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LGD 2004 (1) - Duncan Matthews


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Is History Repeating Itself ? The Outcome of Negotiations on Access to Medicines, the HIV/AIDS Pandemic and Intellectual Property Rights in the World Trade Organisation



Duncan Matthews

Senior Lecturer and Senior Research Fellow,
Intellectual Property Research Institute,
Centre for Commercial Law Studies,
Queen Mary,
University of London, UK

d.n.matthews@qmul.ac.uk

Abstract

This article examines the negotiating history of the 1994 World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) and compares TRIPS negotiations with more recent attempts to find a solution to the problem identified in the Doha Declaration on the TRIPS Agreement and Public Health of 14 November 2001. The Doha Declaration identified the problem of how best to ensure access to low-cost essential medicines in developing countries faced with public health crises such as the HIV/AIDS pandemic and set WTO Members the task of agreeing on an appropriate mechanism to address this problem. Following difficult and prolonged negotiations, an agreement on such a mechanism was finally reached on 30 August 2003. The suggestion of this article is that history is repeating itself – that there are strong similarities between these recent WTO negotiations on access to essential medicines and the earlier multilateral trade talks that resulted in the TRIPS Agreement a decade ago.

Keywords: Essential Medicines, HIV/AIDS, Intellectual Property, Patents, Public Health, TRIPS Agreement


This is a refereed article published on 4 June 2004.

Citation: Matthews, D, 'Is History Repeating Itself ? The Outcome of Negotiations on Access to Medicines, the HIV/AIDS Pandemic and Intellectual Property Rights in the World Trade Organisation', Law, Social Justice & Global Development Journal (LGD) 2004 (1), <http://elj.warwick.ac.uk/global/04-1/matthews.html>. New citation as at 15/07/04: <http://www2.warwick.ac.uk/fac/soc/law/elj/lgd/2004_1/matthews/>.


1. Background

In many respects, the debate about how best to ensure access to essential medicines to combat the HIV/AIDS virus has come to typify anxieties about the World Trade Organisation (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (the TRIPS Agreement) and its potential to have adverse socio-economic impacts on developing countries. But, while there are wider anxieties that the TRIPS Agreement will exacerbate the North-South divide between developed and developing countries in the long term, there are also more immediate problems to be addressed specifically in relation to public health. More than 5.3 million new cases of HIV/AIDS are diagnosed each year, of which 92 per cent are in developing countries, and over 60 million sufferers in total worldwide. It is the scale of this pandemic that raises the most immediate concerns and the need for an agreement to ensure access to low-cost essential medicines needed to tackle HIV/AIDS in developing countries could not be more urgent.

Alongside recognition of the scale and gravity of the public health problem, there is growing concern that gaining access to anti-retroviral drugs - the essential medicines required to combat the HIV/AIDS pandemic - may actually become more difficult in the future due to rising prices. The concern is that, when the patent provisions of the TRIPS Agreement come fully into force in developing countries on 1 January 2005 and patent protection is extended to all pharmaceutical products, including many HIV/AIDS anti-retroviral drugs, the effect will be increased prices that will further reduce access to essential medicines. The TRIPS Agreement has a crucial role to play because, although over 95 percent of medicines on the World Health Organisation (WHO) essential medicines list are not patented, many newer drugs, particularly those designed to combat HIV/AIDS, are subject to patent control. Although further WTO derogations are available for a small number of least-developed nations, after TRIPS transitional arrangements come to an end for the vast majority of developing countries on 1 January 2005 prices of anti-retroviral drugs are predicted to rise in most developing countries.

This article reviews recent attempts to find a solution to this public health problem, as embodied in the WTO Doha Declaration on the TRIPS Agreement and Public Health of 14 November 2001, namely how best to ensure access to low-cost essential medicines in developing countries when faced with public health crises such as the HIV/AIDS pandemic. In response to the Doha Declaration, WTO Members agreed a Decision designed to improve access to essential medicines in developing countries on 30 August 2003. The article examines how the Decision of 30 August was reached and assesses its likely impact. It makes this assessment against the background of the original negotiations that concluded the TRIPS Agreement a decade ago. The suggestion of this article is that history is repeating itself – that there are strong similarities between recent WTO negotiations on access to essential medicines and the earlier multilateral trade talks that resulted in the original TRIPS Agreement ten years ago. In particular, as with negotiations that led to the TRIPS Agreement itself in 1994, the role of both government and industry actors from the European Communities (EC), Japan and particularly the United States (US) has been crucial, as has the tendency for small groups of countries to engage in negotiations to the exclusion of others, as well as the potential for package deals to offer developing countries trade benefits in particular sectors in return for concessions on intellectual property rights. Package deals still remain a possibility for the future at the end of the Doha Round of multilateral trade negotiations. But, there are also important differences between the recent deliberations on access to essential medicines and the original TRIPS negotiations. In particular, unlike the original TRIPS negotiations, recent deliberations on essential medicines and public health have been marked by a higher profile for Non-Governmental Organisations (NGOs). In order to make these comparisons more fully, it is with the original TRIPS negotiations that the article begins.

