Background Note on Intellectual Property Rights and Public Health
Background paper for the
Dialogue on Governance, Globalisation and Development
BARCELONA, OCTOBER 30 – 31 - 2003
by
Pedro Roffe
Pedro Roffe is director, Intellectual Property Rights and Development (joint UNCTAD-ICTSD)
Historically, the relationship between patents and medicines has been controversial. The incorporation, in 1994, of intellectual property issues in the multilateral trading system through the TRIPS Agreement[i] and the treatment it provides to public health issues has attracted intense public attention.
A number of governments and civil society organizations have accused research-based pharmaceutical companies of misusing their exclusive patent rights. They blame them first, for charging high prices for treatments, including for diseases which affect a large number of poor people who cannot afford them; second, for putting pressure on governments to prevent the local manufacture or import of cheaper, copied versions of the drugs produced in off-patent countries. In addition, they are criticized for not undertaking research and development (R&D) on diseases affecting poor people.[ii]
As
will be shown in this note, the patenting of medicines has been a central and
contentious issue throughout the history of the intellectual property system and
has indeed been divisive in both developed and developing nations.
As also
discussed in this note, the use of compulsory licensing as a legal mechanism to
control possible abuses of the patent owner has been a key factor in the
evolution of international patent regimes.
Under the TRIPS Agreement all members of the World Trade Organization (WTO)
are bound to grant patents for pharmaceutical products. This obligation did not
exist under previous international conventions.
With respect to the resort to compulsory licensing, the Agreement sets up
a number of modalities conditioning the use of this legal mechanism.
When the Uruguay Round negotiations began in 1986, more than 50 countries still had no patent protection for medicines. The TRIPS Agreement obliges WTO Members to reinforce rights conferred under process patents, and to protect – against unfair commercial use – the information submitted for the marketing approval of drugs.[iii] The new obligations also include granting patent protection for at least 20 years from the date of application and limiting the scope of exemptions from patent rights.[iv] Thus, the adoption in 1994 of the TRIPS Agreement constitutes a milestone in the history of intellectual property. The Agreement supplements the basic World Intellectual Property Organization (WIPO) conventions on intellectual property with substantive obligations and disciplines within the WTO. Among these obligations is the submission to the settlement of disputes procedures of the WTO and compensation and suspension of concessions in the event of non-compliance with the Agreement. It also calls for substantial strengthening of administrative and enforcement procedures.[v]
This paper deals with the controversial relationship between intellectual property and medicines, and particularly with the recent debate on the impact of the TRIPS Agreement on public health. It also looks at how the multilateral trading system has tackled this old dispute.
The traditional focus of attention of intellectual property has been the patent system established to protect in an exclusive manner an invention related to a product or process in a particular field of technology.[vi] The TRIPS Agreement has introduced one major innovation in this respect by including under the same regime all major intellectual property disciplines. The relationship between medicines and intellectual property is mainly related to the operation of the patent system. This note accordingly focuses on the latter.
The spread of national laws on patents was not without tensions. In Europe, the birthplace of the system, a major anti-patent movement emerged in the 19th century. The liberalization of international trade was gathering momentum and patent protection was perceived as antinomy to “free trade”. Some of the critics asserted that national patent laws acted as prohibitive tariffs. For example, several inquiries and parliamentary committees in Britain investigated the operation of the patent system leading to calls for its abolition in the 19th century. In Germany, industrial associations recommended abolition of the patent laws and at one point Chancellor Bismarck announced in 1868 his objections to the principle of patent protection.[vii] In two countries, the Netherlands and Switzerland the debate had major repercussions. It led to the repeal of the patent law in the Netherlands and to the rejection of a patent system in Switzerland.[viii]
By the time when the preparatory work on a first multilateral patent regime commenced, 22 countries had national patent systems. This led to the establishment in 1883 of the International Union for the Protection of Industrial Property with the signature of the Paris Convention. The United States of America, as it did 100 years later in the case of TRIPS, played a leading role in promoting the adoption of the first truly international convention on the protection of industrial property.[ix]
The evolution of national laws followed the general principles of the Paris Convention that influenced the spread of national laws protecting inventions and trademarks. However, this evolution followed different trajectories in response to distinct national interests and experiences. The most striking example was the protection of medicines. The Paris Convention left much freedom to member States to legislate including which fields of industry should be subject to patent protection.[x] Consequently, on medicines, countries followed different approaches until the emergence of TRIPS.
As
noted, the establishment of the Paris Convention played a major role in the
spread of national patent legislation. If
by 1873 only 22 countries had patent laws, by the end of the nineteenth century
the number had doubled. Already, in
the early part of the 20th century all major industrialized countries
had a national patent system. In
contrast, the extension of national patent legislation in developing countries
is a more recent phenomenon. By the time of the Second World War, all Latin
American countries had national patent laws.
The spread was slower in the Asian developing region.[xi]
Only two countries had national laws by the end of the nineteenth
century.
While
the national systems of patent protection were expanding and evolving following
different patterns, the Paris Convention was becoming more universal with the
entry, in the post-decolonization period, of countries in Africa and Asia.
But, the establishment of the Paris Convention did not exempt the system
of tensions and controversies. Those
were normally channelled through revision processes particularly around issues
relating to compulsory licensing and revocation of patents.
During
the late 1960s[xii],
a number of developing countries led a process of re-examination of the patent
system and its implications for economic development.[xiii]
It included revisiting the Paris Convention to make it more responsive to
the interests of countries with a weak technological base.
