TRIPS, Doha and Access to Medicines:

Recent Lessons

CARSTEN CARSTEN FINKFINK

Globalization, Intellectual Property Rights and Social Equity:

Challenges and Opportunities of Free Trade Agreements

Bogotá, Colombia, July 21 & 22, 2004

OverviewIntroduction: the pharmaceutical industry, intellectual property and drug prices

TRIPS: what came out of the Uruguay Round

Doha Declaration on TRIPS and Public Health

“Paragraph 6” negotiations and the August 2003 Decision

What’s next?

Introduction: the pharmaceutical industry, intellectual property

and drug prices

The pharmaceutical industry

Long and expensive R&D process:

Research, development, clinical testing, regulatory approval

Risky process: only a small share of promising chemical entities make it to the market

Up to 10 years before drugs are marketed

Without intellectual property protection, new chemical entities can easily be copied by competing firms

Two main industry playersResearch-based companies:

Create intellectual property

Multinational in scope, limited number of firms

Generic drug companiesProduce drugs of which intellectual property rights have expired

Large number of firms, competitive market structure

Efficient developing country producers

Intellectual property and prices

Main intellectual property instruments:

Patent exclusivity

Protection of pharmaceutical test data

Significant price falls documented upon expiry of pharmaceutical patents:

Example: wholesale price of Pfizer’s blockbuster drug Prozac fell from $240 to less than $5 per bottle within six months after patent expiry*

*As reported by Frontline documentary “The other drug war”, June 19, 2003

Public policy considerations

Trade-off between incentives to invent and competitive provision of drugs

“Optimal” intellectual property policies may differ from country to country, depending on average incomes as well as nature and extent of health burden

Effectiveness of intellectual property rights:

Market-oriented decision-making on R&D

Crude policy tool, exploitation of market power

TRIPS: what came out of the Uruguay Round

TRIPS AgreementNegotiated during Uruguay Round of Trade Negotiations (1986-94)

One of three multilateral “pillar” agreements that set out the trading rules of the World Trade Organization

Provisions apply to all 147 WTO members and newly acceding countries

International law, subject to WTO’s dispute settlement provisions

Key TRIPS obligationsArticle 27:

Patents to be awarded without discrimination among fields of technology

Patents to cover both processes and products

Patents to be protected for 20 years from the date of filing

Article 39:Protection of undisclosed test data against unfair commercial use, where such data is submitted to regulatory authorities

TRIPS transition periodsDeveloping countries without product patent laws have until January 1, 2005 to comply, but must, nonetheless, grant “market exclusivity” to newly invented pharmaceutical products

Least developed countries were given until January 1, 2006 to comply.

Where TRIPS is flexibleTRIPS allows the use of compulsory licenses

In case of emergencies, compulsory licenses can be granted without an attempt to obtain voluntary license from patent holder

No obligation on legality of parallel imports

Members are free to impose price regulations

Doha Declaration on TRIPS and Public Health

ContextIssued at the WTO Doha Ministerial Meeting in 2001

Growing concern that TRIPS obligations could undermine access to medicines in poor countries

Three elements:

Political statement

Extension of deadlines for LDCs

Negotiating mandate

Political statement“We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health” (paragraph 4).

The Doha Declaration confirms key TRIPS flexibilities

Extension of deadlines for LDCs

Least-developed countries have until 2016 to implement the pharmaceutical patent provisions of TRIPS

Do not need to enforce existing patent rights until 2016

Deadline can be further extended

Negotiating mandateCan countries with insufficient manufacturing capacities in the pharmaceutical sector make effective use of compulsory licenses?

For example, Article 31(f) mandates that compulsory licenses “… shall be authorized predominantly for the supply of the domestic market.”

Paragraph 6 of Doha Declaration calls for an expeditious solution to this problem

“Paragraph 6” negotiations and the August 2003 Decision

“Paragraph 6” Negotiations

Economic case for importation under CL is straightforward: it’s about free trade

Long and acrimonious negotiating process

United States alone opposed December 2002 compromise text, seeking to limit the scope of diseases to which importing mechanism can be applied

Attempt to forge consensus in February 2003 failed

August 2003 DecisionTwo elements:

Decision on Implementation of Paragraph 6

Chairman’s Statement

Waives Article 31(f)

No scope of diseases limitation, mechanism not limited to emergencies

Other elementsVoluntary opt outs by certain countries not to use the mechanism or to only use the mechanism in emergency situations

Understanding that mechanism would not be used to promote “industrial policy objectives”

Transparency obligations and safeguards to minimize risk of drug diversion

More burdensome than necessary?

Create opportunities for political abuse?

Use of August 2003 Decision

Is the drug protected by a patent in the exporting market?

Can the drug be manufactured domestically?

No

Has a compulsory license on the drug been issued?

No

Would a predominant share of production be

exported?

Yes

Need for August 2003 mechanism to import

generic drugs

No

Yes

What's next?

Evolving patent situationGeneric sources still exist for virtually all medicines (in particular from India)

Increased patent conflicts, use of compulsory licenses (e.g., Malaysia, Mozambique)

Starting in 2005, the share of patented medicines in developing countries will rise

What will happen in India?

Will LDCs emerge as sources of generic drugs?

Concern about bilateral agreements

Recent US bilateral FTAs with Australia, Central America, Chile, Jordan, Morocco, Singapore

Text of FTAs and legal analyses suggest TRIPS-plus provisions:

Protection of undisclosed test data

Registration of pharmaceutical products

Restrictions on parallel importation

US Government maintains that bilateral FTAs do not compromise Doha flexibilities