2. Revisiting the Past: The TRIPS Negotiations (1986-1994)

During the early years of TRIPS negotiations, until 1990, discussions were undertaken in accordance with the ‘Green Room’ formula (Gorlin, J, 1999, pp 4), whereby negotiators from all countries involved in the Uruguay Round engaged in discussions with one another across the table of the Green Room in the General Agreement on Tariffs and Trade (GATT) building in Geneva, with draft texts exchanged and differences narrowed in successive versions. However, from 1991 onwards, the ‘Green Room’ approach was abandoned in favour of a ‘10+10’ Group (Matthews, D, 2002, pp 38), by which was meant ten developed countries plus ten developing countries.[1] This reduced dramatically the number of negotiators involved and allowed the US, EC and Japan a greater role in deciding the pace and direction of negotiations, these three developed countries often presenting a common viewpoint once they had reached agreement on the best way forward amongst themselves. So, while some commentators (see, for example, Wade, R, 2004, pp 149) have identified the Green Room as the source of many a fait accompli in WTO negotiations, the reality in the TRIPS context was actually far more restrictive than even the Green Room scenario envisaged, with a far smaller number of players given access to the crucial negotiations on intellectual property rights through the ‘10+10’ Group

As for developing countries, they largely gave up their resistance to the TRIPS Agreement in the face of the trilateral alliance of the US, EC and Japan. Towards the end of the Uruguay Round, developing countries were experiencing ‘negotiation fatigue’ (Braithwaite, J and Drahos, P, 2000, pp 197) not least due to a problem of information deficiencies and a lack of technical expertise on the part of their official delegations in relation to intellectual property. Only about ten developing countries actually sent intellectual property experts to the TRIPS negotiations (Matthews, D, 2002, pp 44) and, even though negotiators were expected to deal with highly technical and complex legal issues (Gervais, D, 1998, pp 13), in most cases, the heads of delegations to the TRIPS negotiations were from national trade ministries rather than being intellectual property specialists. Several developing countries were merely represented by generalist Trade Counsellors from national Permanent Missions to the United Nations (UN) in Geneva (Balasubramanium, K, 2000). In the absence of the necessary legal expertise, fatigue resulted because developing countries simply did not have the knowledge necessary to negotiate effectively on the content of the TRIPS Agreement (Matthews, D, 2002, pp 44).

In contrast, developed country delegations to the Uruguay Round negotiations were supported by their industry experts and had access to the highest level of business advice, this proving to be the most effective method for delegates to acquire the negotiating expertise they required (Braithwaite, J and Drahos, P, 2000, pp 63, Drahos, P 1997, pp 210). Throughout the Uruguay Round of Multilateral Trade Negotiations between 1986 and 1994, which included negotiations on the TRIPS Agreement, the corporate lobby not only maintained good relations with the Geneva delegations of the US and the EC (Matthews, D, 2002, pp 43) but, in the case of national industry associations such as the Pharmaceutical Research and Manufacturers of America (PhRMA), actually provided the technical and legal expertise and advocacy skills on which US trade negotiators based their strategies (Drahos, P, 1995, pp 13, Ryan, M, 1998, pp 109). With no other sources of information available, the Office of the United States Trade Representative (USTR) became reliant on information provided by US companies. Equally, the EC delegation in Geneva received important input from European business and from the Union of Industrial and Employers’ Confederation of Europe (UNICE), while Japanese business advised its government’s Geneva delegation via the Japanese Federation of Economic Organisations (Keidanren). The CEO of US pharmaceutical company Pfizer, Ed Pratt, was even an adviser to the US Official Delegation to the Punta delEste meeting that launched the Uruguay Round (Drahos, P, 1995, pp 13). This developed country reliance on industry advice and intellectual property expertise during the TRIPS negotiations has been criticised as giving a one-sided approach to the negotiations (see, for example, de Koning, M, 1997, pp 66). But, given the lack of specialist intellectual property expertise and advocacy skills in government, the reality was that developed country trade negotiators had little alternative. The influence of business interests was crucial to developed countries’ negotiating positions on intellectual property protection during the Uruguay Round and played an important role in influencing policy decisions (Matthews, D, 2002, pp 44).

Of the larger developing countries, although India and Brazil were initially able to formulate counter-proposals to the TRIPS Agreement, these proposals were evaluated by legal experts from US industry, who were ultimately able to advise the US government negotiating team in Geneva how to undermine developing country arguments, with the effect that superior US technical expertise won the day during the TRIPS negotiations. But what the Uruguay Round did offer developing countries was potential in terms of issue-linkage and package deals across trade sectors, particularly in relation to textiles and agriculture (Matthews, D, 2002, pp 44). In return for accepting the TRIPS Agreement proposals, developing countries were effectively engaged in ‘linkage-bargain diplomacy’ (Ryan, M, 1998, pp 92), agreeing to TRIPS proposals in return for favourable trading conditions for particular products. By the time that the Uruguay Round negotiations ended, it appeared that issue-linkage had played a key role. Faced with the coordinated negotiating strategy of the US, EC and Japan, augmented by the technical expertise of business groups, and issue-linkage offering developing countries benefits in other areas of international trade, developing countries relented. The result was that the final version of the TRIPS Agreement signed in Marrakesh on 15 April 1994 was perceived to closely reflect the demands of developed countries and their industries on a range of intellectual property issues.

3. Compulsory Licensing, Access to Medicines and the TRIPS Agreement

Yet, despite the perceived pro-developed country bias of the TRIPS Agreement, the final text did contain provisions that aimed to resolve exactly the type of problem that has arisen with respect to the issue of patents and how best to ensure access to medicines when a public health crisis occurs. The TRIPS Agreement sought to do this by means of Article 31, which allows for compulsory licensing.[2] A compulsory licence is a licence granted by the competent national authority to allow a third party to manufacture a patented product without the authorisation of the right holder. Compulsory licensing permits countries to produce generic drugs that are more affordable than patented proprietary medicines. Article 31 also sets out conditions that must be satisfied before a compulsory licence can be awarded. These conditions include, under Article 31(b), a requirement that a reasonable period of time is allowed to negotiate a licence with the right holder on the basis of reasonable commercial terms, but this requirement of prior negotiation and adequate remuneration[3] can be waived in the event of a national emergency or other circumstances of extreme urgency. So, on the face of it, compulsory licences could be granted by a developing country without prior negotiation with the holder of rights to key pharmaceutical patents in the case of a public health crisis of epidemic proportions.