Especially controversial were the proposals to strengthen the capacity of
developing countries to issue compulsory licences.[xiv]
The origin of this process was centred in Latin America. In 1969, the Andean Group (Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela) adopted Decision 24 on the common treatment of foreign capital, trademarks, patents, licensing agreements and royalties. One radical provision of the Decision was the authority given to the Commission of the Andean Group to “identify production processes, products or groups of products for which no patent privileges may be granted in any of the Member countries.”[xv] This meant in plain language the adoption of less stringent patent policies in sensitive social areas such as public health.
Large countries suchlike Brazil and Mexico adopted patent legislation, which, generally, advocated a more flexible approach to patent protection. Brazil, for example, excluded both pharmaceutical products and processes from patent protection. India, following a major parliamentary inquiry on the role of patents in economic development adopted a new law in 1970 introducing a number of innovative features that included a different treatment of inventions dealing with health and nutrition. While products and processes in all other industrial sectors enjoyed a 14-year patent protection, pharmaceutical processes –products were excluded – had only a 7-year duration. This was highly critized by research-based pharmaceutical international firms.
This reformist wave came suddenly to an end by the mid-1980s.[xvi] This coincided with the emergence in GATT of discussions on trade-related aspects of intellectual property rights that led finally to the adoption of the TRIPS Agreement.
In
brief, until the emergence of TRIPS, the system expanded and developed according
to the needs and technological sophistication of countries.
The Paris Convention played a catalytic role in that expansion. The
Convention was not an intrusive instrument and was thus responsive to different
national experiences and levels of sophistication.
For example, the compulsory licensing provisions contributed to the
appeasement of the 19th century controversy around the patent system.
These provisions, conceived to prevent abuses derived from the exercise of the
exclusive rights conferred by patents,[xvii]
were at the very centre of its evolution and modernization.[xviii]
Precisely these same questions have re-emerged as central questions
in the recent debate on intellectual property rights and public
health.
The reasons for including intellectual property rights in the framework of the multilateral trading system are complex. The attempt was originally resisted by developing countries. Countries such as Brazil and India continually expressed concerns, on social interests grounds, about subjecting inventions related to public health and nutrition to strict patenting rules under a new trading regime.[xix] The United States was a major advocate for introducing intellectual property rights issues into the future WTO.[xx] The perceived weakening of intellectual property rights protection in developing countries through the reform process of the 1970s –referred to above- was an important consideration in pushing the trade agenda in the area of intellectual property rights. According to Jerome Reichman, the proposals made by developing countries to reform the compulsory licensing system of the Paris Convention led to the collapse of the revision process, "and they were instrumental in the decision to remove efforts to reform international industrial property law from the exclusive jurisdiction of WIPO and to bring them within the legislative and judicial jurisdiction of the GATT and its successor institution, the WTO."[xxi] The advocates of TRIPS claimed huge revenue losses as a result of counterfeiting and thus insufficient intellectual property protection. They also considered that inadequate or lack of protection in sectors such as medicines constituted a threat to counterfeiting and impacted on the well being of people in both developed and developing countries.
Contrary to the Paris Convention, the TRIPS Agreement establishes that patents are available for any inventions[xxii], whether products or processes, in all fields of technology. This is one of the major achievements of TRIPS from the point of view of the research-based pharmaceutical industry. As observed before, countries were free, in affording patent protection, to discriminate among industrial sectors.
While
TRIPS is as an instrument of minimum standards of protection[xxiii]–but high compared to those of the Paris Convention- as well as flexible
in terms of policy adaptation, recent trends suggest a more complex picture.
A “TRIPS –plus” phenomenon has emerged. It has elicited concerns as
it goes beyond the minimum standards of TRIPS by seeking to harmonize
intellectual property regimes with those of economically and technologically
more advanced countries and thus making the development gap more difficult to
overcome. This harmonization trend is being encouraged and advocated by
developed countries in bilateral, regional and new multilateral initiatives.[xxiv]
The
concerns advanced by some developing countries relate to the curtailment of
their policy space in an important area of economic development.
In brief, these TRIPS-plus requirements mean that countries are not in a
position to use fully the flexibilities implicit in the TRIPS Agreement[xxv]
and to resort to industrial policies followed in the past by developed
countries-
and until recently by newly industrialized countries, such as the Republic of
Korea and Singapore. A case in point is the health issue that is discussed in
the remainder of this note.
Drug
companies rely heavily on patents to recover their R&D costs and make
profits. Several studies[xxvi]
have shown that patents are particularly important to the pharmaceutical
industry, given the high costs of R&D, and the fact that once a new drug has
been developed, knowledge becomes public and, hence, competitors may easily copy
it. The “research-based” pharmaceutical industry claims that a globally
strong patent system is essential for them to remain in the highly expensive
business of discovering and developing new drugs.[xxvii]
Its corporations are also concerned that if copying is allowed in developing
countries, these drugs will be exported to developed-country markets, where
these firms make most of their profits. But, patents
are not the only factor that plays a role in determining accessibility to drugs.
Other factors, such as market distribution, infrastructure and professional
support, are important. But, at least in principle, patent rights place the
firms holding those exclusive rights in a strong position to set prices. These
issues have been brought to the fore by the current HIV/AIDS crisis and were
plainly exposed in the debate on the implementation of the Doha Declaration on
TRIPS and Public Health, discussed below.
As advanced
earlier, the main sector excluded from patentability by many countries in the
pre-TRIPS era was exactly that of medicines. The general trend was that
processes were patentable, but the product was not. The rationale for this exclusion was founded on public or
social considerations related in most cases to the need for ensuring access to
medicines at a lower cost to the population.
