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ix
xiii
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1. Introduction
1
2. Key IP-related issues in access to new essential medicines
2.1 Debates on access to medicines and the TRIPS Agreement
2.1.1 Brief history of TRIPS
2.1.2 Scope, objective and principles of the TRIPS Agreement
5
8
9
12
3. History of the debate on intellectual property protection
and pharmaceuticals
3.1 US Senate investigations into pharmaceuticals and anti-trust
3.2 Early debates at the World Health Assembly
15
15
17
4. The Doha Declaration on TRIPS and Public Health
4.1 Negotiations on TRIPS and Public Health at the WTO
4.2 From Seattle to Doha
4.2.1 Trade dispute in South Africa: Big Pharma vs. Nelson Mandela
4.2.2 Trade dispute in Brazil: The Brazilian AIDS Programme
4.2.3 Trade dispute in Thailand
4.2.4 Cipla's announcement of 1 USD a day ARV treatment.
4.2.5 Protest on university campuses in the US
4.2.6 World Health Assembly (WHA)
4.2.7 Attention to the AIDS medicines crisis
4.2.8 Changing landscape
4.3 Why the Doha Declaration came to pass
4.4 Provisions of the Doha Declaration
4.5 Paragraph 6 of the Doha Declaration
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25
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35
5. Practical implementation of the Doha Declaration on TRIPS and Public Health 39
5.1 History of compulsory licensing
39
5.2 Examples of compulsory licensing on medicines in industrialized countries
41
5.2.1 Canada's pharmaceutical compulsory licensing regime
41
5.2.2 UK Crown Use
42
5.2.3 US Government use of pharmaceutical patents
43
5.2.4 Other recent compulsory licenses
44
5.3 Use of TRIPS flexibilities by middle-income developing countries
(medicines producing and exporting countries)
44
5.3.1 Brazil
44
5.3.2 Thailand
5.3.3 Malaysia
5.3.4 South Africa
5.3.5 Kenya
5.3.6 India
5.4 Medicines importing countries
5.4.1 Results
5.5 International and multilateral donors
5.5.1 The Global Fund to fight AIDS, TB and Malaria
5.5.2 The World Bank
5.5.3 UNITAID
5.5.4 The US President's Emergency Plan for AIDS Relief (PEPFAR)
5.6 Summary
6. Attempts to limit the scope and use of the Doha Declaration
6.1 US objectives for IP in bilateral and regional trade agreements
6.1.1 Push back in the US
6.2. Other TRIPS-plus developments
6.2.1 European Commission
6.2.2 A legal challenge of TRIPS flexibilities: Novartis and the Indian Patents Act.
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59
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7. Rationale for the pharmaceutical patent system
7.1 Patents and innovation – where is the evidence?
7.2 Patents and drug development for ‘neglected’ and
‘most neglected’ diseases
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80
8. Conclusions and recommendations
8.1 Access: towards pro-access management of IP
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8.1.1 Routine compulsory licensing and government use in procurement
8.1.2 Licences of right
8.1.3 Extend the 2016 deadline for LDCs
8.1.4 Patent pools
8.2 Access and innovation
8.2.1 Change the incentive system for health R&D
8.2.2 Not-for profit drug development
8.2.3 Novartis R&D fund proposal
8.2.4 Prize model
8.2.5 The Medical Innovation Prize Act 2005
8.2.6 A proposal to solve the drug price crisis in the US
8.2.7 R&D treaty
8.3 Conclusion
References
Annex 1: Declaration on the TRIPS Agreement and Public Health
Annex 2: Selected Articles from TRIPS
Annex 3: 2005 Indian Patents (Amendment) Act, Section 3(d)
Annex 4: 2003 WTO ‘August 30th’ Decision
Annex 5: Negotiating history of the ‘August 30th Decision’
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131
LIST OF ABBREVIATIONS AND ACRONYMS
vii
LIST OF ABBREVIATIONS AND ACRONYMS
List of abbreviations and acronyms
lamivudine
abacavir
African, Caribbean and Pacific countries
Acquired Immune Deficiency Syndrome
active pharmaceutical ingredient
antiretroviral
artesunate/amodiaquine
zidovudine
zidovudine/lamivudine
Boehringer Ingelheim
Bristol Myers Squibb
Canadian Dollars
Central American Free Trade Agreement
WHO Commission on Intellectual Property Rights, Innovation
and Public Health
CIPR
United Kingdom Commission on Intellectual Property Rights
CL
compulsory license
CPTech
Consumer Project on Technology
d4T
stavudine
DDC
Drug Development Corporation
ddI
didanosine
DG Trade
Directorate General for Trade of the European Commission
DNDi
Drugs for Neglected Diseases initiative
Doha Declaration WTO Declaration on TRIPS and Public Health
DSB
WTO Dispute Settlement Body
EC
European Commission
EMRs
exclusive marketing rights
EPAs
Economic Partnership Agreements
FDC
fixed-dose combination
FTA
free trade agreement
G8
Group of Eight
GAO
United States Government Accountability Office
GATT
General Agreement on Tariffs and Trade
GDP
gross domestic product
Global Fund
The Global Fund to Fight AIDS, Tuberculosis and Malaria
GPO
Government Pharmaceutical Organisation (Thailand)
GSK
GlaxoSmithKline
GSP
Generalized System of Preferences
GU
government use
HAART
highly active antiretroviral treatment
3TC
ABC
ACP
AIDS
API
ARV
ASAQ
AZT
AZT/3TC
BI
BMS
CAD
CAFTA
CIPIH
viii
HAI
HIV
ICH
IDA
IFPMA
IGWG
INP+
IP
IPC
KEI
LDC
MAP
MEDS
MEPs
MMSA
MSD
MSF
NAFTA
NDA
NGO
NHS
NME
PEPFAR
R&D
TB
TRIPS
UN
UNAIDS
UNDP
UNICEF
US
US FDA
USAID
USD
USTR
WHA
WHO
WIPO
WTO
UK
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Health Action International
human immunodeficiency virus
International Conference on Harmonisation of Technical
Requirements for Registration of Pharmaceuticals for Human
Use
International Dispensary Association
International Federation of Pharmaceutical Manufacturers &
Associations
Intergovernmental Working Group on Public Health,
Innovation and Intellectual Property
Indian Network for People Living with HIV/AIDS
Intellectual Property
Intellectual Property Committee
Knowledge Ecology International (formerly CPTech)
Least-Developed Country
World Bank Multi-country HIV/AIDS Program
Mission for Essential Drugs and Supplies (Kenya)
Members of the European Parliament
US Military Medical Supply Agency
Merck Sharp & Dohme
Médecins Sans Frontières
North American Free Trade Agreement
new drug application
non-governmental organisation
United Kingdom National Health Service
new molecular entity
United States President’s Emergency Plan for AIDS Relief
research and development
Tuberculosis
Agreement on Trade-Related Aspects of Intellectual Property
Rights
United Nations
Joint United Nations Programme on HIV/AIDS
United Nations Development Programme
United Nations Children’s Fund
United States
United States Food and Drug Administration
United States Agency for International Development
United States Dollars
United States Trade Representative
World Health Assembly
World Health Organization
World Intellectual Property Organization
World Trade Organization
United Kingdom
TIMELINE OF EVENTS
ix
TIMELINE OF EVENTS
Timeline of events
Related to access to medicines and
intellectual property
1957 – 1962
1965
1969-1992
1986
Early 1990s
1995
1995
1996
1996 (May)
1997
The United States Senate Sub-committee on Anti-trust and
Monopoly, under the chairmanship of Senator Estes
Kefauver, examines the prescription drug industry and
recommends legislation to curtail the monopoly powers of
the pharmaceutical industry. In the late 1950s-early ‘60s, the
US invoked government use powers on a routine basis to
order generic medicines from abroad, regardless of the patent
status of the products.
Pfizer Corporation unsuccessfully challenges the United
Kingdom’s routine use of compulsory licenses (“Crown Use”)
for the provision of generic medicines to the National Health
Service.
Canada issues 613 compulsory licenses for importation
and/or local production of medicines as part of its cost
containment measures.
Launch of the Uruguay Round of the GATT (the predecessor
of the WTO).
Highly Active Antiretroviral Therapy (HAART) becomes
available in Europe and North America, changing AIDS from
a lethal disease to a chronic illness.
Establishment of the World Trade Organization (WTO) and
the adoption of the TRIPS Agreement.
UNAIDS created.
Brazil starts offering universal free ARV treatment to people
living with AIDS.
World Health Assembly (WHA) adopts the Revised Drug
Strategy and strengthens WHO’s mandate in the area of
intellectual property; the WHA requests the WHO ‘to report
on the impact of the work of the World Trade Organization
(WTO) with respect to national drug policies and essential
drugs and make recommendations for collaboration between
WTO and WHO, as appropriate.’
Brazil starts granting pharmaceutical product patents.
x
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
The South African Pharmaceutical Manufacturers
Association and 39 mostly multinational pharmaceutical
companies bring suit against the government of South Africa,
alleging that the Medicines and Related Substances Control
Amendment Act, No. 90 of 1997 violated TRIPS and the
South African constitution.
1999
Médecins Sans Frontières (MSF) launches its international
Campaign for Access to Essential Medicines.
1999 (March)
MSF, Health Action International (HAI) and Consumer
Project on Technology (CPTech) organise the first meeting
on compulsory licensing of AIDS medicines, held at the UN in
Geneva
1999
MSF, HAI and CPTech organise an international conference
on access to medicines in the run-up to the Seattle WTO
Ministerial conference.
1999
Seattle WTO Ministerial meeting collapses. For the first time,
delegates officially discuss the consequences of the WTO
TRIPS Agreement for access to medicines.
2000 (May)
US President Clinton issues Executive Order 13155
supporting sub-Saharan African countries in using measures
such as compulsory licensing to allow production and import
of generic AIDS drugs, without fear of trade retaliation.
2000 (May)
Multinational drug companies announce price reductions for
AIDS drugs.
2000 (July)
The 13th International AIDS conference takes place in
Durban, South Africa. This was the first time that this
prestigious conference was held in a developing country.
2000 (December) A 3-day G8 summit on infectious diseases takes place in
Okinawa, Japan, drawing attention to the need for global
action and new financing for health.
2001 (February) The Indian generic medicines manufacturer Cipla announces
triple-ARV AIDS treatment for 350 USD per patient/year.
2001 (April)
Following a global public outcry against the 39 drug
companies’ actions in South Africa, the companies are
compelled to drop their lawsuit.
2001 (November) The Fourth WTO Ministerial Conference adopts the Doha
Declaration on TRIPS and Public Health.
2001
WHO launches the Prequalification Programme to ensure the
quality of medicines for HIV/AIDS, TB and malaria.
2002
WHO includes ARV medicines in its Essential Medicines List
(EML) for the first time.
TIMELINE OF EVENTS
2002
2003
2003
2003
2003
2003
2003
2003
2005 (March)
2006 (January)
2006 (March)
2006 (May)
2006
2006
xi
The Global Fund to Fight AIDS, Tuberculosis and Malaria is
established.
The WHO starts the ‘3 by 5’ initiative to expand access to HIV
treatment to 3 million people by 2005.
Thailand offers universal access to ARVs to people living with
AIDS.
WTO adopts the “August 30th” decision to allow drugs to be
produced under a compulsory license predominantly for
export.
In South Africa, the Treatment Action Campaign (TAC) wins
its case against GlaxoSmithKline and Boehringer Ingelheim
before the Competition Commission, which found the
companies guilty of anti-competitive practices.
US President’s Emergency Plan for AIDS relief (PEPFAR) is
launched.
The Drugs for Neglected Diseases Initiative (DNDi), a
not-for-profit drug development organisation, is founded.
The UK Commission on Intellectual Property Rights
publishes its report, concluding that the new global
architecture for intellectual property has serious drawbacks
for developing countries, in particular for access to
medicines.
India amends its 1970 Patents Act to introduce
pharmaceutical product patents, as required by the TRIPS
Agreement.
Indian Patent Office rejects the patent application by
Novartis for imatinib mesylate (Glivec).
The Indian Network of People Living with HIV/AIDS and the
Manipur Network of Positive People file at the Kolkata
patent office in India a pre-grant opposition to GSK’s patent
application for AZT/3TC (Combivir).
Novartis sues the Indian government over its amended
Patents Act, attempting to overturn the provision (Section
3d) that establishes higher patentability criteria. The criteria
were aimed at only granting patents to highly innovative
products, thereby preventing frivolous patenting and
“evergreening” of patents.
Establishment of UNITAID, a new mechanism for the
purchase of medicines, financed by a tax on airline tickets.
WHO Commission on Intellectual Property Rights,
Innovation and Public Health publishes its report, leading
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
2006 (August)
2006
2006 – 2008
2007 (January)
2007 (May)
2007 (July)
2007 (October)
2008 (January)
2008
2008
the World Health Assembly to establish the
Intergovernmental Working Group on Public Health,
Innovation and Intellectual Property (IGWG).
GSK announces the withdrawal of its patents and patent
applications for a specific formulation of AZT/3TC which
were subjects of civil society actions in India and Thailand.
Thailand issues a compulsory license for the AIDS drug
efavirenz.
IGWG negotiations take place in Geneva.
Thailand issues CL for the AIDS drug lopinavir/ritonavir and
the heart disease drug clopidogrel
Brazil issues a compulsory license for efavirenz.
Rwanda notifies the WTO that it intends to use the “August
30” system to import medicines produced under a
compulsory license.
In the first use of the “August 30th” system, Canada issues a
compulsory license for the production of a triple fixed-dose
combination ARV for export to Rwanda.
Thailand issues compulsory licenses for four anti-cancer
drugs: docetaxel, letrozole, erlotinib, imatinib.
World Health Assembly adopts the Global Strategy and Plan
of Action on Public Health, Innovation and Intellectual
Property drawn up by the IGWG.
UNITAID Board decides, in principle, to set up a patent pool
for AIDS medicines.
ACKNOWLEDGEMENTS
xiii
ACKNOWLEDGEMENTS
Acknowledgements
This publication could not have been possible without the input and help
of many.
I am grateful to the IS Academy HIV/AIDS, a partnership project of the
School for Social Science Research of the University of Amsterdam (UvA)
and the Dutch Ministry of Foreign Affairs, for making this fellowship
possible. I am particularly grateful to Professor Anita Hardon for her
support and friendship.
Nicole Schulp from the UvA has contributed substantially by collecting
and documenting essential information about the use of the Doha
Declaration on TRIPS and Public Health in developing countries. I also
thank her for her support in all practical and administrative matters. I
would like to thank the International Dispensary Association and UNICEF
for sharing information on procurement practices in developing countries.
Alexander Leusenkamp’s field research has provided essential information
on procurement practices in Uganda and Kenya.
The following people provided information, shared their knowledge
and answered my queries without hesitation: Prof Frederick M. Abbott,
James Arkinstall, Wilbert Bannenberg, Jonathan Berger, Kajal Bhardwaj,
Christa Cepuch, Gabriela Chaves, Yoke Ling Chee, staff at the
Congressional Information Service, Marta Darder, Nathan Ford, Laurent
Gadot, Christopher Garrison, Alexandra Heumber, Kannikar
Kijtiwatchakul, Mbabazi Kasara, Gaelle Krikorian, Janice Lee, Joel
Lexchin, Michel Lotrowska, Leena Menghaney, Tido von Schoen-Angerer,
Ann-Marie Sevcsik, Michelle Vilk, and David Wilson.
I would like to specially mention James Love, director of Knowledge
Ecology International (formerly Consumer Project on Technology), who,
among many other things, maintains the world’s most complete archives
on his website (ww.keionline.org) offering an invaluable source of freely
accessible information for anyone doing research on access to medicines
and intellectual property.
I would also like to thank Anita Hardon, David Banta, Michelle Childs
and Pascale Boulet for critically reviewing earlier drafts of the manuscript.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
The members of the advisory committee of the Dutch Ministry of
Foreign Affairs and the Ministry of Health, Welfare and Sport, Anno
Galema, Otto Genée, Tanne de Goei, Anita Hardon, Els Klinkert, Marleen
Monster, Frida Nikolai, Lander van Ommen, and Wilbert Bannenberg
offered important comments and I am grateful for the discussions we have
held at the Ministry of Foreign Affairs in The Hague on the policy
implications of the study. I thank Maaike van der Velden for organising the
meetings.
I am deeply grateful to Que Mai Do who gave me invaluable support in
finding and verifying references, carrying out background research,
formatting the manuscript and maintaining our archives at Médecins Sans
Frontières. It is safe to say that without her, this work would not have been
possible.
I am tremendously grateful to Suerie Moon who so generously offered
to edit the text and whose knowledge and insights have been invaluable to
ready the manuscript for publication.
Ten years of experience as advocacy director at the MSF Campaign for
Access to Essential Medicines has offered me the opportunity to meet
numerous experts in the field of intellectual property and public health. It
has been a privilege to learn from them.
While I have greatly benefited from the input of many, all mistakes are
entirely my own.
Ellen ’t Hoen
December 2008
EXECUTIVE SUMMARY
xv
EXECUTIVE SUMMARY
Executive Summary
The Global Politics of Pharmaceutical
Monopoly Power
Introduction to access to medicines & the Doha Declaration
The magnitude of the AIDS crisis has drawn attention to the fact that
millions of people in the developing world do not have access to the
medicines they need to treat disease or alleviate suffering. The high cost of
1
AIDS medicines has focused attention on the relationship between patent
protection and high drug prices. The difficulties developing countries
experience in paying for new essential medicines has raised concerns about
the effects of the 1994 World Trade Organization (WTO) Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS), which
mandates global minimum standards for the protection of intellectual
property (IP).
Most significantly, the TRIPS Agreement harmonized patent terms for a
minimum of 20 years and mandated the granting of patents in all fields of
technology; this requirement made it no longer possible to exclude
medicines and food from patenting. The full implications of the TRIPS
Agreement for health are just beginning to emerge, but will only become
fully apparent in the years to come. All new health products, including
drugs, vaccines and diagnostics, are likely to be affected by the new
TRIPS-based patent regime.
The Fourth WTO Ministerial Conference, held in 2001 in Doha, Qatar,
responded to these concerns by adopting the Declaration on TRIPS and
Public Health. The Doha Declaration, as it is widely known, affirmed the
sovereign right of governments to take measures to protect public health,
1 ‘A patent is the right granted to an inventor by a State, or by a regional office acting for several
States, which allows the inventor to exclude anyone else from commercially exploiting his
invention for a limited period, generally 20 years’ (WIPO).
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
including the use of compulsory licensing2 and parallel importation.3 It also
allowed least developed countries (LDCs) not to grant or enforce
pharmaceutical product patents until at least 2016. These measures have
become known as the ‘TRIPS flexibilities.’
A key issue that remained unresolved in Doha was how to ensure that
products manufactured under a compulsory license could be exported to
countries without domestic production capacity. It took two years of
difficult negotiations at the WTO to arrive at the ‘August 30th’ decision,
which established a cumbersome process to allow such export (See Section
4.5); to date, it has been used by only one country. The Doha Declaration
also did not address the as-yet-unfulfilled promises of increased R&D in
exchange for higher levels of IP protection, an expectation that was part of
the bargain when countries were negotiating the TRIPS Agreement.
Nevertheless, the Doha Declaration is one of the most significant
developments of the last decade in trade and health. It signalled a sea
change in thinking about patents and medicines, and is at the root of a
cascade of activities aimed at reformulating IP protection as a social policy
tool for the benefit of society as a whole, rather than a mechanism to
protect only limited commercial interests.
Implementation of the Doha Declaration
The Doha Declaration has had an important impact on national and
international policies. Between 2001 and end 2007, 52 developing and
least-developed countries have issued post-Doha compulsory licenses for
production or import of generic versions of patented medicines, given
effect to government use provisions, and/or implemented the non-enforcement of patents. Many countries have also used the flexibilities as leverage
in price negotiations with patent-holding pharmaceutical companies.
The use of TRIPS flexibilities has been applied primarily to AIDS-related
drugs, particularly antiretrovirals (ARVs). However, Thailand has recently
issued government use orders for treatments for cardiovascular disease and
cancers. The Thai example is important because chronic (non-communicable or Type I) diseases account for half of the disease burden in the
developing world, and is rapidly increasing. The World Bank estimates that
2 Compulsory licensing enables a competent government authority to license the use of a
patented invention to a third-party or government agency without the consent of the
patent-holder against a payment of ‘adequate remuneration’.
3 Parallel imports are cross-border trade in a patented product, without the permission of the
manufacturer or publisher. Parallel imports take place when there are significant price
differences for the same good in different markets.
EXECUTIVE SUMMARY
xvii
by 2015, chronic diseases will be the leading cause of death in the
developing world (Adeyi et al. 2007). These diseases may not mobilize
advocates and campaigns for access to medicines in the same way as
HIV/AIDS. Medicines to treat chronic diseases exist but many are far beyond
the means of developing country governments and populations.
In many cases, countries were able to use the TRIPS flexibilities to access
lower-priced generic drugs because these drugs could still be produced in
countries such as India where product patent protection was not introduced
until 2005. However, as pharmaceutical product patents start to be granted
in producing countries, this situation will change. The patent law in India,
which has long served as the ‘pharmacy of the developing world’, is
particularly influential. The Doha Declaration and the general awareness of
the need for more health-sensitive patent policies has enabled India to
implement a patent law containing a number of very significant safeguards,
including: strict patentability criteria to limit the number of patented
products, automatic compulsory licensing for generic drugs brought to
market between 1995 and 2005, and the possibility for anyone to oppose the
granting of a patent. While this law was challenged – most significantly by
Novartis after it was denied a patent on its cancer drug imatinib mesylate –
thus far, it has been upheld and has set an important example for other
countries wishing to build more flexibilities into their national patent laws.
Nevertheless, the future supply of generics from India will not be easy. In
principle, India could make use of the August 30th mechanism to allow its
industry to continue to produce and export generic versions of medicines
that do become patented. However, since this authorization can only be done
drug order by drug order, and only upon request by another country, it is
highly unlikely that this system will provide sufficient economic incentive to
keep the generic medicines sector in business. Rather, it is to be expected that
the Indian generic medicines sector will shift its business orientation away
from supplying new medicines to the developing world, and towards the
export of off-patent generics to more affluent markets. Trends in that
direction are already visible (Sampath 2005).
Reactions to Implementation of the Doha Flexibilities
There is no denying that the pharmaceutical industry has responded
harshly to the Doha Declaration and to some uses of compulsory licensing.
Developing countries that make use of the flexibilities tend to receive much
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
stricter scrutiny than past compulsory licensing practices by Western
European countries, Canada and the US.
The reaction has been particularly harsh when TRIPS flexibilities are
used in countries with emerging economies. The growth opportunities for
the industry lie in these emerging markets, since sales in Western markets
are stagnating, partly due to saturation and stagnating innovation
(PricewaterhouseCoopers 2007). In addition, TRIPS-plus provisions in free
trade agreements, trade retaliation and political pressures all have seriously
impeded the full use of the Doha Declaration.
However, in contrast to the past, these trade and political pressures no
longer remain unseen or unheard. The change in international thinking
about IP, coupled with legal opportunities in developing countries, enabled
civil society groups and individuals to challenge weak patents and to
successfully campaign for policy changes to blunt the sharpest edges of the
new global IP regime.
However, the developments over the last 7 years do not take away from
the fact that the TRIPS Agreement, which forced countries to give up the
diversity and flexibility in IP law that had existed before, is highly
detrimental to access to medicines. While the Doha Declaration can offer
relief in dealing with access problems and high drug prices, full
implementation is still far from a reality. Over time, the effectiveness of
compulsory licensing will wear off unless a more satisfactory solution is
found to encourage competition, and in particular, to ease countries’ ability
to export medicines produced under a compulsory license (MSF 2006).
Towards Access and Innovation
While the Doha Declaration was important for drawing attention to and
offering policy options for the access problems related to IP, until recently
there has been little attention to the question of innovation. Many of the
pro-access measures described in this book resulted from an ad hoc
case-by-case approach that was often highly dependent on an active civil
society. A sustainable policy that tackles the fundamental problem of a
monopoly-based innovation and access system is still far away.
The current pharmaceutical innovation system largely depends on
patent protection for financing and priority-setting. Patent protection in
the pharmaceutical field has increased over the last 20 years, but the rate of
innovation has fallen while the number of ‘me-too drugs’ of little or no
therapeutic gain has increased. This global trend in R&D has had a
EXECUTIVE SUMMARY
xix
disproportionately heavy impact on the needs of people in developing
countries.
The voices calling for a reassessment of the current R&D incentive
system are growing stronger. Recent studies have demonstrated the
drawbacks of relying on patents as the main financing mechanism for
innovation. Most notable is the 2006 report of the WHO Commission on
Intellectual Property Rights, Innovation and Public Health (CIPIH). As a
result, international talks have commenced to examine alternative models
for innovation and financing of essential health R&D under the auspices of
the WHO Intergovernmental Working Group on Public Health,
Innovation and Intellectual Property (IGWG).
In May 2008, the IGWG concluded its work with the World Health
Assembly’s (WHA) adoption of the Global Strategy and Plan of Action on
Public Health Innovation and Intellectual Property (WHA Resolution
61.21).
Conclusions & Recommendations
A policy agenda for access and innovation is sorely needed and should
address both immediate steps to be taken, as well as tackle the fundamental
question of how to create incentives for R&D that do not create access
barriers.
Ensuring lower prices for medicines and other health care products
requires the full implementation and use of the provisions of the Doha
Declaration. Furthermore, the WTO should extend the 2016 deadline for
LDCs to comply with obligations in the TRIPS Agreement to provide
pharmaceutical product patents and protect undisclosed test data; it should
also review the August 30th decision on production for export under a
compulsory license. Finally, the international community, including
patent-holding and generic pharmaceutical companies, should consider
supporting patent pools as a tool for improving the management of IP for
access and innovation.
In the longer term, medical research should be targeted in the direction
of greatest need. Some alternatives currently being tested and/or debated
include: a not-for-profit drug development model, prize funds that reward
innovation based on health impact; and an R&D treaty that focuses on
equitable contributions to the cost of R&D through multiple means – not
exclusively through the granting of patent monopoly rights.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Since globalisation accounts for a major part of the problem of high
drug prices in the developing world, perhaps the solution will also be found
at the global level, in a new agreement on sharing the costs and benefits of
medical R&D for the sake of humankind.
1. INTRODUCTION
1
1. INTRODUCTION
1. Introduction
Drug patents, access, innovation and the
application of the WTO Doha Declaration on
TRIPS and Public Health
The relentless march of intellectual property rights needs to be
stopped and questioned. Developments in the new technologies
are running far ahead of the ethical, legal, regulatory and policy
frameworks needed to govern their use. More understanding is
needed – in every country – of the economic and social
consequences of the TRIPS Agreement. Many people have started
to question the relationship between knowledge ownership and
innovation. Alternative approaches to innovation, based on
sharing, open access and communal innovation, are
flourishing, disproving the claim that innovation necessarily
requires patents.
1999 Human Development Report, UNDP
The magnitude of the AIDS crisis has drawn attention to the fact that
millions of people in the developing world do not have access to the
medicines they need to treat disease or alleviate suffering. The high cost of
AIDS medicines has focused attention on the relationship between patent
protection and high drug prices.1 The difficulties developing countries
experience in paying for new essential medicines has raised concerns about
the effects of the 1994 World Trade Organization (WTO) Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS), which
mandates global minimum standards for the protection of intellectual
property (IP).
Most significantly, the TRIPS Agreement harmonised patent terms for a
minimum of 20 years and mandated the granting of patents in all fields of
technology; this requirement made it no longer possible to exclude
medicines and food from patenting. The full implications of the TRIPS
1 ‘A patent is the right granted to an inventor by a State, or by a regional office acting for
several States, which allows the inventor to exclude anyone else from commercially exploiting
his invention for a limited period, generally 20 years’ (WIPO).
2
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Agreement for health are just beginning to emerge, but will only become
fully apparent in the years to come.
Access to medicines is by no means a recent problem for the developing
world. For decades countries have suffered from dependency on Western
companies for the supply of medicines (Chetley 1990:94-106). The TRIPS
Agreement’s extended requirements for pharmaceutical patents are likely to
further increase developing countries’ dependency on multinational
pharmaceutical companies. The AIDS crisis provides an alarming preview
of the consequences of such dependence, which is by no means confined to
AIDS medicines. All new health products, including drugs, vaccines and
diagnostics, are likely to be affected by the new TRIPS-based patent regime.
The Fourth WTO Ministerial Conference, held in 2001 in Doha, Qatar,
responded to these concerns by adopting the Declaration on TRIPS and
Public Health. The Doha Declaration, as it is widely known, affirmed the
sovereign right of governments to take measures to protect public health,
including the use of compulsory licensing2 and parallel importation.3 It also
allowed least developed countries (LDCs) to exclude pharmaceutical
products from patenting. These measures have become known as
‘flexibilities in patent law’ or the ‘TRIPS flexibilities’.
The Doha Declaration was a landmark decision because it was the first
time developing countries had succeeded in pushing back on IP
requirements, after decades of bilateral and multilateral pressures to ratchet
them up. It offers clear guidance to WTO Members regarding their rights
under TRIPS to take measures to ensure the availability of more affordable
medicines. A key issue that remained unresolved in Doha was how to
ensure that products manufactured under a compulsory license could be
exported to countries without domestic production capacity. The Doha
Declaration also did not address the as-yet-unfulfilled promises of
increased R&D in exchange for higher levels of IP protection, an expectation
that was part of the bargain when countries were negotiating the TRIPS
Agreement.
The Doha Declaration has impacted national and international
policies. Since 2001 an increasing number of countries have used the
flexibilities in patent law to allow for production of generic versions of
2 Compulsory licensing enables a competent government authority to license the use of a
patented invention to a third-party or government agency without the consent of the
patent-holder against a payment of ‘adequate remuneration’.
3 Parallel imports are cross-border trade in a patented product, without the permission of the
manufacturer or publisher. Parallel imports take place when there are significant price
differences for the same good in different markets.
1. INTRODUCTION
3
patented essential medicines, to import generic medicines from countries
where pharmaceutical product patents do not exist, or as leverage in price
negotiations with multinational pharmaceutical companies.
Countries’ use of the Doha Declaration has not been without
controversy. In particular, multinational pharmaceutical companies and
their home governments fiercely opposed the practical implementation of
TRIPS flexibilities, as was demonstrated in Thailand and Brazil in
2007-2008. (See Sections 5.3.1 and 5.3.2.)