However, under Article 31(f) of the TRIPS Agreement, generic drugs produced under a compulsory licence must be ‘predominantly’ for domestic use.[4] This has the practical effect of preventing exports of generic drugs to countries that do not have significant pharmaceutical industries themselves (see also Abbott, F M, 2001, pp 13). Only about a dozen developing countries, among them China, India, Brazil, Argentina and South Africa would have the level of manufacturing capacity capable of producing significant quantities of off-patent generic drugs. For countries with insufficient manufacturing capacity, the only realistic sourcing mechanism would be importation. Currently developing countries can buy generic drugs from a few producers in countries such as India. But they will be unable to do so after 1 January 2005, when transitional arrangements under Article 65(4) of the TRIPS Agreement expire and provisions under Article 27(1) requiring patent rights to be enjoyable without discrimination as to place of invention, field of technology and whether products are imported or locally produced, are extended to all except a few least-developed nations.

4. The Doha Declaration on the TRIPS Agreement and Public Health

At the 4th Ministerial Conference in Doha, 9-14 November 2001, WTO Members adopted a Declaration on the TRIPS Agreement and Public Health.[5] The Doha Declaration acknowledged concerns that the obligation on developing countries to provide patent protection for pharmaceutical products after 1 January 2005 would mean higher prices for essential medicines, particularly those designed to combat HIV/AIDS, tuberculosis, malaria and other epidemics. It also recognised that problems would be created by the requirement that compulsory licences issued in accordance with Article 31 of the TRIPS Agreement could only be issued if predominantly for domestic use.

The Doha Declaration recognised 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. It stressed the need for the TRIPS Agreement to be part of a wider national and international action to address these problems. It reaffirmed that the TRIPS Agreement does not and should not prevent measures to protect public health and affirmed that the TRIPS Agreement 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.

The Declaration recognised the flexibilities contained in the TRIPS Agreement with respect to: the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted, the right of each Member to determine what constitutes a ‘national emergency’ or other circumstances of extreme emergency, it being understood that public health crises can represent a national emergency or other circumstances of extreme emergency, and the effect of provisions of the TRIPS Agreement that allow each Member freedom to establish its own regime for exhaustion of intellectual property rights.

Crucially, in recognition of the fact that the compulsory licensing provisions of the TRIPS Agreement are of no practical use to countries with little or no pharmaceutical manufacturing capabilities, paragraph 6 of the Doha Declaration then went on to explicitly recognise 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 and set a deadline of the end of 2002 to find an expeditious solution to this problem.

5. The Paragraph 6 Negotiations

In an attempt to resolve the issues identified in paragraph 6 of the Doha Declaration, negotiations between WTO Members, meeting within the TRIPS Council, took place from early 2002 onwards, culminating in the WTO Decision of 30 August 2003 (see also Matthews, D, 2004, pp 73). As during the original negotiations on the TRIPS Agreement, the US and the EC took the initiative during the paragraph 6 talks (on the role of the US and EC in the earlier TRIPS negotiations see Matthews, D, 2002, pp 49). However, unlike the original TRIPS negotiations, the paragraph 6 process was also marked by a far greater degree of involvement on the part of NGOs, acting in support of the developing country cause (see also Sell, S K, 2002, pp 15).

The higher profile of NGOs in the paragraph 6 debate has been seen as largely attributable to the work of organisations such as Consumer Project on Technology (CPTech), a US-based NGO focusing on information technologies, intellectual property and research and development, and Health Action International (HAI) a global network of health, development, consumer and other public interest groups, based in the Netherlands. CPTech and HAI have been active in the debate surrounding patents, access to medicines and public health since the mid-1990s (Sell, S K, 2002, pp 15). Meanwhile, the Quaker UN Office has also played a key role in the public health debate through the work of its consultant Geoff Tansey and the influential report it commissioned (Abbott, F M, 2001) in the run-up to the Doha Ministerial Meeting. James Love and Ellen ‘t Hoen of NGOs CPTech and Médecins sans Frontières (MSF) respectively have also been extremely active in the access to essential medicines debate, as have academics Carlos Correa and Jerome Reichman. Oxfam has also been active through the work of Ruth Mayne and briefing papers such as ‘TRIPS and Public Health: the next battle’.[6]

Negotiations on a possible solution to the issues identified in paragraph 6 of the Doha Declaration concerned: (i) the scope of diseases to be included in any agreement, (ii) the countries to be beneficiaries of an agreement on access to essential medicines as either importers or exporters of cheap drugs, (iii) a possible waiver of Article 31(f) of the TRIPS Agreement, (iv) a moratorium on complaints to the WTO Dispute Settlement Body in relation to Article 31(f), and (v) an Article 30 solution to the Article 31(f) problem. Each of these issues is discussed in turn below.

5.1 Scope of Diseases

Taking the initiative on the scope of diseases to be covered by any agreement on exceptions to Article 31(f) of the TRIPS Agreement, on 5-6 November 2002, the EC, having reportedly lobbied for support from China, Brazil and India, presented compromise proposals in the run-up to the Sydney WTO Mini-Ministerial Meeting that took place on 14-15 November 2002. The EC proposed that any solution which allowed an exemption to existing TRIPS rules under Article 31(f) that required generic drugs produced under a compulsory licence to be ‘predominantly’ for domestic use should be limited to the production of medicines ‘where the gravity of public health problems afflict developing and least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics’. Product coverage would include patented pharmaceuticals and diagnostic test kits needed to address public health problems.