In other cases, the rationale for such exclusion was to protect the
national pharmaceutical and chemical sector that was at a lower stage of
development than that of their foreign competitors.
In a study published by the United Nations in 1975, a great number
of both developing and developed countries were listed as excluding
pharmaceutical products as patentable inventions.[xxviii]
The research-based pharmaceutical industry was not comfortable with the state of
affairs and exerted a major role in reversing these trends.
The conclusion of the TRIPS Agreement was the culmination of that
process.[xxix]
The new rules of the
game dramatically changed the legal framework for the production and
commercialization of and access to drugs particularly in developing countries.
Though
the role of patents in inducing R&D in pharmaceuticals is clear, the
industry’s arguments about the need for a strong patent system in developing
countries have been called into question. Doubts have been raised about the
following: the actual costs of R&D involved in the development of new drugs
(especially as compared to the marketing costs of pharmaceutical companies); the
important role that publicly funded R&D plays in the discovery of new drugs;
the use of patents to protect a myriad of minor developments and prevent or
delay the entry of generic products after patent expiry; and the justification
for extending to developing countries the same model of patent protection
applied in more advanced countries.[xxx]
In
addition, the pharmaceutical industry, it is argued, devotes very little R&D
effort to diseases of the poor in developing countries, since such diseases are
not high-income generators. The World Health Organization has estimated that
only 4.3 per cent of pharmaceutical R&D expenditure is targeted at those
health problems, such as malaria and tuberculosis that mainly concern low- and
middle-income countries.[xxxi]
According to James Orbinski, former President of the International Council of Médecins
Sans Frontières (MSF), while 95 per cent of active tuberculosis cases occur in
developing countries, no new drugs for the disease have been developed since
1967.[xxxii]
It should be noted, finally, that the share of developing countries in the world pharmaceutical market is relatively small. For example, in 2002, Africa is reported to account for only 1,3 per cent of the worldwide profits of the pharmaceutical industry, while Southeast Asia, China, and the Indian subcontinent altogether made up a mere 6.7 per cent. Developing country markets, generally, appear hardly to have any impact on the revenues of the pharmaceutical industry. [xxxiii]
Even if the
new rules on pharmaceutical patents have changed radically since TRIPS, the
Agreement does allow for important flexibilities. This
include, notably, the freedom left to WTO Members to define the broad parameters
of a patentable invention; the possibility of establishing exceptions to the
exclusive rights, such as the early working exception (also known as “Bolar
exception”); parallel imports of patented products when they are obtainable in
a foreign country (where a patent also exists) at lower prices; and the use of
compulsory licences.
In brief,
certain exceptions to the exclusive rights afforded by patents are legitimate
under TRIPS. The
Bolar exception, for example, enables generic firms, before the expiration of a
patent, to use the patented pharmaceuticals to conduct tests and to obtain
marketing approval for generic copies of the patented drug for the time
immediately after the patent expires. [xxxiv]
Compatible also with TRIPS is the ability of
purchasers of drugs sold abroad to import them into a country where they are
patented. This is known as parallel
imports that are explicitly recognized under Article 6 of TRIPS.,
The Doha Declaration on Public Health has left
t to each
country the freedom to establish its own regime. This is important, because it
means that if national laws indicate that patent rights over drugs are
“exhausted” by their first legitimate sale, countries can then import drugs
legally purchased in countries where they are sold at a lower price.[xxxv]
However, the most relevant public policy instrument for the purpose of this note is the resort to compulsory licensing which has been the focus of the recent polemic. A compulsory licence is an authorization granted by a government to a party other than the holder of a patent on an invention to use that invention without the consent of the patent holder. The patent itself is a concession from a government in favour of a particular person that gives that person certain exclusive rights. The compulsory licence acts to restrain the exercise of those private rights in the public interest.[xxxvi]
The use of a patent’s subject matter under compulsory licensing is permitted under TRIPS even without prior negotiation “in the case of a national emergency or other circumstances of extreme urgency” or in cases of public non-commercial use. However, the resort to compulsory licensing in general is not necessarily an easy remedy.[xxxvii] Where prior authorization from the patent owner is required (as is normally the case, except for national emergencies), negotiations can be complicated and take a long time to conclude. Second, the patent specification may not provide sufficient information to copy the drug. In fact, in the case of some drugs, the most efficient manufacturing process is protected as a trade secret or by a separate patent, which may even be owned by a different company. Third, many countries may lack professionals who can do the copying, and licensees may not necessarily be able to profitably sell the drug at a much lower price than that of the patent-holding firm. However, the very possibility of compulsory licensing tends to strengthen the bargaining position of governments and potential licensees.
Research-based firms argue that compulsory licensing reduces incentives to engage in R&D, and that reduced R&D diminishes global welfare by lowering the future stock of useful inventions. However, the benefit to developing countries of increased R&D in the developed countries is often remote, and there is no evidence that the granting of compulsory licences has led to a reduction in R&D investment.[xxxviii] It is also argued, on the other hand, that the use of compulsory licensing might make a country less attractive to foreign investors. The potential use of such measures, unpopular with international firms, might make developing countries fear possible retaliation or negative attitudes of those corporations. It should be noted though that few countries have a large record of issuing compulsory licensing, with the sole exception of the United States and Canada.[xxxix]
It should also be recalled that one of industry’s important negotiating objective in the TRIPS negotiations, as was also the case throughout the history of the revision conferences of the Paris Convention[xl], was to set limits to the use of compulsory licensing[xli]
The TRIPS Agreement (Article 31) by regulating compulsory licensing sets up procedures that governments are expected to follow when they grant a licence, and describes certain conditions that the grant of compulsory licences should follow. The procedures and terms vary depending on the contexts in which the compulsory licence is employed. The Agreement, however, does not limit the grounds for the use of compulsory licensing. The Declaration on the TRIPS Agreement and Public Health[xlii], as discussed below, reiterates this principle.
