TRIPs and the essential medicines debate

Transcription

1 Faculty of Law Academic Year Exam Session 1 TRIPs and the essential medicines debate LLM Paper by Kasami Paul Winyi Student number : Promoter : Prof. Diederik Bruloot.

2 Contents LIST OF ABBREVIATIONS AND ACRONYMS:... 4 INTRODUCTION:... 6 CHAPTER 1: NATURE OF PATENT PROTECTION UNDER THE TRIPS AGREEMENT AND A Patent: Patenting Pharmaceutical products: TRIPS Flexibilities: Compulsory license: Parallel imports: Transitional Arrangements: Fundamental events and opinions of various international organs and Member The case of the Association of Pharmaceutical Manufacturers of South Africa United States of America v. Brazil - DISPUTE DS199: World Health Organisation: The third W.T.O Ministerial Conference in Seattle (1999): The United Nations: XI Summit of the Heads of State and Government of the G-15: European Union s Programme for Action aimed at Accelerated Action against the main communicable diseases in developing countries: The Anthrax crisis of October, CHAPTER 2: THE DOHA DECLARATION ON TRIPS AGREEMENT AND PUBLIC Overview: The request by the African Group Response to the African Group Proposal from the developed countries and the The Doha Declaration on the TRIPs Agreement and Public Health ( The Doha Declaration ): Responses from the pharmaceutical companies and the developed nations CHAPTER THREE Period after the Doha Declaration on the TRIPs Agreement and Public Health: The Paragraph 6 conundrum: The Proposal by the European Community:

3 3.3. The Proposal by the United States: Proposals from the African Group: The Result of the combination of proposals: The Motta Text: Implementation Decision of paragraph 6 of the Doha Declaration on the TRIPS Aftermath of the Declaration and the Decision: Cambodia: Uganda: The reaction by the Developed countries: Reaction by the European Union: CHAPTER FOUR: TRIPS-PLUS Looking beyond the TRIPs Agreement: EU Trade Policy and EU Doha commitments: The United States of America ( the US ): US-Thailand FTA TRIPs-plus and access to medicines: US-SACU FTA TRIPs-plus: Conclusion: BIBLIOGRAPHY:

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5 LIST OF ABBREVIATIONS AND ACRONYMS: AIDS - Acquired Immuno Deficiency Syndrome. ARV - Anti-Retroviral Therapy. CAFTA - Central America Free Trade Agreement. ECJ - European Court of Justice. EU - European Union. FDA - Food and Drug Administration (United States). FTA - Free Trade Agreement. HIV - Human Immunodeficiency Virus. GATT - General Agreement on Tariffs and Trade. IP - Intellectual Property. IPR - Intellectual Property Right(s). LDC - Least Developed Country. LMIC - Low and Middle Income Country. MFN - Most Favoured Nation. MSF - Médecins sans Frontières. NAFTA - North American Free Trade Agreement NGO - Non-governmental Organisation. PMA - Pharmaceutical Manufacturer s Association. R&D - Research and Development. SADC - Southern African Development Community. SACU - South African Customs Union. TRIPs - Agreement on Trade Related Aspects of Intellectual Property Rights. UNAIDS - Joint United Nations Programme on HIV/AIDS. 4

6 US - United States. WHO - World Trade Organisation. WIPO - World Intellectual Property Organisation. W.T.O - World Trade Organisation. 5

7 INTRODUCTION: The debate has seen an interaction of the legal, political and economic effects of intellectual property bringing about a form of hybrid argument that seeks to, on the one hand, justify the legal protection granted to the pharmaceutical products by way of patents and on the other, an argument against the patent especially on medicines that are classified as essential medicines. Access to essential medicines has become a key pillar of any system of health care which aims at the provision of drugs at affordable prices and ensuring that the same drugs eventually reach the patient who is ultimately the end user. This access is, however, diminished by the fact that most of the high-profile and effective drugs are protected by patents which, most argue, makes them expensive for the public living on less than a dollar a day. As such, they find it impossible to purchase these drugs. It is argued that the patent creates a monopoly of the market and because of the demand for such drugs they tend to be highly priced so as to increase gains to the manufacturer. To address this problem, the TRIPs Council on the 14 th November 2001 adopted a non-binding (soft) law on the implementation and interpretation of the TRIPs Agreement in line with public health known as the Declaration on TRIPs and Public Health (hereinafter referred to as The Declaration ) in which the Member States of the W.T.O not only recognised the gravity of the public health problems affecting many countries, especially diseases classified as epidemics 1, but also that the TRIPs agreement should not prevent Members right to protect public health 2. Despite having a Declaration in place, the fundamental questions surrounding the issue of intellectual property law and public health persisit to date. The main question has always been around the extent to which the TRIPs flexibilities may be utilised. This is so because the nature of IP protection dictates that once a specific form of intellectual property is granted by the State, it places upon the holder rights in law and equity to prevent his/her invention from unauthorised usage. 1 Doha Ministerial Declaration on the TRIPS Agreement and Public Health (hereinafter the Doha Declaration ), WT/MIN(01)/DEC/W/2, 14 November 2001, Article 1. 2 Article 4 ibid 6