These trade conflicts have also drawn attention to the larger question of
the legitimacy of the patent system. The current pharmaceutical
innovation system largely depends on patent protection for financing and
priority-setting. Recent studies have demonstrated the drawbacks of
relying on patents as the main financing mechanism for innovation. Most
notable is the 2006 report of the WHO Commission on Intellectual
Property Rights, Innovation and Public Health (CIPIH). As a result,
international talks have commenced to examine alternative models for
innovation and financing of essential health R&D under the auspices of the
WHO Intergovernmental Working Group on Public Health, Innovation
and Intellectual Property (IGWG). In May 2008, the IGWG concluded its
work with the World Health Assembly’s (WHA) adoption of the Global
Strategy and Plan of Action on Public Health Innovation and Intellectual
Property (WHA Resolution 61.21).
Other factors besides price and patents affect access to medicines; for
example, irrational use, inadequate health financing, unreliable medicines
supply, the quality of medicines, and lack of R&D for new medicines all
play a role. This book does not cover all these aspects, but rather, focuses on
the impact of recently expanded IP protection on access to medicines and
pharmaceutical R&D. The book describes historical developments needed
to understand the globalisation of IP norms with respect to
pharmaceuticals, and the practical implementation of the Doha
Declaration on TRIPS and Public Health. It also lays out the current debates
on pharmaceutical innovation and access. Finally, the book makes
recommendations for a policy agenda aimed at ensuring both health-needs
driven innovation and access to the fruits of innovation.
4
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
5
2. KEY IP-RELATED ISSUES
2. KEY IP-RELATED ISSUES
2. Key IP-related issues in access to new
essential medicines
An estimated 30% of the world population does not have access to the
medicines they need (WHO 2004). The reasons for this situation are
manifold, but price is a major issue. A Médecins Sans Frontières (MSF)
survey of 122 people on AIDS treatment in Nigeria found that 72% had
experienced treatment interruption, with financial difficulties as the
leading cause (MSF 2005).1
Patents have a major impact on product prices because they prevent
competition. The price of a drug is related to the degree of competition
among producers. In the case of antiretroviral drugs (ARVs) for AIDS, it was
only after competing generic products arrived on the market that
originator drug companies agreed to a dramatic reduction in their prices
(MSF 2008). If generic competition increases, in general, prices come down
(See Figure 1).
Before TRIPS, many developing countries did not grant pharmaceutical
product patents and/or they limited patent terms, which allowed a generic
industry and competition to flourish. Generic companies made relatively
Figure 1. Cost per capsule or tablet in USD 1996 - 2000
5
4,5
4
3,5
3
2,5
2
1,5
1
2,90
2,00
1,72
1,31
0,83
0,28
0,5
0
Indinavir 400
mg
1,85
1,55
1,04
Saquinavir 200
mg
Lam ivudine 150
mg
Stavudine 40
mg
0,51
0,08
Zalcitabine 0.75 Didanosine 100
mg
mg
Source: UNAIDS, B. Samb, 2000, quoted in WHO-Health Technology and Pharmaceuticals,
Revised Drug Strategy, April 2000
1 Financial reasons were cited by 61% of respondents, ‘other reasons’ by 19%, government
stock out by 14%, and side effects by 6% (MSF 2005).
6
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
new products available in developing countries; these products would have
been costly or unavailable had they been patent-protected. India’s 1970
Patents Act, for example, provided for process patents but not product
patents; this law encouraged the development of a generics industry that
reverse-engineered its own versions of new medicines that were often
patented elsewhere. Developing countries have for many years relied on
countries such as India, Egypt, Israel, Jordan, Brazil, and Argentina for
their supply of affordable medicines. Developing countries that did not
grant pharmaceutical product patents at the date of application of the
TRIPS Agreement (1st January 2000) were allowed under the transitional
rules to delay the implementation of product patents until 2005.2
Countries that made use of this transition period were, however, obliged to
have “mailbox” provisions to receive patent applications during the
transition (For further discussion of mailboxes, see Section 5.3.6).3 India
was one of the few countries to make full use of the TRIPS Agreement’s
transition provisions.
Following the full implementation of TRIPS on January 1st 2005 in
India and several other developing countries that did not previously grant
pharmaceutical patents, reverse engineering is no longer possible. As a
result, access to affordable new drugs is expected to become more difficult.
Figure 2. Prices of active pharmaceutical ingredients in 2004, USD/kilo
Saquinavir (SQV)
Ritonavir (RTV)
Nelfinavir (NFV)
Lopinavir (LPV)
Efavirenz (EFV)
Abacavir (ABC)
Indinavir (IDV)
High
Low
High
Low
Nevirapine (NVP)
Zidovudine (AZT)
Stavudine (d4T)
Lamivudine (3TC)
Didanosine (ddI)
0
500
1000
1500
2000
http://www.who.int/entity/3by5/amds/en/API.pdf
2 TRIPS Agreement Article 65.4
3 TRIPS Agreement Article 70.8 and 70.9.
2500
3000
3500
4000
4500
5000
2. KEY IP-RELATED ISSUES
7
Successful AIDS programmes such as those of Brazil and Thailand were
possible, in part, because key pharmaceuticals were not patent-protected
and could be produced locally at much lower costs. These are primarily ‘1st
line’ drugs, which are used when patients first begin AIDS treatment. The
production of ARVs in Brazil created a larger market for ARV active
pharmaceutical ingredients (API), making it possible for Indian companies
to start production of ARVs in large volumes; the resulting economies of
scale allowed for dramatically reduced prices. In Figure 2 the white bars
represent products that could be produced in Brazil because they were not
patent protected there. Brazil’s purchasing power reduced the price of the
API on the global market.
Most of the ARVs currently available at affordable prices come from
India. In 2008, an estimated 3 million people in low and middle income
countries received ARV therapy for HIV/AIDS. It is estimated that
approximately 60% of the ARVs come from India, including up to 80% of
first-line treatments (Nguimfack, personal communication, 2008).
Furthermore, in 87 developing countries, 70% of the treatment for
patients purchased by the United Nations Children’s Fund (UNICEF),
International Dispensary Association (IDA), the Global Fund to Fight
AIDS, Tuberculosis and Malaria (Global Fund) and the Clinton
Foundation, comes from Indian suppliers. MSF purchases 80% of its ARVs
in India for projects in over 30 countries. The purchase by the US
President’s Emergency Plan for AIDS Relief (PEPFAR) of Indian ARVs
resulted in cost-savings of up to 90%, and 91% of the generic ARVs
approved by the US Food and Drug Administration (US FDA) for PEPFAR
are from India (MSF 2007).
However these medicines were brought on to the market in the
pre-TRIPS era. Today, all products may be subject to at least 20 years of
patent protection in all but the LDCs and a few non-WTO Members.
Because TRIPS implementation will affect both producers in key
manufacturing countries and countries that depend on these
manufacturers for raw materials, prices will remain high and access to new
medicines will become more problematic for populations in the developing
world. Generic producers will also be blocked from developing fixed-dose
combinations or paediatric formulations until the relevant patents on the
individual components of the combinations expire. Second-line ARVs, used
to treat patients for whom 1st line drugs are no longer effective, were more
recently developed and therefore are widely patented; they tend to be far
more expensive than 1st line treatments.
8
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Table 1. Price comparison of selected medicines in the US and India
product
Lipitor (atorvastatin calcium)
Zocor (simvastatine)
Norvasc (amlodipine besylate)
Celebrex (celecoxib)
Zyprexa (olanzapine)
Paxil (paroxetine hydrochloride)
Vioxx (rofecoxib)
Zoloft (sertraline Hcl)
Pravachol (pravastatin sodium)
Fosamax (alendronate sodium)
US price
per pill (USD)
Indian price
per pill (USD)
Indian price
as % of US price
3.1
3.8
1.3
2.4
8.3
2.44
2.47
2.21
2.5
15.3
0.35
0.35
0.11
0.11
0.18
0.24
0.11
0.26
0.33
0.70
11.3
9.3
8.5
4.6
2.1
9.9
4.4
11.9
13.2
4.6
Source: adapted from ‘Taking advantage of the transitional period to implement the TRIPS
Agreement: features of access to medicines in Brazil and India’ (Barbara Rosenberg 2006).
Therefore, comparing the prices of 1st and 2nd line ARVs provides a
useful illustration of the effect of the lack of generic competition on price.
In general, the best price of a 2nd line ARV regimen is 4.4 times the price of
the 1st line regimen (MSF 2007c). In Brazil these price differentials mean
that three patented AIDS medicines (out of a total of 17) accounted for 65%
of the total national expenditure on ARV procurement (Brazil Ministry of
Health 2005).
The effect of generic competition is not confined to ARVs. Table 1
demonstrates the large differences between US and Indian prices for the
same medicine.
2.1 Debates on access to medicines and the TRIPS Agreement
The debate on patents and access to medicines should not be seen in
isolation from the debate on IP in general and the TRIPS Agreement in
particular. The debate on the effects of the IP system on access to medicines
is much older than the recent attention to access to AIDS drugs may suggest.
The recent focus on compulsory licensing as a remedy to the socially
undesirable effects of patent monopolies may also give the false impression
that these are new mechanisms. Yet this impression is far from the truth.
Compulsory licensing is as old as patent law itself. History reveals a variety
of uses of compulsory licensing, including in the field of health.
2. KEY IP-RELATED ISSUES
9
2.1.1 Brief history of TRIPS
In 1958 the economist Fritz Machlup wrote, ‘If we did not have a patent
system, it would be irresponsible, on the basis of our present knowledge of
its economic consequences, to recommend instituting one. But since we
have had a patent system for a long time, it would be irresponsible, on the
basis of our present knowledge, to recommend abolishing it.’
And yet 37 years later, the WTO TRIPS Agreement came into being,
globalising intellectual property requirements that were only recently
adopted by rich nations. TRIPS was part of a set of international treaties
agreed upon at the conclusion of the Uruguay Round of negotiations
within the General Agreement on Tariffs and Trade (GATT); this round
concluded with the creation of the WTO and was intended to encourage
trade among Members of the new organization. What was an agreement
that created monopolies – which inherently restrict free trade and
competition – doing in an institution whose main purpose was to
encourage free trade and global competition? What were the forces behind
the adoption of the TRIPS Agreement?
The TRIPS Agreement signalled a fundamental change, in that for the
first time, global minimum requirements for the creation and protection of
IP were enforceable through the WTO. Before TRIPS, pharmaceutical
patent law, policies and practices differed immensely among countries, in
particular between developed and developing countries. The patenting of
essential goods such as medicines and foods was for a long time considered
an act against the public interest. At the time the Uruguay Round launched
in 1986, 49 of the 98 members of the Paris Convention4 excluded
pharmaceutical products from patent protection, 10 excluded
pharmaceutical processes and 22 excluded chemical processes (WIPO
1988). Countries varied in the periods of protection granted and/or set out
other conditions that restricted patent holders’ rights. Such exceptions were
also common in Western countries. For example the following European
countries excluded pharmaceutical products from patentability: France
(until 1960), Switzerland (until 1977), Italy (until 1978), Sweden (until
1978) and Spain (until 1992) (Dutfield 2003).
4 The Paris Convention for the Protection of Industrial Property, signed in Paris, France, on
March 20, 1883, was one of the first multilateral intellectual property agreements. It is
administered by the World Intellectual Property Organisation (WIPO) and has today 173
contracting parties. As a result of the Paris Convention, intellectual property systems,
including patents, of any contracting state are accessible to the nationals of other states party
to the Convention.
10
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
The Netherlands abolished its patent system in the name of free trade
In 1869, the Netherlands abolished its patent system and suspended the Dutch patent
law. The grounds for this action lay in the liberal economic thinking of the time, which
considered this form of government intervention in trade undesirable. The granting of
patents was also seen as a barrier to trade, a hindrance to industrial development and
an undesirable mechanism that created artificially high prices of goods. A new patent
law was not adopted until 1912 and only after extensive lobbying by interest groups
and pressure from foreign countries. The Netherlands was at that time a member of
the Paris Convention, which meant that Dutch nationals could apply for patents in
other member countries. The lack of reciprocity came under fierce criticism from other
nations, in particular the US, which urged the Netherlands to reinstate a patent
system. The 1912 patent law, however, did not grant product patents. The general
understanding at the time was that product patents discouraged innovation by taking
away incentives to seek more efficient production methods, particularly in the
chemical industry (Gerzon 1986).
The TRIPS Agreement was not accepted without opposition. In the
Uruguay Round developing countries initially objected to a substantial
agreement on IP protection as part of the package of trade agreements. The
Group of Ten developing countries (India, Brazil, Argentina, Cuba, Egypt,
Nicaragua, Nigeria, Peru, Tanzania and Yugoslavia) argued that talks
should be limited to a counterfeit code for fashion goods and trademark
infringement. Their concerns were that a more substantial intellectual
property agreement would have a negative effect on their ability to obtain
technology, and on the cost of pharmaceuticals and agrochemicals. They
argued that the United Nation agency, the World Intellectual Property
Organization (WIPO), would be a better forum for negotiating
international agreements on intellectual property (Matthews 2002). In
contrast, American commercial interests took the view that much more
could be achieved in expanding IP protection at the WTO than at WIPO,
and lobbied hard for the inclusion of IP in the GATT.
India was a leading force in the Group of Ten. On 10 July 1989 India
made a detailed submission to the Negotiating Group on Trade-related
aspects of Intellectual Property Rights, in which it outlined its position
(Government of India 1989). The document presented the concerns of
developing countries about the consequences of patent monopolies for
their socio-economic development. Of particular concern were the ‘serious
adverse effects’ a patent system could have in sectors of critical importance
to developing countries such as food production, poverty alleviation,
nutrition, health care and disease prevention (Government of India 1989:4).
India took the view that only ‘restrictive and anti-competitive practices of
2. KEY IP-RELATED ISSUES
11
the owners of IP can be considered trade-related’ and argued that it ‘would
not be appropriate to establish within the framework of the GATT any new
rules and disciplines pertaining to standards and principles concerning the
availability, scope and use of intellectual property rights’ (Government of
India 1989: 20).
Developing countries wished to design rules for a New International
Economic Order to facilitate access to technologies protected by
intellectual property rights (IPRs) in the West, while limiting the scope of
IP protection in the developing world to encourage economic development
(UNCTAD and ICTSD 2005:3). This objective was diametrically opposed to
the interests of the US, which saw its supremacy in manufacturing
declining as a result of competition from Japan and newly industrialised
countries that had initially imitated many of the technologies developed in
the US (Correa 2000).
Western industries with diverse IP interests (trademark, copyright,
patent and semiconductor) came together and formed an international
lobby group in 1986: the Intellectual Property Committee (IPC). The IPC
became a powerful influence. This lobby successfully framed US-style IP
protection as a trade-related issue that belonged in the GATT, and thereby
sold the notion that creating monopolies was part and parcel of fair
competition. This was a most bizarre result of the GATT, which was a forum
designed to deregulate trade, but seemed to be doing the opposite with the
adoption of TRIPS (Dutfield 2003).
The resolution of the diametrically opposed positions in the GATT
negotiations was not the result of multilateral discussions but of harsh
unilateral measures by the US. In 1984, the US Congress amended Section
301 of the Trade Act of 1974 to allow the United States Trade
Representative (USTR) to take action against nations for the failure to
protect intellectual property. This unilateral retaliation mechanism became
a strong weapon in the hands of the US to push its IP agenda at the
multilateral negotiating table. In 1991 the US put India, China and
Thailand on the Special 301 Watch List, which served as a precursor to
trade sanctions. In 1992 the US carried out its threats by suspending
Generalized System of Preferences (GSP) tariff exceptions for Indian
pharmaceutical products, which caused a 60 million USD loss in Indian
pharmaceutical exports and a subsequent softening of the Indian position
at the GATT negotiations (Matthews 2002:31).
12
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
An important factor for developing countries in agreeing to the TRIPS
Agreement was the anticipation of being free from unilateral pressures on
IP (Dutfield 2003:197). However, this side of the bargain was not kept. In
1994, the US Special 301 law was amended to clarify that a country could
be found lacking in adequate and effective intellectual property protection
even if it was in compliance with its obligations under the TRIPS
Agreement. Today, new Members of the WTO are pressured in their
accession agreements to adopt ‘TRIPS-plus’ provisions – that is, IP
protection that is even more stringent than required by TRIPS. For example
during its WTO accession negotiations, Jordan was urged not to seek
recourse to transition periods, among a number of other TRIPS-plus
provisions (WTO 1999). The Jordan-US Free Trade Agreement, signed on
24 October 2000, also included a range of TRIPS-plus provisions and
became the model for subsequent agreements with other countries (Drahos
& Braithwaite 2002:16) (For further discussion of Jordan, see Section 6.1).
2.1.2 Scope, objective and principles of the TRIPS Agreement
Once the opposition to a substantive WTO agreement on intellectual
property was broken, developing countries fought hard to blunt what they
saw as the harshest edges of the new global IP regime. This is reflected, for
example, in the principles, objective and scope of the TRIPS Agreement.
Interest groups representing IP rights-holders sometimes give the
impression that TRIPS is primarily concerned with protecting commercial
interests. Careful reading of the treaty demonstrates that this is not the case.
The TRIPS Agreement includes references to overall public interest and
development objectives. This section discusses those provisions of TRIPS
that are most relevant for health.
The Preamble
The preamble to TRIPS draws attention to the fact that the purpose of the
Agreement was not to protect the private interests of a small group of IP
rights-holders, but rather, was to serve the wider goals of trade and
economic development. It warns in the first paragraph that IP itself could
become a barrier to trade. It defines IP as a means to an end, not as an end in
itself. This idea is reflected in the fifth clause of the preamble to TRIPS,
which reads: ‘Recognizing the underlying public policy objectives of
national systems for the protection of intellectual property, including
developmental and technological objectives.’
2. KEY IP-RELATED ISSUES
13
Nature and scope of obligations: Article 1
TRIPS Article 1.1 indicates that it sets out the ‘required’ minimum
standards. Where it reads that countries ‘shall not be obliged’ to implement
more extensive protection, Article 1 also reflects the fact that these
standards are the maximum countries were prepared to agree on. Article
1.1 reads:
Members shall give effect to the provisions of this Agreement.Members
may, but shall not be obliged to, implement in their law more extensive
protection than is required by this Agreement, provided that such
protection does not contravene the provisions of this Agreement.
Members shall be free to determine the appropriate method of
implementing the provisions of this Agreement within their own legal
system and practice.
According to legal scholar Carlos Correa, Article 1.1 of TRIPS provides
protection against demands for higher standards than TRIPS requires and
outlaws unilateral sanctions such as Section 301 of the US Trade Act
(Correa 2000:9). A country demanding TRIPS-plus provisions from a trade
partner would thus be acting in bad faith with regard to its TRIPS
obligations (UNCTAD and ICTSD 2005:24). A counter argument is that
countries have the sovereign right to adopt higher standards if they so
desire. However Article 1.1 aims to provide some protection from
TRIPS-plus pressures in the absence of maximum standards in the
Agreement. Developing countries also counted on the multilateral dispute
settlement mechanism of the WTO to put an end to unilateral sanctions
(Correa 2000:11).
Objective: Article 7
The stated objective of the TRIPS Agreement includes reference to social
and economic welfare, thereby stipulating that TRIPS does not only create
and protect the private rights of innovators but also serves the broader
public interest. Article 7 reads:
The protection and enforcement of intellectual property rights should
contribute to the promotion of technological innovation and to the
transfer and dissemination of technology, to the mutual advantage of
producers and users of technological knowledge and in a manner
conducive to social and economic welfare, and to a balance of rights
and obligations.
14
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
The inclusion of this objective was the result of proposals made by
developing countries that were concerned about their ability to obtain
Western technologies under an IP system that ran ahead of their level of
industrial development. Article 7 also made clear that IP protection should
be seen as a social policy tool designed to benefit societal and economic
welfare. The TRIPS objectives together with Article 1.1 give countries
leeway in how the Agreement can be interpreted and implemented.
The 2001 Doha Declaration strengthens the notion even further that
the TRIPS Agreement should serve a greater public good. It further expands
the freedom countries have to implement TRIPS in a manner that takes into
account specific needs with regard to health and access to medicines.
Developing countries’ concerns were also at the root of Article 8, which
allows for measures ‘to protect public health and nutrition, and to promote
the public interest in sectors of vital importance to their socio-economic
and technological development, provided that such measures are consistent
with the provisions of this Agreement.’
Developing countries also obtained transition periods. (Flexibilities
with regard to substantive provisions are discussed in Chapter 4.)
But all of these clauses do not take away from the fact that the TRIPS
Agreement obliges countries to give up much of the diversity and flexibility
in intellectual property law and practices that existed beforehand.
3. HISTORY OF THE DEBATE
15
3. HISTORY OF THE DEBATE
3. History of the debate on intellectual
property protection and pharmaceuticals
Intellectual property in the form of patents should be thought of
as a very useful tool with a relatively narrow applicability
rather than as a means for owning ever larger swathes of human
knowledge which is the way it is being driven at the moment
(2008).
Sir John Sulston, 2002 Nobel Prize for Physiology or
Medicine
3.1 US Senate investigations into pharmaceuticals and anti-trust
(1950s-60s)
The debate on patents and access to medicines is not new. Interesting
lessons can be learned from the investigation of the US Senate
Subcommittee on Anti-trust and Monopoly under the chairmanship of
Senator Estes Kefauver, which ran from 1957-1962, and examined the
steel industry, the automobile industry, bread bakery and prescription drug
industry (‘ethical’ drug industry). The findings of the Subcommittee seem
alarmingly contemporary.
The Subcommittee examined the price differences between US
companies and foreign companies for a number of medicines widely-used
at the time, including: tranquillisers, diabetes drugs, arthritis drugs and
antibiotics. It also looked into marketing and advertising practices and the
safety of medicines.
The hearings revealed huge price differences between the US and
Europe. For example, a hypertensive drug developed by the Swiss company
CIBA was sold in Europe for 1 USD while the US subsidiaries were charging
4.50 USD. Penicillin V cost 6.50 USD in the UK and 18.00 USD in the US.
Tolbutamine (sold as Orinase), a diabetes drug developed by Hoechst, sold
in Germany for 1.85 USD and in the US for 4.17 USD, where it was available
exclusively from the licensee Upjohn (Kefauver 1965:55).
Witnesses for the pharmaceutical industry justified high prices with the
need to invest in R&D. In defence of aggressive brand name promotion,
16
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
they also asserted that generic medicines were of inferior quality and that
advertising was an essential means of providing information to the medical
profession. Pharmaceutical companies still use the same arguments today
in response to their critics. However, in the early 1960s they did not
impress the Senate Subcommittee. For example, the testimonies that high
drug prices in the US were needed to pay for R&D did not convince the
committee, as European originator companies had carried out R&D for
many of the drugs but still sold them in their home markets for a fraction of
the US price.
Instead, the Subcommittee found that patenting practices were a
determining factor when comparing European and US drug prices.
European countries generally took the position that drugs were too
important to public health to allow private monopolies, and product
patents were not available for drugs. Germany and Switzerland, both
leaders in drug research, only granted process patents, which allowed others
to make competing products using new processes. This greater freedom to
produce resulted in greater price competition in Europe (Kefauver
1965:56-57).
Individual Americans who had to pay out-of-pocket had little choice
but to shoulder the burden of high drug costs in the US. In contrast, for
public procurement, the US government exercised its “government use”
powers to purchase drugs at the best price on the global market, regardless
of the patent status of the drug at home. Government use is a form of
compulsory licensing, in which a government or its assignee makes use of a
patent for public purposes (See Section 5.1 for further discussion of
compulsory licensing). It should therefore be no surprise that the first draft
of the 1960 Kefauver-Cellar drug bill proposed to remedy some of the
findings of the Subcommittee: dramatically reducing the then-existing
17-year patent terms, the bill required compulsory licensing after 3 years of
patent protection with a maximum 8% royalty based on sales (Bill S 1552).
Kefauver also recommended that combinations and modifications of
existing products only be patentable if they were therapeutically superior to
the original products. The pharmaceutical industry vowed to fight the
proposed legislation to the death.
The Kefauver-Harris Act subsequently adopted the promotion of
generics and made generic labelling compulsory. It also expanded the FDA’s
role in evaluating the efficacy of drugs (including drugs already on the
market), in addition to monitoring safety and adverse drug reactions. But
the sections on patenting and licensing were deleted.
3. HISTORY OF THE DEBATE
17
Ironically, the Kefauver-Harris legislation went down in history as the
law drawn up in response to the thalidomide disaster and the need for
reform at the FDA. Thalidomide was a safety issue – which, in fact, the FDA
had dealt with adequately by never approving the product for human use.
Despite the fact that the Subcommittee investigation focused on the
monopolistic position of pharmaceutical companies and the consequences
for competition, the subsequent legislation emphasized the safety and
efficacy aspects of pharmaceutical regulation, but had little force in
countering the effects of monopoly pricing. The compulsory licensing
provision was omitted from the final version passed by Congress and no
corrective action was taken. Kefauver pointed out, ‘In terms of protection
of the public’s pocketbook, this constitutes a serious gap in the law’
(Kefauver 1965:98).
3.2 Early debates at the World Health Assembly
In more recent history, the public health community first raised concerns
about the consequences for drug access of globalising intellectual property
standards during the 1996 World Health Assembly (WHA). This annual
gathering of the health ministers of WHO Member States is charged with
setting the direction of WHO’s work. A resolution on the Revised Drug
Strategy (RDS) set out the WHO’s medicines policy and requested the WHO
‘to report on the impact of the work of the World Trade Organization
(WTO) with respect to national drug policies and essential drugs and make
recommendations for collaboration between WTO and WHO, as
appropriate’ (WHO 1996: Paragraph 2(10)). This resolution gave the WHO
the mandate to publish the first guide for Member States recommending
ways to implement TRIPS while limiting the negative effects of tighter levels
of patent protection on drug availability (Velasquez & Boulet 1999). The
US and a number of European countries pressured the WHO to prevent
publication of the guide, but did not succeed (Benkimoun 2001).
At that time, the WHO’s involvement in trade issues was highly
controversial. The emphasis on public health needs over trade interests was
seen as a threat to the commercial sector of the industrialised world. For
example, in 1998, in response to the draft WHA resolution on the RDS and
in reference to ‘considerable concern among the pharmaceutical industry,’
the Directorate General for Trade (DG Trade) of the European
Commission concluded: ‘No priority should be given to health over
intellectual property considerations’ (1998).
18
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
However, subsequent WHA resolutions have strengthened the WHO’s
mandate in the trade arena. (For further discussion see Section 4.2.6.)
4. THE DOHA DECLARATION
19
4. THE DOHA DECLARATION
4. The Doha Declaration on TRIPS and Public
Health
Debates on access to medicines spilled over from the WHO to the WTO,
leading to the adoption of the 2001 Doha Declaration on TRIPS and Public
Health. The Doha Declaration was a landmark legal and political
declaration. It clarified unambiguously the rights of countries to take
measures such as compulsory licensing to protect public health and created
new rights for LDCs by allowing them to postpone pharmaceutical product
patenting, enforcement of pharmaceutical product patents and the
protection of undisclosed test data until at least 2016. Implicitly, it
recognised the concern of developing countries about the effects of TRIPS
on access to medicines. However the WTO failed to resolve effectively the
burning question of production for export under a compulsory licence.
This chapter explains the key events that led to the Doha Declaration,
analyses its component parts, and discusses how the WTO managed the
export question noted above.
4.1 Negotiations on TRIPS and Public Health at the WTO 1999 - 2001
The debate on TRIPS and public health started at the WTO in 1999 at the
ministerial meeting in Seattle. Though in 1999 public health and access to
medicines did not form part of the official agenda in Seattle, the issue did
receive attention for a number of reasons.
First, in Seattle, the European Commission prepared a Common
Working Paper that, in its section on TRIPS, proposed that developing
countries ought to be allowed to issue ‘compulsory licenses for drugs
appearing on the list of essential drugs of the World Health Organization’
(European Commission 1999). Since only about 11 of the 306 products on
the WHO Model List of Essential Drugs were widely-patented, this
proposal would likely have limited the use of compulsory licensing, rather
than making sure it became a useful tool to overcome patent-related access
barriers such as prohibitive pricing. 1
1 At that time, a high price was grounds for excluding a drug from the WHO Essential Drug
List.
20
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Second, then-US President Clinton chose Seattle as the venue to declare
a change in US policy with regard to intellectual property rights and access
to medicines. The US government had come under fierce attack from AIDS
activists because of its policies in South Africa. In particular Vice-President
Al Gore was criticised for being the envoy of the US pharmaceutical
industry in its attempts to challenge the South African Medicines Act
(Babcock & Connolly 1999). Under the new policy, the USTR and the US
Department of Health and Human Services would together establish a
process to analyse health issues that would arise in the application of US
trade-related intellectual property law and policy. In his speech, President
Clinton referred specifically to the situation in South Africa and the
HIV/AIDS crisis, declaring: ‘The United States will henceforward
implement its health care and trade policies in a manner that ensures that
people in the poorest countries won’t have to go without medicine they so
desperately need’ (Clinton 1999).
In May 2000, President Clinton confirmed the change in US policy by
issuing an Executive Order on Access to HIV/AIDS Pharmaceuticals and
Medical Technologies, supporting the use of compulsory licenses to
increase access to HIV/AIDS medication in sub-Saharan Africa (Clinton
2000). Although this policy change contributed to breaking the taboo on
the use of compulsory licensing in the health field, attention to TRIPS and
medicines at the WTO was diverted by the collapse of the WTO ministerial
conference in Seattle, leaving all matters on the table unresolved. At the
time, an editorial in the Pharmaceutical Executive commented: ‘Unlikely
as it seems, the pharmaceutical industry may have reason to thank the
demonstrators who brought Seattle and the ministerial meeting of the
World Trade Organization (WTO) to a standstill. Had the demonstrators
not disrupted the gathering, the forecast for global pharma might be much
cloudier’ (Gopal 2000).
However, outside the WTO, the debate on access to medicines, TRIPS,
and compulsory licensing grew more intense.
4.2 From Seattle to Doha
The period between the failed Seattle WTO Ministerial conference in 1999
and the 2001 WTO meeting in Doha saw a number of developments that
had a profound effect on the debate on access to medicines and intellectual
property. First, trade disputes arose between Western and developing
countries that tried to bring the price of medicines down. Second, there
4. THE DOHA DECLARATION
21
was increased attention to the devastating effects of the AIDS crisis in the
developing world. And third, national treatment programmes that relied
on locally-produced generic ARVs began to experience the consequences of
aggressively enforced pharmaceutical patents on AIDS drugs.