However, concerned that increasing off-patent access to cheap essential medicines would undermine potential new markets for proprietary medicinal products in developing countries and increase the risks of trade diversion of these products into developed country markets, the US adopted a more restrictive approach. On 25 October 2002, Assistant USTR for Africa, Rosa Whitaker, wrote to all sub-Saharan African countries, urging them to support the US position (the full text of the letter is reprinted in Jawara, F and Kwa, A, 2003, pp 250-252). The Whitaker letter insisted that an exemption be limited to HIV/AIDS, tuberculosis and malaria with no scope for ‘other epidemics’ to be included. The US view was that broadening the exemption to cover any ‘other epidemics’, in keeping with the wording of the Doha Declaration, would risk the inclusion of ‘lifestyle’ illnesses such as obesity or the common cold that should not be excluded from the compulsory licensing provisions of the TRIPS Agreement. NGOs criticised the US approach on grounds that half of the victims of non-communicable diseases (cardiovascular diseases, cancer, diabetes, chronic respiratory diseases etc.) are from the developing world, where access to expensive patented pharmaceutical products remains limited. The Whitaker letter also argued against allowing the full range of health care products (including diagnostic kits) to fall within a paragraph 6 solution, as the EC suggested, on grounds that this would divert attention from access to medicines.

5.2 Beneficiary Countries

The EC and US both took the view that countries benefiting from the exception as importers of low cost essential medicines should be limited to least-developed countries and nations classified by the World Bank as low-income developing countries. High-income developing countries[7] would be able to benefit from the exemption only if the low-cost medicines were needed to address situations of ‘national emergency or extreme urgency’. Eligible countries would also have to show that they have no or insufficient manufacturing capacity in the drugs sector (i.e. no plants manufacturing active ingredients) and that they would not be able to create such capacities in the short term. NGOs criticised the proposal to restrict the exemption to low-income economies on the grounds that this condition denied equal rights of access to generic medicines for at least 72 developing countries that could not, with the probable exception of China, produce these generic versions of the new drugs for themselves, nor do so at a reasonable price.

Another major sticking point arose over which countries should be allowed to qualify as exporters of low-cost essential medicines. While the EC proposed that all WTO members should qualify, in the Whitaker letter the US suggested limiting exporters under the exemption to least-developed and developing countries. Permitting developed countries to be exporters would, in the opinion of the US, hinder technology transfer and pharmaceutical company investment in the developing world. This US proposal was criticised by NGOs as having the effect of reducing the number of potential suppliers of generic medicines that would be able to produce low-cost medicines. The main problem with this solution was that the company supplying cheap generic drugs would have to ask the government of its own country to override the relevant patent before any export could take place. This would make the importing country dependent on the political will of another government and increase the administrative burden.

Alongside the arguments put forward by NGOs, the EC and US proposals that would have prevented high-income developing countries from benefiting from the new rules were also criticised by developing countries themselves, including Brazil, India, South Africa, Kenya, Thailand, China and Egypt on grounds that the proposals of developed nations amounted to an attempt to differentiate among the potential beneficiary countries to an extent not agreed upon by paragraph 6 of the Doha Declaration, which simply refers to countries with ‘insufficient or no manufacturing capacities’. The developing countries argued that all WTO Members should be allowed to judge for themselves whether they meet these criteria.

The African Group of developing countries elaborated on this position, stating that differentiating between developing countries may not have a good basis in the Doha Declaration because in that text reference was made to all developing country Members as a category. But the African Group signalled flexibility on possible safeguards imposed on the country making the generic drug. They proposed that safeguards could include a requirement to export all of the production to the country issuing the licence and to require special labelling of the drug. But they argued that proposals to require special colouring and shaping of pills might increase production costs and should be avoided.

The US was particularly concerned that generic medicines produced under an exemption could be diverted to developed country markets and sold illicitly for huge profit. In order to minimise the re-direction of low-cost medicines into developed country markets, the EC proposed that safeguards need to be put in place, with producers and importers taking necessary measures to prevent trade diversion, including making medicines produced under the exemption clearly distinguishable through labelling, marking and packaging.

5.3 Waiver of Article 31(f) of the TRIPS Agreement

The US advocated a temporary solution in the form of a waiver or, alternatively, a short-term moratorium until the end of the Doha Round, at which time a permanent solution would be sought. A waiver would take the form of a decision that developing country obligations would be temporarily set aside to enable that country to take steps appropriate to address public health crises until a definitive resolution of the paragraph 6 issue has been achieved (see also Abbott, F M, 2001, pp 32). Article IX: 3-4 of the WTO Agreement sets out the procedure for achieving a waiver on an obligation imposed on a WTO Member by one of the multilateral trade agreements, including the TRIPS Agreement. The request for a waiver from a developing country would initially be submitted to the TRIPS Council, following which the Ministerial Conference may approve the waiver by consensus or a three quarters vote. A waiver would be temporary and would have the advantage over a permanent amendment of the TRIPS Agreement in that it would not require the approval of parliamentary bodies within WTO Members and could be tailored to the specific objectives of the public health crisis in question (Abbott, F M, 2002, pp 20). Members would then agree on an amendment to the TRIPS Agreement, formally recognising the scheme, by the time the Doha Round of trade negotiations are due to end in January 2005.