The
conditions for the use of compulsory licences are spelled out in Article 31 of
TRIPS and they include among others the following:[xliii]
Notwithstanding the TRIPS consistency of the resort to flexibilities such as compulsory licences and parallel imports some governments and the research-based pharmaceutical industry strongly objected to their use in some developing countries.
One of the most highly publicized cases in the apparent clash between TRIPS and health policies relates to the amendments introduced in 1997 to South Africa’s Medicines Act permitting parallel imports and compulsory licensing of pharmaceuticals. The United States Government denounced the measure as an infringement of patent rights and the Office of the Trade Representative (USTR) designated South Africa as a Special 301 “watch list” country -- a status that could lead to trade sanctions. This step created a furore in both countries on the part of AIDS activists and for a while the question took on an important dimension in the presidential campaign of former Vice-President Al Gore.[xliv] The crux of the issue was access to drugs at affordable prices through the implementation of the flexibilities in the TRIPS Agreement.[xlv] The dispute was temporarily settled in August 1998 by a political understanding between Vice-Presidents Al Gore and Thabo Mbeki. The USTR announced that the two Governments had come to an understanding with respect to South Africa’s urgent need to provide better, more affordable health care, while ensuring that intellectual property rights were protected.[xlvi]
However, 39 international firms including the South African
Pharmaceutical Manufacturers Association (PMA) brought finally their legal
action against Nelson Mandela and the South African Department of Health before
that country’s judicial system.
After a global civil society campaign the legal action against the South
African government was withdrawn.
In another case, a complaint was introduced by the United States against Brazil in the WTO dispute settlement system. It challenged the TRIPS implementing legislation in Brazil that authorized the granting of compulsory licences and parallel imports in instances when patent holders have not worked or produced the patented invention in that country. This complaint was later withdrawn, but the potential conflict between patents and public health became an important issue and led to the negotiations of the Doha Declaration on Public Health.
The two cases
briefly outlined above, created the basis for the discussions leading to the
Doha Declaration of 14
November 2001. The Ministerial
Conference adopted a text (see annex) intended to address the public health
problems faced by the developing and least developed countries.[xlvii]
The Declaration was hailed as one historic achievement in the short
history of the WTO. According to
Frederick Abbott, “The adoption … of the Ministerial Declaration … marked
a turning point in political and legal relations at the WTO.
Developing country Members sent a clear message that they would take
steps to protect and advance their essential interests.”[xlviii]
The Declaration
states 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.” It further clarifies the freedom all WTO Members have with respect to
compulsory licensing, their determination of what constitutes a national
emergency or other circumstances of extreme urgency, and exhaustion of rights.
Thus, the Declaration reaffirms the right to use to the full the provisions in
TRIPS allowing each Member “to grant compulsory licences and the freedom to
determine the grounds upon which such licenses are granted.” It also
reiterates the Members' discretion with regard to the grounds upon which
compulsory licences are granted. It refers to Article 31(b), making clear that
the definition of the terms "national emergency" and "other
circumstances of extreme urgency" is up to Members' discretion.
The Declaration explicitly mentions that public health crises “relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.” Moreover, as mentioned earlier, WTO Members are free to establish their own regimes on parallel imports or “exhaustion of intellectual property rights”.
The
Declaration, in general, does not mean any substantive deviation from the TRIPS
Agreement. It reiterates what is
already stipulated therein. But, it recognizes considerable room for the pursuit
by Member countries of public policy objectives, especially those related to
public health.
One matter that the Declaration left unresolved is the situation where countries lacking the capacity to produce drugs will find it difficult to make effective use of compulsory licensing. Since TRIPS stipulates, as outlined above, that unauthorized use of a patent shall be “predominantly for the supply of the domestic market”, it may not be possible to grant a compulsory licence mainly or exclusively to supply a patented medicine to a third importing country in need. Many countries lack the capacity to manufacture different pharmaceutical products, and would therefore need to import them from countries such as India, an important supplier of cheap generic drugs. To make the situation even more difficult, all developing countries, including India, with the exception of the least-developed countries are required by the terms of TRIPS to introduce product patents on drugs as 1 January 2005.[xlix] As explained by F. Abbott, one important consequence of this will be that developing countries with the present capacity to export off-patent drugs will lose that capacity in regards to newly developed patented drugs. “At this juncture, affordable access to on-patent medicines in developing and least developed countries will become increasingly dependent on compulsory licensing.”[l] But, it is not only developing Members that may lack sufficient manufacturing capacity to meet their compulsory licensing needs. Moreover, it is difficult, if not impossible to anticipate the circumstances in which Members may wish to grant compulsory licences. [li]
Paragraph 6 of the Declaration instructs the TRIPS Council “to find an expeditious solution to this problem and to report to the General Council before the end of 2002.”
Against this background, the Council for TRIPS embarked on intense negotiations to find a solution to the problem identified in paragraph 6 of the Declaration. The debate centred on the legal mechanism to be adopted. In this context, some countries favoured the use of a moratorium or waiver of Article 31 (f) (establishing the condition that compulsory licensing should be granted predominantly for domestic market); others argued for a permanent amendment of the same provision with a waiver to be used in the transitional period. Others, finally, believed that the best and most expeditious solution was via a statement reaffirming that exports of generic drugs produced through a compulsory licensing granted in an exporting country to supply the needs of a third country not in a position of manufacturing locally, was legitimate under Articles 30 of TRIPS (dealing with exceptions to the exclusive rights conferred by patents).[lii]
After protracted negotiations on the possible legal mechanism, WTO members reached the conclusion that the best course of action was to agree, as a first step, on the substantive components of such a solution and once agreed on those elements propose an interim solution based on a waiver to Article 31 (f). Following that, a subsequent step would be to seek an amendment to the Agreement.