4.2.1 Trade dispute in South Africa: Big Pharma vs. Nelson Mandela
Perhaps the most significant trade dispute in the running up to the Doha
WTO Ministerial Conference was the legal challenge mounted by 39 drug
companies against the South African medicines legislation. In February
1998, the South African Pharmaceutical Manufacturers Association and
40 (later 39, as a result of a merger) mostly multinational pharmaceutical
manufacturers brought suit against the government of South Africa,
alleging that the Medicines and Related Substances Control Amendment
Act, No. 90 of 1997 (‘Medicines Act’) violated TRIPS and the South
African constitution (Pharmaceutical Manufacturers’ Association of South
Africa 1998).
The 1997 Medicines Act had introduced a legal framework to increase
the availability of affordable medicines in South Africa. Provisions included
generic substitution of off-patent medicines, transparent pricing for all
medicines, and the parallel importation of patented medicines.
At the start of the litigation, the drug companies could rely on the
support of their home governments. For its part, the US had put pressure on
South Africa by withholding trade benefits and threatening further trade
sanctions, aiming to force the South African government to repeal the Act
(Barber 1998; Omnibus Consolidated and Emergency Supplemental
Appropriations Act 1999). In 1998, the European Commission joined the US
in pressuring South Africa to repeal the legislation (Brittan 1998). AIDS
activists effectively highlighted these policies, profoundly embarrassing
then-presidential candidate Al Gore, who found himself confronted at
election campaign rallies with his personal involvement in the dispute
(Barber 1999). As a result of increasing public pressure, the US changed its
policies.
Demonstrators in major cities asked the companies to drop the case;
several governments and parliaments around the world, including the
European Parliament, demanded that the companies withdraw from the
case. The legal action turned into a public relations disaster for the drug
companies (Cooper et al. 2001). By the time the case finally reached the
22
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
courtroom in May 2000, the drug companies could no longer count on the
support of their home governments.
During the course of the trial it became clear that the most contentious
section of the Medicines Act was based on a draft legal text produced by the
WIPO Committee of Experts (Sidley 2001), a fact that made it difficult for
the drug companies to maintain their position that the Act violated South
Africa’s obligations under international law. Eventually, the international
public outrage over the companies’ legal challenge of a developing country’s
medicines law and the companies’ weak legal position caused them to
withdraw unconditionally from the case in April 2001.
4.2.2 Trade dispute in Brazil: The Brazilian AIDS Programme
In February 2001, the US took action against Brazil at the WTO Dispute
Settlement Body (DSB) over Article 68 of the Brazilian intellectual property
law, which allowed for compulsory licensing (Law 9,279, 1996). Under
that provision, Brazil required holders of Brazilian patents to manufacture
the product in question within Brazil – a so-called ‘local working’
requirement. If the patent-holder did not fulfil this requirement, the patent
would be subject to compulsory licensing after three years, unless the
patent-holder could show that it was not economically feasible to produce
in Brazil or that the requirement to produce locally was not reasonable. If
the company was allowed to work its patent by importation instead of
manufacturing in Brazil, parallel import by others would be permitted.
The US argued that the Brazilian law discriminated against US owners of
Brazilian patents and that it curtailed patent holders’ rights. The US
claimed that the Brazilian law violated Article 27.1 and Article 28.1 of
TRIPS (WTO 2001a). Brazil argued that its Article 68 was in line with the
letter and spirit of TRIPS, including Article 5.4 of the Paris Convention,
which allows for compulsory licensing if there is a failure to work a patent.
(Article 2.1 of TRIPS incorporates relevant articles of the Paris Convention).
The US action came under fierce pressure from the international NGO
community, which feared it would have a detrimental effect on Brazil’s
successful AIDS programme (MSF 2001). Since the mid-1990s, Brazil had
offered comprehensive AIDS care, including universal access to ARV
treatment since 1996. Brazil had been vocal internationally in the debates
on access to medicines. On several occasions, including the Group of Eight
(G8), the Roundtable of the European Commission, and WHO meetings,
Brazil had offered to transfer technology and know-how to help developing
4. THE DOHA DECLARATION
23
countries increase their drug manufacturing capacity. NGOs feared that the
US action could have a negative effect on other countries’ ability to accept
Brazil’s offer of assistance. On June 25, 2001, in a joint statement with
Brazil, the US announced that it would withdraw the WTO complaint
against Brazil (Cooper 2001).
US Trade Representative Robert Zoellick explained the move in the
media by calling it another step forward in the Bush administration’s
‘flexible approach’ to health and intellectual property issues (Cooper 2001).
However this ‘flexible approach’ was certainly a result of growing criticism
of US policies in support of the pharmaceutical industry. Zoellick
recognised that maintaining an inflexible attitude towards IP in the face of
the global health crisis could, as he said, ‘put at risk the whole intellectual
property rights system’ (as quoted in Blustein 2001).
4.2.3 Trade dispute in Thailand
Thailand’s national AIDS programme today offers universal access to
treatment, care and prevention. It is celebrated globally as a huge success. It
started to provide ARV mono-therapy in 1992, dual-therapy in 1995 and
triple-therapy in 2000. Initially the costs of the triple-therapy were high
and could only be provided to 1500 people. Scale-up of ARV triple-therapy
did not occur until 2003 (Ford et al. 2007:22).
The local production of low-cost generic AIDS medicines has been
central to the success of the Thai programme. The Thai Government
Pharmaceutical Organisation (GPO), a state company producing low-cost
generic drugs, has been producing generic zidovudine (AZT) since 1992,
which reduced the price of the drug 82% between 1992 and 1996 (Von
Schoen-Angerer et al. 2001). In 1998, as a result of a Thai NGO campaign,
generic companies were authorised to produce generic fluconazole.
Fluconazole (marketed by Pfizer) is an essential medicine for the treatment
of cryptococcal meningitis, an opportunistic infection affecting one out of
ten people living with HIV/AIDS. Without treatment, patients with this
infection have a life expectancy of one month. The treatment for
cryptococcal meningitis is life-long and requires one pill a day. The product
was not patented in Thailand but fell under the so-called Safety
Monitoring Program, and as a result was granted a period of market
24
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
exclusivity, which kept the price at monopoly levels. 2 In 1998, three Thai
companies began to produce generic versions of fluconazole and within
nine months the price dropped 97% from 200 Baht (6 USD) to 6.5 Baht
(0.19 USD) per pill, dramatically expanding access to the medicine. In
1999, Thai activists, motivated by the fluconazole experience, asked the
government to issue a compulsory license for the AIDS drug didanosine
(ddI) to enable local production of ddI tablets. In 1998, the launch of a
generic version of ddI had been blocked by Bristol-Myers Squibb (BMS),
which held a formulation patent related to the tablet form of the drug.
In January 2000, the US warned Thailand against the use of compulsory
licensing (USTR 2000), provoking global NGO mobilisation to pressure the
USTR to reverse its position. On 7 February 2000, USTR wrote to the Thai
government, ‘If the Royal Thai Government determines that issuing a
compulsory license is required to address its health care crisis, the United
States will raise no objection, provided the compulsory license is consistent
with the provisions of the WTO Agreement TRIPS’ (Barshefsky 2000).
However, the Thai government, wary of trade sanctions, decided to
authorise GPO to produce only the powdered form of ddI, which would not
infringe the BMS patent.3 The powdered form, however, was less
well-tolerated by patients than the tablet form protected by BMS.
Table 2. Wholesale prices of 200 mg fluconazole capsules
manufacturer
country
price per USD
Biolab (Thailand)
Cipla (India)
Bussie (Colombia)
Pfizer
Vita (Spain)
Pfizer
Pfizer
Pfizer
Pfizer
Pfizer
Pfizer
Thailand
India
Guatemala
Thailand
Spain
South Africa
Kenya
Spain
Guatemala
USA
Guatemala
0.29
0.64
3.00 (negotiated)
6.20
6.29
8.25
10.50
10.57
11.84 (negotiated)
12.20
27.60 (not negotiated)
(Perez-Casas et al. 2000)
2 The Safety Monitoring Progam (SMP) was put in place in August 1989 following a demand of
the USTR that Thailand offer pipeline protection for pharmaceuticals that were not patented.
The SMP provided five years of market exclusivity and de facto functioned as a surrogate for
patent protection and had little value for improving drug safety.
3 Thai AIDS groups argued that the BMS patent for the ddI tablet form was not valid and in May
2001 challenged the patent in court, leading to the withdrawal of the patent by BMS in
February 2004. For details see Wisartsakul 2004 and Cawthorne et al. 2007.
4. THE DOHA DECLARATION
25
By then both the fluconazole case and the ddI case had been widely
publicised and received a lot of attention worldwide. These cases helped to
illustrate the enormous price differences between patented and
non-patented medicines, the weakness of negotiating prices when generic
competition was lacking (see Table 2) and the difficulties countries
experienced when attempting to issue a compulsory license.
4.2.4 Cipla’s announcement of 1 USD a day ARV treatment.
On 6 February 2001, the Indian generic medicines producer Cipla offered
triple-therapy AIDS treatment for 350 USD per patient/year to MSF and for
600 USD for governments of developing countries (McNeil 2001). At that
time the price of the same drug cocktail from multinationals was between
10,000-15,000 USD per patient/year. A number of African countries were
engaged in negotiations with the multinational pharmaceutical companies,
whose best offer at the time for the same product was about 1000 USD
(Zimmerman et al. 2001). Cipla was able to reduce the price to this level
because Brazil’s local production had brought down the cost of the raw
materials (active pharmaceutical ingredient, or API) for ARVs by creating a
larger international market. Cipla’s dramatic price reduction, which
received widespread media attention, hammered the message home that
the multinational drug companies were abusing their monopolistic
position in the face of a catastrophic human disaster. It also focused
attention on the effects of generic competition in bringing drug prices
down.
On 1 December 2003, the WHO prequalification project approved the
Cipla product. 4 Almost three year later, on 17 November 2006, the FDA
also granted it tentative approval under ‘expedited procedures for the
President’s Emergency Plan for AIDS Relief (PEPFAR) program.’ This
triple-therapy is currently available without any geographical restrictions
for less than 90 USD per patient/year.
4 The Prequalification Project, set up in 2001, is a service provided by the WHO to facilitate
access to medicines that meet unified standards of quality, safety and efficacy for HIV/AIDS,
malaria and tuberculosis. It offers assessments of drugs following an application by the
company. These assessments can be used by procurement agencies and national authorities to
accelerate access to medicines from manufacturers that meet the international quality
standards (WHO 2004).
26
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
4.2.5 Protest on university campuses in the US
Researchers and students began to realize that, while their universities
made significant contributions to the development of AIDS drugs, they
were paralysed when it came to making these products available in the
developing world as a result of university technology transfer and IP
policies.
A controversy over the cost of the drug stavudine (also known as d4T)
came to a head on the Yale University campus in March 2001. Stavudine
was an important drug used to treat HIV/AIDS. It was developed by
researchers at Yale University, which held the patent on the drug. Yale
licensed the patent to BMS, and it had been a great commercial success for
both BMS and Yale. In 2000, Yale earned over 40 million USD in royalties
from the stavudine license (Yale University Office of Cooperative Research
2000). In March 2001, researchers and students campaigned on the Yale
campus, demanding that Yale not enforce its stavudine patent in South
Africa so that generic versions of the drug could be used. At that time, the
price of the generic version of stavudine in South Africa was thirty-four
times less than the price of the BMS brand-name product. Yale Professor
William Prusoff, who, together with the late Dr. Tai-Shun Lin,
demonstrated the value of stavudine in treating AIDS, stated publicly,
‘People shouldn’t die for economic reasons, because they can’t afford the
drug’ (as quoted in Demenet 2002). Under pressure from researchers,
students, and access advocates, Yale renegotiated its license with BMS to
ensure the availability of generic versions of stavudine in developing
countries (‘t Hoen 2003).
4.2.6 World Health Assembly (WHA)
In 1999, the WHA had strengthened WHO’s role in intellectual property
‘to ensure that public health interests are paramount in pharmaceutical and
health policies’ (WHO 1999). This put health advocates at the table of trade
negotiations, as the subsequent developments at the WTO TRIPS Council
and the Doha WTO ministerial conference would show. The resolution also
urged countries to look into the options they had under current trade rules
to safeguard access to essential medicines, a clear reference to TRIPS
flexibilities such as compulsory licensing. Most importantly, the Assembly
requested the WHO to assess the health implications of trade agreements,
which was understood to mean TRIPS, with a view to assist countries in
mitigating the negative effects of these agreements.
4. THE DOHA DECLARATION
27
This resolution had come in response to country requests to WHO for
technical assistance in implementing the TRIPS flexibilities. In 2000 and
2001 the debates on access to medicines and intellectual property at the
WHA further intensified. In 2000 a resolution was adopted that instructed
the WHO to advise countries on how to overcome legal and regulatory
barriers to purchasing low-priced medicines in the global marketplace,
including advice on how to overcome obstacles relating to intellectual
property protection. During the debate on the WHO Revised Drug
Strategy, developing countries stressed the need for the WHO to provide
independent and pro-active advice on intellectual property issues relating
to health. The 2000 WHA was marked by an unprecedented level of
participation from trade and intellectual property experts representing the
industrialized Member States and international organisations such as the
WTO and WIPO. In response to their presence, some developing country
delegates commented: ‘We are at the World Health Assembly, not the
World Intellectual Property Assembly.’
At the following year’s WHA, a conflict about WHO’s role in monitoring
medicines prices flared up, following a Brazilian proposal for the creation of
a WHO database of drug pricing information and an expanded role for the
WHO in trade and health matters. The proposal was met with fierce
opposition from the US and the EU despite the fact that the 1999 Revised
Drug Strategy had charged the WHO with the task of monitoring and
analysing the public health impact of TRIPS and other trade agreements on
an ongoing basis. In May 2001, the WHA adopted two resolutions that had
a particular bearing on the debate over TRIPS (WHA 54.10 2001; WHA 54.11
2001). The resolutions addressed 1) the need to strengthen policies to
increase the availability of generic drugs, and 2) the need to evaluate the
impact of TRIPS on access to drugs, local manufacturing capacity, and the
development of new drugs. As a result, the WHO’s work programme on
pharmaceuticals now includes the provision of policy guidance and
information on intellectual property to countries for monitoring and
analysing the effects of TRIPS on access to medicines (WHO 2001). But
despite this progress, WHO has problems operating effectively (New 2006).
The programme is not adequately staffed and WHO is reluctant to publish
practical guidance for countries on the use of the TRIPS flexibilities. This
has left a void in policy and technical guidance from the world’s most
important norm setting agency in health.
28
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
4.2.7 Attention to the AIDS medicines crisis
In 2000 the G8 paid unprecedented attention to health and the need for
action to increase access to medicines. In December of that year, a 3-day G8
summit on infectious diseases took place in Okinawa, Japan. For AIDS in
particular it set the following priorities: (1) preventing the spread of
HIV/AIDS, (2) providing care and support to those infected and affected by
HIV/AIDS, and (3) enhancing research and development for international
public goods. The summit put an important emphasis on new approaches
to R&D and called for a new partnership for the improvement of the
availability of international public goods through R&D and access to
knowledge (Ministry of Foreign Affairs, Japan 2000). This summit was
also the birthplace of the Global Fund to Fight AIDS, Tuberculosis and
Malaria (henceforth, ‘the Global Fund’).
Since Okinawa, infectious diseases and access to medicines has been a
recurring subject at the G8 meetings. Unfortunately, the G8 has lost much
of its decisiveness since Okinawa. While the 2000 Okinawa Summit
promised new approaches to managing IP and emphasized the need for
access to medicines and innovation to address health needs in the
developing world, subsequent G8 meetings have significantly watered these
down.5
Another important event that year was the 13th International AIDS
conference that took place in Durban, South Africa. It was the first time
that this prestigious meeting was held on the continent most severely
affected by the disease. This conference signalled a paradigm shift, with
participants focusing on the fact that most of the 30 million people with
HIV/AIDS lived in developing countries and had no hope of receiving the
life-saving treatment that had become the norm in the West.
Other organizations, such as the Joint United Nations Programme on
HIV/AIDS (UNAIDS), the World Bank, the Group of 77, and regional
organizations such as the Organization of African Unity, added their voice
to the debate on intellectual property and access to medicines. The UN
Sub-Commission for the Protection and Promotion of Human Rights
passed a resolution pointing out the negative consequences for the human
right to food, health, and self-determination if TRIPS were implemented in
its current form. Referring specifically to pharmaceutical patents, the
5 The 2007 Heiligendam G8 was a particular low point, when the heads of state could not even
agree on making a reference to the Doha Declaration (G8 Summit Declaration 2007).
Instead, they uncritically promoted IP as the backbone of innovation.
4. THE DOHA DECLARATION
29
resolution stressed the need for intellectual property rights to promote
social welfare (United Nations Economic and Social Council Commission
on Human Rights 2000). In 1999, the United Nations Development
Programme’s (UNDP) Human Development Report made a plea for
re-writing the rules of globalisation to make them work ‘for people – not
just profits.’
4.2.8 Changing landscape
In summary, between the Seattle WTO ministerial meeting in 1999 and the
Doha WTO ministerial meeting in 2001 the landscape had changed.
Numerous events had focused the attention of many players on
pharmaceutical IP protection and access to medicines. Within a year,
discussions about pharmaceutical IP protection had moved from the
exclusive realm of industry lobbyists, IP lawyers and trade negotiators in
Geneva to a public debate that held the attention of the media. Knowledge
and information about pharmaceutical pricing and access issues became
more readily available, while the Internet helped to disseminate
information rapidly and mobilize a growing movement for access to
medicines.
Unable to turn a deaf ear to the rising chorus of critics of TRIPS and its
effects on access to medicines, the WTO changed course. In April 2001, the
chair of the TRIPS Council, Zimbabwe, proposed a special TRIPS Council
session on access to medicines, arguing that the WTO could no longer
ignore this issue that was being actively debated outside the WTO but not
within it (WTO 2001b). But the battle was not won yet.
4.3 Why the Doha Declaration came to pass
How was it possible to achieve a declaration on such a contentious issue in
2001 at Doha, considering that public health hardly appeared in trade talks
just two years earlier? Michael Moore, then the WTO Director-General,
made it clear on the opening day of the conference that the issue of TRIPS
and public health might be the deal-breaker for a new trade round, putting
the success of the entire Doha trade talks in the hands of those negotiating
on TRIPS and access to medicines. Observers point to a number of factors
that contributed to the success of the negotiations (Banta 2001): First, the
developing country Members were extremely well-prepared and operated
as one block. Second, the uncompromising positions of Western countries
such as the US and Canada were hard to maintain in light of the anthrax
30
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
crisis and the threat of a shortage of the only known treatment,
ciprofloxacin. After anthrax was sent through the US postal system in
October 2001, both the US and Canada rapidly expressed their willingness
to set aside the patent held by the German company Bayer if other
solutions to the shortage and the high price of ciprofloxacin could not be
found (Harmon & Pear 2001). The anthrax scare forced all WTO Members
to ask themselves how much of a prisoner they wanted to be of their own
patent systems. Third, a growing and active international access to
medicines movement ensured the issue would be high profile, and that
NGOs would monitor different countries’ positions.
NGOs have played a key role in advocating for the use of TRIPS
provisions, such as compulsory licensing, to increase access to medicines.
The first international meeting specifically on the use of compulsory
licensing to increase access to AIDS medicines was organized in March 1999
by Consumer Project on Technology (CPTech), Health Action
International (HAI), and MSF at the Palais des Nations in Geneva. Later that
year, the same group of NGOs organized the Amsterdam Conference on
Increasing Access to Essential Drugs in a Globalised Economy, which
brought together 350 participants from 50 countries on the eve of the
Seattle WTO ministerial conference. The Amsterdam Statement that
emerged from this conference focused on three objectives: establishing a
working group in the WTO on TRIPS and access to medicines, considering
the impact of trade policies on people in developing and least-developed
countries, and providing a public health framework for the interpretation
of key features of WTO agreements.
The working group was to address questions related to the use of
compulsory licensing to increase access to medicines, mechanisms to allow
production of medicines for export to a country with no or insufficient
production capacity, patent barriers to research, and overly restrictive and
anti-competitive interpretations of TRIPS rules regarding protection of
pharmaceutical test data.6 In addition, the working group was to examine
6 There is only one article in the TRIPS Agreement that talks about test data: Article 39.3 of
TRIPS states that: ´Members, when requiring, as a condition of approving the marketing of
pharmaceutical or of agricultural chemical products which utilize new chemical entities, the
submission of undisclosed test or other data, the origination of which involves a considerable
effort, shall protect such data against unfair commercial use. In addition, Members shall
protect such data against disclosure, except where necessary to protect the public, or unless
steps are taken to ensure that the data are protected against unfair commercial use.’ TRIPS
requires that WTO Members protect ‘undisclosed test or other data’ against ‘unfair
commercial use’ and ‘disclosure’. TRIPS does not require that Members provide exclusive rights
to the originator of the data for a given period (WHO 2006).
4. THE DOHA DECLARATION
31
‘burden sharing’ approaches for R&D that would permit countries to
consider a wider range of policy instruments to promote R&D and to
consider the practical burdens on poor countries of administering patent
systems. The Amsterdam Statement also urged national governments to
develop new and innovative mechanisms to ensure funding for R&D for
neglected diseases.
The Amsterdam Statement has served as a guide for the work of NGOs
and other advocates on TRIPS and public health.7 The working group was
not established, but the issues related to pro-access mechanisms such as
compulsory licensing were taken up in the TRIPS Council and ultimately
led to the Doha Declaration. The Statement was also ahead of its time. In
1999 it called for different approaches towards health-needs driven R&D.
In 2008 this issue was at the core of international talks at the WHO
Intergovernmental Working Group on Public Health, Innovation and
Intellectual Property.
Some have warned against overemphasising the role of NGOs in
influencing global IP rules. Peter Drahos commented in his report to the
UK Commission on Intellectual Property:
NGOs, after states and business, have become a third force in the global
politics of intellectual property rights. NGOs function as an analytical
resource for developing states and as possible partners in a global
coalition of minority factions on international intellectual property
standard-setting issues. But these kinds of coalitions are difficult to put
together, are issue specific and predominantly rely on a crisis of some
kind to be truly effective. They do not threaten the standard-setting
dominance of the US and EU, especially when these two states are
united on the direction in which global regulation should travel
(Drahos 2002).
Nevertheless in a more recent paper, Drahos called the Doha Declaration ‘a
case of a weak coalition making a gain that an observer would not have
predicted given the power resources of the US-led coalition’ (Drahos 2007).
He specifically described the NGO/developing country networking and
coalitions as pivotal in the adoption of the Doha Declaration.
7 Many international and national NGOs, such as the Oxfam ‘Cut the Cost’ campaign, MSF,
CPTech, the South African Treatment Action Campaign, Act Up Paris, Third World
Network, and the Health Gap Coalition in the US are today involved in campaigning for
access to medicines.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
4.4 Provisions of the Doha Declaration: Paragraphs 1-5 and 7
The Doha Declaration contains seven paragraphs (see Annex 1 for full
text). The first four paragraphs set out the scope, background and basic
principles of the Declaration. Paragraph One reads:
We recognize the gravity of the public health problems afflicting many
developing and least-developed countries, especially those resulting
from HIV/AIDS, tuberculosis, malaria and other epidemics.
Notably, the Declaration covers ‘health problems’ without restrictions.
Paragraph One highlights the examples of ‘HIV/AIDS, tuberculosis, malaria
and other epidemics’, but this text is meant to illustrate some of the
problems, not to limit the use of the Doha Declaration to these three
diseases or epidemics only.8
Paragraph Two was included to signal that WTO Members recognised
that IP was not the only factor that affected access to medicines. It reads:
We stress the need for the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement) to be part of the wider
national and international action to address these problems.
Some Members, in particular the US, strongly pushed the notion that
factors other than IP were the cause of access problems. In one submission,
in order to illustrate why patents were not relevant, the US argued that some
people were so poor they could never afford to buy medicines, even at the
most competitive prices (USTR 2002).
Paragraph Three reads:
We recognize that intellectual property protection is important for the
development of new medicines. We also recognize the concerns about
its effects on prices.
8 Throughout the negotiations over the Declaration, developed countries attempted to limit
the scope to a fixed set of diseases but such attempts were unsuccessful. Nevertheless, this is a
much misunderstood and misinterpreted paragraph. In the media one can regularly find
statements that the Doha Declaration can only be invoked in cases of emergency or
epidemics. For example, Jon Pender of GlaxoSmithKline said in relation to government use
licenses in Thailand: ‘…Although compulsory licensing is legal, TRIPS rules allow it only under
limited circumstances, such as national health emergencies, and only after lengthy efforts to
negotiate prices with firms’ (The Economist 2007). For further details, see ‘t Hoen 2002; ‘t
Hoen 2003; and Correa 2002.
4. THE DOHA DECLARATION
33
The significance of this text is that it recognises the link between patents
and high medicines prices and the difficulties this creates for developing
countries. Carlos Correa commented: ‘The consensus achieved on patent
protection’s impact on drug prices may be considered one of the major
political achievements of the developing countries in the Doha Ministerial
Declaration’ (Correa 2002:7).
Paragraph Four is often referred to as the core of the Declaration, and
reads:
We agree that the TRIPS Agreement does not and should not prevent
Members from taking measures to protect public health. Accordingly,
while reiterating our commitment to the TRIPS Agreement, we affirm
that the Agreement can and should be interpreted and implemented in
a manner supportive of WTO Members’ right to protect public health
and, in particular, to promote access to medicines for all.
Paragraph Four is critical because it gives primacy to public health
considerations and clarifies that this principle is not restricted to certain
selected provisions of TRIPS, but rather stretches out over the entire TRIPS
Agreement. ‘Measures to protect public health’ is not limited to medicines
only but also refers to vaccines, diagnostics and other health tools needed to
facilitate the use of these products.
Paragraphs Five, Six and Seven are the substantive sections of the
Declaration. Paragraph Five lays out the key measures and flexibilities
within TRIPS, such as compulsory licensing that can be used to overcome
intellectual property barriers to access to medicines. It reads:
Accordingly and in the light of paragraph 4 above, while maintaining
our commitments in the TRIPS Agreement, we recognize that these
flexibilities include:
a) In applying the customary rules of interpretation of public
international law, each provision of the TRIPS Agreement shall be read
in the light of the object and purpose of the Agreement as expressed, in
particular, in its objectives and principles.
b) Each Member has the right to grant compulsory licences and the
freedom to determine the grounds upon which such licences are
granted.
34
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
c) Each Member has the right to determine what constitutes a national
emergency or other circumstances of extreme urgency, it being
understood that public health crises, including those relating to
HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a
national emergency or other circumstances of extreme urgency.
d) The effect of the provisions in the TRIPS Agreement that are relevant to
the exhaustion of intellectual property rights is to leave each Member free
to establish its own regime for such exhaustion without challenge, subject
to the MFN and national treatment provisions of Articles 3 and 4.
The use of the term ‘include’ in the first sentence of this paragraph makes it
clear that the flexibilities in implementing TRIPS are not limited to those
listed in the Doha Declaration. Paragraphs Four and 5 (b) identify
compulsory licensing as a key measure for developing countries to limit the
exclusive rights of patent-holders and to identify alternate sources of
medicines, whether through local production or importation. It
strengthens countries’ rights to use compulsory licensing and is
unambiguously clear on the fact that there are no limitations as to the
grounds for issuing compulsory licenses. Paragraph 5(c) reiterates
countries’ freedom to determine what is a national emergency or
circumstance of extreme urgency. This clause is important because TRIPS
waives certain procedural requirements, such as prior negotiation with the
patent-holder, if a compulsory license is issued in a situation of emergency
or urgency. It does not mean that a compulsory license can only be applied
in cases of emergency or urgency. This is a common misunderstanding
regarding TRIPS.
Paragraph 5(d) resolves once and for all the question of whether TRIPS
authorizes parallel trade by noting that TRIPS leaves ‘each Member free to
establish its own regime for such exhaustion without challenge’.
Paragraph Six, which dealt with production for export under a
compulsory license, requires lengthier discussion and is therefore covered
separately in Section 4.5.
Paragraph Seven extends the transition period from 2006 to at least
2016 for the implementation of pharmaceutical product patents and the
protection of undisclosed test data for LDC Members. Since many LDCs
had already granted those rights, it also allows them not to enforce such
rights until at least 2016. The paragraph reads:
4. THE DOHA DECLARATION
35
We reaffirm the commitment of developed-country Members to
provide incentives to their enterprises and institutions to promote and
encourage technology transfer to least-developed country Members
pursuant to Article 66.2. We also agree that the least-developed country
Members will not be obliged, with respect to pharmaceutical products,
to implement or apply Sections 5 and 7 of Part II of the TRIPS
Agreement or to enforce rights provided for under these Sections until
1 January 2016, without prejudice to the right of least-developed
country Members to seek other extensions of the transition periods as
provided for in Article 66.1 of the TRIPS Agreement. We instruct the
Council for TRIPS to take the necessary action to give effect to this
pursuant to Article 66.1 of the TRIPS Agreement.
While paragraph Five provides an interpretation of existing rights under
TRIPS, paragraph Seven creates new rights for LDCs.
4.5 Paragraph 6 of the Doha Declaration: production for export
under a compulsory license
The TRIPS Agreement stipulates that production under a compulsory
license must be ‘predominantly for the supply of the domestic market’
(Article 31f) except when the compulsory license is granted to remedy an
anticompetitive practice (Article 31k). This restriction limits the quantity
of products that can be produced for export. This limitation was a key issue
because it could render local production of a drug uneconomical for a WTO
Member, even if – in principle – production was legally permissible under
the compulsory license. It is precisely economies of scale and access to
export markets that has made low-cost high-volume production
economically attractive, as is illustrated by the case of India.
The Doha Ministerial decided to postpone a resolution of this problem
to a later date, but called for an ‘expeditious solution’ in Paragraph 6 of the
Doha Declaration, which reads:
We recognize that WTO Members with insufficient or no
manufacturing capacities in the pharmaceutical sector could face
difficulties in making effective use of compulsory licensing under the
TRIPS Agreement. We instruct the Council for TRIPS to find an
expeditious solution to this problem and to report to the General
Council before the end of 2002.
36
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
However, the cooperative spirit of Doha quickly evaporated once
negotiators were back in Geneva. It took the TRIPS Council nearly two
years to reach an agreement to allow the export of medicines produced
under a compulsory license. (For a detailed account of the negotiating
history, see Annex 5.)