5.4 Moratorium on Disputes Relating to Article 31(f)

A moratorium would have taken the form of restraint on the part of complainant WTO Members on bringing dispute settlement actions against developing countries before the Dispute Settlement Body of the WTO in relation to Article 31(f) of the TRIPS Agreement. This was suggested by the US as an appropriate mechanism for low income developing countries.[8] However developing countries and NGOs complained that the moratorium would be unworkable, Health GAP even labelling it as a ‘hoax’ because it creates too much uncertainty.[9] To take advantage developing countries would have to amend national legislation in order to permit production for export under a compulsory licence and/or in order to permit compulsory licences for import. There was the problem that, implicit in the moratorium, was the proviso that it would apply only if developing countries compensated patent holders for compulsory licences, and only until the expected end date of Doha Development Round of multilateral trade negotiations in January 2005 when the transitional arrangements for developing countries under Article 65(4) of the TRIPS Agreement would also come to an end. With the prospect of a temporary solution of the kind offered by a moratorium lasting only until the end of the Doha Round, the concern was that trade-offs and package deals would emerge, as they did during the original TRIPS negotiations, with developing countries offered trade advantages and market access in key areas such as agriculture and textiles in return for agreeing to the more restrictive interpretation of Article 31(f) proposed by developed countries.

5.5 Article 30 Solution to the Article 31(f) Problem

One provision of the TRIPS Agreement that was seen to offer an opportunity to make generic drugs readily available in developing countries was Article 30. That provision allows WTO Members to provide limited exceptions to the exclusive rights conferred by a patent, provided such authorisation does not prejudice the legitimate interests of the patent owner, taking into account the interests of third parties. There was hence speculation, particularly amongst NGOs, that the Article 30 mechanism could be used to authorise the making and export of patented public health related products to developing countries, where this is undertaken to fulfil the unmet public health needs in countries of import (see also Abbott, F M, 2001, pp 33, 2002, pp 6). The measures envisaged by Article 30 were even given practical embodiment in proposals made by the European Parliament (EP).

On 23 October 2002, during the first reading of the draft Directive to update Directive 2001/83/EC relating to medicinal products for human use, the EP adopted proposals for an Article 30 solution in the form of Amendment 196, which stated that:

‘Manufacturing shall be allowed if the medicinal product is intended for export to a third country that has issued a compulsory licence for that product, or where a patent is not in force and if there is a request to that effect from the competent public health authorities of that third country.’[10]

Amendment 196, which was consistent with contemporaneous proposals by the WHO, set out a basic framework for a solution to the paragraph 6 problem by allowing generic manufacturers in any country to supply consumers in any country, so long as the sale of that product was legal and appropriate in the country where it was used by patients, and so long as the legitimate rights, if any, of the patent owners, were protected in the country where the product was consumed.

The EP approach was also consistent with proposals of the WHO.In its statement to the TRIPS Council on 20 September 2002, the WHO argued that:

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 authorisation, as requested by the Doha Declaration, to permit third parties to make, sell and export medicines and other health technologies to address public health needs’.[11]

Even in the run-up to the Doha Ministerial, Abbott was suggesting that WTO Members reach an agreement to the effect that Article 30 permits authorising the making and export of patented drugs under certain circumstances (Abbott, F M, 2001, pp 14). But the reality was that serious doubts had already been raised about the extent to which circumstances can amount to a ‘limited exception’ within the meaning of Article 30 following the WTO Dispute Settlement Panel Decision on Sections 55.2(1) and (2) of the Canadian Patent Act (see also Skyes, A O, 2002, pp 6), which appeared to all but exclude the possibility of WTO Members using Article 30 to allow generic manufacturers to supply drugs to another country.[12]

6. Chairman’s Draft

In the closing months of 2002, the debate became stymied by disagreement over the issue of which illnesses and medicines should be covered by an exception, which countries should be allowed to benefit from the exception, which countries should be allowed to produce generic equivalents of patented medicines for export and whether the TRIPS Agreement should be formally amended.

Ambassador Eduardo Perez Motta, Chairman of the TRIPS Council, attempted to achieve progress with a compromise text on 16 December 2002,[13] under which the TRIPS Agreement would be amended so that any country with manufacturing capacities could export, while developing countries without manufacturing capacities in the pharmaceutical sector would be allowed to benefit from this system in the face of public health problems. Countries with sufficient capacity and/or financial means would not be able to use the exemption system, since this would only divert resources away from those countries that need it most. Developed and high-income developing countries would opt out from the system entirely, while the disease scope would reflect the wording of the Doha Declaration.

Under the Chairman’s draft, countries importing generic pharmaceutical products and using the paragraph 6 mechanism would be expected to take measures to prevent re-exportation, provided such measures were ‘reasonable’, ‘within their means’ and ‘proportionate’ to their administrative capacities and the risk of trade diversion. Exporting countries would be obliged to require the beneficiary company of the compulsory licence (1) to export their entire production to the countries needed and (2) to clearly identify the products through labelling or marking and through special colouring or shaping of the products themselves.

At the informal TRIPS Council meeting on 17 December 2002, Ambassador Motta made it clear that the US had little option but to accept or reject the compromise text contained in the Chairman’s draft.[14] Developing countries, including India, Brazil and Kenya signalled a willingness to accept the Chairman’s draft, much to the dismay of some NGOs, provided there was no move to further limit the scope of diseases.[15] But when the TRIPS Council met formally on 20 December 2002, the effective deadline for the conclusion of paragraph 6 negotiations, there was deadlock. The US blocked an agreement on grounds that the scope of coverage in the Chairman’s draft was too broad and went beyond the focus of HIV/AIDS, tuberculosis and malaria. The US felt that the compromise text could be interpreted as meaning that drug patents could be ignored on treatments for a wide range of diseases.[16] Negotiations were suspended and Ambassador Motta asked WTO Members to resume negotiations and report to the next meeting of the TRIPS Council, which took place on 10 February 2003. In the interim, both the EC and US announced temporary measures in the form of a moratorium on disputes arising from Article 31(f) until such time as a permanent solution could be reached.