The substantive issues addressed by the Council included the following: the scope of diseases to be covered; the scope of products; the eligible beneficiaries and the eligible exporting countries; and the conditions that should accompany the legal mechanism including safeguards to prevent distortion of trade to countries that are not intended to become importing beneficiary countries. After intensive debates on the various possible approaches, Ambassador Perez-Motta from Mexico, then the chairman of the Council for TRIPS, issued on 16 December 2002 a draft decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. Most members accepted the compromise decision but particularly the USA considered that it was not an adequate solution to paragraph 6 of the Declaration and that the suggested compromise would be detrimental to the interests of the research-based pharmaceutical industry in their quest for solutions to grave and orphan diseases.
Thus, the deadline of December 2002, set by the Doha Declaration, was not met and as a result the multilateral trading system suffered a major setback. On the road to Cancun many attempts were made to resolve this major impasse. Finally, a compromise was found on 30 August 2003. The compromise consists of the acceptance of the 16 December text, as drafted by Ambassador Perez-Motta, but with an accompanying statement by the WTO General Council’s Chairperson which supplements the Decision.
The statement provides some satisfaction to those who perceived the 16 December text as vague and ambiguous. The statement by the Chairperson of the General Council places on record “several key shared understandings of Members regarding the Decision to be taken and the way in which it will be interpreted and implemented.” The nature of the Statement, compared to the main Decision, is of a political nature but it will no doubt have a significant influence in the interpretation and potential disputes around the application and implementation of that Decision. Precisely, the Statement provides that countries seek to resolve issues arising from the use and implementation of the Decision expeditiously and amicably. In this respect, any member should bring matters related to the interpretation or implementation of the Decision, including issues on diversion, to the TRIPS Council, with a view to taking appropriate action. It also allows members concerned that the terms of the Decision have not been fully complied with to utilize the good offices of the Director General or Chair of the TRIPS Council, “with the view to finding a mutually acceptable solution.”
The Decision of 30 August, incorporating the 16 December text, deals specifically with the issues, referred to above, that constituted the core of the debate before the Council for TRIPS, namely: the scope of diseases to be covered by the agreed mechanism; the eligible beneficiaries importing countries; and the conditions to be attached to the use of such a mechanism including safeguards to prevent distortion of trade to countries that are not intended to be beneficiaries of the legal mechanism.
i)
Scope of diseases. The Decision avoids
an express reference to the scope of diseases that was a major difficulty for
the pharmaceutical industry that feared unrestrained use of compulsory licensing
for frivolous considerations (e.g. use for sexual disorders).
The USA pharmaceutical industry wanted to limit the mechanism to AIDS,
tuberculosis, malaria “and other infectious diseases or epidemics of similar
gravity and scale”. This issue is addressed in the Decision by defining
“pharmaceutical product” as 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.”
The reference to paragraph 1 was a major success particularly to African
countries that argued from the outset for a broad coverage of the mechanism
including “public health problems afflicting many developing and least
developed countries, especially those resulting from HIV/AIDS, tuberculosis,
malaria and other epidemics.”[liii]
ii)
Beneficiary importing countries. The
mechanism is a multilateral waiver of article 31 (f), TRIPS, to allow exports of
generic drugs to a country in the situation described in paragraph 6 of the Doha
Declaration, namely a country with insufficient or no manufacturing capacity in
the pharmaceutical sector. The
characterization of a country lacking this capacity was also a major point of
disagreement between developed and developing countries. Developed countries and
particularly the USA wanted to limit the group of beneficiary countries to
Sub-Sahara Africa. It was the view
of others that any country might be facing a health crisis that might require
the resort to a compulsory licensing, as was the case in the wake of September
11 to deal with the anthrax outbreak.[liv]
The
text resolved this question by assuming that the so-called least-developed
countries are deemed to have insufficient or no manufacturing capacity in the
pharmaceutical sector. With respect
to other eligible importing countries, they should establish that condition,
either by declaring that it has no manufacturing capacity in the pharmaceutical
sector or where the country has some capacity in this sector, it has found that
this capacity is “currently insufficient for the purposes of meeting its
needs.” (See, Annex to Decision). Again,
the concern of the industry, particularly the USA, was that the system did not
guarantee that advanced countries such as India and Brazil might resort to the
system with the intention of strengthening their national pharmaceutical
industry.
In
this respect, the Chairperson’s statement recalls that a number of high-income
countries have indicated, as stated in a footnote to the Decision, that they
will opt out of using the system as importers.
This group includes all present members of the European Union, plus
Australia, Canada, Japan, New Zealand, Norway, Switzerland and the United States
of America. With respect to future
members of the European Union, the Statement notes they would only use the
system in situations of national emergency or other circumstances of extreme
urgency. This latter group of countries agreed also that upon their accession to
the Union, they would opt out of using the system as importers.
The Statement refers further to a third group of countries[lv] that have agreed that they
would only use the system as importers in situations of national emergency or
other circumstances of extreme urgency. Thus,
the eligible beneficiaries of the agreed mechanism would be mainly developing
and least-developed countries.