During this period, the fundamental disagreement was over whether
the solution would be simple and economically feasible or complex and
economically risky. On the one hand, developing countries, the WHO, and
NGOs supported a solution that would have automatically allowed export
once the importing country had expressed the need and/or issued a
compulsory license.9 On the other hand, industrialized countries pushed to
restrict the use of compulsory licensing as much as possible, attempting to
restrict the solution to a fixed set of diseases, to a limited number of eligible
countries, or to national emergencies or other situations of extreme
urgency.
Finally, on 30 August 2003, a decision was adopted, which later became
an amendment to TRIPS Article 31.10 The mechanism put in place was
meant to waive the requirement that compulsory licensing be
predominantly for the supply of the domestic market. However, the
mechanism was not automatic, but rather, needed to be invoked on a
drug-by-drug, case-by-case, country-by-country basis. It ignored the
economic reality of generic medicines production, which needs economies
of scale and thus access to export markets in order to achieve low costs. In
addition, the mechanism was needlessly cumbersome. The requirement
that the importing and exporting countries notify the TRIPS Council in
advance of their intention to use the mechanism unnecessarily exposed
9 This solution would have relied upon TRIPS Article 30, and considered export under
compulsory license to be a ‘limited exception’ to a patent right. The European Commission
initially signaled its openness towards this approach, but later moved toward the more
restricted position of the US. Article 30 reads: Exceptions to Rights Conferred: Members may
provide limited exceptions to the exclusive rights conferred by a patent, provided that such
exceptions do not unreasonably conflict with a normal exploitation of the patent and do not
unreasonably prejudice the legitimate interests of the patent owner, taking account of the
legitimate interests of third parties.
10 The August 30 Decision provides for a temporary waiver in order to allow export. In
December 2005, the waiver was followed by an amendment to the TRIPS Agreement , which
will come into force once two-thirds of the WTO membership has ratified it. As of December
2008, only seven out of the 150 Member countries have done so.United States (17 December
2005), Switzerland (13 September 2006), El Salvador (19 September 2006), Rep. of Korea
(24 January 2007), Norway (5 February 2007), India (26 March 2007), Philippines (30
March 2007). The waiver will stay in place until the amendment (Article 31bis) comes into
force.
4. THE DOHA DECLARATION
37
developing countries to political pressure from industrialized countries,
creating a further disincentive to use the mechanism (MSF 2006).
To date, a limited number of countries including Canada, Norway,
China, India and the European Union, have adopted legislation to
implement the August 30th Decision.11 In some countries, such
implementation has introduced additional limitations. For example China
and Canada limited the scope of diseases and products for which the
mechanism may be used, and Canada introduced extra procedural
requirements (MSF 2006). In July 2007, Rwanda became the first country to
notify the TRIPS Council that it intended to use the mechanism to import
generic medicines from Canada (WTO 2007a).
The lack of use of the mechanism can partly be explained by the fact
that many of the 1st line AIDS drugs needed today are ‘pre-TRIPS’ – that is,
they are not patented in India and are still available as generics. A single
compulsory license, government use order12 or non-enforcement
statement13 suffices to allow for the import of these products when a valid
patent exists in the importing country. However, as pharmaceutical
product patents start to be granted in producing countries such as India,
this situation will change. In principle, India could make use of the August
30 mechanism to allow its industry to continue to produce and export
generic versions of patented medicines. However, since this authorization
can only be done drug order by drug order, and only upon request by
another country, it is highly unlikely that this system will provide sufficient
economic incentive to keep the generic medicines sector in business.
Rather, it is to be expected that the Indian generic medicines sector will
shift its business orientation away from supplying new medicines to the
developing world, and towards the export of off-patent generics to more
affluent markets. Trends in that direction are already visible (Sampath
2005).
Many have noted that the system has serious flaws. The WHO
Commission on Intellectual Property, Innovation and Public Health
(CIPIH) recommended that the effectiveness of the August 30th Decision
‘needs to be kept under review and appropriate changes considered to
achieve a workable solution, if necessary’ (WHO 2006). The European
Parliament, citing the ineffectiveness of the solution, initially postponed
11 The Netherlands published policy guidelines that allow the production for export under a
compulsory license (De Staatscourant 2004). See also Bannenberg 2005.
12 According to Paragraph 5 of the Doha Declaration.
13 According to Paragraph 7 of the Doha Declaration.
38
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
ratification of the TRIPS amendment and indicated that it wished to
re-open the TRIPS and access to medicines debate more broadly. The
Parliament also asked the European Commission and the EU Member
States to do more to ensure that developing countries could make use of the
TRIPS flexibilities to expand access to medicines and to increase R&D for
neglected diseases. Parliamentarians also asked for a restriction of the
mandate of the Commission ‘in order not to negotiate
pharmaceutical-related TRIPS-plus’ measures in trade agreements, which
would negatively affect public health and access to medicines (European
Parliament 2007). In October 2007, the European Parliament finally gave
its assent to the ratification of the TRIPS amendment by the Commission.
The Parliament only agreed to vote in favour after it had obtained
assurances from the Council of Ministers that its above-mentioned
demands would be met (Montesquieu Institute 2007).
The August 30 Decision is a textbook example of a WTO compromise
with little practical use. At the end of the day, the objective was to reach an
agreement – any agreement – without regard to the effectiveness of the
compromise.
5. PRACTICAL IMPLEMENTATION
39
5. PRACTICAL IMPLEMENTATION
5. Practical implementation of the Doha
Declaration on TRIPS and Public Health
The most significant flexibility available under TRIPS and the Doha
Declaration is compulsory licensing. Compulsory licensing allows other
parties to make use of a patented invention without the consent of the
patent holder. A state authority grants compulsory licenses upon request,
or, for example, as a result of a court decision. A government can also make
use of a patent without the consent of the patent holder. This legal tool is
called ‘government use’ or, in some countries, ‘Crown Use’. Today
developing countries and least developed countries use compulsory
licensing mostly for the purchase of antiretroviral drugs for their AIDS
programmes. Compulsory licensing in the pharmaceutical field is not new,
as the next section explains.
5.1 History of compulsory licensing
Patent monopolies were originally created to advance the public good, and
with the patent grant came obligations; if these obligations were not
fulfilled, the state has always had the authority to limit severely or revoke a
monopoly grant. A 1623 listing of such obligations drawn up by a British
patent authority included: ‘the continuous production of the patented
article in sufficient quantity, the maintenance of a sufficient stock on hand,
the keeping of its quality up to the prescribed standards; and the selling of it
at easy and reasonable prices with reference to a standard price’ (Penrose
1951:163). Failure to fulfil these conditions could lead to cancellation of the
patent.
Compulsory licensing made its first appearance in an amendment
proposed by the Senate to the first United States patent law of 1790. The
House refused the amendment, but the proposal was significant as the first
reference to compulsory licensing in legal history. It took another century
for it to appear in law (Penrose 1951:166).
The Vienna Patent Congress of 1873 offered important support for
compulsory licensing (Penrose 1951). At the time, compulsory licensing
was seen as a way to resolve the controversy between the pro-patent lobby
40
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
and the free-trade group, which considered patents a threat to the free flow
of international commerce. Subsequently, the German law of 1877 obliged
the patentee to grant a license if the public interest required it. Initially, the
1880 Paris Convention left the matter of compulsory licensing up to the
individual member countries. In 1925 the principle of compulsory
licensing was included in the International Convention (Paris Convention)
after which most member countries revised their laws to include
compulsory licensing provisions (Penrose 1951:168).1 Compulsory licensing
was seen as a milder measure than forfeiture or revocation of the patent,
which was until then the remedy for patent abuse (including failure to
work). Revocation of a patent thereby became a last resort measure, only to
be invoked in case compulsory licensing was proven ineffective.
The issue of compulsory licensing was not without controversy. In
reference to a German law that allowed compulsory licenses to be granted
to those found infringing a patent, one American official called CL a ‘cloud
on the entire patent system’ while a French official took the view that it was
a ‘form under which the community expresses its rights over the invention’
(Penrose 1951:197).
In the early 20th century the significance of compulsory licensing in the
pharmaceutical sector was limited, because many countries excluded
pharmaceuticals from patentability. In fact, strong supporters of
compulsory licensing could be found in the pharmaceutical sector. For
example, the chairman of Boots Pure Drug Company said in a speech to
shareholders about compulsory licenses: ‘The license to manufacture
should be granted to any firm that can provide satisfactory assurances of its
competence to do so. If international agreements on those lines could be
adopted, there would be a freer exchange of ideas and a wider availability of
products, instead of an unnecessary and often uneconomical dependence
upon others’ (as quoted in Penrose 1951:185).
1 Members of the Union for the protection of industrial property (Paris Convention) at that
time were: Australia (territory of Papua & New Guinea, Norfolk Islands, Nauru), Austria,
Belgium, Brazil, Bulgaria, Canada, Cuba, Czechoslovakia, Denmark and Faeroe Islands,
Dominican Republic, Finland, France (Algeria and colonies), Germany, Great Britain and
Northern Ireland (Ceylon, Tanganyika, Trinidad and Tobago, Singapore), Greece, Hungary,
Ireland, Italy, Japan, Lebanon, Luxembourg, Mexico, Morocco, Netherlands (Antilles,
Surinam and Curacao), New Zealand, Norway, Poland, Portugal with Azores and Madera,
Rumania, Spain, Sweden, Switzerland, Syria, Tunis, Turkey, United States, Yugoslavia.
5. PRACTICAL IMPLEMENTATION
41
5.2 Examples of compulsory licensing on medicines in
industrialized countries
There are a number of examples of compulsory licensing in the pharmaceutical sector in industrialised countries that deserve mention.
5.2.1 Canada’s pharmaceutical compulsory licensing regime
From 1923 until the North American Free Trade Agreement (NAFTA) in
1993, Canada had a special compulsory licensing provision for pharmaceuticals and food. Compulsory licensing was used to promote price
competition for medicines for almost 70 years.2 However, from 1923 to
1969 only 49 applications for compulsory licenses were received, of which
22 were granted. At the time, the recipient of a compulsory license was
required to manufacture locally the product in question; however, in many
cases, the Canadian market was considered too small for local production
to be economically viable. In 1969, in response to high drug prices, the law
was amended to allow import of generics under a compulsory license
(Lexchin 1997:70).
Under the new system, between 1969 and 1992, Canada issued 613
compulsory licenses for importation and local production. As a result,
Canada had some of the lowest medicines prices in the industrialised world
(Reichman & Hasenzahl 2003). By 1983, savings on drug costs were
estimated at 211 million USD per year in a market worth 1.6 billion USD
(Lexchin 1993:150). The compulsory license legislation allowed the
development of a local generic pharmaceutical industry and a drug benefits
programme for welfare recipients and the elderly. It is important to note
that the compulsory licensing policy did not gravely harm the
multinational pharmaceutical companies, which only lost 3.1% of the
market to generic competition. The 1983 Eastman report found that
‘growth [of the pharmaceutical industry] has been more buoyant in Canada
than it has been in the United States since 1967’ (Canada 1985).
Nevertheless, the multinational industry mounted numerous campaigns
against the law.
2 Beginning in the early 20th century Canada actively encouraged industrial development by
stimulating local production through its patent law. It required patentees to work the patent
locally, which meant that production within Canadian borders or licensing on reasonable
grounds was a prerequisite to maintaining a patent. In 1935, compulsory licensing replaced
revocation of the patent as a remedy for the failure to work locally. Canada took these
measures because it considered its level of development insufficient to merit more stringent
patent policies.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
In 1987, Canada adopted legislation that made compulsory licensing
permissible only after seven to ten years of patent life (Bill C-22), and in
1993 Canada effectively abolished all forms of compulsory licensing in the
medicines field (Bill C- 91) (Pharmaceutical Policy in Canada 1997). Since
then Canada has seen a rapid increase in drug prices. For example between
1987 and 1993 the average price per prescription essentially doubled from
12.48 USD to 24.09 USD (Lexchin 1997:74). Between 1996 and 2004, total
expenditure for prescription drugs in Canada also doubled from 7.6 billion
CAD to 18 billion CAD (Morgan 2005). In exchange for the restrictions on
compulsory licensing, the pharmaceutical industry promised to increase its
R&D activities and create jobs in the R&D sector. These promises were not
fulfilled (Lexchin 1997).
An important lesson from the Canadian experience is the effectiveness
of CL in increasing competition to reduce prices. The role of importation
has been key in making CL efficient in Canada. Today many developing
countries are at a far lesser level of industrial development than Canada was
at the time of its CL policy. The fact that the Canadian market was not
considered large enough to merit a purely local pharmaceutical production
strategy should sound a cautionary note to advocates of local production
solutions for high drug prices, and to those who support restrictions on
importation, such as those contained in the WTO August 30th Decision.
The Canadian case demonstrates clearly that economies of scale are key to
driving prices down.
5.2.2 UK Crown Use
Most countries have CL and government use provisions (often called
Crown Use in Commonwealth countries) in their patent laws. The UK has
a history of Crown Use in the provision of generic medicines to the
National Health Service (NHS). The NHS would purchase medicines that
were patented in the UK from producers in countries where pharmaceutical
patents were not granted, mostly from Italy. The Ministry of Health
ordered medicines to be bought through tendering according to standard
government contracts that authorized and required the supplier to
disregard patent rights. The patentee had the right to compensation from
the government but could not halt the importation and use of the generic.
The Pfizer Corporation challenged this practice in 1965 after the Minister
of Health had authorised the purchase of a generic version of the antibiotic
tetracycline from Italy for use in NHS hospitals (Pfizer vs. Ministry of
5. PRACTICAL IMPLEMENTATION
43
Health 1965). Pfizer’s main argument was that using drugs to treat hospital
patients was not use ‘for’ the Crown. The case went all the way up to the
House of Lords, which dismissed Pfizer’s arguments and ruled in favour of
the Ministry of Health. Lord Reid observed at the time of the ruling:
… It appears to me that the natural meaning of use ‘for the services of
the Crown’ is utilization by members of such services in the course of
their duties. Sometimes, as in the case of the armed services, that use
will or is intended to benefit the whole community; sometimes it will
benefit a particular section of the community and sometimes it will
benefit particular individuals... Therefore the use of patented drugs for
National Health Service patients is use ‘for services of the Crown (as
quoted in Lyngwa 2008).
In 1975, renowned IP scholar Stephen Ladas commented: ‘Although this
power of the Ministry of Health to purchase drugs and medicines from
sources independent of the patentee has been much criticised by the
pharmaceutical industry, it is not likely to be affected by such criticism.
Such power will be exercised if the patentee is alleged to maintain unduly
high prices for these products’ (1975). Unfortunately, recent cases of
government use in developing countries have proven him wrong (See for
example Section 5.3.2 on Thailand).
The Crown Use provision is still part of UK patent law today.
5.2.3 US Government use of pharmaceutical patents
In the late 1950s and early 60s the US used on a routine basis government
use powers to procure generic medicines from abroad. Because much of
Europe did not grant product patents on pharmaceuticals, medicines from
the continent were often much cheaper than in the US. In 1959, the US
Military Medical Supply Agency (MMSA) placed an order for generic
tetracycline in Italy for 0.08 USD per capsule. At the time, Pfizer was
charging 0.17 USD per capsule. When another tender was issued in 1961,
Pfizer responded by reducing the price to 0.06 USD, but the Italian supplier
beat this offer by bidding 0.05 USD per pill. By 1963, international price
competition made possible by the compulsory licensing powers of the US
government had driven down the price of tetracycline to 0.0015 USD per
capsule, less than one-tenth of Pfizer’s 1959 price.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
5.2.4 Other recent compulsory licenses
Compulsory licensing in industrialised countries is not a historical artefact,
as illustrated by the willingness of Canada and the US to invoke this
measure when faced with a shortage of ciprofloxacin during the 2001
anthrax scare (See Section 4.3 for details). Furthermore, Italy recently
issued a number of compulsory licenses related to antitrust cases,
including: on 21 June 2005 for imipenem/cilastatin, a broad spectrum
antibiotic marketed by Merck Sharp & Dohme (MSD); on 26 February
2006 for sumatriptan succinate, a GSK product to treat migraine headaches; and on 26 March 2007 for the active ingredient finasteride, an MSD
product to treat benign prostate enlargement and male baldness. The
licenses are royalty free. The Italian antitrust authority cited refusal to
license as the grounds for the CL and mentioned anticipated price reductions, promotion of more widespread use of generics and benefits for
consumers when it announced its decision (Autorita Garanta della
Concorrenza E Del Mercato 2006, 2007).
5.3 Use of TRIPS flexibilities by middle-income developing
countries (medicines producing and exporting countries)
This section discusses the use of compulsory licensing and government use
by developing countries, which is more widespread than some commentators suggest (Scherer 2006). However, developing countries that make use
of the flexibilities tend to receive much stricter scrutiny than past CL
practices by Western European countries, Canada and the US.
Between 2001 and end 2007, 52 developing and least-developed
countries have issued post-Doha compulsory licenses, given effect to
government use provisions or implemented the non-enforcement of
patents. This section covers some of the more significant cases.
5.3.1 Brazil
An estimated 600,000 people are infected with HIV in Brazil (Okie 2006).
Since 1996, Brazil has offered universal free ARV treatment. In 2005,
170,000 people with HIV/AIDS received ARV treatment. The Brazilian AIDS
programme has reduced AIDS-related mortality by more than 50 percent
between 1996 and 2002 (Okie 2006). Between 1997 and 2004, Brazil
averted 791,069 AIDS-related hospitalisations, which represents a savings
5. PRACTICAL IMPLEMENTATION
45
Brazil, a tiger without teeth? National gathering of NGOs working on HIV/AIDs in Curitiba,
Parana, Brazil calling the Brazilian government a ‘Tiger without Teeth’ for threatening to
issue compulsory licences for AIDS drugs, but not actually issuing one. (5 September 2005)
Photographer: Michel Lotrowska
of 2.2 billion USD in hospital and treatment costs for AIDS-related
infections (Ministry of Health, Brazil 2005).
At the core of the success of Brazil’s AIDS programme is the ability to
produce medicines locally. Currently 17 different ARVs are distributed
through the public health system, including new drugs such as atazanavir,
tenofovir and enfurvitide. Of these 17, eight are produced as generics in
Brazil.3 The locally-produced products have never been patented in Brazil,
because they were developed before Brazil introduced pharmaceutical
product patents in May 1997. Brazil’s ARV production has lowered the
international prices of APIs, and as a result, has led to lower prices elsewhere
in the developing world (WHO 2004, Pinheiro et al. 2006). Brazil has also
negotiated lower prices for patented drugs by using the threat of
production under a compulsory license (Ministry of Health Brazil 2001,
Rich 2001). Since 1997, the average annual cost of ARVs has declined from
6240 USD per patient/year to 1336 USD in 2004 (Okie 2006).
3 These are: zidovudine, stavudine,didanosine, lamivudine, nevirapine, ritonavir, saquinavir
and indinavir (Brazil Ministry of Health presentation at the International AIDS Society
meeting (IAS) 2005).
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Table 3. Best price of key antiretroviral drugs in Brazil and internationally (in USD)
2006
2003
Efavirenz
Lopinavir/ritonavir
Nelfinavir
Tenofovir
govern.
price
best
intern.
price
580
3241
1718
2905
438
500
880
500
difference
govern.
price
best
intern.
price
difference
x 1.3
x 6.5
x 2.0
x 5.8
580
1380
1537
1382
220
338
683
500
x 2.6
x 4.1
x 2.3
x 2.8
Ford et al., 2007
However, the need for newer medicines, either to respond to growing
drug resistance or to improve treatment to meet current guidelines, is
leading to an increase in the cost of AIDS drugs. Newer AIDS medicines are
patented in Brazil and are purchased through importation. As a result, in
2005 the average cost of ARVs rose to 2500 USD per patient/year.
Out of the total 2005 budget for ARVs of 395 million USD, the eight
locally produced medicines cost 85 million USD (21.4%) while the
branded products consumed the majority of the budget at 310 million USD
(78.6%). It is alarming to note that over 60% of this budget was spent on
the purchase of only three ARVs: efavirenz (Stocrin, Merck), tenofovir
(Viread, Gilead) and lopinavir/ritonavir (Kaletra, Abbott). In 2005, these
were single-source products for which no local production took place.
On 4 May 2007, Brazil issued a compulsory license that would allow for
the import and production of generic versions of efavirenz (Ministry of
Health Brazil 2007). Despite numerous threats in the past, Brazil had never
before actually issued a CL for an AIDS drug.4 Before the CL, Brazil had been
paying Merck 580 USD per patient/year for efavirenz, which comprised
about 18% of the ARV budget that year. As a result of the CL, the price will
come down to 165 USD per patient/year (Cohen 2007), a considerably
lower price than Brazil had been able to obtain through negotiations.
5.3.2 Thailand
Since 2001, Thailand has offered universal access to essential medicines
through its national public health insurance scheme (National Health
4 Many media reports and casual observers have been under the false impression that Brazil had
used compulsory licensing multiple times before 2007, perhaps because its negotiations with
pharmaceutical companies were often highly-publicized in the international media.
5. PRACTICAL IMPLEMENTATION
47
Security Act 2002) and since October 2003, has offered universal access to
ARVs. Only 2 % of the population purchases private health insurance
(Ministry of Public Health and National Health Security Office, Thailand
2007), with the remainder of the population relying on the public health
system. Thailand has an essential medicines list,5 which contains about 900
items. In 2004, 572,000 people were living with HIV/AIDS in Thailand,
and about 60,000 people received ARVs through the National Access to
Antiretroviral Programme for People Living with HIV/AIDS (NAPHA) or
through the Social Security Scheme. Widespread access to ARV treatment
in Thailand is recent, but the Thai government was able to roll out
treatment quickly once the Government Pharmaceutical Organisation
(GPO) started the production of a fixed-dose triple combination (GPO-vir)
of stavudine, lamivudine and nevirapine at a cost of 1200 Baht (30 USD)
per month. Between 2002 and 2005, the number of people receiving ARVs
rose from 3000 to 52,593 (Bank 2005:4). Local production of these
first-line ARVs was possible because none of the products was patented in
Thailand.
However, like Brazil, Thailand is facing rising drug costs because of the
need to access second-line ARVs that are patent-protected in Thailand. In
2004, the World Bank calculated the average cost of first-line regimens at
360 USD and of second-line regimens at 6,737 USD - a nearly 20-fold
difference.6 In 2005, the World Bank recommended that Thailand issue
compulsory licenses to allow for the local production of patented
second-line ARVs (World Bank 2005:22). As of early 2007, 8000 people
needed lopinavir/ritonavir (Kaletra), but because of the high price charged
by Abbott, the Thai government could only provide the drug for 600
people (Cawthorne et al. 2007). An additional complication was that
lopinavir/ritonavir was not heat-stable and thus difficult to use in tropical
climates. Abbott had developed a heat-stable version of the product, but
this new version was not made available in developing countries where it
was most needed (MSF 2006).
5 ‘Essential medicines are those that satisfy the priority health care needs of the population.
They are selected with due regard to public health relevance, evidence on efficacy and safety,
and comparative cost-effectiveness. Essential medicines are intended to be available within
the context of functioning health systems at all times in adequate amounts, in the appropriate
dosage forms, with assured quality and adequate information, and at a price the individual
and the community can afford. The implementation of the concept of essential medicines is
intended to be flexible and adaptable to many different situations; exactly which medicines
are regarded as essential remains a national responsibility’ (WHO 2008).
6 Calculations were based on the lowest prices available for both generic and branded products
in September 2004.
48
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Citing the high drug prices and its obligation to provide access to
essential medicines, Thailand issued government use (GU) orders (a type of
compulsory license) for three drugs on the national essential medicines list:
efavirenz (November 2006), lopinavir/ritonavir (January 2007), and
clopidogrel, a heart disease drug marketed as Plavix by BMS (January
2007). The patent holders were entitled to a royalty of 0.5% of the total
sales of the generic product. The GU authorised GPO to import or produce
generic versions of these products for non-commercial use in the public
health sector. Initially the GU was used for importation.
It was particularly urgent to resolve the availability of efavirenz; in
addition to the high cost, Thailand experienced regular stock-outs, which
made reliable provision and use of the product difficult (Ford et al. 2007).
Generic efavirenz arrived in the country in February 2007. The immediate
effect of the GU was to increase by 20,000 the number of people with
access to efavirenz. Prior to the GU, only those suffering from the most
severe side effects received efavirenz. After the GU was issued, Thai health
authorities purchased generic efavirenz from Indian generics firm Ranbaxy
for 216 USD per patient/year, a 50% decrease from Merck’s price of 468
USD (MSF 2007).
Up until 2006, Abbott had sold lopinavir/ritonavir to the Thai
government for 2967 USD per patient/year (Ford et al. 2007). Following
continued international pressure, Abbott further reduced the price to 2200
USD per patient/year for middle-income countries, including Thailand. Yet
the production cost of the drug in 2006 was estimated to be less than 400
USD (Pinheiro et al. 2006).
The TRIPS Agreement does not require prior negotiation with the
patent holder for government use licenses. Nevertheless, between 2004 and
2006 Thailand tried to negotiate better prices for these drugs with the
patent-holders without significant results. Only after the appreciation of
the Thai currency in early 2006 were some price reductions obtained, but
they were less than the currency appreciation (Ministry of Public Health
and National Health Security Office, Thailand 2007:5).
The case of the Thai government use orders is of particular interest
because of the fierce responses it provoked from the media, politicians,
pharmaceutical companies and their lobby groups. This outcry was all the
more surprising considering that the issuing of the government use orders
was done in a legal manner, fulfilling all national and international
procedural requirements. The USTR Susan C. Schwab had to acknowledge
this after pressure on the home front: twenty-two members of the US
5. PRACTICAL IMPLEMENTATION
49
Congress had urged her to respect the right of Thailand and other nations
to implement the Doha safeguards, and expressed concern about a possible
US government intervention (Allen et al. 2007). In her response, Schwab
clearly stated: ‘We have not suggested that Thailand has failed to comply
with particular national or international law’ (Schwab 2007).
On 10 July 2007 the EU Trade Commissioner Peter Mandelson wrote
to the Thai Minister of Commerce to complain about Thailand’s
government use orders (Mandelson 2007). Mandelson wrote: ‘Neither the
TRIPS Agreement nor the Doha Declaration appear to justify a systematic
policy of applying compulsory licenses wherever medicines exceed certain
prices’ (Mandelson 2007). The legal basis, if any, of Mandelson’s assertion is
unclear; his defence of the European drug industry is not. He also urged the
Thai minister to engage in negotiations with the drug companies
(Mandelson 2008), which Thailand was not required to do in cases of
non-commercial use. Mandelson acted against the instructions of the
European Parliament to refrain from the pursuit of TRIPS-plus measures.7
Abbott responded to the GU on its drug lopinavir/ritonavir by
withdrawing all new drug applications from the Thai Food and Drug
Administration, including the much needed heat-stable version of
lopinavir/ritonavir. This unprecedented action led to international
condemnation from the public health community, NGOs and AIDS activists
(Dyer et al. 2001).
WHO’s Director-General Margaret Chan was initially critical of
Thailand’s government use order, and urged the Thai government to
negotiate further with the pharmaceutical companies, a position also being
pushed by the US (Treerutkuarkul 2007). She had to reverse this position
after heavy criticism from developing countries, AIDS groups and NGOs
(Chan 2007, Piyaporn 2007, Cawthorne et al. 2007).
An international media campaign portrayed the Thai government as a
pirating military junta that showed no regard for property rights. In a series
of editorials, the Wall Street Journal characterized Thailand’s actions as a
‘seizure of foreign drug patents’ and a ‘frontal attack on property rights’,
and called those who supported Thailand ‘anti-patent hooligans’ (2007). A
conservative lobby group, USA for Innovation, in full-page ads in US
7 The chair of the Committee of International Trade of the European Parliament wrote to
Mandelson on 21 May 2008: our letter to the Thai Government could be seen as inconsistent
with the resolution adopted by the European Parliament and by the position supported by the
European Commission and the Council on the Protocol amending the TRIPS Agreement
during the plenary debate last October as well as the Commitment made by Council and
Commission in plenary last year (Markov 2008). See also Section 4.5.
50
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
newspapers called on the White House and Congress to ‘take retaliatory
action in the form of trade or economic sanctions or the removal of military
aid’ (as quoted in Samabuddhi 2007). Ed Silverman, a long-time observer of
the pharmaceutical industry, wondered how far the pro-pharma lobby
would go in an article ironically entitled ‘Should the US invade Thailand?’
(2007).
The medical journal the Lancet took a counter-position to the attacks in
the financial press, writing that the failure to support Thailand would have
serious consequences for the rights of developing countries to protect
public health and further harm the reputation of the World Trade
Organisation (2007).
Initially, UNAIDS Director Peter Piot had been alone when on 26
December 2006 he commended the Thai Minister of Health for allowing
the import of generic efavirenz. It required extensive international NGO
mobilisation to further bolster political support for Thailand. NGOs played
a key role in generating support from Members of the European
Parliament, the French Ministry of Foreign Affairs, Members of the US
Congress, and the Clinton Foundation.
5.3.3 Malaysia
In 2001 Malaysia offered free ARV triple-therapy to limited groups of
people, while most people requiring ARV treatment had to purchase two of
the three medicines out of pocket. 8 In late 2002, Malaysia changed its AIDS
policy to provide free triple-therapy to all people living with AIDS who met
certain medical criteria.9 The Malaysian government entered into
negotiations with pharmaceutical companies to seek price reductions
without satisfactory results. On 29 October 2003, the Malaysian
Table 4. Monthly cost per patient (in USD)
regimen
2001 price
for patented
product
2004 price
for patented
product
2004 price
for generic
equivalent
D4T + ddI + nevirapine
261.44
197.10
45.32 (FDC)
AZT/3TC +EFV
32.63
136.34
115.14
Ling, 2006
8 HIV-infected mothers after delivery, children with HIV/AIDS, health care workers infected in
the line of duty and people infected through contaminated products.
9 Treatment was offered to people living with HIV/AIDS with a CD4 count of less than 400.
5. PRACTICAL IMPLEMENTATION
51
government issued a government use authorisation for didanosine (BMS),
zidovudine (GSK) and lamivudine/zidovudine (GSK).
The authorisation was valid for two years from 1 November 2003, and
allowed for the importation of generic versions of these medicines from
the Indian producer Cipla. The products were for use in public sector
hospitals only. The initial GU order provided for royalty payments to the
patent holder, the level of which was to be set at a later date. The Ministry
of Health proposed a royalty rate of 4% of the generic sale price to the
patent holder, however, the patent holders have not yet claimed this
payment (Oh 2006).