7. EC Compromise Text

Ahead of the February TRIPS Council meeting, on 9 January 2003, the EC launched a new initiative to break the deadlock.[17] The EC proposal was to remove WTO constraints requiring compulsory licences to be ‘predominantly’ for domestic supply in the case of medicines to combat a limited list of 22 infectious diseases (including HIV/AIDS, tuberculosis and malaria) that are generally recognised by health experts to have the most damaging impact on developing countries. For any health concern not explicitly covered by the initial list, WTO Members wishing to import medicines under compulsory licence terms would be encouraged to seek WHO advice before doing so. Involving the WHO, with its public health expertise, was seen as a way of ensuring that the Doha Declaration could be used in good faith.

The TRIPS Council on 10 February 2003 failed to take the issue much further, the meeting lasting only two hours and ending in deadlock with no party willing to relinquish its key demands. Meanwhile, the pharmaceutical industry also remained unconvinced. ‘It’s the old Pandora’s Box again’,[18] complained Harvey Bale, Director-General of the International Federation of Pharmaceutical Manufacturers Associations, arguing that an agreement based on the EC proposal had the potential to undermine patent rights on a wide array of medicines to deal with ‘lifestyle’ illnesses ‘including treatments for the common cold and obesity’. ‘Unfortunately the EC proposal is an open-ended, bottomless pit’, he claimed.

At the next TRIPS Council meeting on 4-5 June 2003, attempts were made to break the deadlock in the form of Communications submitted by the EC and by the African, Caribbean and Pacific (ACP) states. The EC Communication stressed that full advantage should be taken of the available expertise on health matters, particularly from the WHO, in relation to implementing the Doha Declaration, and made clear that the principles of the Doha Declaration should be carried through to issues other than compulsory licensing or parallel imports, such as ‘exceptions to exclusive rights or other policy options’.[19] This latter statement appeared to leave open the possibility of future EC support for an Article 30 based solution to the paragraph 6 problem in the future. The ACP Communication expressed disappointment at the failure to reach agreement on the 16 December 2002 Motta text and highlighted the need for technical assistance, in particular from the World Intellectual Property Organisation (WIPO), the WTO and the WHO.[20] The June TRIPS Council meeting ended without any substantial progress on a solution. However, following the June meeting, reports began to appear that the United States was prepared to abandon its earlier insistence that a paragraph 6 solution cover only specific diseases (namely HIV/AIDS, tuberculosis and malaria), shifting its focus from disease coverage to limitations on eligibility aimed at low-income developing countries and least-developed nations, together with safeguards against the risk of commercial export of low-cost medicines into other markets.[21] This shift in the position of the United States was crucial in securing agreement on a Decision of the WTO General Council, designed to resolve the issue, at the end of August 2003.

8. WTO Decision on Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health

The final breakthrough came when Ambassador Motta’s successor as Chairman of the TRIPS Council, VanuGopalaMenon of Singapore, replicated the negotiating formula that had proved so successful in achieving a breakthrough during the original TRIPS negotiations in the early 1990s through the ‘10+10’ Group, by meeting with a small group of WTO Members to negotiate a solution to paragraph 6. Ambassador Menon’s group, comprising the US, Kenya, Brazil, South Africa and India, succeeded in producing a draft Decision on 21 August 2003, followed by a revised draft, almost identical to the original version, on 26 August. Following approval by the TRIPS Council on 28 August, the General Council of the WTO was then presented with a final draft of the Decision on implementation of paragraph 6 of the Doha Declaration, which it adopted on 30 August 2003.[22]

The Decision provides for a temporary waiver of Members’ obligations under Article 31(f) of the TRIPS Agreement, of the type originally proposed by the US during the paragraph 6 negotiations, until such time as that article is amended.[23] Pharmaceutical products covered by the Decision include any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address public health problems as recognised by paragraph 1 of the Doha Declaration. This explicitly includes active ingredients necessary for their manufacture and diagnostic kits needed for their use.

Countries eligible to import under the agreement include any least-developed WTO Member and any other Member that has notified the TRIPS Council 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. A number of Members (Hong Kong China, Israel, Kuwait, Macao China, Mexico, Qatar, Singapore, Chinese Taipei, Turkey and the United Arab Emirates) have stated that, if they use the system, it will only be in situations of national emergency or other circumstances of extreme urgency (this statement carrying with it the significant implication that other Members may use the system more liberally in circumstances other than in situations of national emergency or other circumstances of extreme urgency).

Furthermore, as regards applicant states for European Union (EU) membership, until their accession the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic and Slovenia all agreed that they would only use the system as importers in situations of national emergency or other circumstances of extreme urgency. They also agreed that upon their accession to the EU they would opt out of using the system as importers altogether. In addition, footnote 3 to paragraph 1(b) of the Decision carries a list of developed country Members that will from the outset opt out of using the system as importers entirely.[24] As regards countries allowed to sanction the manufacture and export of low-cost essential medicines under the system, the Decision makes it clear that any Member may use the system set out in the Decision to produce pharmaceutical products for, and export them to, an eligible importing country.

The Decision then goes on to set out a number of safeguards designed to ensure that cheap drugs manufactured under compulsory licensing arrangements and intended for developing countries are not diverted to developed country markets. These anti-diversion measures require that medicines made available under the scheme be a different shape and colour from those sold for profit in developed country markets, while the TRIPS Council will review periodically whether the licensing arrangements are being abused.