In
relation to this aspect of the Decision, the Chairman’s Statement includes one
important consideration intended to appease those having difficulties with the
16 December text. This concerns the
expressed fears that exporting countries might use such a mechanism to promote
national champions in the pharmaceutical sector. In this context, the first shared understanding contained in
the statement refers to the recognition that the system should be used “in
good faith to protect public health” and “not to be an instrument to pursue
industrial or commercial policy objectives.”[lvi]
The Chairperson’s Statement also adds another qualification to the
Decision. This relates to the
information that eligible importing countries need to provide in their
notification to the Council for TRIPS. According
to the Statement, with a view to promoting transparency and avoiding
controversy, the importing country needs to provide information on how the
Member in question established that it had insufficient or no manufacturing
capacity in the pharmaceutical sector. This
aspect of the Decision has been criticized by civil society organizations that
have advanced that the “deal gives WTO itself new authority to second guess
and interfere in the granting of individual compulsory licences to generic
industries.”[lvii]
iii) The third aspect of the Decision relates to the conditions attached to the use of the mechanism that include safeguards to prevent distortion of trade to countries other than the eligible importing one. This was indeed another major controversial issue in the negotiations. Developing countries expressed preference for a system that should become expeditious and efficient enough to react promptly to a major health crisis. Industry and major developed countries favoured a restricted system that would address specifically the issue at hand and would prevent distortions to trade.
With respect to the conditions attached to the use of the mechanism, the compromise spells out the following. First, the eligible importing country needs to establish that it has insufficient or no manufacturing capacity. Second, the notification to the Council for TRIPS, by both the importing country and exporting country. Third, the granting in both countries of a compulsory licence. Fourth, safeguards regarding distortion of trade.
With
respect to the first condition, as explained above, the Annex to the Decision
sets out the parameters for the categorization of eligible importing countries. Let us briefly review the other conditions spelled out in the
Decision. With respect to the
notification to the Council for TRIPS, the importing country needs, besides
confirming that is an eligible importing country, to inform WTO of the names and
expected quantities of the product needed.
The exporting country, on its own terms, needs also to notify the Council
for TRIPS on the granting of a compulsory license to meet the needs of the third
country. This notification should
include information concerning the beneficiary licensee, the products covered by
the licence, its duration and the name of the beneficiary countries.
The
third condition refers to the granting of compulsory licences in the importing
and exporting countries. This was
one criticism made from the outset by those who sought a more straightforward
solution to this issue. The
issuance of two compulsory licenses was seen as a serious obstacle to achieving
an expeditious solution to this problem. It should be clarified that what is mandatory under the
mechanism is the granting of a licence in the exporting country. ,
provided the pharmaceutical
product in question is patented in that country.
The
In the same
vein, the importing country needs to issue a licence only when the
pharmaceutical product is patented in its territory.
In the latter case, Tthe
Decision obliges the importing country to inform the Council that it has granted
or intends to grant a licence in accordance with the conditions of the TRIPS
Agreement. It is important to
recall that importing countries that fall in the category of least-developed
countries might, under the terms of the Doha Declaration, opt out, until 1
January 2016, of their obligations under TRIPS to enforce the provisions of the
Agreement with respect to pharmaceutical products.
In other words, least-developed countries that decide not to enforce
obligations on pharmaceutical products are exempted of granting patents to
pharmaceutical products until 2015 and thus would not need to issue a compulsory
licence for the purpose of the 30 August Decision.
In brief,
the mechanism applies only when in at least one
country, exporting or
importing, there
is a patent covering the pharmaceutical product in question.[lviii]
With
respect to the compulsory licence issued by the exporting country, the Decision
specifies a number of conditions that the authorization should contain.
For example, it should state that only the amount necessary to meet the
needs of the importing country may be manufactured under the licence and the
entirety of this production shall be exported to the country that has complied
with the condition of notifying to the Council for TRIPS of its health needs.
The authorization should also establish that products produced under the
system shallshould
be clearly identified through special labelling or marking. Equally, before shipment begins, the licensee shall post on a
website information concerning the quantities being supplied and the
distinguishing features of the product regarding packaging, labelling or
marking.
The
granting of the compulsory licence in the exporting country is subject to the
general condition of the TRIPS Agreement concerning adequate remuneration to be
paid to the patent holder in that country taking into consideration the economic
value to the importing country.[lix]
The fourth condition relates to additional safeguards to prevent trade diversion to third countries. In this respect, all parties agreed that the waiver should benefit only countries that could not make effective use of compulsory licensing and that measures should be taken to prevent the risk of re-exportation of the products to non-eligible countries. Pharmaceutical firms were concerned that the mechanism might encourage this type of trade to more affluent economies placing research-based firms in difficult conditions to compete under those circumstances. Even if all parties agreed, in principle, to the need to prevent trade distortion, it was under the assumption that the mechanism in place would not impact prices or would not impose undue administrative burdens. The compromise of 16 December underlined the commitment that the products imported should be used for public health purposes and that the importing country should take reasonable measures “within their means, proportionate to their administrative capacities” to prevent re-exportation of the products. As explained earlier, the exporting country was also obliged in the compulsory licence to condition the production to special labelling or marketing. Furthermore, the Decision calls on third countries to ensure the availability of effective legal means to prevent the importation and sale in their territories of products produced under the waiver mechanism and diverted to their markets inconsistently with the Decision.
The
issue on how to deal with trade diversion and the possible shortcomings of the
16 December text was, subsequent to the failure of meeting the December 2002
deadline, exposed by the USA industry as a great obstacle for joining the
consensus of WTO Members on intellectual property rights and public health.
The 2003 deliberations focused, among others, on this question.