With the arrival of generic ARVs after the issuing of the government
use order, pharmaceutical companies began to demonstrate a greater
willingness to decrease prices. For example, GSK reduced its price of
lamivudine/zidovudine from 3432 USD per patient/year in 2001 to
696 USD in 2004, a reduction of 80%. BMS reduced the price of
didanosine from 763 USD per patient/year in 2001 to 392 USD in
2004, a reduction of 50%.
While the patent-holders in 2004 offered significant price reductions
compared to 2001, generic producers still offered far lower prices, as shown
in Table 4.
As a result of the GU, the average treatment cost per patient fell from
about 3800 USD to 700 USD. The number of people that could be treated
nearly tripled from 1500 to 4000 (Ling 2006).
5.3.4 South Africa
In December 2003, GSK and Boeringer Ingelheim (BI) granted voluntary
licenses as part of a settlement after the South African Competition
Commission had found the companies guilty of anti-competitive practices
in the case Hazel Tau vs. GSK and BI. Technically, these were voluntary
licenses; however, it is doubtful that the companies would have agreed to
voluntary licenses without the Commission’s ruling and the prospect of
considerable fines and compulsory licenses. It is therefore more appropriate
to discuss this case in this section on non-voluntary measures.
Two years prior to the Hazel Tau settlement, GSK and BI had reached
voluntary license agreements with one South African generic company,
Aspen Pharmacare. These licenses were limited to the supply of the South
African public sector and the requested royalties were 30% of the generic
sales price for GSK and 15% for BI. These licences were highly problematic
52
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
because by only licensing one company they severely restricted
competition, and by limiting the market to the South African public sector,
they prevented economies of scale in manufacturing. In 2001, a public
sector market in South Africa for ARVs hardly existed. Export to other
nations was not permitted under the licenses. The royalties were high and
set an undesirable precedent. These licenses seemed to be aimed at carving
up the monopoly rather than introducing real competition in the market.
In September 2002, a group of eleven individuals living with AIDS,
health care workers, AIDS treatment organizations and a trade union
(Treatment Action Campaign 2003) launched a complaint against GSK and
BI at the South African Competition Commission (Tau 2002). The
complainants alleged that the companies engaged in excessive pricing of
ARVs to the detriment of consumers, as prohibited by Section 8(a) of the
Competition Act, 89 of 1998. They argued that the excessive pricing of
ARVs was directly responsible for the premature, predictable and avoidable
deaths of children and adults living with HIV/AIDS. The ARVs concerned
were: zidovudine, lamivudine, the fixed-dose combination of lamivudine/zidovudine and nevirapine.
The complainants had a well-prepared case, and offered the Competition Commission detailed information on the epidemiology of the AIDS
epidemic, medical and scientific information about ARV treatment,
detailed information on ARV prices in South Africa compared to prices
available elsewhere, and data on the costs of pharmaceutical R&D (see Table
5). National and international interested parties, including Action for
Table 5. Adult formulations per tablet/capsule in 2002
product
price sold
to private
sector
AZT
ZAR
(300mg)
USD
Lamivudine
ZAR
(150mg)
USD
intern.
best price offer
branded product
9.70
0.92
ZAR
10.67
1.02
ZAR
AZT/lamivudine
ZAR 13.33
ZAR
(300mg/150mg)
USD
1.27
USD
Nevirapine
ZAR
USD
6.00
0.57
ZAR
(200mg)
taken from Tau 2002
USD
USD
USD
WHO
pre-qualified
generic
intern.
best price offer
generic
6.30
0.60
ZAR 2.59
6.30
0.60
ZAR 1.46
USD
0.14
USD
8.93
0.85
ZAR
3.81
0.36
USD
6.30
0.60
ZAR 2.39
USD
USD
USD
0.25
0.23
ZAR 2.01
USD
0.19
ZAR 0.95
0.09
ZAR 2.93
0.28
ZAR 1.61
USD
0.15
5. PRACTICAL IMPLEMENTATION
53
South Africa, Oxfam International, MSF, the Canadian HIV/AIDS Legal
Network, Consumer Project on Technology and the Council of Medical
Schemes, provided affidavits to the Competition Commission on a series of
specific issues (Competition Commission Complaint 2003).
On 16 October 2003, the Competition Commission found that GSK
and BI had contravened the Competition Act of 1998 (South Africa
Competition Commission 2003). The firms were found to have abused
their dominant positions in their respective ARV markets.
In particular, the Commission found that the firms were guilty of the
following restrictive practices: denied a competitor access to an essential
facility, excessive pricing and engaged in an exclusionary act. The
Commission decided to refer the matter to the Competition Tribunal for
determination and requested the Tribunal to impose the following
sanctions:
• Compulsory licenses of the patented medicines to allow any
person to exploit the patents to market generic versions of GSK’s
and BI’s patented medicines or fixed-dose combinations that
require these patents, in return for the payment of a reasonable
royalty.
• A penalty of 10% of the annual turnover of GSK’s and BI’s ARVs in
South Africa for each year that they are found to have violated the Act.
This decision and the hefty sanctions that were requested from the
Tribunal brought the companies to the negotiating table, and on 10
December 2003 an agreement between the parties was reached (Treatment
Action Campaign 2003b). The South African Treatment Action Campaign
(TAC) played a key role in both the preparation of the case and the
negotiations with the companies. The settlement included the following
provisions:
• Licenses for four generic companies to produce, import, sell and
distribute zidovudine and lamivudine, and licenses to three
generic companies to produce, import, sell and distribute
nevirapine (both adult and paediatric formulations).
• Royalties were set not to exceed 5%.
• Licenses were for both public and private sector markets.
• Licenses allowed for export but limited the export to sub-Saharan
African countries.
54
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
In principle this meant that the South African government could benefit
from the best prices on the global market. TAC pointed out that as a result
of the licenses, South Africa too could now benefit from a price agreement
that the Clinton Foundation had made in October 2003 with four Indian
companies to supply triple-combination fixed-dose ARVs for 140 USD per
patient/year (TAC 2003c). In practice, however, the Indian companies could
not be part of the South African government’s tender because the licence
with GSK and BI had not been finalised at the time of the tender (with the
exception of a partial award to Cipla for d4t) (Berger, personal
communication 2007). This was a significant drawback of the voluntary
nature of the license: if the South African government had made
government use or issued a compulsory license, this delay in accessing the
lowest-priced medicines could have been avoided and competition could
have been more effective. Five years later, the original tender was still in
place. Apart from Cipla’s contract, Aspen was the only generic company
supplying the South African public sector in 2008 (Berger, personal
communication 2008).
Nevertheless, the use of competition law by groups campaigning for
access to medicines reduced the price of first-line ARVs dramatically in
South Africa. In 2007, a co-blister package of stavudine+lamivudine+
nevirapine was available in the public sector for 180 USD per patient/year.10
Problems with monopoly pricing remain in areas where competition does
not exist or companies restrict licensing to just one grantee (Avafia et al.
2006).
5.3.5 Kenya
Kenya, as a developing country WTO Member, has used parallel import
provisions in its Industrial Property Bill to allow the import of generic
drugs patented in Kenya, as long as the product is put on the market
legitimately in the exporting country. Industrial Property Bill Section 58
(2) states: ‘… the rights under the patent shall not extend to acts in respect
of articles which have been put on the market in Kenya or in any other
country or imported into Kenya.’ This provision was included in the
Kenyan Industrial Property Act in July 2001. The Kenya Coalition for
Access to Essential Medicines had been campaigning for a public health
10 Providing these drugs in a fixed-dose combination (three medicines in one pill) is medically
preferable to a co-blister (three medicines in separate pills but packaged together), because it
simplifies treatment for patients and helps prevent partial dosing. However, patent barriers
can block the use of fixed-dose combinations.
5. PRACTICAL IMPLEMENTATION
55
friendly law. In May 2002, MSF, Mission for Essential Drugs and Supplies
(MEDS), Nyumbani Orphanage and Action Aid used the provision for the
first time to import generic ARVs from India. There have been attempts in
2002, 2005, 2006, and 2007 to amend Section 58(2) to read: ‘... the rights
under the patent shall not extend to acts in respect of articles which have
been put on the market in Kenya or in any other country or imported into
Kenya by the owner of the patent or with his express consent’ (emphasis
added). Such an amendment would effectively end the current practice of
importing generics from India because such importation would be subject
to approval from the patent-holder, an unlikely event. In 2002 such an
amendment passed but was reversed by President Moi following
complaints by civil society. A curious aspect of the attempts to amend
Section 58(2) of the Act is that until today no one has been able to trace the
origin of the amendments (Leusenkamp 2007a). As of mid-2008, an official
investigation was underway to determine the origin of the recurring
proposed amendments to the Industrial Property Act (Garwood 2007).
The Kenyan generic company Cosmos produces a generic version of
zidovudine/lamivudine under a voluntary license from GSK. Cosmos is not
WHO pre-qualified and as a result, its market in Kenya is quite small
because most donor supported procurement in Kenya requires drugs whose
quality is approved by WHO or the US FDA. As a result, Cosmos supplies
primarily private health facilities (Leusenkamp 2007b). Kenya came close to
issuing compulsory licenses for ARVs in 2004 after Cosmos won a tender to
provide ARVs that were patented in Kenya; however, the companies
concerned, GSK (Leusenkamp 2007c) and BI, subsequently granted
voluntary licenses (Avafia et al. 2006, New 2007).
56
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
5.3.6 India
The idea of a better ordered world is one in which medical
discoveries will be free of patents and there will be no
profiteering from life and death.
Indira Gandhi, 1982 World Health Assembly
The case of India is of particular importance because of its longstanding role
as supplier of low-cost medicines to the developing world. The way in which
India implements its patent law is likely to affect access to medicines far
beyond its borders. It is for this reason that many anticipated with dread
India’s deadline to comply with the TRIPS Agreement on 1 January 2005. As
of this writing, India has not issued compulsory licenses or government use
orders to allow the generic production of medicines. Pharmaceutical product
patents are very recent in India, and only a handful has been granted.
However India did make use of the flexibilities provided in TRIPS and the
Doha Declaration when it amended its 1970 Patents Act to become TRIPS
compliant. For that reason the case of India is discussed in this section.
In March 2005, the Indian Parliament adopted amendments to the
1970 Patents Act to comply with TRIPS obligations. The 1970 Indian
Patents Act did not allow the patenting of pharmaceutical products. It only
provided for process patents. The law was modelled after the German
patent law. As a result India developed a pharmaceutical industry that,
through reverse engineering, could develop generic versions of new
medicines patented elsewhere without infringing any patents in India.
India could supply these products to any country in the world where the
products were not patented or where compulsory licenses had been issued.
However, from 2005 onwards, all new drugs were subject to at least 20
years of product patent protection in India. India had a preview of what
extended levels of pharmaceutical patent protection could bring when an
exclusive marketing right (EMR) for imatinib mesylate (Glivec) was granted
to Novartis. The grant of the EMR put at risk the availability of generic
versions of the drug from Indian generic manufacturers, costing
approximately 200 USD per patient/month as opposed to the Novartis
price of 2600 USD per patient/month (MSF 2006). (The Glivec case is
discussed in more detail in Section 6.2.2.)
The possible consequences of a changing patent environment in India
had not gone unnoticed by those who depended on countries such as India
for their supply of affordable newer medicines. A number of developing
countries expressed their concern to the WHO about the effects of TRIPS
5. PRACTICAL IMPLEMENTATION
57
implementation in India on their own ability to scale up AIDS treatment
(Kim 2004).
Politicians, UN officials, and international NGOs also called on Indian
policymakers to take into account India’s responsibility as a supplier of
affordable medicines (ACT-UP Cleveland et al. 2004, Gillies & LaouabdiaSellami 2005, Hobbs 2005, Loos 2004, Sadik & Lewis 2005, Dangor 2005).
A New York Times editorial called upon the Indian Parliament to ensure
that India could continue to play its role as leading supplier of low-cost
medicines and to ensure that the amended patent law protected India’s ability
to make AIDS medicines available (The New York Times Editorial Board
2005). This editorial received serious attention in India and was read out in
Parliament during the debate on the Patents Act in March 2005.
When the Indian Patents Act was amended, it included the following
key safeguard provisions:
a. High criteria for patentability:
By restricting patents on known inventions, the patentability criteria were
formulated to award significant innovation and discourage both the
‘evergreening’ of patents and frivolous claims. Section 3(d) of the Indian
Patents (Amendment) Act 2005 excluded from patentability the following:
‘(d) the mere discovery of a new form of a known substance which does
not result in the enhancement of the known efficacy of that substance
or the mere discovery of any new property or new use for a known
substance or of the mere use of a known process, machine or apparatus
unless such known process results in a new product or employs at least
one new reactant.
Explanation – For the purposes of this clause, salts, esters, polymorphs,
metabolites, pure form, particle size, isomers, mixtures of isomers,
complexes, combinations and other derivatives of known substance
shall be considered to be the same substance, unless they differ
significantly in properties with regard to efficacy.’
These requirements will likely restrict the number of patents granted.
b. Pre-grant opposition:
The Act allows any person to oppose the granting of a patent by the patent
controller and bring to the attention of the patent controller any
knowledge that should lead to the refusal of granting of the patent.
58
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
c. Protection of generic production of ‘mail-box’ patented drugs:
TRIPS allowed developing countries that did not grant pharmaceutical
product patents to delay doing so until January 2005. However,
developing countries were obliged to have provisions for receiving patent
application from the date of general application of the TRIPS Agreement (1
January 2000). This transitional provision is often referred to as the
‘mailbox’. Section 11 A(7) of the Indian law ensured that generic
production of medicines for which mail-box patent applications were
made between 1995 and 2005 could continue. The patent holder is
entitled to a reasonable royalty but cannot take action to halt the
production. This is a type of automatic non-voluntary license that does not
require case-by-case decision making. At the time of the patent law
amendment, there were over 6000 pharmaceutical-related patent
applications in the mailbox waiting for examination. For example, GSK had
applied for a patent for its combination product zidovudine/lamivudine.
This product is one of the most widely-used combination ARV drugs
supplied by Indian manufacturers. A patent on the product would have
given GSK the authority to demand the Indian manufacturers to halt
production, which likely would have increased the price and possibly
created supply problems. Section 11 A(7) averts this risk. It reads:
Provided also that after a patent is granted in respect of applications
made under sub-section (2) of section 5, the patent holder shall only be
entitled to receive reasonable royalty from such enterprises which have
made significant investment and were producing and marketing the
concerned product prior to 1.1.2005 and which continue to
manufacture the product covered by the patent on the date of grant of
the patent, and no infringement proceedings shall be instituted against
such enterprises.
d. Compulsory licensing for export:
Section 92 A(1) of the amended patent law provides that compulsory
licenses
‘… shall be available for manufacture and export of patented
pharmaceutical products to any country having insufficient or no
manufacturing capacity in the pharmaceutical sector for the concerned
product to address public health problems, provided compulsory
licence has been granted by such country or such country has, by
5. PRACTICAL IMPLEMENTATION
59
notification or otherwise, allowed importation of the patented
pharmaceutical products from India.’
The term ‘shall’ here is important because it indicates that the CL will be
granted automatically without separate scrutiny or procedural
requirements in India. This amendment also corrected an earlier provision
that required a CL to be issued in the importing country.11
In addition, Section 90 of the Patents Act as amended in 2005 allows
the export of products that are produced under a compulsory license for
domestic supply in India, to countries where an export market exists that is
not being supplied or developed.
e. Data protection
As of this writing, India was still studying how best to implement Article
39.3 of TRIPS, which requires the protection of undisclosed test data
against unfair commercial use. An inter-ministerial committee has made a
proposal that has the following features:
• The term of data exclusivity starts running from the first filing
date worldwide, and a company must file for marketing approval
within one year of this date to get the benefits of data exclusivity.
• Exclusivity is limited to ‘new chemical entities’ defined strictly, and
is not available for new indications, dosage forms, isomers, etc.
• Data exclusivity could be waived to safeguard public health
protection.
A decision on data protection was expected in 2007 but is still pending.
The amendments to the Indian Patents Act, which established the first
pharmaceutical product patent regime since 1970, took into account
India’s role as a prime supplier of essential medicines to the developing
world as well as concerns about the effects of pharmaceutical patents on
prices for Indian consumers (Government of India 2007).
5.4 Medicines importing countries
The use of flexibilities in patent law is widespread in LDCs and developing
countries, both WTO and non-WTO members. Most developing countries
11 This earlier provision in the Patents (Amendment) Ordinance (Ord. No 7 of 2004) would
have excluded LDCs that did not grant or enforce patents or countries where the relevant
patent did not exist or was not valid.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
depend heavily on medicines produced abroad, and therefore use the
flexibilities primarily for generic import rather than for production.
This study obtained information about the use of TRIPS flexibilities by
searching the Internet, particularly the listserv IP-health, which is dedicated
to sharing information about intellectual property and health related
matters. The study also obtained statements by 65 countries authorising
the procurement, import and use of generic medicines for the treatment of
AIDS between 2004 and 2008. These so-called procurement letters are
mostly issued by ministries of health and addressed to medicines suppliers
such as UNICEF or IDA. They are almost exclusively confined to medicines
related to AIDS and in some cases to ARVs only. Some of the letters contain
statements about the patent status of the particular products concerned.
Often, however, there is no reference to specific products.12
The letters and the references to the Doha Declaration therein are
aimed at providing the necessary confidence to medicines suppliers that the
import and procurement of these medicines, regardless of patent status, is
done with the authorisation of the appropriate government authorities.
In general LDCs allow the import and use of generic medicines with
reference to paragraph 7 of the Doha Declaration. This paragraph allows
LDC members of the WTO to postpone the protection and enforcement of
pharmaceutical product patents until at least 2016.
Other developing countries allow the import and use of generic
medicines with a reference to a national emergency caused by the AIDS
epidemic. This allows governments or the competent authorities to provide
compulsory licenses without approaching the patent holder to obtain a
voluntary license. The rationale behind this provision is that approaching
the patent holder would take up precious time for negotiations, which is
not available in case of an emergency or other situation of urgency. The
obligation to first approach the patent holder before issuing a compulsory
license is also waived in case the government makes use of a patent – the
government use provisions discussed earlier. The procurement letters used
by developing countries often contain references to both: government use
and national emergency.
12 Contact author for examples on file.
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5. PRACTICAL IMPLEMENTATION
Table 6. Countries that used TRIPS flexibilities
countries
CL/GU
non enforcement
no
patent
DCs
16
–
4
LDCs
2
24
–
non-WTO
7
3
4
DC = developing country members of the WTO, LDC = least -developed members of the WTO,
CL = compulsory license, GU = governement use license
5.4.1 Results
Based on the 65 documents obtained, each letter was categorized based on
which type of TRIPS/Doha flexibility was used. The overall results are
presented in Table 6.
Analysis of the cases demonstrates the following: Sixteen non-LDC
developing country Members have issued compulsory licenses or
government use authorizations for the production or import of generic
medicines for AIDS treatment.13 With the exceptions of Thailand (discussed
above) and Taiwan (which issued a compulsory license for oseltamivir in
July 2004 (Hille 2005)), the licenses were for medicines related to AIDS
treatment. Eight countries, stated they did not have patents on the AIDS
medicines they intended to import.14
Since 2001, 26 of 32 total LDC WTO members have, with reference to
the Doha/TRIPS flexibilities, allowed import of generic health products.15
Of them 24 called upon paragraph 7 of the Doha Declaration to allow the
import of generic products regardless of the patent status. Two countries
allowed import of generic products with a reference to government use
only.16
13 Brazil, Cuba, Gabon, Georgia, Ghana, Guatemala, Guyana, Honduras, Indonesia, Ivory
Coast, Malaysia, Philippines, Swaziland, Taiwan, Thailand, Zimbabwe. (2/3 of the 150
members of the WTO are developing countries).
14 Bolivia, Namibia, Nigeria, Uzbekistan, East Timor, Guinea Equatorial, Moldova, Somalia
(Puntland).
15 Angola, Benin, Burkina Faso, Burundi, Central African Republic, Cambodia, Chad,
Democratic Republic of Congo, Djibouti, Gambia, Guinea, Guinea-Bissau, Haiti, Lesotho,
Malawi, Mali, Mozambique, Myanmar, Niger, Senegal, Rwanda, Tanzania, Togo, Uganda,
Zambia.
16 Mauritania and Tanzania.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
It is interesting to note that even though neither TRIPS nor the Doha
Declaration applies to non-WTO countries, Doha nevertheless seems to
have encouraged a significant number of such countries to make use of
patent law flexibilities to allow the use of generic medicines regardless of the
patent status of the product. Eleven non-WTO members have allowed the
import of generic AIDS medicines regardless of the patent status of the
medicines in the country.17 Three suspended enforcement of patent
protection, making reference to Doha paragraph 7. Six have issued
government use licenses to allow generic entry, often with a reference to
national emergencies. Four non-WTO countries declared that they did not
have patents on the ARVs to be imported.18 While it is encouraging to see
that an increasing number of countries allow the import of generic
medicines with reference to the Doha Declaration, there is also reason for
concern. Some of the procurement letters reflect an alarming lack of
understanding by the authorities regarding their own situation with regard
to the WTO or the patent status of the products in question. For example,
two countries stated that they were WTO Members when they were not.19
Another stated that patents existed on its territory for ABC and 3TC, but not
for abacavir and lamivudine; since ABC is an abbreviation for abacavir, and
3TC for lamivudine, it would be impossible for both statements to be true.
Another potential weakness of the procurement letters is that it is not
confirmed that they indeed provide sufficient legal protection in case of an
infringement suit by the patent holder. It is also unclear whether in all cases
the letters or declarations are issued in compliance with national law.
5.5 International and multilateral donors: Procurement policies,
IP, and access to medicines
In recent years, international funding for health has increased dramatically.
New funding mechanisms, such as the Global Fund, PEPFAR and
UNITAID, have been created and are involved in the procurement of
medicines, vaccines and other essential health tools. Other donors, such as
the World Bank and the European Commission, have opened or expanded
possibilities to finance the procurement of health commodities, including
17 Belarus, Cape Verde Islands, Comoros, Eritrea, Ethiopia, Liberia, Sao Tome & Principe,
Sudan, Somalia, Tajikistan, Ukraine. Note that except for Eritrea and Somalia all these
countries are WTO observers, which means that within five years of obtaining observer status
they are obliged to start accession negotiations.
18 East-Timor, Uzbekistan, Guinea Equatorial, Somalia.
19 Eritrea and Liberia.
5. PRACTICAL IMPLEMENTATION
63
ARVs. In general, all of these funding mechanisms have rules for medicines
procurement that address the question of intellectual property. This
section examines how far these funding mechanisms encourage the use of
the Doha Declaration through their procurement policies.
5.5.1 The Global Fund to fight AIDS, TB and malaria
The Global Fund requires that their ‘recipients must procure their
products in accordance with national and international laws. The Global
Fund encourages recipients to apply the flexibilities provided within
national laws and in the World Trade Organization’s Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS) (as
interpreted in the Declaration on the TRIPS Agreement and Public Health
[the Doha Declaration]) in a manner that achieves the lowest possible price
for products of assured quality.’
In the event that a recipient does not have the requisite capacity to assess
the national and international intellectual property rights issues that apply
to the desired products in their country, it may, using funds budgeted in the
Global Fund grant, contract the necessary expertise. Few countries have
applied for financial support under this provision. In practice, many
countries procure through UNICEF and IDA and, in particular in
Sub-Saharan Africa, countries make use of Doha paragraph 7, government
use provisions or compulsory licensing through declaration to their
suppliers.
5.5.2 The World Bank
The World Bank has expressed concern about the consequences of an
increasingly global IP regime and predicted that developing countries will
be the net losers, since IP is largely owned by entities in developed
countries. In 1999, the Bank estimated a deficit for developing countries of
7.5 billion USD in royalties and licensing fees across all fields of technology
(Commission on Intellectual Property Rights 2002:21).
In light of this finding, it is perhaps less surprising that the World Bank
addresses head-on the question of whether a recipient under the
Multi-country HIV/AIDS Program (MAP) can use the received funds to
purchase generic ARVs from India. In its procurement guide, ‘Battling
HIV/AIDS’, the Bank provides clear and detailed policy advice (Tayler 2004).
The World Bank policy is that MAP recipient countries may use those
funds to procure ARVs in any circumstances that are legal. The guide gives
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
detailed information to countries about what action to take should a patent
form a barrier to the procurement of lower-cost generic medicines. It
recommends that developing countries use parallel importation,
compulsory licensing or government use provisions, and that LDCs not
enforce patents on pharmaceutical products nor any obligation under data
protection rules (Tayler 2004:17). The guide provides decision-making
charts and checklists for use by local authorities. It also encourages allowing
decisions related to patents and procurement to be made by the
procurement authority on behalf of the government (rather than, for
example, by the Minister of Trade or the President, as is the case in some
countries).
5.5.3 UNITAID
UNITAID is a relatively new financing mechanism set up in 2006 as a way of
securing sustainable financing through a tax on airline tickets. UNITAID
focuses on financing of medicines for AIDS, TB and malaria with a special
focus on second-line ARV drugs and drugs to treat multi-drug resistant
diseases. UNITAID also plans to play a role in the development of new
medicines, for example, paediatric formulations for AIDS drugs or
fixed-dose combinations where they do not exist. In July 2008, the
UNITAID board decided in principle to establish an international patent
pool to deal with both access and innovation issues related to the patents of
new WHO-recommended first-line ARV drugs, including the development
of products for paediatric use (UNITAID 2008). In general, UNITAID has
pledged to pursue innovative ways to obtain its objectives and is one of the
few donors that has taken a clear position on the implementation of the
Doha Declaration in its constitution.
In relation to intellectual property, the UNITAID constitution states:
To fulfill its mission, UNITAID will use sustainable, predictable and
additional funding to help generate a steady demand for drugs and
diagnostics, thereby significantly impacting market dynamics to reduce
prices and increase availability and supply. UNITAID will base its price
reduction strategy on market competition. Where intellectual property
barriers hamper competition and price reductions, it will support the
use by countries of compulsory licensing or other flexibilities under the
framework of the Doha declaration on the Trade-Related Aspects on
Intellectual Property Rights (TRIPS) Agreement and Public Health,
when applicable.
5. PRACTICAL IMPLEMENTATION
65
5.5.4 The US President’s Emergency Plan for AIDS Relief (PEPFAR)
PEPFAR was established by law in 2003 (Public Law 108-25, May 27 2003).
When PEPFAR became operational in 2004 it required its recipients to
purchase according to the standards of the United States Agency for
International Development (USAID), which meant that USAID-financed
medicines had to be produced in and shipped from the United States.
PEPFAR also instructed its field officers not to allow the purchase of generic
ARVs, stressed the need for medicines to meet the standards of the US FDA
and stated that WHO Prequalification did not constitute approval by a
stringent regulatory authority for procurement. The US General
Accounting Office (GAO) identified this policy as a constraint on PEPFAR’s
ability to support country treatment programmes, such as those that had
purchased generic FDCs to boost adherence (2004).
In 2004, the US implemented its own drug assessment procedures at the
FDA for medicines for use in PEPFAR programmes. As a result, medicines
that are not registered in the US because of patent protection could receive
FDA approval and subsequently be made available in the 14 PEPFAR
recipient countries. As of end 2007, 57 generic ARV formulations have been
approved by the US FDA. Today PEPFAR recipients may purchase generic
ARVs. However PEPFAR does not give support for the implementation of
the Doha Declaration. In the US, however, the FDA approvals have had the
side benefit of expediting the availability of 7 generic ARVs in the US market
when they came off patent (PEPFAR 2008).
5.6 Summary
Experience with the implementation and use of the Doha Declaration to
increase access to medicines paints a mixed picture. On the one hand, there
are the LDCs in sub-Saharan Africa that refer to the Doha Declaration to
justify the non-enforcement of patents. This practice has led to the
widespread availability of generic ARV drugs, particularly first-line
fixed-dose combinations. Rich countries hardly ever challenge the practice
in LDCs, even if the mechanisms used to disregard patents may raise issues
of proper procedure. So far the use of Doha flexibilities in Africa has not
gone beyond medication used in AIDS treatment. At this point in time it is
hard to predict whether procurement authorities will use the mechanism
for the purchase of other medicines.
The situation for middle-income countries is quite different. Middleincome developing countries that have made use of the Doha Declaration
66
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Figure 3. Global pharmaceutical sales by region, 2006 (607.9 USDBN)
A sia, A frica and A ustralia
52.0
8,6%
Japan
56.7
9,3%
Latin A merica
27.5
4,5%
No rth A merica
289.9
47,7%
Euro pe
181.8
29,9%
and flexibilities in national patent law have come under tremendous
pressure regardless of whether the correct procedures were followed or not.
The contrast in responses by wealthy countries reflects the following
pattern: the LDCs in Africa are left alone when they take measures to set
patents aside, while the middle-income developing countries in Asia and
Latin America face huge trade disputes if they take the same measures.
The explanation of this policy incoherence most likely lies in the
difference in share of the pharmaceutical market these regions represent.
In 2006 global pharmaceutical sales were valued at 643 billion USD,
almost double 1999 levels (IMS 2007a). Of the global market, 86.9% is in
North America, Europe and Japan. While Asia and Latin America
comprise a much smaller share, they are currently significant growth
markets for a pharmaceutical industry that is seeing its sales stagnate in
high-income countries. The fastest growing markets are in Latin America
where sales were up 12 %, while Africa, Asia and Australia had a combined
growth rate of 9.8% (driven largely by Asia) compared to 8% growth in
North America, 4.8% in Europe and a decrease in sales in Japan of 0.7%
(IMS 2007b). These trends help explain why the pharmaceutical industry
has responded so strongly to recent actions by Thailand and Brazil to bring
drug prices down.
While these emerging economies today represent only around 5% of
the global pharmaceutical market, it is predicted that opportunities to
increase sales in these markets will grow exponentially. The GDP of the
so-called E7 emerging economies (China, India, Russia, Brazil, Mexico,
Indonesia, Turkey) is expected to triple by 2020, compared to only a 40%
increase in the G7 countries (PriceWaterhouseCoopers 2007). It is expected
5. PRACTICAL IMPLEMENTATION
67
that diseases formerly associated with industrialized countries will increase
in these emerging economies. For example, in 2004, 639 million people
with hypertension lived in the developing world, and by 2025 this number
is expected to grow to 1 billion (Kearney et al. 2005).
Another reason that may explain the different responses is that in Asia
compulsory licenses are issued outside the scope of AIDS treatment.
Thailand, for example, has issued CLs for a heart disease medication
(clopidogrel) and cancer treatments, products that account for large sales.