A separate statement by WTO General Council Chairman Carlos Pérez del Castillo, then describes Members’ ‘shared understanding’ that the Decision will be interpreted and implemented on a ‘good faith’ basis in order to deal with public health problems and not for industrial or commercial policy objectives, and that issues such as preventing the medicines getting into the wrong hands are important.[25] It also stresses that Members recognise that the purpose of the Decision would be defeated if products supplied under its arrangements were diverted from markets for which they are intended and that all reasonable measures should be taken to prevent such diversion, such as special packaging and/or colouring or shaping of medicines and that such measures should not have a significant impact on price. Examples of ‘best practice’, based on existing anti-trade diversion detection measures already taken by donor pharmaceutical companies, are appended to the statement. The statement then goes on to stress the role of the TRIPS Council in settling disputes arising from these arrangements expeditiously and amicably, with the TRIPS Council explicitly given a new role in reviewing notifications made under the system and all information gathered on implementation of the Decision included in the TRIPS Council annual review of the Decision.

9. Likely Impact

Concerns remain that the added costs associated with altering packaging, pill size and colour will have a detrimental effect on the availability of essential medicines in developing countries, reducing the incentives for generic drug companies, which will find it less cost-efficient to produce identifiable pills, while there are also concerns that the administrative burden associated with the procedural arrangements for notifying the WTO of its decision to use the mechanism and undergo TRIPS Council scrutiny will result in lengthy delays and prove costly for developing country governments.

There are also concerns that the Decision sets out burdensome procedural arrangements. The new arrangements will require that the importing country first attempt to obtain a voluntary licence from the patent holder on reasonable commercial terms for a reasonable period. If this is not possible, the importing country must then assess its generic industry’s capacity to produce the medicine locally and, if capacity is deemed insufficient, then notify the WTO with a detailed justification of its decision. The importing country must then notify a potential importer, which must in turn seek a voluntary licence and, failing that, must seek a compulsory licence from its own government on a single-country basis, with compensation payable on standards of reasonableness in the importing country. Conversely, there are still some lingering concerns for individual companies operating in the proprietary pharmaceutical industry that some high- and middle-income developing countries will not opt out from the arrangements.

The Decision is likely to have far-reaching consequences. At an institutional level, it re-defines the role of the TRIPS Council, which will now routinely receive notifications from developing countries of their intention to use compulsory licences. The TRIPS Council will also produce an annual report on the activities of WTO Members in this respect. As such, the Decision opens a new chapter in the activities of the TRIPS Council. At an operational level, the Decision introduces a new degree of differentiation between developing countries to an extent not previously seen in the TRIPS Agreement and also carries with it a number of uncertainties and additional obstacles for those WTO Members seeking to avail themselves of the new procedures. However, the Decision does mark a step back from the more restrictive interpretation of a paragraph 6 solution advocated by the EC and US in earlier negotiations. The arrangements outlined in the final text of the Decision do not limit the scope of diseases, nor as a general rule require a national emergency such as an epidemic to be identified before compulsory licences can be issued since public health problems can now routinely be dealt with under the agreed arrangements.

But despite the progress made by the WTO Decision of 30 August 2003, the stakes remain high. One potential adverse impact of accepting a system that may lead to more frequent recourse to compulsory licensing may, of course, be a continuation of the dearth of research into diseases of particular importance to developing countries, such as malaria and drug-resistant tuberculosis. Some commentators argue that the presumption that greater patent protection in developing countries under the terms of the TRIPS Agreement would result in increased levels of research into tropical diseases, with the prospect of significant financial rewards for pharmaceutical companies holding key patents would be likely to be undermined by a more liberal interpretation of TRIPS provisions on compulsory licensing and parallel importation (Sykes, A O, 2002, pp4). There remains a risk that a pharmaceutical company considering investing in research and development into diseases that particularly affect developing countries might consider this unviable in commercial terms if compulsory licences are subsequently awarded and importation allowed into the affected area with only reduced compensatory payments awarded to the patent holder (Sykes, A O, 2002, pp 22).

There is also the risk that the US remains prepared to take tough unilateral action if developing countries try to use cheap generic drugs through its Special 301 mechanism. This is a form of the ‘TRIPS-plus’ bilateral action (Drahos, P, 2001) while a further manifestation of TRIPS-plus might well occur through the introduction of bilateral trade agreements, such as the draft Free Trade Area for the Americas (FTAA),[26] namely a ratcheting up of standards to limit compulsory licensing through trade agreements outside the remit of the WTO. Developing countries may well be prepared to sign such agreements in order to avoid losing access to developed country markets.

Yet, overall, the reality is that the debate about the Doha Declaration and compulsory licensing is part of a much wider structural problem in development policy (Reichman, J H, 2002, pp 27). Improving health care systems and public health awareness via education programmes, plus new research into treatments for diseases prevalent in developing countries will all be crucial.

10. Concluding Remarks

As with negotiations that led to the TRIPS Agreement in the early 1990s, the role of the US and the EC has been crucial in the progression of the debate concerning the Doha Declaration, access to essential medicines and public health. But, unlike the original TRIPS negotiations, the recent paragraph 6 negotiations have been marked by a higher profile for NGOs. Developing countries themselves, although initially ‘emboldened’ (Sykes, A O, 2002, pp 2) to seek greater recourse to compulsory licences and importation, ultimately experienced ‘negotiation fatigue’, as they had earlier done during the original TRIPS negotiations. By the time a small number of developing countries met with developed countries as Ambassador Menon’s negotiating group in August 2003, developing nations were prepared to lessen their opposition to the formula put before them by developed countries.

