The Multinational Monitor


December 2002 - VOLUME 23 - NUMBER 12

T H E    F R O N T

Medicine Access in Dispute

With the rich countries eager to renege on promises made at the November 2001 World Trade Organization (WTO) ministerial meeting in Doha, Qatar, developing countries in November rejected rich country proposals that public health advocates said would significantly limit poor countriesí access to essential medicines.

The Doha Declaration on TRIPS (Trade-Related Aspects of Intellectual Property) and Public Health recognized the serious public health issues facing developing countries and the importance of low-cost medicines in meeting public health needs. It reiterated countriesí right, under the WTOís TRIPS agreement, to undertake compulsory licensing ó by which governments authorize generic production of on-patent products including medicines. Compulsory licensing can drive down pharmaceutical prices by as much as 95 percent or more.

Paragraph 6 of the declaration promised to resolve, by the end of 2002, an outstanding issue in the TRIPS Agreement: the terms on which countries can export drugs as part of a compulsory licensing scheme.

Under TRIPS, countries are permitted to assign compulsory licenses to manufacturers overseas, and to import from these manufacturers. But it must be legal in the manufacturerís home country to make and export the product ó a problem if the product is patented in the home country.

Thus Zambia, say, is permitted to issue a compulsory license to a generic drug company in India to sell a drug patented in Zambia by GlaxoSmith-Kline. But the Indian company, if it is making the drug in a factory in India, must still obtain rights in India to manufacture and export the drug.

Under one set of TRIPS rules, if the drug is patented in India, then the Indian company would need to obtain a compulsory license in India. Even then, it must manufacture "predominantly" for the domestic market, so it could only ship 49 percent of its product to Zambia and any other country that had issued a compulsory license on the product.

At the Doha meeting, it was widely recognized that this arrangement was irrational. It biases small and poor countries that do not have sufficiently large markets for drug companies to set up production within their borders, for sale primarily in the country. Even rich countries may often have inadequately sized markets to justify domestic production primarily for domestic use. Smaller rich countries like New Zealand may need to import. Larger markets may need to import certain products that serve small patient populations. And emergency circumstances may require even the largest rich countries to import, as the United States considered during the anthrax scare, when Cipro manufacturer Bayer initially refused to lower prices and was not clearly able to provide supplies on the scale that might have been required.

This situation does not currently pose a serious problem, because India, which has a vibrant generics sector, is not required to comply with TRIPS rules until 2006. Indian generics producersí super-discount prices for AIDS drugs have dropped the price of treatments from at least $10,000 a year per person in Africa to $300 or less.

Negotiations over how to resolve the Paragraph 6 production-for-export issue have continued throughout 2002, heating up in an informal "mini-ministerial" in Sydney, Australia in early November and then at the TRIPS Council negotiations in late November.

Health groups had suggested a simple approach by which TRIPS rules be interpreted to permit countries to adopt laws enabling their manufacturers automatically to export to satisfy compulsory licenses issued in other countries.

At the TRIPS Council meeting, the United States and the European Union, accompanied by Japan, Canada and Switzerland, suggested instead a range of severe limitations. Among others, they suggested that:

ï Any production-for-export solution be limited only to HIV/AIDS, malaria and tuberculosis, or possibly other diseases of similar magnitude;

ï Any solution apply exclusively to pharmaceuticals, and not to vaccines or other healthcare technologies;

ï Only the poorest countries be permitted to import under a solution; and

ï Exporters be required to get a compulsory license in the home country.

In advance of the TRIPS Council meeting, Rosa Whitaker, Assistant United States Trade Representative for Africa, circulated a letter to African governments that sought to justify these limitations as actually serving African interests.

For example, Whitaker wrote that the U.S.-favored approach "focuses on the serious epidemics faced by Africans ó HIV/AIDS, malaria, and tuberculosis. Broadening the solution to cover any public health problem, as some are advocating, would divert attention and resources away from these epidemics, at Africaís expense, and risks trivializing the gravity of these serious epidemics."

Consumer and public health groups denounced the proposed limitations from the rich countries as cynical, dishonest and fundamentally interfering with countriesí ability to make effective use of compulsory licensing. Using compulsory licensing for other diseases would not "use up" the ability of countries to use it also for HIV/AIDS, malaria and tuberculosis, they said.

"To try and limit the solution to only a very small number of diseases is immoral," says Cecilia Oh, a Geneva-based representative of the Third World Network. "The intention of the Doha declaration was to address public health problems, but the negotiations are now going backwards, against the agreement reached at Doha. How can the U.S. Trade Representative be competent to decide which diseases amount to a public health problem for any country? Itís not just about HIV/AIDS, tuberculosis or malaria. Thereís a whole list of other diseases that are being excluded. Cancer, multiple sclerosis, asthma, diabetes, the list goes on ó these are all diseases which cause immense suffering."

Although the United States placed tremendous pressure on developing countries, especially African nations, to agree to the rich country proposals, they eventually refused.

As the meeting wound down, on behalf of the Africa group, Kenya made a statement definitively rejecting the rich country proposals. "The African Group is disappointed and frustrated by the progress made so far," the Kenyan statement said. "There is no merit in coming up with a purported solution that amounts to a step back from Doha or even that creates further restrictions on the current flexibilities in the TRIPS Agreement as highlighted in the Declaration."

This position reflected the health group view. The groups had insisted a bad solution was worse than nothing. First, noted James Love of the Washington, D.C.-based Consumer Project on Technology, the export problem only becomes acute in 2006, so there is no rush. Second, there are ways available under the existing TRIPS agreement to maneuver around the predominantly-for-domestic-market requirement, and a bad "solution" at the TRIPS Council would have prejudiced those alternatives.

With the talks collapsed, it remains unclear whether the rich countries will be able to force them to closure on their terms, or whether a standoff is emerging, or, though much less likely, whether the Third World might be able to achieve a near-term victory.

In surveying the wreckage at the end of the talks, Love said, "The U.S. government deserves most of the blame for the breakdown, as President Bush allowed the White House to take over the negotiations, and allowed a handful of large pharmaceutical companies to dictate the U.S. negotiating position." This constituted a hardening of more flexible positions suggested earlier by U.S. trade negotiators, said Love, who surmised the change came as payback for the industryís heavy investment in supporting Republicans in the mid-term elections concluded just a few weeks before the TRIPS Council meeting.

ó Robert Weissman