For example, clopidogrel, a blood thinner used in the treatment and
prevention of heart disease, is the fourth-best selling drug in the world,
accounting for 5.8 billion USD in global sales in 2006 (IMS 2007c).
However, middle-income developing countries are important not only
for the size of their markets but also because they have the production
capacity to supply generic medicines in the developing world. It is
imperative for global access to medicines that these countries take measures
to protect the viability of their industries. If the sources of generic
production cease to exist, the African continent will find itself soon
without a supplier to whom to issue procurement letters. In other words,
the effectiveness of the Doha Declaration in sub-Saharan Africa largely
depends on the success of the application of that same declaration in
middle-income countries. The de facto position of rich countries that the
use of the Doha Declaration should only be condoned in the poorest
countries, where manufacturing capacity is extremely limited, may over
time have disastrous consequences for access to medicines.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
6. ATTEMPTS TO LIMIT THE SCOPE AND USE OF THE DOHA DECLARATION
69
6. ATTEMPTS TO LIMIT THE SCOPE AND USE OF THE DOHA
DECLARATION
6. Attempts to limit the scope and use of the
Doha Declaration.
Though still on a limited scale, developing countries have begun to use the
Doha Declaration to access affordable medicines and to develop more
public health-friendly patent laws. It is therefore of serious concern that
Western industrialized countries continue to attempt to limit the scope
and use of the Doha Declaration in the pursuit of stricter IP requirements.
The pursuit of stricter levels of pharmaceutical IP protection than
required by the TRIPS Agreement or the Doha Declaration comes in
different shapes and forms. It is carried out in trade agreements, in
particular with the US, and in accession agreements to the WTO. It is
pursued through legal action by pharmaceutical companies challenging the
implementation of flexibilities in national patent legislation, such as
Novartis’s legal challenge of the Indian Patents Act section 3(d) in 2007,
and through political pressure on countries that want to make use of the
TRIPS flexibilities, as was the case recently in Thailand.
The attempts to limit the scope of diseases covered by the Doha
Declaration and the grounds on which the TRIPS flexibilities could be
invoked have existed since the negotiations on TRIPS and public health
started at the WTO in 1999. Despite the clarity of the 2001 Doha
Declaration on this issue, debates on the scope of the declaration continue
to flare up (MSF 2003). This situation is helped along by a constant stream
of misinformation in the media about the grounds and conditions for
compulsory licensing and other TRIPS flexibilities by the proponents of
strong IP protection and ill-informed editors. (See for example Cass 2007,
The Economist 2007.)
Today bilateral trade agreements, in particular with the US, form the
most serious threat to the scope and effectiveness of the Doha Declaration,
as discussed in the following section.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Demonstrations against TRIPS-plus during the US-Thai FTA negotiations Jan 9-13 2006.
Photographer: FTA Watch
6.1 US objectives for IP in bilateral and regional trade agreements
After having been forced to compromise in multilateral negotiations, the
US has stepped up its efforts to tighten IP standards through bilateral and
regional trade agreements. These agreements have, until fairly recently,
attracted little attention. They are highly technical and negotiated in secret,
without draft texts being available for public scrutiny (Rangel et al. 2007).
Another huge problem is that the trade ministers, but not the health
ministers, are at the negotiating table. Often health authorities find out
only after the fact that a trade agreement has consequences for health and
pharmaceutical policies.
The United States is seeking to secure, or has secured, the inclusion of
several intellectual property provisions in its regional and bilateral trade
agreements that are particularly detrimental to the objective of achieving
access to medicines for all. Some of the TRIPS-plus provisions found in FTAs
are also included in the accession agreements of new members of the WTO.
The following TRIPS-plus features of trade agreements with the US can
delay the introduction of generic medicines:
6. ATTEMPTS TO LIMIT THE SCOPE AND USE OF THE DOHA DECLARATION
71
• Patent linkage: Prohibits granting of marketing approval by drug
regulatory authorities during the patent term without the consent
of the patent holder. These provisions effectively create a new
function for health authorities in the enforcement of patents on
medicines;
• Data exclusivity: Prohibits for a certain period of time the use of
pharmaceutical test data for drug regulatory purposes, which will
delay the registration and thereby the marketing of generic
medicines regardless of the patent status of the product;
• Extension of the patent term for pharmaceuticals beyond the 20
years required by the TRIPS Agreement, which will further delay
generic competition;
• Extension of the scope of patent protection to allow known
substances to be patented for each ‘new use’;
• Restrictions on the grounds for compulsory licensing
• Prohibitions of parallel importation (in some cases)
Some or all of these provisions appear in concluded agreements such as the
Central American Free Trade Agreement (CAFTA),1 the US-Singapore Free
Trade Agreement, the US-Chile Free Trade Agreement, the US-Morocco
Free Trade Agreement, US-Peru Trade Promotion Agreement and other
agreements that have already been signed.2 The TRIPS-plus provisions
reappear or are likely to reappear in trade agreements being negotiated with
Thailand, Panama, the Andean countries (Bolivia, Colombia, Ecuador)
and the countries of the Southern African Customs Union (SACU), and
have also appeared in accession agreements with new WTO Members, for
example, China and Cambodia (WTO 2008).3
The proliferation of TRIPS-plus rules through FTAs poses a very serious
threat to the effective use of the patent law safeguards. It also launches the
process of globalising new IP norms and standards, which the US would not
be able to obtain in multilateral negotiations. (See also Bannenberg 2005).
1 CAFTA originally included Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua,
but the Dominican Republic agreed in March 2004 to sign on to CAFTA as well.
2 NAFTA (US, Canada, Mexico) as well as several bilateral investment agreements with the US.
3 ACU includes Botswana, Lesotho, Namibia, South Africa and Swaziland.
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Jordan provides some insight into the effects of TRIPS-plus provisions
on access to medicines, since it acceded to the WTO in 2000 and the
US-Jordan FTA has been in place since December 2001.
Jordan became a member of the WTO on 11 April 2000 (WTO 2000).
Jordan did not grant pharmaceutical product patents before it became a
WTO member. The accession agreement with the WTO contains a number
of TRIPS-plus provisions not dissimilar to those seen in US FTAs. These
provisions include, for example, five years of data exclusivity, patent
linkage, limits to parallel importation and the introduction of
pharmaceutical product patents before the expiration of the transition
period allowed in TRIPS. The US-Jordan FTA’s TRIPS-plus provisions
include:
• Patent linkage. The drug regulatory agency is required to notify
the patent holder when a generic producer applies for marketing
authorisation. which may hamper the drug regulatory authority to
assess an application during the time of the patent term.
• An additional three years of data exclusivity (beyond five years) for
new uses of already known chemical entities.
• Compulsory licensing permitted only to remedy an anti-competitive
practice, in case of public non-commercial use, or in the case of
national emergency or other situations of extreme urgency.
• Patent extension for unreasonable curtailment of patent term as a
result of a delay in the marketing approval process.
• Best efforts to accede to or ratify the Patent Cooperation Treaty.
In 2007, Oxfam published an analysis of the effects of the TRIPS-plus rules
that had been in place in Jordan since 2001. Oxfam analysed the effects of
data exclusivity on 108 new drugs multinational companies had put on the
market in Jordan since 2001. Out of the 108 products, 81 (79%) had no
generic equivalent because of data exclusivity. The availability of generic
equivalents would have made it possible to reduce expenditures on
medicines by an estimated 6.3-22.05 million USD.
6.1.1. Push back in the US
Recently there has been some push back from the US Congress to the Bush
Administration’s TRIPS-plus agenda. In May 2007, Congress and the
White House reached an agreement on loosening some of the TRIPS-plus
6. ATTEMPTS TO LIMIT THE SCOPE AND USE OF THE DOHA DECLARATION
73
provisions in FTAs. The agreement contains the following requirements,
which are conditions for Congressional approval of FTAs (USTR 2007):
Clarification that the period of protection for test data for pharmaceuticals in developing country FTA partners will, in some circumstances, not extend beyond the period that such protection is available
for the same product in the United States, coupled with a provision that
will encourage our partners to process marketing approval applications
for innovative drugs in a timely manner.
A more flexible approach, for developing country partners, to restoring
patent terms to compensate for processing delays. This flexibility is
accompanied by new provisions, stipulating that trading partners will
make best efforts to process patent and marketing approval applications
expeditiously.
More flexibility in terms of the types of procedures and remedies that
developing country partners may implement to prevent the marketing
of patent-infringing pharmaceutical products.
Clarification that FTA partners may implement exceptions to the rules
for protecting test data if necessary to protect public health.
Integration within the intellectual property chapter of a recognition
that nothing in the chapter affects the ability of US FTA partners to take
necessary measures to protect public health by promoting access to
medicines for all, and a statement affirming mutual commitment to the
2001 Doha Declaration on the TRIPS Agreement and Public Health.
This agreement took the sharpest edges off of the US FTAs and was
cautiously welcomed by groups that had campaigned against TRIPS-plus
provisions. However, the changes did not go far enough. Knowledge
Ecology International commented, ‘In general, the changes are welcome, as
a partial but still incomplete step toward honouring the 2001 Doha
Declaration (2007).’
Nevertheless, it is good news that in the US a non-domestic access to
medicines issue received strong enough attention from members of
Congress to force the White House to change course.
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6.2. Other TRIPS-plus developments
6.2.1 European Commission
While the focus with regard to TRIPS-plus provisions has been on the US
free trade agreements, the current policies of the European Trade
Commissioner also merit attention. The European Union has a long
tradition of TRIPS-plus requirements in accession agreements with new EU
Member States. Following complaints by the European Federation of
Pharmaceutical Manufacturers (EFPIA), the European Commission has
had regular contact with Turkey to pressure it to adopt and implement
EU-style data exclusivity.
The EU-Turkey Customs Union Agreement requires the prior
marketing of the original/reference product in Turkey before a generic
application can be lawfully filed. The European Commission reported in
July 2007 on Cases under the Trade Barrier Regulation (2007):
The issue of the respect of the regulatory conditions and requirements
applicable to the processing and approval of generics applications, and
the recent approval by the Turkish Ministry of Health of a generic
product in violation of Turkey’s commitments under the EC acquis,
were raised on multiple occasions by the Commission services. The
Commission continues to monitor developments and has urged Turkey
to fully comply with the relevant EC acquis on the matter.
The Commission has shared the pharmaceutical industry’s concern
about ‘the long-standing issue of unlawfully filed generics applications’
with the Turkish health authorities. Though the regulation of drug safety
and efficacy is a matter of health law, not trade law, the Commission is
interfering with Turkey’s domestic health regulation when it demands the
implementation of EU-style data exclusivity under the aegis of TRIPS
(Article 39.3). This is a clear example of a TRIPS-plus policy.
In South Korea, the Commission is monitoring the government’s
pharmaceutical regulatory practices and pricing and reimbursement
policies, despite the fact that the Commission could not identify any
violation of WTO rules (European Commission 2007:35). In 2002, the
Commission had pressured Korea into abandoning its drug pricing policy,
which had been based on the lowest price found on the market (European
Commission 2007:36). The Commission had also pushed for a range of
6. ATTEMPTS TO LIMIT THE SCOPE AND USE OF THE DOHA DECLARATION
75
TRIPS-plus measures that would undermine the government’s efforts to
control pharmaceutical costs.
Again, the South Korean example demonstrates that the European
Commission’s bilateral trade policies are driven by concerns for the
European brand-name pharmaceutical industry’s market access rather than
by concerns for access to medicines for all. Under the guise of dealing with
trade barriers, policies that support generic use and cost containment have
come under pressure from the Commission.
The European Union has formally adopted a policy in support of the
Doha Declaration and has committed not to pursue pharmaceuticalrelated TRIPS-plus provisions in ‘poor developing countries’, though it has
not clarified which countries it means by this term (Antunes 2007). But in
reality, the European Commission has not refrained from TRIPS-plus
demands that affect the pharmaceutical field in its bilateral and regional
trade negotiations.
In the European Partnership Agreements (EPAs) with the African,
Caribbean and Pacific (ACP) countries, the EU seeks to impose new
obligations on developing countries in the area of intellectual property
rights. In their report to the European Parliament, IP experts Abbott and
Reichman list the following TRIPS-plus demands that may have a negative
effect on access to medicines (2007):
• Adherence to or acceptance of the obligations of the Patent
Cooperation Treaty (PCT) and the Patent Law Treaty (PLT),
which will lead to more extensive pharmaceutical patenting in
ACP countries;
• Duty to implement the terms of its Intellectual Property
Enforcement Directive, the provisions of which may have a strong
chilling effect on generic medicines suppliers, who may be
threatened with seizure of products and costly legal procedures
even before infringement is established.
The authors warn that:
A developing country that enters into an FTA with the United States
and an EPA with the EU along the lines of those presently proposed will
be constrained to provide a very strong market dominant position for
pharmaceutical originator companies, and thus to create substantial
obstacles to the introduction of generic products.
They recommend that the EU should refrain from imposing any new
intellectual property obligations on APC countries that could affect their
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public health programs and that the European Parliament should
encourage the EU expressly to endorse full implementation in APC
countries of the flexibilities in the TRIPS Agreement, as recognized in the
Doha Declaration, in order ‘to promote access to medicines for all’ (Abbott
& Reichman 2007:38).
The European Union’s stated support for the Doha Declaration creates a
responsibility for the EU and its institutions to ensure that full implementation
of the Declaration is indeed possible. Being silent about the relentless US
pursuit of TRIPS-plus measures makes the Commission complicit. There is no
denying that the European drug industry benefits from the TRIPS-plus
provisions in US bilateral FTAs; once implemented, these provisions will
benefit pharmaceutical companies without regard for nationality.
If the EU indeed wants to support the implementation of the Doha
Declaration it should be compelled to intervene proactively in the US
pursuit of TRIPS-plus, refrain from TRIPS-plus demands in relations with
other countries, and adopt measures that encourage the use of the
Doha/TRIPS safeguards. Such support could include, for example,
technical and legal assistance and explicit political support. Such political
support was missing in the case of Thailand when the head of IP at DG
Trade characterized the Thai CL as violating the spirit of the Doha
Declaration (see Section 5.3.2).
6.2.2 A legal challenge of TRIPS flexibilities: Novartis and the Indian Patents
Act.
In February 2006, the Indian patent controller granted the first
pharmaceutical product patent under the new legislation to Roche India
Pvt Ltd, the Indian arm of Swiss drug maker F Hoffmann La Roche, for its
biotech drug Peginterferon alpha-2a (Pegasys) (The Financial Express 2006).
In January 2006, it had rejected the patent application by Novartis for
imatinib mesylate (Glivec) on the basis that it was a new form of a known
substance and therefore was not patentable under Section 3(d) of the
Indian patent law. The Novartis patent application had been opposed by
Natco Pharma Ltd., an Indian drug firm that produced a generic version of
the product, and by the Cancer Patients Aid Association (CPAA).
Imatinib mesylate is a drug used in the treatment of chronic myeloid
leukaemia (CML), a specific type of cancer of the blood. Novartis had
applied for an earlier patent on imatinib in 1993 in countries where this
was possible. However, because India did not have a product patent system
6. ATTEMPTS TO LIMIT THE SCOPE AND USE OF THE DOHA DECLARATION
77
People living with AIDS in India calling on Novartis to drop the case against section 3(d) of
the Indian Patents Act. ( 29 January 2007)
Photographer: Sheila Shettle
at that time, Novartis could not apply for this patent in India. Nor was it
possible to make a mailbox application because the mailbox system was not
established until 1995, according to WTO requirements.
In 1998, Novartis did submit a mailbox patent application for the new
form of imatinib mesylate and received an exclusive marketing right (EMR)
for the product in 2003. As a result of the EMR, generic production of
imatinib mesylate had to stop. At that time Novartis’s international price
for one year of treatment with imatinib mesylate was 27,000 USD. The
Indian generic companies were selling the product for 2,700 USD per
patient/year (Datta 2004). In January 2005, the Chennai High Court
ordered Novartis to make the drug available to all patients suffering from
CML with an income below 336,000 rupees (7700 USD) per month; the
decision came after Novartis had stopped its donation programme in India,
which had been conditional on the absence of generic production
(Newindpress.com 2003; The Hindu Businessline 2005).
The decision to reject the imatinib mesylate application demonstrated
the new Indian Patents Act at work: the rejection was based on the
patentability criteria laid down in Section 3(d) of the Act, and third parties
had the opportunity to make a pre-grant opposition through which they
could bring evidence for rejection to the attention of the patent controller.
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Following the amended 2005 Patents Act, generic companies and
patient groups had filed many pre-grant oppositions. The key grounds for
rejection of many of these oppositions were based on non-compliance with
the patentability criteria of Section 3(d). For example, in March 2006 the
Indian Network for People Living with HIV/AIDS (INP+) filed an
opposition to GSK’s patent application for a fixed-dose combination of
zidovudine and lamivudine. INP+ based its opposition on Section 3(d) of
the patent law, arguing that the patent claim in question was not for a new
invention but rather for the combination of two existing drugs. Soon after
its application was opposed in India, GSK announced the withdrawal of all
its patents and patent applications for the fixed-dose combination of
zidovudine and lamivudine (Tanglertpaibul 2006).
Following the 2006 rejection, Novartis legally challenged both the
decision to deny a patent for imatinib mesylate and the legality of Section
3(d) of the Indian Patents Act. Novartis argued that Section 3(d) violated
India’s Constitution and the TRIPS Agreement. Novartis’ action aroused
very strong international criticism, reminiscent of the 2001 South African
court case. NGOs organised global petitions calling upon Novartis to drop
the case. Numerous politicians and personalities joined this call (MSF
2007a). The Novartis challenge was seen as a direct assault on the TRIPS
flexibilities, an attack that was deeply troubling in a country that had
become known as the pharmacy of the developing world.
On 6 August 2007, the Madras High Court ruled against Novartis and
rejected all its claims. On the question of TRIPS compatibility, the court
declared itself not competent and deferred to the Dispute Settlement Body
set up for WTO Members to resolve trade disputes. Whether a country will
indeed challenge the Indian Patents Act at the WTO is not known at this
point, but no complaint has come to light as of this writing. Furthermore,
Novartis announced that it would not appeal the Madras High Court’s
decision and declared the case a matter for the WTO (Jack 2007).
In practice, this means that Section 3(d) of the Indian Patents Act
remains in force and that the patent offices will continue to use the
standards contained therein to assess patent applications and rule on
pre-grant opposition cases.
Nevertheless, this case demonstrates that the space countries have to
implement pro-health patent law is not easily ceded by IP-holding
industries. Furthermore, the pursuit of extended levels of IP protection
takes place not only through multilateral and bilateral governmental
negotiations, but also through direct challenges in domestic courts.
7. RATIONALE FOR THE PHARMACEUTICAL PATENT SYSTEM
79
7. RATIONALE FOR THE PHARMACEUTICAL PATENT SYSTEM
7. Rationale for the pharmaceutical patent
system
We have no model which would meet the need for new drugs in
a sustainable way …. You can’t expect for-profit organisations to
do this in a large scale. If you want to establish a system where
companies systematically invest in this kind of area you need a
different system.
Daniel Vasella, CEO Novartis in The Financial Times 2006
The rationale for the patent system is based on the assumption that
granting temporary monopolies to the inventor encourages innovation by
allowing the inventor to recoup R&D costs. The downside is that it comes
at a cost to society. A patent gives the patentee the right ‘to prevent third
parties not having the owner’s consent from the acts of: making, using,
offering for sale, selling, or importing for these purposes that product’
(TRIPS Article 28). This has a number of consequences. First, prices of
single source (monopoly) products are, in general, higher than they would
be if there was free competition. Second, patent monopolies limit what
others can do with the subject matter and may hamper follow-on
innovation, such as the development of fixed-dose combinations or other
dosage forms of medicines.
The pharmaceutical industry argues that without patents there would
be no innovation at all. The International Federation of Pharmaceutical
Manufacturers & Associations (IFPMA) claims: ‘Without patent
protection, the world would have been deprived of the innovative
medicines which have saved countless lives (2008).’ History does not
support such broad sweeping claims. One of the most important
innovations of the last century was the polio vaccine. When Jonas Salk was
asked who would own the patent, he replied: ‘Who owns my polio vaccine?
The people! Could you patent the sun?’ (as quoted in Smith 1990). He
considered his invention a public good.
More recently established not-for-profit drug development initiatives
take a very similar view. For example, the Drugs for Neglected Diseases
Initiative (DNDi) patent policy states: ‘DNDi regards drug research as a
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public good that should primarily lead to the advancement of health.’ Its
first product brought to the market, in collaboration with pharmaceutical
company Sanofi-Aventis, is a fixed-dose combination anti-malaria
medicine. The drug, artesunate/amodiaquine (ASAQ), was not patented,
but rather, was marketed as a generic product from the first day. This
accomplishment garnered numerous positive responses from politicians.1,2
Pharmaceutical innovation also depends on heavy investment by the
public sector. In 2005 public funding for health R&D by high-income
countries was 64 billion USD. In 2005, the US government alone spent 35
billion USD on health R&D (Burke & Matlin 2008). In the US the public
sector was involved in the development of 70% of the medicines with
therapeutic gain (UNDP 1999). Especially since the adoption of the
Bayh-Dole Act in 1980 in the US, the pharmaceutical industry has greatly
benefited from these investments and subsequent inventions developed in
academia or the public sector (Angell 2004).
7.1 Patents and innovation – where is the evidence?
There have always been fierce debates between the proponents of the
patent system and its critics. However if one looks beyond the rhetoric, the
broader question remains: how strong is the evidence that patent
protection in the pharmaceutical field leads to innovation that creates
health benefits? This question is particularly pertinent now that patent
standards have been globalised and the societal costs of the system are felt
everywhere, with especially harsh consequences for the developing world.
1 The vice president of the European Parliament wrote: ‘therefore would like to offer my
deepest congratulations to DNDi and Sanofi/Aventis, as you finally give us the tangible
evidence that patents can be skipped in the interest of public health, especially for poor people
with no purchasing power. As you know, this is a concern that all human rights organizations
and the civil society worldwide have voiced for years, claiming the fundamental people right
of access to essential health tools. This battle is still on, and we are still working on it. I
also consider the innovative partnership between DNDi and Sanofi/Aventis a concrete answer
to the Novartis case in India, in which I’m personally engaged in favour of the lawfulness of
the generic version of ‘Gleevec’ distribution. Thanks to ASAQ solution, it will be more
difficult now for the big pharmaceutical companies to defend the thesis according to which it
is not possible to make progress in pharmaceutical innovation, without the patent profit
mechanism’ (Morgantini 2007).
2 The German minister of development cooperation Heidemarie Wieczorek-Zeul wrote:‘I am
particularly pleased of course that the new drug will be available without any patents for all
suppliers and patients i.e. as a public good. By taking this route, all those involved are making
an important statement about affordable medical care for the people in the developing
countries and I would like to thank you most sincerely for that!’ (2007).
7. RATIONALE FOR THE PHARMACEUTICAL PATENT SYSTEM
81
A 2006 report by the US Government Accountability Office (GAO)
analysed pharmaceutical drug development and the recent decline in the
number of new drug applications (NDA) submitted to the US FDA. While
pharmaceutical R&D expenses had increased by 147% since 1993 from 16
to 39 billion USD, NDAs had increased by only 38%. Applications for
approval of ‘new molecular entity’ (NME) drugs, or drugs that differed
significantly from others already on the market, had risen only 7%. Overall
the number of applications had declined since 1999. According to the
report, the majority of newly developed medicines were so-called ‘me-too’
drugs, which are substantially similar to existing drugs, are less risky than
NME drugs to develop, and ‘offer little in the way of therapeutic breakthroughs’ (GAO 2006).
The report concluded that ‘current patent law discouraged drug
companies from developing new drugs by allowing them to make excessive
profits through minor changes to existing pharmaceuticals’.3
Studies carried out in other parts of the world found similar results. A
review of new medicines published in April 2005 by La Revue Prescrire,
concluded that 68% of the 3,096 new products approved in France
between 1981 and 2004 offered ‘nothing new’ over previously available
medicines (Prescrire International 2005). The British Medical Journal
published a study rating barely 5% of all newly-patented drugs in Canada
as ‘breakthroughs’ (Barer 2005). And a breakdown of over one thousand
new drugs approved by the US FDA between 1989 and 2000 revealed that
over three quarters had no therapeutic benefit over existing products
(National Institute for Healthcare Management Foundation 2002). Drugs
classified as ‘me-too drugs’, or as having no added therapeutic benefit, were
the most important driver of increased retail spending on prescription
drugs and accounted for 67% of the increase associated with new drugs,
and 44% of the total increase in spending on new drugs between 1995 and
2000. These studies provide a telling illustration of a system that rewards
innovation, regardless of whether it also represents a therapeutic advance.
The GAO convened a panel of experts to look into the reasons for the
decline in innovation. The panel identified the following reasons:
3 US Senator Richard Durbin commented: ‘The findings in this new GAO report raise serious
questions about the pharmaceutical industry claims that there is a connection between new
drug development and the soaring price of drugs already on the market. Most troubling is the
notion that pharmaceutical industry profits are coming at the expense of consumers in the
form of higher prices and fewer new drugs’ (as quoted in Lee 2006).
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• Difficulties in translating basic research discoveries into new
medicines.
• A business environment that favoured the development of costly
blockbuster drugs – at the expense of the development of
innovative but less profitable products – and “me-too” products,
which are less risky to develop but offer little additional health
benefits.
• The abandonment of drug development efforts because of
mergers in the sector.
• Regulatory uncertainty over what the FDA would accept as safe
and effective.
• Patent law that allowed manufacturers to obtain patents for minor
changes to products or new indications, reducing the incentive to
develop new medicines.
The GAO lists suggestions to remedy the last problem, such as additional
financial incentives and a change in patent law that would allow variable
patent terms depending on the usefulness of the innovation. For example,
one could shorten the patent terms for ‘me-too’ products to ten years.
In addition, the investment sector has voiced concerns about the
pharmaceutical industry’s declining ability to innovate despite dramatically
increased spending on R&D. Data from the US Security and Exchange
Commission showed that research expenditure by the pharmaceutical
industry on average is 13 % (20% -6%) of revenue, while expenditure for
marketing and administration accounts for 32% (46% - 16%) of revenue.
Graham Dukes points out that accurate estimates of research spending are
difficult to ascertain, as it is common practice in the industry to count
marketing research and distribution of samples as R&D expenditure (2006).
A recent report by PricewaterhouseCoopers recommends fundamental
changes in the way the industry functions (2007). In 2006 in North
America, the pharmaceutical industry spent 55.2 billion USD on R&D (3/4
global spending) while the FDA only approved 22 NMEs. The report
identified a number of barriers to innovation including the fact that
priority setting is dictated by the need to answer to the shareholders. This
leads to risk-averse behaviour and conservatism in R&D. Companies prefer
to invest in line extensions and me-too products, rather than riskier but
more innovative pharmaceutical research. The current international patent
system exacerbates this development because the rewards are the same for a
7. RATIONALE FOR THE PHARMACEUTICAL PATENT SYSTEM
83
me-too drug as for a real therapeutic breakthrough. The report suggests
altering the patent system to have more varied awards that allow for the
recognition of the therapeutic and/or preventive value of the products.
7.2 Patents and drug development for ‘neglected’ and ‘most
neglected’ (WHO Type II and III) diseases
The crisis in pharmaceutical R&D disproportionately affects developing
countries. In the last three decades there has been no progress in innovation
for the so-called ‘neglected diseases’.4 Between 1975 and 2004, of the 1,556
new chemical entities marketed globally, only 20 new drugs - a mere 1.3%
- were for tropical diseases and tuberculosis. Yet these diseases account for
12% of the total disease burden. This one percent ratio has been steady
over the last three decades, despite the expansion of pharmaceutical patent
protection in the developing world. Thus, the notion that the lack of patent
protection has caused the lack of innovation in tropical medicines is a very
weak argument that is not supported by the evidence.
In 1999, Pécoul et al. questioned whether R&D for tropical diseases
would indeed become a reality as a result of the implementation of TRIPS in
developing countries, as drug companies were arguing at the time. Since
1999, a number of studies have looked into this question. In 2001, MSF
published the results of a survey of the top pharmaceutical companies in
Europe, Japan and the US regarding their R&D activities in the field of
infectious and parasitic diseases (MSF and Drugs for Neglected Diseases
Working Group 2001). Eleven companies responded to the survey, each
representing an R&D budget of 500 million to over 1 billion USD per year.
Out of the eleven respondents, eight had spent nothing at all over the
previous fiscal year on the most neglected diseases (sleeping sickness,
leishmaniasis, Chagas disease), one company did not give information.
4 The CIPIH used the following classification of diseases: Type I diseases are incident in both rich
and poor countries, with large numbers of vulnerable populations in each. Many medicines
and vaccines are developed for these diseases, but are often not available to people in
developing countries because of cost. Type II diseases are incident in both rich and poor
countries, but with a substantial proportion of the cases in the poor countries. HIV/AIDS and
tuberculosis are examples: both diseases are present in both rich and poor countries, but more
than 90 percent of cases are in the poor countries. As a result, the market may not be attractive
enough to attract R&D investment for the development of new products. Type II diseases are
often called ‘neglected diseases’. Type III diseases are those that are overwhelmingly or
exclusively incident in the developing countries, such as African sleeping sickness
(trypanosomiasis) and African river blindness (onchocerciasis). Such diseases receive
extremely little R&D, and essentially no commercially based R&D in the rich countries. Type
III diseases are often called the ‘most neglected diseases’.
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Two companies reported spending on malaria and 5 companies reported
spending on TB. Seven companies reported spending less than 1% on any
of the five diseases or failed to respond. Overall this provided a very
alarming picture of the pharmaceutical industry’s involvement in infectious
and parasitic disease R&D, despite increasingly stringent IP protection in
the developing world. The report proposed ‘a R&D treaty which would
provide a new framework to correct the imbalance that exists between
private sector rights and obligations under present international treaties
and agreements (e.g. TRIPS) and provide new legal options to make drugs
for neglected diseases global public goods.’
Concerns about the imbalance between the obligations of developing
countries under the new IP rules and the lack of R&D were confirmed in
April 2006 when the WHO Commission on Intellectual Property
Innovation and Public Health (CIPIH) published its report. The CIPIH
concluded that: ‘There is no evidence that the implementation of the TRIPS
Agreement in developing countries will significantly boost R&D in
pharmaceuticals on Type II and particularly Type III diseases. Insufficient
market incentives are the decisive factor.’