But it was ultimately the change in approach on the part of the United States and its proprietary pharmaceutical industry in August 2003 that created the conditions under which an agreement, in the form of the 30 August Decision, could be put in place, albeit with procedural safeguards additional to those suggested the previous December. NGOs and developing countries may have played a significant role in seeking to re-define and re-align the rules of international intellectual property law, but the final outcome was characterised by the dominance of the US and the EC as key institutional actors, assisted by industry groups. Together with the reluctance of developing country governments to ultimately oppose the US approach in the face of negotiating fatigue and, looming on the horizon, the possibility of issue-linkage with textiles and agriculture when a permanent solution to the access to essential medicines problem is put in place at the end of the Doha Round of multilateral trade negotiations, the scenario played out is remarkably familiar. It repeats the pattern of negotiations that led to the original TRIPS Agreement in 1994.

Nevertheless, the future is not totally bleak. If developing countries are able to overcome the administrative burdens associated with the new WTO Decision on access to medicines and at the same time address structural weaknesses in their own healthcare systems, the outcome of the paragraph 6 negotiations may well be of long-term benefit to HIV/AIDS sufferers worldwide. But, from a public international law perspective, what has become clear from the analysis of recent negotiations contained in this article is that the continued dominance of the US and the EC lies at the heart of WTO negotiations in relation to the TRIPS Agreement. As such, the history of intellectual property rights in the WTO does indeed appear to be repeating itself.




Endnotes

[1] The size and membership of the ‘10+10’ Group varied depending on the issue being discussed at any one time and was sometimes as small ‘5+5’, but generally included the US, EC, Canada, Japan, Argentina, Brazil, the Nordic countries, Hong Kong, India, Malaysia, Switzerland and Thailand.

[2] For a negotiating history of Article 31 of the TRIPS Agreement see Gold and Lam (2003).

[3] For a theoretical and empirical analysis of royalties set under compulsory licences see Scherer and Watal (2002).

[4] For a discussion of the meaning of ‘predominantly’ within the context of Article 31(f), see Abbott (2002, pp 26).

[6] <http://www.oxfam.org.uk/policy/papers/15trips/15trips.html>

[7] According to the World Bank classification of high-income countries among non-OECD economies are: Brunei, French Polynesia, Guam, Hong Kong China, Macao China, New Caledonia, N. Mariana Islands, Singapore and Taiwan, Slovenia, Andorra, Channel Islands, Cyprus, Faroe Islands, Greenland, Liechtenstein, Monaco, Israel, Kuwait, Qatar, United Arab Emirates, Aruba, Bahamas, Bermuda, Cayman Islands, Netherlands Antilles, and Virgin Islands.

[8] US Announces Interim Plan to Help Poor Countries Fight HIV/AIDS and Other Health Crises in Absence of WTO Consensus’, USTR Press Release: <http://www.ustr.gov.releases/2002/12/02-119.htm>.

[9] ‘US Moratorium is a Cruel Hoax’, Brook K. Baker, Health GAP, message posted on <IP-Health@lists.essential.org>.

[13] ‘Main Elements of the Chair’s 16 December 2002 Draft Compromise Decision (Perez Motta Text)’, European Commission (Trade and Development) Press Release, 9 January 2003, available at: <http://europa.eu.int/comm/trade/csc/memo090103_en.htm>.

[14] ‘US Faces Touch Choice’, BNA WTO Reporter, 18 December 2002: <http://pubs.bna.com/ip/BNA/wto.nsf/is/A0A6G2B6C2>.

[15] ‘US Sticks to Hard Line on TRIPS, as Supachai Tries to Broker Deal’, Inside US Trade, 20 December 2002.

[16] ‘Consensus on TRIPS Unravels as US Blocks Deal on Scope of Diseases’ Inside US Trade, 3 January 2002, see also ‘US Wrecks Cheap Drugs Deal: Cheney’s Intervention Blocks Pact to Help Poor Countries After Pharmaceutical Firms Lobby White House’, The Guardian, 21 December 2002: < http://www.guardian.co.uk/international/story/0,3604,864071,00.html>.

[17] ‘EU Seeks to Break the Current Deadlock on WTO Access to Medicines: a multilateral solution is needed’, European Commission (Trade and Development) Press Release, 9 January 2003, available at: <http://europa.eu.int/comm/trade/csc/pr090103_en.htm>.

[18] ‘EU Moves to Break Cheap Drugs Impasse’, The Financial Times, 10 January 2003, available at: < http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1039524389161>.

[19] The Implementation of the Doha Declaration on the TRIPS Agreement and Public Health, Communication from the European Communities and their Member States, IP/C/W/402, 24 June 2003.

[20] Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, Communication from the African, Caribbean and Pacific Group of States (ACP), IP/C/W/401, 28 May 2003.

[21] ‘Industry to Unveil Cheap Drugs Plan’, Guy de Jonguières, Financial Times, 23 June 2003, ‘US Rumoured to Consider Change in Tactic on TRIPS and Health’, Bridges Weekly Trade Digest, 3 July 2003, <http://www.ictsd.org/weekly/03-07-03/story4.htm>.

[22] ‘Cheap Drugs Deal Agreed as US Lifts Veto’, Frances Williams, Financial Times, 1 September 2003, 8.

[23]Implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health, IP/C/W/405, 30 August 2003, <http://www/wto/org/english/tratop_e/trips_e/implem_para6_e.htm>.

[24] Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom and the United States of America.

[25] The General Council Chairperson’s statement on implementation of paragraph 6 of the Doha Declaration on the TRIPS Agreement and public health, 30 August 2003, available at: < http://www.wto.org/english/news_e/news03_e/trips_stat_28aug03_e.htm>.

[26] < http://www.ftaa-alca.org/alca_e.asp>

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