The Statement by the Chair underlines in this context 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.” It further adds, what some observers
have qualified as a significant “amendment” to the main text of the
Decision, that the provisions on labelling or marking “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.”
The Statement draws attention to some “best practices” guidelines
based on experiences of international companies to prevent product diversion...
The guidelines are attached to the Statement.
This note has attempted to explain the context and background to the
current debate on patents and public health.
It has briefly reviewed the issues and noted that the protection of
medicines, as well as the use of compulsory licensing as a remedy to possible
abuses in the exercise of the exclusive rights conferred by patents, have been
at the centre of the evolution of the national and international patent legal
regimes. The Paris Convention of
1883, the first major international treaty on the protection of industrial
property, left countries with the freedom to legislate in the industrial sectors
that they considered appropriate for the granting of exclusive production and
marketing rights. As a result,
pharmaceuticals was an area that late comers generally excluded from
patentabilty. (I
am not sure if I would use the term "late comers": not
only Asian countries like Japan and Korea, but also "early
comers" like the
European countries introduced product patent protection for pharmaceuticals only
in the 1960s,
see Policy Paper, p. 36, fn. 37.)
As also reviewed in this note, the issue of compulsory
licensing was conceived, at the time of the Paris Convention, as the balancing
element and the compromise to appease the European anti-patent sentiments of the
19th century. The
compulsory licensing provisions of the Paris Convention suffered important
changes in the 20th century and have been at the centre of the
evolution of the international regime. The
adoption of the TRIPS Agreement significantly altered this picture by
introducing the concept of non-discrimination among technology fields for
purposes of granting a patent and by incorporating a set of modalities for the
issuance of compulsory licensing. These
two major questions have been the focus of the recent debate on TRIPS and public
health.
The crisis raised by the health issue that culminated in the Doha Declaration has been partially overcome by the compromise reached on 30 August 2003. But, as noted, the agreement in the form of an interim waiver will terminate on the date on which a final amendment to the TRIPS Agreement takes effect. Accordingly, the TRIPS Council will initiate by the end of 2003 work on the preparation of such an amendment with the view to its adoption within six months. In other words, the implementation of paragraph six dealing with one aspect of the Doha Declaration, the case of countries lacking manufacturing capacity, is still in progress. For Carlos Correa, “the agreement on paragraph 6 does not mean an end to the controversies around intellectual property rights and public health. They are likely to continue, especially as developed countries seek TRIPS-plus standards protection via interpretation or the negotiation of bilateral and regional agreements, and as patents on marginal or trivial developments (sometimes called ever-greening patents) are granted and used to block or delay generic competition.” [lx]
The solution reached on 30 August, on the eve of the Cancun Ministerial meeting, was perceived as a major success of the multilateral trading system. But, at same time, it received a mixed and cautious reception. The WTO Director-General, greeted the Decision as “a historic agreement for the WTO … It proves once and for all that the organization can handle humanitarian as well as trade concerns.” The Secretary-General of the United Nations, K. Annan, echoed similar views but emphasized that “we must now ensure that developing countries are given the support they need to make use of the mechanisms that have been agreed, so that drugs reach the millions who are suffering and dying. This is a moral imperative.” The EU Trade Commissioner Pascal Lamy expressed satisfaction for the outcome that “shows the WTO can respond flexibly and pragmatically to the concerns of developing countries and contribute to the fight to combat killer diseases.”
Civil society groups that played an important role in the process leading to the Doha Declaration expressed serious reservations on the outcome. A group of these NGO’s, led by MSF and Oxfam, characterized the WTO deal on medicines as a “gift bound on red tape.” In its public statement of 10 September 2003 it warned that: “If the framework imposed on countries by the WTO cannot be used effectively to promote public health and access to medicines for all, then the poor countries should not be obligated to issue patents on medicines.” Ellen t’Hoen from MSF described the original 16 December text as “a monstrosity that seems to be designed to be a solution that won’t work.” In her view, the discussion seemed to have lost its focus, being more about giving comfort to the pharmaceutical industry than about access to medicines.[lxi] Criticism of the Chairperson’s statement has been sharp. To Cecilia Oh, from Third World Network, it “appears to be an attempt to limit the effectiveness of the system, as contained in the December 16 text.”[lxii] Professor Carlos Correa, a leading actor in the health debate is of the view that the waiver only means “that a WTO Member will not complain against another Member using the system, but it does not prevent a private party from blocking the exportation or importations of drugs, if the national laws do not specifically permit such exports or imports under compulsory licences.”[lxiii] On his part, Harvey Bale, Director-General of the International Federation of Pharmaceutical Manufacturers Associations, rejected these criticisms, saying the text added “clarity to the focus on the neediest.”[lxiv]
Despite this mixed reception, the 30 August Decision opens the way for a more dispassionate debate on its follow up with the view to finding a multilateral and more permanent solution to the problems of countries with little or no manufacturing capacity in the pharmaceutical sector, including an amendment to the TRIPS Agreement. It is expected that an enlightened discussion will take place and that an expeditious and practical solution could be reached. The Doha Declaration was a landmark in the history of WTO in the sense that it recognized the gravity of the public health problems afflicting many developing countries and the need for the TRIPS Agreement to be part of the wider national and international action to address these problems. As such, the Agreement does not and should not prevent countries from taking measures to protect public health. Moreover, it recognized that patents could be an important incentive for the development of new medicines but that it also had an effect on prices. As stressed in this note, WTO Members have reached an interim solution to this problem. The Doha Declaration’s broader objectives should guide future work in this area.