8. CONCLUSIONS AND RECOMMENDATIONS
85
8. CONCLUSIONS AND RECOMMENDATIONS
8. Conclusions and recommendations
A policy agenda for IP, access and
innovation
The problems of public policy in the realm of private monopoly
are acute.
US Senator Estes Kefauver in 1965
The WTO Declaration on TRIPS and Public Health is one of the most
significant developments of the last decade in trade and health. The Doha
Declaration signalled a sea change in thinking about patents and
medicines, and is at the root of a cascade of activities aimed at
reformulating IP protection as a social policy tool for the benefit of society
as a whole, rather than a mechanism to protect only limited commercial
interests. The Doha Declaration provided an authoritative interpretation
of the TRIPS flexibilities, gave political backing to countries that wanted to
use these provisions, and created new rights for LDCs not to grant or
enforce pharmaceutical product patents until at least 2016. In the history
of the WTO, the Doha Declaration has no precedent (Banta 2001).1
The use of TRIPS/Doha flexibilities is extensive and has been essential
for increasing access to first-line ARVs for AIDS treatment. These drugs
could still be produced as generics in countries such as India, where
product patent protection was not introduced until 2005. The
non-enforcement of patents by LDCs is also widespread; it is actively
encouraged by UNICEF and IDA, often as part of drug procurement with
Global Fund financing. Developing countries also increasingly make use of
compulsory licensing or government use.2 Compulsory licensing is being
applied by Thailand and Brazil to increase access to second-line ARVs, and
1 Peter Drahos asserts that the only real win for developing countries in the history of the WTO
negotiations has been the Doha Declaration on TRIPS and Public Health. He points out that
the role of NGOs has been pivotal in this. See Drahos 2007.
2 The practical execution of these measures can be improved. For example several developing
countries that have issued CLs do not offer royalties to the patent holder. Over the long run,
this practice will be politically unsustainable, though it can be easily remedied by offering
reasonable royalties.
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in the case of Thailand, for treatments for cardiovascular disease and
cancers.
The Thai example is important because chronic (non-communicable or
Type I) diseases account for half of the disease burden in the developing
world, and is rapidly increasing. The World Bank estimates that by 2015,
chronic diseases will be the leading cause of death in the developing world
(Adeyi et al. 2007). These diseases may not mobilize advocates and
campaigns for access to medicines in the same way as HIV/AIDS; the lack of
outcry regarding the overpricing and non-availability in developing
countries of the HPV vaccine to prevent cervical cancer suggests as much.
Medicines to treat chronic diseases exist but many are far beyond the means
of developing country governments and populations.
The Doha Declaration and the general awareness of the need for more
health-sensitive patent policies has enabled India to implement a patent
law containing a number of very significant safeguards, including: strict
patentability criteria to limit the number of patented products, automatic
compulsory licensing for generic drugs brought to market between 1995
and 2005 (during the mailbox period) and the possibility for anyone to
oppose the granting of a patent. India also has a simple provision for
production of generics under compulsory license for export to countries
without manufacturing capacity.
There is no denying that the pharmaceutical industry has responded
harshly to the Doha Declaration and to some uses of compulsory licensing
– in particular, when they are granted by countries with emerging
economies. The growth opportunities for the industry lie in these emerging
markets, since sales in Western markets are stagnating, partly due to
saturation and stagnating innovation (PricewaterhouseCoopers 2007). In
addition, TRIPS-plus provisions in FTAs, trade retaliation and political
pressures all have seriously impeded the full use of the Doha Declaration.
However, in contrast to the past, these trade and political pressures no
longer remain unseen or unheard. In May 2007, Congress and the White
House reached an important agreement on loosening some of the
TRIPS-plus provisions in the FTAs (USTR 2007).
The change in international thinking about IP, coupled with legal
opportunities in developing countries, enabled civil society groups and
individuals to challenge patents. Examples include the ddI case in
Thailand, in which an NGO coalition successfully challenged the BMS
patent on the drug; pre- or post-grant oppositions in Thailand
(zidovudine+lamivudine), China (tenofovir), Brazil (tenofovir) and India
8. CONCLUSIONS AND RECOMMENDATIONS
87
(multiple); the competition case against GSK and BI in South Africa; and US
students’ challenge of BMS’s abuse of the Yale patent on d4t, which led to
the re-negotiation of the license to BMS to allow the use of generics in
developing countries.
This somewhat optimistic analysis by no means indicates that the
problems are solved. None of the developments over the last 7 years take
away from the fact that the TRIPS Agreement is highly detrimental to access
to medicines.3 The full implications of the TRIPS Agreement for access to
medicines are beginning to emerge, but will only become apparent in the
years to come.
While the Doha Declaration can offer relief in dealing with access
problems and high drug prices, full implementation is still far from a
reality. Over time, the effectiveness of compulsory licensing will wear off
unless a more satisfactory solution is found to encourage competition, and
in particular, to ease countries’ ability to export medicines produced under
a compulsory license (MSF 2006).
Many of the pro-access measures described in this book resulted from
an ad hoc case-by-case approach that was often highly dependent on an
active civil society. A sustainable policy that tackles the fundamental
problem of a monopoly-based innovation and access system is still far away.
While the Doha Declaration was important for drawing attention to
and offering policy options for the access problems related to IP, until
recently there has been little attention to the question of innovation. The
discussions at the WTO and the Doha Declaration have failed so far to
address an important issue that underlies the WTO TRIPS Agreement,
namely, that increased levels of patent protection should lead to increased
pharmaceutical R&D and innovation.
Patent protection in the pharmaceutical field has increased over the last
20 years, but the rate of innovation has fallen while the number of “me-too
drugs” of little or no therapeutic gain has increased. This global trend in
R&D has had a disproportionately heavy impact on the needs of people in
developing countries. There is abundant evidence that implementing
TRIPS has not increased R&D dedicated to the needs of the poor (UK CIPR
2002; WHO 2006).
3 TRIPS forced countries to give up the diversity and flexibility in intellectual property law and
practices that existed pre-TRIPS. For example, by introducing a minimum 20 year patent term
and obliging patenting in all fields of technologies, it was no longer possible to exclude
medicines and food from patenting. It also introduced requirements for test data protection
that, in practice, have created additional forms of monopoly by creating exclusive rights to the
data needed to obtain marketing approval (data exclusivity).
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In the meantime, however, the lobby to further expand patent
protection for pharmaceuticals is pursuing its mission with vigour. But the
voices that call for a reassessment of the current R&D incentive system are
also growing stronger; they were responsible for the call by the 60th World
Health Assembly in 2007 to encourage the WHO Director-General to
develop proposals for mechanisms that would de-link the incentives for
R&D from the incentives for production (WHA 2007). In other words, R&D
costs would no longer be recovered through the price of medicines.
A policy agenda for access and innovation is sorely needed and should
address both immediate steps to be taken, as well as tackling the
fundamental question of how to create incentives for R&D that do not
create access barriers. The following section will outline some key elements
of such a policy.
8.1 Access: towards pro-access management of IP
To resolve today’s problems of high drug prices as a result of patent
monopolies, and in particular, the high prices of medicines needed to treat
HIV/AIDS, countries should make full use of the provisions in the Doha
Declaration. Currently, rewards based on 20 year monopoly rights are the
accepted business model; however, one could also imagine a system in
which patents are granted to innovators but their award comes in the form
of royalties from multiple users of the patent. This would allow for a
competitive market in production and sales, while the innovator receives
his or her awards. The legal framework to do so now exists. Organisations
such as the WHO, World Bank and the Global Fund should proactively
encourage the use of CL and government use measures in day-to-day
procurement practices. This should include guidance on how to issue
compulsory licenses, how to determine reasonable royalty rates to be paid
to the patent owner, and other legal and technical matters.
Following are a few suggestions to develop more systematic mechanisms
for licensing.
8.1.1 Routine compulsory licensing and government use in procurement
In the past, countries such as Canada, the UK and the US have liberally used
CLs and made government use of patents to procure health products for the
public sector or the military. The success of these practices in bringing
prices down in Western countries should serve as a model for developing
countries today. After all, the level of industrialization in most developing
8. CONCLUSIONS AND RECOMMENDATIONS
89
Demonstration against pharmaceutical companies’ legal action in South Africa (March 5
2001)
Photographer: Act Up-Paris
countries today is still far behind that of Western countries when they
excluded drugs from patenting or routinely used compulsory licensing.
8.1.2 Licences of right
Licences of right are a particular form of licensing that could be of use in
developing countries. If a patent is marked with a licence of right it means
that the patent-holder is required to grant such a licence should a
qualifying applicant request it. A patent can be marked with a licence of
right by a competent authority or the patent-holder. The advantage of a
licence of right is that the third party’s entitlement to a licence is automatic
and does not require justification by the licensee. Licences of right were the
basis of the Canadian pharmaceutical compulsory licensing policy that was
in place from 1923 to 1993. (See section 5.2.1)
8.1.3 Extend the 2016 deadline for LDCs
The WTO should extend the 2016 deadline for LDCs to comply with
obligations in the TRIPS Agreement to provide pharmaceutical product
patents and protect undisclosed test data.
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8.1.4 Patent pools
Dealing with existing patents can be done on a case-by-case basis through
voluntary or non-voluntary licensing. But it is also possible to manage IP
collectively through patent pooling. A patent pool is created when a
number of patent rights, held by different owners (companies, universities,
government institutions), are brought together (pooled) and made
available on a non-exclusive basis to manufacturers and distributors of
medicines against the payment of royalties. Third parties (e.g. generic
manufactures of drugs) can make use of the patents against the payment of
a royalty. It serves as ‘one stop shop’ for all involved.
Potential benefits of pooling include: a) reduced licensing transaction
costs through ‘one stop’ licensing rather than multiple agreements; b)
elimination of blocking patents; c) management of multiple owners and
stacking of royalties; d) the potential to encompass non-patent technology
and know-how; e) the potential to facilitate downstream innovation and
development; and f) the potential to facilitate technology transfer and a
sustainable scaling-up of capacity and access in the developing world
(Clark et al. 2000).
Patent pools are not new and have been established in several fields of
technology. The WHO Severe Acute Respiratory Syndrome (SARS)
Consultation Group and the SARS IP Working Group (key owners of
SARS-related intellectual property) are developing a patent pool for a SARS
vaccine (Simon 2004). This group has found that innovation would be
delayed and constricted by the multiplicity and restriction of patents.
An area where the establishment of a patent pool would have immediate
and obvious advantages is in the development of fixed-dose combinations
(FDC) of the newly WHO-recommended first-line ARV treatment. This
treatment consists of tenofovir, lamivudine and either nevirapine or
efavirenz. An FDC of three of these drugs currently does not exist. The
patents on every compound in this triple-therapy are held by a different
company. A generic company seeking voluntary licenses for the
development and production of these FDCs would have to obtain licences
from four different patent holders. However, if these patents could be
combined in a patent pool, the generic company wishing to develop,
produce and market the FDC would only have to deal with the pool, which
would also be responsible for the collection and payment of royalties. A
patent pool may be an attractive way for patent-holding companies to
avoid the proliferation of compulsory licences and the associated public
8. CONCLUSIONS AND RECOMMENDATIONS
91
relations problems that arise from IP conflicts, to get access to new markets
(through the licensee), and to improve the overall public image of the
company.
Currently UNITAID is exploring the establishment of a patent pool for
the development and production of second-generation ARV FDCs for adults
and children. Other countries should support this initiative. It could serve
as a pilot project to provide a model to be expanded for other products.
8.2 Access and innovation
8.2.1 Change the incentive system for health R&D
While the recommendations above are aimed at solving immediate access
problems, they do not address the more fundamental question of how an
R&D incentive system can be improved so that it no longer creates access
barriers. At the core of the issue is the fact that the financing of innovation
depends on the ability to charge high prices. The stronger the monopoly,
the greater is the ability to charge high prices. But the societal cost of patent
monopolies is high, and for developing countries it is too high. Policymakers have started to focus their attention on examining how effective the
IP system is at encouraging the development of needed products.
In the last few years, a number of important studies on IP, access and
innovation have been published that have demonstrated the weakness of
the current market-based R&D system (CIPR 2002; CIPIH 2006). The 2006
report of the WHO Commission on Intellectual Property, Innovation and
Public Health is perhaps the most significant, calling attention to the need
for changes in the way health R&D is prioritised and financed.
The CIPIH report lists 60 recommendations to increase access and move
towards a more health-needs driven innovation system. It introduced a
re-conceptualised definition of innovation as encompassing discovery,
development and delivery, thereby including access as an integral part of
innovation. Following the CIPIH report, the WHA established the
Intergovernmental Working Group on Public Health, Innovation and
Intellectual Property (IGWG) to negotiate new frameworks and a plan of
action for priority setting and financing of essential health R&D (WHA
2006). These multilateral negotiations on IP, health, access and innovation
started in 2006 at the WHO and are scheduled to conclude with a Plan of
Action in 2009.
The 60th WHA in 2007 asked the WHO Director-General to:
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
encourage the development of proposals for health-needs driven
research and development for discussion at the Intergovernmental
Working Group that includes a range of incentive mechanisms
including also addressing the linkage of the cost of research and
development and the price of medicines, vaccines, diagnostic kits and
other health-care products and a method for tailoring the optimal mix
of incentives to a particular condition or product, with the objective of
addressing diseases that disproportionately affect developing countries
(WHA 2007)
This resolution was echoed in the Organisation for Economic Cooperation
and Development (OECD) Noordwijk Medicines Agenda, which also
called for an exploration of ‘alternative policy mechanisms to reward
innovation’ (OECD 2007). The Noordwijk Agenda also recognised that
‘innovation includes both the development of new healthcare products and
the delivery and diffusion of those products, and any efforts to improve the
availability of medicines, vaccines, and diagnostics must be accompanied
by efforts to improve access to health care and to strengthen health
systems.’
The CIPIH has shown that when market prospects guide the R&D
agenda, important health needs are neglected. But as long as health R&D
depends on patent monopolies for its financing, prices are likely to remain
an access barrier. Access problems and the lack of R&D are two sides of the
same coin. Their solution lies in altering the way R&D is financed, by
separating the incentives for medicines R&D from the incentives for
medicines production.
Moving away from patent monopolies as the main mode of financing
R&D is not a farfetched idea. There are already interesting experiments
taking place and proposals being discussed. The IGWG’s Global Strategy
adopted by the World Health Assembly in May 2008 is a forceful call for
change. The strategy includes proposals for patent pools for upstream and
downstream technologies to increase access and innovation, promotes the
use of compulsory licensing to encourage competition in the pharmaceutical generics market, rejects TRIPS-plus measures in trade agreements,
and encourages the development of new incentive mechanisms, such as
prizes and government involvement in R&D priority- setting.
More ambitiously, the Global Strategy opens the door for fundamental
change in two key areas:
First, building on WHA Resolution 60.30, it calls for the development
of proposals for health-needs driven R&D, including ‘addressing the
8. CONCLUSIONS AND RECOMMENDATIONS
93
de-linkage of the costs of research and development and the price of health
products.’ De-linking paying for the cost of R&D from the price of the
product would break the vicious cycle of financing R&D through high drug
prices. As long as R&D depends on the ability to charge high prices, steering
the current market-driven R&D system towards more health-needs driven
research will remain wishful thinking; and reducing drug prices sustainably
will be impossible, other than through painstaking drug-by-drug,
country-by-country battles. Prizes are one way to achieve the de-linking of
R&D costs from price (Stiglitz 2007).
The second more fundamental change that the Strategy may usher in is
the possibility of intergovernmental talks about an essential health and
biomedical R&D treaty to change the rules of medical R&D. The Strategy
includes the following proposal:
‘encourage further exploratory discussions on the utility of possible
instruments or mechanisms for essential health and biomedical R&D,
including inter alia, an essential health and biomedical R&D treaty.’
Today’s predominant global R&D treaty, the TRIPS Agreement, is based on
granting monopolies as the predominant incentive for innovation. And its
provisions for technology transfer are limited. If one asks whether the
TRIPS Agreement would come into being today, knowing what we know
now about access and innovation – even its fiercest proponents would
likely say no. International talks that have health needs driven R&D as its
focus will likely come to a different result than talks that aim at increasing
IP protection per se.
The IGWG and its Global Strategy is, after the 2001 Doha WTO
Declaration on TRIPS and Public Health, the second most important
multilateral attempt to alter IP policies so they respond better to real health
needs. This time, the health authorities are leading the negotiations - the
process is taking place at WHO, and not at WTO.4, 5 Its success will thus
depend on WHO’s forcefulness and resolve.
4 ‘WHO is the only intergovernmental organization with a formal international mandate to
protect and advance health internationally’ (Pecoul et al. 1999).
5 Another forum where the issue of access to medicines and the need for IP reform is debated is
the World Intellectual Property Organisation (WIPO) – a specialised UN agency on
intellectual property (See in particular the WIPO Development Agenda debates).
94
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
8.2.2 Not-for profit drug development
An example of a new business model experiment for R&D for neglected
diseases is the DNDi, which finances R&D up front and offers the outcome
of its research on a non-exclusive basis to generic producers. The two
products that DNDi has developed are not patent-protected. Such a
business model could be adopted on a much larger scale. Even if drug
developers patent the products they have developed, this does not have to
lead to monopolies. Drug developers and, in particular, not-for-profit drug
development initiatives can adopt non-exclusive open licensing policies
that would allow for technology transfer and competition among multiple
producers.
A similar change in the licensing practices of government-funded
research and university research should be encouraged. Aside from helping
to combat monopoly pricing, such policies could also help overcome
patent barriers to research (Universities Allied for Essential Medicines 2006,
2008). Non-exclusive licensing practices would be particularly opportune
in situations where the inventor is not dependent on sales of the invention
to finance his or her work, such as in the case of government, university or
otherwise up-front funded research.
8.2.3 Novartis R&D fund proposal
Novartis has proposed to create a global fund for R&D for neglected
diseases to support not-for-profit innovation. The proposal includes
centralised portfolio management and IP management. Beneficiaries of the
fund would be required to license their IP exclusively to the funding body
for the neglected disease, but would be allowed to exploit their IP in more
affluent markets provided that royalties were paid to the fund. In case the
new molecule had advantages in the treatment of a disease with greater
commercial value, the inventor/company would be allowed to develop and
or market such a product on condition that compensation would be paid to
the fund for data developed with financing intended for neglected diseases
(Herrling 2007). The proposal focuses on neglected diseases only and is
limited in the sense that it does not suggest fundamental changes to the
global R&D system.
8.2.4 Prize model
Barbados and Bolivia have made proposals to the WHO IGWG for prizes for
innovation. The idea to award innovators with a prize is not new. One of
8. CONCLUSIONS AND RECOMMENDATIONS
95
the early prizes in the medical field was for the best essay on ‘the means of
Diagnosticating Latent Tuberculosis before its appearance or after its
Cure.’ This prize was established in 1892 by the Congress for the Study of
Tuberculosis and awarded in 1898 to Dr Koch among others, whose mode
of diagnosing TB – sputum smear microscopy - is still the most widely
available means of diagnosing TB in developing countries. An improved
method is desperately needed, as it detects less than half of patients with
pulmonary TB (Guillerm et al. 2006).
The idea of awarding and incentivising innovation with prizes rather
than with monopolies is again gaining ground (Stiglitz 2007). A more
recent example is the prize offered by InnoCentive, an online platform for
matching problems and rewards with inventors. InnoCentive offered a
prize for a ‘Safe and Economical Synthetic Route for PA-824, a candidate
drug for tuberculosis.’ In December 2008, InnoCentive awarded 20,000
USD each to two researchers in India and China who submitted an
improved method of synthesizing this potential new medicine; the prize
was funded by the Rockefeller Foundation in support of the Global
Alliance for TB Drug Development, a non-profit drug development entity
(InnoCentive 2008).
The Barbados and Bolivia proposals made to the WHO IGWG suggested
starting to explore multiple prizes: for the development of a low cost rapid
diagnostic test for tuberculosis, for new treatments for Chagas disease, for
new cancer treatments in developing countries, a priority medicines and
vaccines prize fund and a licensed products prize fund for donors
(Barbados and Bolivia 2008). These proposals aim to create incentives that
are not price-based for research into diseases that are neglected by
market-driven R&D. It is expected that these proposals will be examined in
the context of the IGWG plan of action that is currently being finalised
(IGWG 2008).
8.2.5 The Medical Innovation Prize Act 2005
The Medical Innovation Prize Act was first introduced by US
Representative (now Senator) Bernie Sanders in 2005 and was revised in
2007 for reintroduction (Sanders 2007). The bill is also based on de-linking
the cost of R&D from the price of the drug by creating an annual prize fund
of 80 billion USD that would remunerate drug developers. The Sanders bill
set aside 6.4 billion USD for neglected diseases, global infectious diseases
such as HIV/AIDS, and medicines needed to respond to bio-terrorism. The
96
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Sanders bill was not based on price controls to reduce prices, but rather on
the elimination of exclusive marketing monopolies. Patents would be used
to establish entitlement to a payment from the prize fund, but could no
longer be used to establish market exclusivity. The Sanders bill would
create a competitive generics market for new pharmaceutical products
while providing abundant financing for innovators.
8.2.6 A proposal to solve the drug price crisis in the US: Finkelstein & Temin
The need to look at incentives schemes for innovation is not only inspired
by the lack of attention to diseases that affect the developing countries, but
also by those concerned about high drug prices and the lack of
pharmaceutical innovation in more affluent markets. In their 2008 book
Reasonable Rx; solving the drug price crisis, Stan Finkelstein and Peter Temin
of the Massachusetts Institute of Technology make the case for a radical
change in the US drug industry. They join those who propose to solve the
drug price crisis by changing the way R&D is financed. At the core of their
proposal is the elimination of the linkage between drug prices and drug
discovery. With reference to the ‘de-integration’ of the telecommunications and electric power industry, they propose to divide the drug
industry in two parts: an R&D sector and a production and marketing
sector. The government would set up an independent drug development
corporation (DDC), which would serve as an interface between the
development sector (profit or not-for-profit) and the distribution sector.
Drug marketing firms would obtain patent licenses that would allow them
to sell new drugs after FDA approval through auctions of innovations held
by the DDC. These licenses would contain price controls. The revenues of
the auctions would remunerate the innovator. The DDC would be financed
with public funds and the revenues of the auctions. Finkelstein and Temin
also envisage contributions by foreign countries.
In this de-linked scenario of drug R&D, the risk of drug development
would be spread among many firms that are engaged in drug development
and society. Drug discoverers would be paid sooner than if they had to wait
for remuneration throughout the patent term. The priorities for
pharmaceutical R&D would be set by the DDC based on needs, and the
savings on drug prices realised through the new system would pay for the
functioning of the DDC.
The Finkelstein-Temin proposal does not detail how the system could
be applied globally and how it could make a contribution to the
8. CONCLUSIONS AND RECOMMENDATIONS
97
development of drugs for neglected diseases. But one can see similarities
with others that have proposed a global approach with a similar
underpinning, such as the Sanders Medical Innovation Prize Fund.
8.2.7 R&D treaty: Hubbard & Love
At the time TRIPS was negotiated there was no international public debate
on IP and health, the scale of the AIDS epidemic in developing countries
was not known, and understanding of the technical and legal details of IP
issues among health groups was virtually non-existent. In contrast,
commercial interests were strongly represented and played a crucial role in
drafting the text and lobbying for its support. For these reasons, TRIPS was
negotiated as a treaty to protect intellectual property rather than a treaty for
R&D.
However, if one were to design an international agreement on essential
health R&D today, the incentives would likely be much more diverse than
IP alone. This concept is at the root of the proposals by Hubbard and Love
for a new trade framework (2004). They propose a trade framework for
R&D that focuses on equitable contribution to the cost of R&D through
multiple means – not exclusively through the granting of patent monopoly
rights. As a result, new products would be more widely accessible rather
than being tied up in 20-year patents. In their model, there would be a
market for R&D and, a separate competitive market for production and
sales in which all products would be generics. An international norm for
contributions to R&D would be established by the treaty, and would ensure
that the financial resources for R&D would be available but would no
longer depend on high prices and the subsequent rationing of access to the
products.
If the framing of the debate shifts from IP to R&D, this is likely to
strengthen the leverage of developing countries to change the dynamics of
IP negotiations in trade agreements. When the talks are no longer about
how strict IP standards should be but, rather, how each country could
contribute to essential health innovation, the power dynamic is likely to
change to the point that TRIPS-plus demands will be hard to maintain.
The Global Strategy of the IGWG contains the following actions:
‘encourage further exploratory discussions on the utility of possible
instruments or mechanisms for essential health and biomedical R&D,
including inter alia, an essential health and biomedical R&D treaty.’
98
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
Furthermore, the new Global Strategy offers the opportunity to explore
fundamental changes when it says:
Proposals should be developed for health-needs driven research and
development that include exploring a range of incentive mechanisms,
including where appropriate, addressing the de-linkage of the costs of
research and development and the price of health products and
methods for tailoring the optimal mix of incentives to a particular
condition or product with the objective of addressing diseases that
disproportionately affect developing countries.
While these more fundamental changes in global R&D policy will take
time, politicians and academia are beginning to explore alternatives to
monopolies as the single most important incentive for health R&D.
8.3 Conclusion
Ironically, change may be fuelled by the increasing concern about high
medicines prices in wealthy countries and the inability of their citizens and
health insurance schemes to pay for them. Even in Europe, where most
consumers have been immune to the effects of rising drug prices because
these costs are covered by health insurance, the situation has begun to
change because expensive treatments are increasingly being excluded from
reimbursement (The Guardian 2008).
Since globalisation accounts for a major part of the problem of high
drug prices in the developing world, perhaps the solution will also be found
at the global level, in a new agreement on sharing the costs and benefits of
medical R&D for the sake of humankind.
However, these ambitions should not shroud the fact that measures can
and need to be taken today to ensure lower prices for medicines and other
health care products that exist, and to steer medical research in the
direction of greatest need.
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ANNEX 1: DECLARATION ON THE TRIPS AGREEMENT AND PUBLIC Health
113
ANNEX 1: DECLARATION ON THE TRIPS AGREEMENT AND
PUBLIC Health
Annex 1: Declaration on the TRIPS Agreement
and Public Health (‘Doha Declaration’)
DOHA WTO MINISTERIAL 2001: TRIPS
WT/MIN(01)/DEC/2
20 November 2001
Declaration on the TRIPS agreement and public health
Adopted on 14 November 2001
1. We recognize the gravity of the public health problems afflicting many
developing and least-developed countries, especially those resulting from
HIV/AIDS, tuberculosis, malaria and other epidemics.
2. We stress the need for the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement) to be part of the wider
national and international action to address these problems.
3. We recognize that intellectual property protection is important for the
development of new medicines. We also recognize the concerns about its
effects on prices.
4. We agree that the TRIPS Agreement does not and should not prevent
members from taking measures to protect public health. Accordingly,
while reiterating our commitment to the TRIPS Agreement, we affirm that
the Agreement can and should be interpreted and implemented in a
manner supportive of WTO members’ right to protect public health and, in
particular, to promote access to medicines for all.
In this connection, we reaffirm the right of WTO members to use, to the
full, the provisions in the TRIPS Agreement, which provide flexibility for
this purpose.
5. Accordingly and in the light of paragraph 4 above, while maintaining
our commitments in the TRIPS Agreement, we recognize that these
flexibilities include:
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THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
• In applying the customary rules of interpretation of public
international law, each provision of the TRIPS Agreement shall be
read in the light of the object and purpose of the Agreement as
expressed, in particular, in its objectives and principles.
• Each member has the right to grant compulsory licences and the
freedom to determine the grounds upon which such licences are
granted.
• Each member has the right to determine what constitutes a
national emergency or other circumstances of extreme urgency, it
being understood that public health crises, including those
relating to HIV/AIDS, tuberculosis, malaria and other epidemics,
can represent a national emergency or other circumstances of
extreme urgency.
• The effect of the provisions in the TRIPS Agreement that are
relevant to the exhaustion of intellectual property rights is to leave
each member free to establish its own regime for such exhaustion
without challenge, subject to the MFN and national treatment
provisions of Articles 3 and 4.
6. We recognize that WTO members with insufficient or no manufacturing
capacities in the pharmaceutical sector could face difficulties in making
effective use of compulsory licensing under the TRIPS Agreement. We
instruct the Council for TRIPS to find an expeditious solution to this
problem and to report to the General Council before the end of 2002.
7. We reaffirm the commitment of developed-country members to provide
incentives to their enterprises and institutions to promote and encourage
technology transfer to least-developed country members pursuant to
Article 66.2. We also agree that the least-developed country members will
not be obliged, with respect to pharmaceutical products, to implement or
apply Sections 5 and 7 of Part II of the TRIPS Agreement or to enforce rights
provided for under these Sections until 1 January 2016, without prejudice
to the right of least-developed country members to seek other extensions of
the transition periods as provided for in Article 66.1 of the TRIPS
Agreement. We instruct the Council for TRIPS to take the necessary action
to give effect to this pursuant to Article 66.1 of the TRIPS Agreement.
ANNEX 2: SELECTED ARTICLES FROM TRIPS
115
ANNEX 2: SELECTED ARTICLES FROM TRIPS
Annex 2: Selected Articles from TRIPS
Agreement on trade-related aspects of intellectual
property rights (TRIPS)
Article 7
Objectives
The protection and enforcement of intellectual property rights should
contribute to the promotion of technological innovation and to the
transfer and dissemination of technology, to the mutual advantage of
producers and users of technological knowledge and in a manner
conducive to social and economic welfare, and to a balance of rights and
obligations.
Article 30
Exceptions to rights conferred
Members may provide limited exceptions to the exclusive rights conferred
by a patent, provided that such exceptions do not unreasonably conflict
with a normal exploitation of the patent and do not unreasonably prejudice
the legitimate interests of the patent owner, taking account of the
legitimate interests of third parties.
Article 31
Other use without authorization of the right holder
Where the law of a Member allows for other use7 of the subject matter of a
patent without the authorization of the right holder, including use by the
government or third parties authorized by the government, the following
provisions shall be respected:
(a) authorization of such use shall be considered on its individual
merits;
(b) such use may only be permitted if, prior to such use, the proposed
user has made efforts to obtain authorization from the right holder on
reasonable commercial terms and conditions and that such efforts have
not been successful within a reasonable period of time. This
requirement may be waived by a Member in the case of a national
emergency or other circumstances of extreme urgency or in cases of
public non-commercial use. In situations of national emergency or
116
THE GLOBAL POLITICS OF PHARMACEUTICAL MONOPOLY POWER
other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable.
In the case of public non-commercial use, where the government or
contractor, without making a patent search, knows or has demonstrable
grounds to know that a valid patent is or will be used by or for the
government, the right holder shall be informed promptly;
(c) the scope and duration of such use shall be limited to the purpose for
which it was authorized, and in the case of semi-conductor technology
shall only be for public non-commercial use or to remedy a practice
determined after judicial or administrative process to be anticompetitive;
(d) such use shall be non-exclusive;
(e) such use shall be non-assignable, except with that part of the
enterprise or goodwill which enjoys such use;
(f ) any such use shall be authorized predominantly for the supply of the
domestic market of the Member authorizing such use;
(g) authorization for such use shall be liable, subject to adequate
protection of the legitimate interests of the persons so authorized, to be
terminated if and when the circumstances which led to it cease to exist
and are unlikely to recur. The competent authority shall have the
authority to review, upon motivated request, the continued existence of
these circumstances;
(h) the right holder shall be paid adequate remuneration in the circumstances of each case, taking into account the economic value of the
authorization;
(i) the legal validity of any decision relating to the authorization of such
use shall be subject to judicial review or other independent review by a
distinct higher authority in that Member;
(j) any decision relating to the remuneration provided in respect of such
use shall be subject to judicial review or other independent review by a
distinct higher authority in that Member;
(k) Members are not obliged to apply the conditions set forth in
subparagraphs (b) and (f ) where such use is permitted to remedy a
practice determined after judicial or administrative process to be anticompetitive. The need to correct anti-competitive practices may be
taken into account in determining the amount of remuneration in such
cases. Competent authorities shall have the authority to refuse
termination of authorization if and when the conditions which led to
such authorization are likely to recur;
(l) where such use is authorized to permit the exploitation of a patent
(‘the second patent’) which cannot be exploited without infringing
ANNEX 2: SELECTED ARTICLES FROM TRIPS
117
another patent (‘the first patent’), the following additional conditions
shall apply:
(i) the invention claimed in the second patent shall involve an
important technical advance of considerable economic significance
in relation to the invention claimed in the first patent;
(ii) the owner of the first patent shall be entitled to a cross-licence
on reasonable terms to use the invention claimed in the second
patent; and
(iii) the use authorized in respect of the first patent shall be
non-assignable except with the assignment of the second patent.
Article 66
Least-developed country members
1. In view of the special needs and requirements of least-developed country
Members, their economic, financial and administrative constraints, and
their need for flexibility to create a viable technological base, such Members
shall not be required to apply the provisions of this Agreement, other than
Articles 3, 4 and 5, for a period of 10 years from the date of application as
defined under paragraph 1 of Article 65. The Council for TRIPS shall, upon
duly motivated request by a least-developed country Member, accord
extensions of this period.
2. Developed country Members shall provide incentives to enterprises and
institutions in their territories for the purpose of promoting and
encouraging technology transfer to least-developed country Members in
order to enable them to create a sound and viable technological base.
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ANNEX 3: 2005 INDIAN PATENTS
119
ANNEX 3: 2005 INDIAN PATENTS
Annex 3: 2005 Indian Patents (Amendment)
Act, Section 3(d)
Section 3(d):
‘the mere discovery of a new form of a known substance which does not result in
the enhancement of the known efficacy of that substance or the mere discovery of
any new property or new use for a known substance or of the mere use of a
known process, machine or apparatus unless such known process results in a new
product or employs at least one new reactant.’
Explanation. — For the purposes of this clause, salts, esters, ethers, polymorphs,
metabolites, pure form, particle size, isomers, mixtures of isomers, complexes,
combinations and other derivatives of known substance shall be considered to be
the same substance, unless they differ significantly in properties with regard to
efficacy.
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ANNEX 4: 2003 WTO ‘AUGUST 30TH’ DECISION
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ANNEX 4: 2003 WTO ‘AUGUST 30TH’ DECISION
Annex 4: 2003 WTO ‘August 30th’ Decision
(including Chairperson’s Statement)
TRIPS: COUNCIL FOR TRIPS
Decision of 30 August 2003
IP/C/W/405
Implementation of paragraph 6 of the Doha Declaration on the TRIPS
Agreement and public health
The General Council,
Having regard to paragraphs 1, 3 and 4 of Article IX of the Marrakesh
Agreement Establishing the World Trade Organization (‘the WTO
Agreement’);
Conducting the functions of the Ministerial Conference in the interval
between meetings pursuant to paragraph 2 of Article IV of the WTO
Agreement;
Noting the Declaration on the TRIPS Agreement and Public Health
(WT/MIN(01)/DEC/2) (the ‘Declaration’) and, in particular, the instruction
of the Ministerial Conference to the Council for TRIPS contained in
paragraph 6 of the Declaration to find an expeditious solution to the
problem of the difficulties that WTO Members with insufficient or no
manufacturing capacities in the pharmaceutical sector could face in
making effective use of compulsory licensing under the TRIPS Agreement
and to report to the General Council before the end of 2002;
Recognizing, where eligible importing Members seek to obtain supplies
under the system set out in this Decision, the importance of a rapid
response to those needs consistent with the provisions of this Decision;
Noting that, in the light of the foregoing, exceptional circumstances exist
justifying waivers from the obligations set out in paragraphs (f) and (h) of
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Article 31 of the TRIPS Agreement with respect to pharmaceutical
products;
Decides as follows:
1. For the purposes of this Decision:
(a) ‘pharmaceutical product’ means any patented product, or product
manufactured through a patented process, of the pharmaceutical sector
needed to address the public health problems as recognized in
paragraph 1 of the Declaration. It is understood that active ingredients
necessary for its manufacture and diagnostic kits needed for its use
would be included; (1)
(b) ‘eligible importing Member’ means any least-developed country
Member, and any other Member that has made a notification (2) to the
Council for TRIPS of its intention to use the system as an importer, it
being understood that a Member may notify at any time that it will use
the system in whole or in a limited way, for example only in the case of a
national emergency or other circumstances of extreme urgency or in
cases of public non-commercial use. It is noted that some Members will
not use the system set out in this Decision as importing Members and
that some other Members (3) have stated that, if they use the system, it
would be in no more than situations of national emergency or other
circumstances of extreme urgency;
(c) ‘exporting Member’ means a Member using the system set out in
this Decision to produce pharmaceutical products for, and export them
to, an eligible importing Member.
2. The obligations of an exporting Member under Article 31(f) of the
TRIPS Agreement shall be waived with respect to the grant by it of a
compulsory licence to the extent necessary for the purposes of production
of a pharmaceutical product(s) and its export to an eligible importing
Member(s) in accordance with the terms set out below in this paragraph:
(a) the eligible importing Member(s) (4) has made a notification (2) to
the Council for TRIPS, that:
(i) specifies the names and expected quantities of the product(s) needed (5);
(ii) confirms that the eligible importing Member in question, other
ANNEX 4: 2003 WTO ‘AUGUST 30TH’ DECISION
123
than a least developed country Member, has established that it has
insufficient or no manufacturing capacities in the pharmaceutical
sector for the product(s) in question in one of the ways set out in the
Annex to this Decision; and
(iii) confirms that, where a pharmaceutical product is patented in its
territory, it has granted or intends to grant a compulsory licence in
accordance with Article 31 of the TRIPS Agreement and the provisions
of this Decision (6);
(b) the compulsory licence issued by the exporting Member under this
Decision shall contain the following conditions:
(i) only the amount necessary to meet the needs of the eligible
importing Member(s) may be manufactured under the licence and the
entirety of this production shall be exported to the Member(s) which
has notified its needs to the Council for TRIPS;
(ii) products produced under the licence shall be clearly identified as
being produced under the system set out in this Decision through
specific labelling or marking. Suppliers should distinguish such
products through special packaging and/or special colouring/shaping
of the products themselves, provided that such distinction is feasible
and does not have a significant impact on price; and
(iii) before shipment begins, the licensee shall post on a website (7) the
following information:
- the quantities being supplied to each destination as referred to in
indent (i) above; and
- the distinguishing features of the product(s) referred to in indent (ii)
above;
(c) the exporting Member shall notify (8) the Council for TRIPS of the
grant of the licence, including the conditions attached to it (9). The
information provided shall include the name and address of the
licensee, the product(s) for which the licence has been granted, the
quantity(ies) for which it has been granted, the country(ies) to which
the product(s) is (are) to be supplied and the duration of the licence.
The notification shall also indicate the address of the website referred to
in subparagraph (b)(iii) above.
3. Where a compulsory licence is granted by an exporting Member under
the system set out in this Decision, adequate remuneration pursuant to
Article 31(h) of the TRIPS Agreement shall be paid in that Member taking
into account the economic value to the importing Member of the use that
has been authorized in the exporting Member. Where a compulsory licence
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is granted for the same products in the eligible importing Member, the
obligation of that Member under Article 31(h) shall be waived in respect of
those products for which remuneration in accordance with the first
sentence of this paragraph is paid in the exporting Member.
4. In order to ensure that the products imported under the system set out
in this Decision are used for the public health purposes underlying their
importation, eligible importing Members shall take reasonable measures
within their means, proportionate to their administrative capacities and to
the risk of trade diversion to prevent re-exportation of the products that
have actually been imported into their territories under the system. In the
event that an eligible importing Member that is a developing country
Member or a least-developed country Member experiences difficulty in
implementing this provision, developed country Members shall provide,
on request and on mutually agreed terms and conditions, technical and
financial cooperation in order to facilitate its implementation.
5. Members shall ensure the availability of effective legal means to prevent
the importation into, and sale in, their territories of products produced
under the system set out in this Decision and diverted to their markets
inconsistently with its provisions, using the means already required to be
available under the TRIPS Agreement. If any Member considers that such
measures are proving insufficient for this purpose, the matter may be
reviewed in the Council for TRIPS at the request of that Member.
6. With a view to harnessing economies of scale for the purposes of
enhancing purchasing power for, and facilitating the local production of,
pharmaceutical products:
(i) where a developing or least-developed country WTO Member is a
party to a regional trade agreement within the meaning of Article XXIV
of the GATT 1994 and the Decision of 28 November 1979 on
Differential and More Favourable Treatment Reciprocity and Fuller
Participation of Developing Countries (L/4903), at least half of the
current membership of which is made up of countries presently on the
United Nations list of least developed countries, the obligation of that
Member under Article 31(f ) of the TRIPS Agreement shall be waived to
the extent necessary to enable a pharmaceutical product produced or
imported under a compulsory licence in that Member to be exported to
the markets of those other developing or least developed country parties
to the regional trade agreement that share the health problem in
ANNEX 4: 2003 WTO ‘AUGUST 30TH’ DECISION
125
question. It is understood that this will not prejudice the territorial
nature of the patent rights in question;
(ii) it is recognized that the development of systems providing for the
grant of regional patents to be applicable in the above Members should
be promoted. To this end, developed country Members undertake to
provide technical cooperation in accordance with Article 67 of the
TRIPS Agreement, including in conjunction with other relevant
intergovernmental organizations.
7. Members recognize the desirability of promoting the transfer of
technology and capacity building in the pharmaceutical sector in order to
overcome the problem identified in paragraph 6 of the Declaration. To this
end, eligible importing Members and exporting Members are encouraged
to use the system set out in this Decision in a way which would promote
this objective. Members undertake to cooperate in paying special attention
to the transfer of technology and capacity building in the pharmaceutical
sector in the work to be undertaken pursuant to Article 66.2 of the TRIPS
Agreement, paragraph 7 of the Declaration and any other relevant work of
the Council for TRIPS.
8. The Council for TRIPS shall review annually the functioning of the
system set out in this Decision with a view to ensuring its effective
operation and shall annually report on its operation to the General
Council. This review shall be deemed to fulfil the review requirements of
Article IX:4 of the WTO Agreement.
9. This Decision is without prejudice to the rights, obligations and
flexibilities that Members have under the provisions of the TRIPS
Agreement other than paragraphs (f) and (h) of Article 31, including those
reaffirmed by the Declaration, and to their interpretation. It is also without
prejudice to the extent to which pharmaceutical products produced under
a compulsory licence can be exported under the present provisions of
Article 31(f) of the TRIPS Agreement.
10. Members shall not challenge any measures taken in conformity with
the provisions of the waivers contained in this Decision under
subparagraphs 1(b) and 1(c) of Article XXIII of GATT 1994.
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11. This Decision, including the waivers granted in it, shall terminate for
each Member on the date on which an amendment to the TRIPS Agreement
replacing its provisions takes effect for that Member. The TRIPS Council
shall initiate by the end of 2003 work on the preparation of such an
amendment with a view to its adoption within six months, on the
understanding that the amendment will be based, where appropriate, on
this Decision and on the further understanding that it will not be part of
the negotiations referred to in paragraph 45 of the Doha Ministerial
Declaration (WT/MIN(01)/DEC/1).
ANNEX
Assessment of Manufacturing Capacities in the Pharmaceutical Sector
Least-developed country Members are deemed to have insufficient or no
manufacturing capacities in the pharmaceutical sector.
For other eligible importing Members insufficient or no manufacturing
capacities for the product(s) in question may be established in either of the
following ways:
(i) the Member in question has established that it has no manufacturing
capacity in the pharmaceutical sector;
OR
(ii) where the Member has some manufacturing capacity in this sector,
it has examined this capacity and found that, excluding any capacity
owned or controlled by the patent owner, it is currently insufficient for
the purposes of meeting its needs. When it is established that such
capacity has become sufficient to meet the Member’s needs, the system
shall no longer apply.
Notes:
1. This subparagraph is without prejudice to subparagraph 1(b).
2. It is understood that this notification does not need to be approved by a
WTO body in order to use the system set out in this Decision.
3. Australia, Austria, Belgium, Canada, Denmark, Finland, France,
ANNEX 4: 2003 WTO ‘AUGUST 30TH’ DECISION
127
Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg,
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, United Kingdom and United States of America.
4. Joint notifications providing the information required under this
subparagraph may be made by the regional organizations referred to in
paragraph 6 of this Decision on behalf of eligible importing Members
using the system that are parties to them, with the agreement of those
parties.
5. The notification will be made available publicly by the WTO Secretariat
through a page on the WTO website dedicated to this Decision.
6. This subparagraph is without prejudice to Article 66.1 of the TRIPS
Agreement.
7. The licensee may use for this purpose its own website or, with the
assistance of the WTO Secretariat, the page on the WTO website dedicated
to this Decision.
8. It is understood that this notification does not need to be approved by a
WTO body in order to use the system set out in this Decision.
9. The notification will be made available publicly by the WTO Secretariat
through a page on the WTO website dedicated to this Decision.
30 August 2003
INTELLECTUAL PROPERTY
The General Council Chairperson’s statement
The General Council has been presented with a draft Decision contained
in document IP/C/W/405 to implement paragraph 6 of the Doha
Declaration on the TRIPS Agreement and Public Health. This Decision is
part of the wider national and international action to address problems as
recognized in paragraph 1 of the Declaration. Before adopting this
Decision, I would like to place on the record this Statement which
represents several key shared understandings of Members regarding the
Decision to be taken and the way in which it will be interpreted and
implemented. I would like to emphasize that this Statement is limited in its
implications to paragraph 6 of the Doha Declaration on the TRIPS
Agreement and Public Health.
First, Members recognize that the system that will be established by the
Decision should be used in good faith to protect public health and, without
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prejudice to paragraph 6 of the Decision, not be an instrument to pursue
industrial or commercial policy objectives.
Second, Members recognize that the purpose of the Decision would be
defeated if products supplied under this Decision are diverted from the
markets for which they are intended. Therefore, all reasonable measures
should be taken to prevent such diversion in accordance with the relevant
paragraphs of the Decision. In this regard, the provisions of paragraph
2(b)(ii) apply not only to formulated pharmaceuticals produced and
supplied under the system but also to active ingredients produced and
supplied under the system and to finished products produced using such
active ingredients. It is the understanding of Members that in general
special packaging and/or special colouring or shaping should not have a
significant impact on the price of pharmaceuticals.
In the past, companies have developed procedures to prevent diversion of
products that are, for example, provided through donor programmes. ‘Best
practices’ guidelines that draw upon the experiences of companies are
attached to this statement for illustrative purposes. Members and
producers are encouraged to draw from and use these practices, and to
share information on their experiences in preventing diversion.
Third, it is important that Members seek to resolve any issues arising from
the use and implementation of the Decision expeditiously and amicably:
• To promote transparency and avoid controversy, notifications
under paragraph 2(a)(ii) of the Decision would include
information on how the Member in question had established, in
accordance with the Annex, that it has insufficient or no
manufacturing capacities in the pharmaceutical sector.
• In accordance with the normal practice of the TRIPS Council,
notifications made under the system shall be brought to the
attention of its next meeting.
• Any Member may bring any matter related to the interpretation
or implementation of the Decision, including issues related to
diversion, to the TRIPS Council for expeditious review, with a view
to taking appropriate action.
ANNEX 4: 2003 WTO ‘AUGUST 30TH’ DECISION
129
• If any Member has concerns that the terms of the Decision have
not been fully complied with, the Member may also utilise the
good offices of the Director General or Chair of the TRIPS
Council, with a view to finding a mutually acceptable solution.
Fourth, all information gathered on the implementation of the Decision
shall be brought to the attention of the TRIPS Council in its annual review
as set out in paragraph 8 of the Decision.
In addition, as stated in footnote 3 to paragraph 1(b) of the Decision, the
following Members have agreed to opt out of using the system as
importers: Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg,
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, United Kingdom and United States of America.
Until their accession to the European Union, Czech Republic, Cyprus,
Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and
Slovenia agree that they would only use the system as importers in
situations of national emergency or other circumstances of extreme
urgency. These countries further agree that upon their accession to the
European Union, they will opt out of using the system as importers.
As we have heard today, and as the Secretariat has been informed in certain
communications, some other Members have agreed that they would only
use the system as importers in situations of national emergency or other
circumstances of extreme urgency: Hong Kong China, Israel, Korea,
Kuwait, Macao China, Mexico, Qatar, Singapore, Chinese Taipei,
Turkey, United Arab Emirates.
Attachment ‘Best practices’ guidelines
Companies have often used special labelling, colouring, shaping, sizing,
etc. to differentiate products supplied through donor or discounted pricing
programmes from products supplied to other markets. Examples of such
measures include the following:
• Bristol Myers Squibb used different markings/imprints on
capsules supplied to sub Saharan Africa.
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• Novartis has used different trademark names, one (Riamet®) for
an anti-malarial drug provided to developed countries, the other
(Coartem®) for the same products supplied to developing
countries. Novartis further differentiated the products through
distinctive packaging.
• GlaxoSmithKline (GSK) used different outer packaging for its
HIV/AIDS medications Combivir, Epivir and Trizivir supplied to
developing countries. GSK further differentiated the products by
embossing the tablets with a different number than tablets
supplied to developed countries, and plans to further differentiate
the products by using different colours.
• Merck differentiated its HIV/AIDS antiretroviral medicine
CRIXIVAN through special packaging and labelling, i.e., gold-ink
printing on the capsule, dark green bottle cap and a bottle label
with a light-green background.
• Pfizer used different colouring and shaping for Diflucan pills
supplied to South Africa.
Producers have further minimized diversion by entering into contractual
arrangements with importers/distributors to ensure delivery of products to
the intended markets.
To help ensure use of the most effective anti-diversion measures, Members
may share their experiences and practices in preventing diversion either
informally or through the TRIPS Council. It would be beneficial for
Members and industry to work together to further refine anti-diversion
practices and enhance the sharing of information related to identifying,
remedying or preventing specific occurrences of diversion.
ANNEX 5: NEGOTIATING HISTORY OF THE ‘AUGUST 30TH DECISION’
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ANNEX 5: NEGOTIATING HISTORY OF THE ‘AUGUST 30TH
DECISION’
Annex 5: Negotiating history of the ‘August
30th Decision’
The TRIPS Agreement stipulates that production under a compulsory
license must be ‘predominantly for the supply of the domestic market’
(Article 31f) except when the compulsory license is granted to remedy an
anticompetitive practice (Article 31k). This restriction limits the quantity
of products that can be produced for export. This limitation was a key issue
because it could render local production of a drug uneconomical for a WTO
Member, even if – in principle – production was legally permissible under
the compulsory license. This would have important consequences for
countries without their own production capacity that rely on import to
give effect to a compulsory licensing.
The Doha Ministerial decided to postpone a resolution of this problem
to a later date, but called for an ‘expeditious solution’ in Paragraph 6 of the
Doha Declaration, which reads:
We recognize that WTO Members with insufficient or no
manufacturing capacities in the pharmaceutical sector could face
difficulties in making effective use of compulsory licensing under the
TRIPS Agreement. We instruct the Council for TRIPS to find an
expeditious solution to this problem and to report to the General
Council before the end of 2002.
However, the cooperative spirit of Doha quickly evaporated once
negotiators were back in Geneva. It took the TRIPS Council nearly two
years to reach an agreement to allow the export of medicines produced
under a compulsory license.
During this period, the fundamental disagreement was over whether
the solution would be simple and economically feasible or complex and
economically risky. On the one hand, developing countries, the WHO, and
NGOs supported a solution that would have automatically allowed export
once the importing country had expressed the need and/or issued a
compulsory license. This solution would have relied upon TRIPS Article 30,
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and considered export under compulsory license to be a ‘limited exception’
to a patent right.
In support of a solution based on Article 30, the WHO said in the TRIPS
council on 17 September 2002:
‘… WHO has published a paper, Implications of the Doha Declaration
on the TRIPS Agreement and Public Health, WHO/EDM/PAR/2002.3.
This paper describes the features of a solution to the so-called
‘paragraph 6 problem’ which are desirable from a public health
perspective. These include: a stable international legal framework;
transparency and predictability of the applicable rules in the exporting
and importing countries; simple and speedy legal procedures in the
exporting and importing countries; equality of opportunities for
countries in need of medicines, even for products not patented in the
importing country; facilitation of a multiplicity of potential suppliers
of the required medicines, both from developed and developing
countries; and broad coverage in terms of health problems and the
range of medicines.
Thus, the basic public health principle is clear: the people of a country
which does not have the capacity for domestic production of a needed
product should be no less protected by compulsory licensing provisions
(or indeed other TRIPS safeguards), nor should they face any greater
procedural hurdles, compared to people who happen to live in
countries capable of producing the product.
Among the solutions being proposed, the limited exception under
Article 30 is the most consistent with this public health principle. This
solution will give WTO Members expeditious authorization, as
requested by the Doha Declaration, to permit third parties to make, sell
and export patented medicines and other health technologies to address
public health needs.
In its submission to the TRIPS Council on 4 March 2002 (IP/C/W/339)
initially the European Commission signalled openness to proposals based
on an interpretation of Article 30. The EC said:
To this end, WTO Members could adopt a declaration stating that a
WTO Member may, in accordance with Article 30 of the TRIPS
Agreement, provide that the manufacture, on its territory, of a patented
product, without the authorization of the right holder, is lawful when it
ANNEX 5: NEGOTIATING HISTORY OF THE ‘AUGUST 30TH DECISION’
133
is meant to supply another country which has granted a compulsory
licence for the import and sale of the product concerned in its territory
in order to deal with a serious public health problem.
While negotiations went on in the TRIPS Council, the European
Parliament on October 23, 2002 adopted Amendment 196 to the EU
Directive 2001/83/EC relating to medicinal products for human use. This
amendment reads as follows:
Manufacturing shall be allowed if the medicinal product is intended for
export to a third country that has issued a compulsory license for that
product, or where a patent is not in force and if there is a request to that
effect of the competent public health authorities of that country.
The Parliament’s amendment had no impact on the EU’s position in the
TRIPS Council, which by then had abandoned its initial openness towards a
solution based on an interpretation of Article 30 and was advocating a
solution solely based on Article 31(f).
NGOs also supported a solution based on Article 30. In June 2002, MSF
published a briefing note entitled: ‘Why Article 30 will work. Why Article
31 will not’ (MSF 2002). The note drew attention to the fact that a solution
based on Article 31 would require, in many cases, two compulsory licenses
with all the procedural requirements that come with it, while an exception
would be automatic:
Put yourself in the position of someone suffering from a lethal disease
and in need of medicines that are unaffordable under patent. Your
government has acted and issued a compulsory licence for import to
your country. Would you prefer that the medicines you need could be
produced and supplied to your country (a) automatically; or (b) after
somebody in a different country has eventually come to a decision that,
in this case, it would be allowed?
The decisions in answer (b) could have life and death consequences for
millions of people. Answer (b) is the preferred option of those who
favour an Art 31 solution even though it is the less swift and sure
option. The best option, answer (a), is instead the Article 30 solution.
Unfortunately the WTO negotiations took an entirely different direction.
Months of discussions in the TRIPS Council showed a deep divide between
the developing countries that were seeking a workable solution and the
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industrialised world that tried to limit the scope of any solution as much as
possible. In an attempt to meet the 2002 deadline most delegations were
prepared to accept a far from ideal compromise text that became known as
‘the December 16 Motta text’ named after the chair of the TRIPS Council.
The Motta text was ambiguous on the scope of diseases through its
reference to Paragraph 1 of the Doha Declaration which mentions AIDS,
TB and malaria. A more appropriate basis for the scope of disease would
have been Paragraph 4 of the Doha Declaration, which refers to public
health problems in general. On the issue of country eligibility, the Motta
text seemed to be at odds with the Doha Declaration, which called for
TRIPS to be implemented in a manner to ‘promote access to medicines for
all.’ The Motta text also created cumbersome procedures to determine the
eligibility of countries to use the system, and measures to prevent diversion
of medicines to rich country markets.
Although the Motta text was seen as far from ideal, all countries were
ready to agree to it. NGOs called upon the negotiators to reject the text
(Consumer Project on Technology et al. 2002). In the end it was the US that
vetoed the proposal. The drug companies had been lobbying fiercely to
restrict the scope of diseases and eligible countries. The US considered the
scope of diseases in the Motta text to be too broadly defined, and rejected
the proposal and announced a unilateral moratorium on disputes. In an
attempt to break the deadlock, the European Commission followed up on
an earlier US proposal and listed diseases for which the solution could apply,
and introduced an advisory role for WHO in case a Member requested this.1
This proposal was rejected by the developing countries as backtracking
on the Doha Declaration and was met with a wave of objections from all
over the world. In numerous letters, professional medical organizations,
individual medical doctors, NGOs, consumer groups and human rights
groups rejected any further narrowing of the scope of the Doha
Declaration. Apart from HIV/AIDS, the list included only diseases for which
1 The EC proposal read: ‘This covers at least HIV/AIDS, malaria, tuberculosis, yellow fever,
plague, cholera, meningococcal disease, African trypanosomiasis, dengue, influenza,
leishmaniasis, hepatitis, leptospirosis, pertussis, poliomyelitis, schistosomiasis, typhoid fever,
typhus measles, shigellosis, hemorrhagic fevers, and arboviruses. When requested by a
Member, the World Heath Organization shall give its advice as to the occurrence on an
importing Member, or the likelihood thereof, of any other public health problem.’ This was a
particularly cynical proposal since this list contained diseases for which a) there were no
treatments available, or b) for which the treatment is off patent and c) for which little R&D
was being carried out offering no prospect of any new medications soon. The list did not
contain any diseases such as cancer or diabetes that would require access to patented
treatments that actually existed.
ANNEX 5: NEGOTIATING HISTORY OF THE ‘AUGUST 30TH DECISION’
135
there was either no treatment or where virtually all the recommended
treatments were so old as to be off-patent. The negotiations in the WTO
became quite bizarre, with trade negotiators trying to determine public
health priorities for countries.
The latest attempt to make the Motta text palatable for the US came
from the Chair of the TRIPS Council, who proposed in January 2003 to
adopt a statement that there was an understanding that the solution ‘under
paragraph 6 of that Declaration as being essentially designed to address
national emergencies or other circumstances of extreme urgency.’ Again
this proposal was rejected by the developing countries. NGOs reacted
fiercely in an open letter to the WTO members and called upon the
Members to reject the proposal. The use of compulsory licensing was never
meant to only address emergency situations. It would certainly have been
unacceptable to limit the use of compulsory licensing for countries without
production capacity even further, when the entire purpose of the Paragraph
6 discussions was to lift the barriers to using compulsory licensing for these
very countries (MSF 2008b).
At this point it had become clear that there was little left of the spirit
that had led to the Doha Declaration. In particular, the US seemed to want
to turn back the clock to the pre-Doha era.
Finally, on August 30, 2003 a decision was adopted. The August 30
decision contained a waiver of the obligations of Article 31(f) and was
followed by an amendment to the TRIPS Agreement (Article 31 bis) on 6
December 2005. The amendment will come into force once two-thirds of
the WTO membership has ratified it. As of this writing, seven out of the 150
Members have done so.2
The waiver will stay in place until Article 31bis comes into force. Both
the August 30 Decision and the adoption of the amendment in December
2005 were accompanied by a Chairman’s statement representing several
‘key shared understandings’ related to the non-commercial nature of the
Decision, the need to take measures against trade diversion, the need to
resolve issues expeditiously and amicably and the need to bring all
information gathered on the Decision’s implementation to the attention of
the TRIPS Council (See Annex 4 for the text). It also included an annex of
‘best practice guidelines’ listing methods to prevent diversion of drugs from
the multinational drug companies’ discount and donation programmes.
2 United States (17 December 2005), Switzerland (13 September 2006), El Salvador (19
September 2006), Rep. of Korea (24 January 2007), Norway (5 February 2007), India (26 March
2007), Philippines (30 March 2007).
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The note also listed the countries that had notified the WTO that they had
opted out of using the solution or had restricted it to use in emergency
situations only.3
Many have noted that the system has serious flaws. The WHO
Commission on Intellectual Property, Innovation and Public Health
(CIPIH) recommended that the effectiveness of the August 30th Decision
‘needs to be kept under review and appropriate changes considered to
achieve a workable solution, if necessary’ (WHO 2006).
For a discussion of the national implementation of the August 30th
decision and broader implications for access to medicines, see Section 4.5.
3 Fifteen Members have agreed to only use the mechanism as an importer in case of national
emergency or extreme urgency. Nine countries and the European Union opted out of the use
of the August 30 decision to allow import of generic medicines under any circumstances, even
in cases of extreme urgency or national emergency. Recent cases such as shortages of
ciprofloxacin in the US and Canada and price disputes between Pfizer and France (in which
Pfizer threatened to withdraw products from the French market) show that wealthy countries
may also face situations that may require importing drugs from sources other than the
patent-holder. It is unclear how the decision to opt out of the August 30 decision can be in the
interests of the citizens of these countries. It seems therefore that this decision was driven by
political motives, namely, signalling that it was not acceptable to use the mechanism.
karwijz 2009
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