From a more general perspective, the debate on TRIPS and Public Health is illustrative of a wide-ranging concern on the way rule making is taking place in an increasingly globalizing economic system. This is particularly the case of intellectual property that is playing a more and more significant role in the emerging but still fractured knowledge-based economy. As pointed out in this note, developing countries are being urged to enter into new intellectual property commitments, the implications of which are not well understood even in advanced countries.
The public health debate also illustrates that even if flexibilities are, on paper, part of the rules of the game, they are not easy to implement due to divergent interpretations or to the use of unilateral pressure on governments not to use some of the accepted legal instruments, e.g. compulsory licences, perceived by some players as detrimental to their interests. For F. Abbott the problem is not the rule itself. "The problem is that to the powerful actors the rules do not appear to apply. Developing Members are accorded rights, but are threatened if they attempt to use them… Based on the historical record, the problem is that the powerful actors will not live by the rules they have agreed to. They will not allow developing countries to make effective use of the mechanism. They will threaten them for contemplating to do so."[lxv]
Finally, the purpose of the note is to contribute to the broad objectives of the Barcelona Dialogue. In this context and from a perspective of governance, globalization and development, the following are issues that demand further clarification and growing consensus:
· Recognition that the protection of intellectual property is important for society in mobilizing investment and promoting research and development in general. But the system to succeed should be premised, as recognized in the TRIPS Agreement, on its contribution “to the promotion of technological innovation and to the transfer of and dissemination of the 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”.
· Acknowledgment that the TRIPS Agreement represents, with all its imperfections, the existing state of intellectual property standards, including flexibilities to adapt it to the special conditions of countries. TRIPS represents minimum standards and countries should be free, and not obliged, to adopt “more extensive protection.”
· Consideration of a moratorium on further commitments in this area. A moratorium that would ensure that for the next couple of years the obligations embodied in TRIPS should be respected and duly enforced with the understanding that further harmonization attempts in line with interests of more advanced countries will not be pursued until it is well argued that the economic and social benefits of new initiatives exceed economic and social costs arising in developing countries. [lxvi]
·
· The Agreement and new developments should be perceived and implemented consensually as means to promote dynamic competition, technological dissemination and local innovations. They should not be considered, as in the case of medicines, as instruments of domination imposed unilaterally on developing countries.
· Intellectual property protection and enforcement could promote innovation and transfer of technology, and foreign direct investment (FDI), but this will not occur automatically. The intellectual property system should not be considered as an isolated instrument of public policy and the sole instrument for promoting technological development. Intellectual property protection is one among many other factors influencing this process.
·
In the area of public health they should be
used in combination with other trade and economic instruments.
Patents are one element of the equation.
Price controls, competition, industrial policies in general are also
important components of this package. Differential
pricing (that is, the application of different price levels according to
countries’ income levels or other indicators) is another mechanism that could
indeed facilitate access to medicines. Some companies have offered voluntarily
to sell their drugs at reduced prices in some markets, especially to fight
HIV/AIDS. In other cases, corporations have gone further by donating drugs. The
design of appropriate policies on parallel imports as well as competition
regimes would be instrumental for differential pricing to work successfully.
·
The interim waiver and the subsequent amendment
of the TRIPS Agreement will not be sufficient to assist countries facing major
health crises. A more long-term
solution depends on the ability of those countries to acquire the capacity to
produce locally or regionally via licensing or otherwise.
This was recognized in the Doha Declaration that reaffirmed the
commitment of developed countries to provide incentives to their enterprises and
institutions to promote and encourage technology transfer to those countries.
In this respect concerted efforts should be undertaken to promote
public-private collaboration to address these questions. These
measures may include tax incentives to encourage research on diseases that most
seriously affect poor people, and a global fund to pay for such research or to
purchase essential drugs and supply them free of charge or at heavily discounted
prices.
ANNEX
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: (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.
(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.
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."
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Documento
de referencia sobre derechos de propiedad intelectual y sanidad pública
Pedro Roffe*
A lo largo de la historia, la relación que ha habido entre patentes y medicamentos ha sido polémica. La incorporación que se hizo en 1994 de las cuestiones de propiedad intelectual al sistema multilateral del comercio a través del Acuerdo ADPIC[i], así como el tratamiento que se hace en este acuerdo de los temas de sanidad pública, han suscitado un vivo interés público.
Numerosos gobiernos y organizaciones de la sociedad civil han acusado a las empresas de investigación farmacéutica de hacer un uso indebido de sus derechos de patente exclusivos. Los culpan, en primer lugar, de cobrar precios elevados por los tratamientos, hasta por los de enfermedades que afectan a numerosos pobres que no pueden costeárselos. En segundo lugar, por ejercer presión sobre los gobiernos para que impidan a la industria local importar copias baratas de medicinas producidas en países que no están sometidos a patente. Y además los critican por no realizar investigación y desarrollo (I+D) sobre las enfermedades que afectan a los pobres.[ii]
Tal como se demostrará en este documento, la patente de los medicamentos ha sido una cuestión fundamental y polémica todo a lo largo de la historia del sistema de propiedad intelectual y ha provocado divisiones tanto en las naciones desarrolladas como en los países en desarrollo. Como también se verá más adelante, la utilización de las licencias obligatorias como mecanismo jurídico para controlar posibles abusos por parte del titular de la patente ha sido un factor clave en la evolución de los regímenes internacionales de patentes. En virtud del Acuerdo ADPIC, todos los miembros de la Organización Mundial del Comercio (OMC) están obligados a conceder patentes para productos farmacéuticos. Esta obligación no existía en anteriores convenios internacionales. En cuanto a las licencias obligatorias, el Acuerdo establece una serie de normas que condicionan el recurso a este meca