8 It is my opinion that the TRIPs Flexibilities, while providing LDCs and DCs with the possibility of having affordable medicines, should be interpreted not in an entirely relaxed manner but one that ultimately puts into consideration the wishes of the manufacturer and retains the sanctity of intellectual property. Further, in finding an alternative route to the discussion, it is my intention to give these alternatives as modes of price reduction or subsidisation of drug production so that in the end, both the LDCs, DCs on the one hand and the pharmaceutical companies and developed countries on the other, can all win from the situation. I, therefore, wish to mention while a blurred line has been portrayed between the legal aspects of the debate on the one hand and the economic, social and political aspects on the other, this paper shall focus on the legal aspect of the debate, namely, the interpretation, implementation and the utilisation of the so-called TRIPs Flexibilities and how the entire debate was structured around these flexibilities. Thus, one of the aims of this paper is to bring to light the historical and consequent interpretation, implementation and utilisation of the flexibilities after the Doha Declaration. It is in this spirit that this paper shall seek to elaborate on the interpretation and implementation of the TRIPs flexibilities throughout the various stages of the debate as well as find an alternative angle to the debate in the hope of finding a lasting solution to the problem of utilisation of the TRIPs flexibilities for the purpose of access to medicines. The following framework shall be adopted. - A brief look at the nature of a patent and its influence on the price of the invention. - A look into the TRIPs flexibilities at the heart of the debate, mainly the compulsory license, the parallel imports and the extension of the deadline for the implementation of the TRIPs Agreement enjoyed by the LDCs and DCs. - A few fundamental events influenced by an interaction of the political with the legal sphere of intellectual property that preceded the Doha Declaration. - How the negotiations were begun, first looking at the submission by the African group and then the responses from the developed countries as well as a legal assessment of their arguments. - The flaws of the Declaration especially in relation to handling the question of exportation of generic drugs from countries that do not offer patent protection to pharmaceuticals. 7

9 - The period after the Doha Declaration, in which case, special attention shall be paid to some least developed countries such as Cambodia and Uganda and their response to the Declaration as well as challenges they may have faced during implementation. For Uganda s case, interest will be on the legislative framework developed and the manufacturing capacity later developed to utilise the flexibilities. - I shall consider the issue of the TRIPs-plus provisions and their legality for the sake of LDCs and DCs in light of the TRIPs agreement and any soft law directly relevant to the matter. - My conclusion shall sum up the position of this paper focusing on the effects of the grant of the patent on the one hand and the TRIPs flexibilities on the other. It shall also consider alternative angles for the debate that could incorporate both the legal and policy considerations on a more realistic and practical basis. By the end of this paper, the above-mentioned points shall have been covered and there will be clarity as to the progress of this debate and its implications on all the players as well as an angle that I believe should be exploited by the debate so as to prevent what could become a dilution of intellectual property protection in the near future, especially where essential medicines are concerned. 8

10 CHAPTER 1: 1. NATURE OF PATENT PROTECTION UNDER THE TRIPS AGREEMENT AND THE TRIPS FLEXIBILITIES: 1.1. A Patent: The basic patent has been defined as the means of providing the patent owner with the legal protection against the making, using, or selling, inter alia, of the new invention for a limited period of time, without his/her/its express authorisation 3. Patent protections generally aim at rewarding an inventor for his/her ingenuity as well as providing an incentive for further invention. Once the patent has been granted, the owner of such patent holds exclusive rights in relation to the performance of any of the inventions for which the patent has been granted. This right to exclusivity is what gives the patent owner the monopoly over factors such as the price determination. In world trade law, before 1994, national laws on the protection of intellectual property were not regulated based on the fact that the GATT system was silent on the protection of Intellectual property 4. However, with the signing of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs Agreement) that sets the minimum standards for the protection of intellectual property, the regulation of intellectual property protection on a global scale begun. Member states to the W.T.O were and still are thus required to adopt laws that seek to provide such intellectual property protection. This is what governs the protection of drug inventions in the pharmaceutical industry. The protection should not go below the standards set by the Agreement. All Member States were and are still expected to apply the international trade laws such as the TRIPs Agreement equally with respect to the Most Favoured Nation principle, National Treatment Principle and the principle of 3 W.T.O OMC, TRIPS AND PHARMACEUTICAL PATENTS: FACT SHEET, September 2006, page 2, available at 4 The W.T.O s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), negotiated in the Uruguay Round, introduced intellectual property rules into the multilateral trading system for the first time. available at 9

11 Non-discrimination. There were, however, soft law instruments within the W.T.O that guided the manner in which certain provisions of trade law were to be interpreted and implemented. One of these minimum standards is the criteria for determining which IP protection is appropriate for the subject matter in question. In order for a particular invention to enjoy protection under patent law, it ought to be shown that it is patentable. This means that the invention must meet set criteria in the TRIPs Agreement in order for it to qualify for such protection. The TRIPs Agreement is instructive on what shall qualify as patentable subject-matter 5. In that regard, it must be shown that the invention is new or novel in that it is the kind that was not part of the existing state of the art at the time 6 of its creation. It must also involve an inventive step 7 in that it must not be obvious to a person skilled in the art or to a technical person with experience in the field to which the invention applies. Finally, it must be capable of industrial application to facilitate its exploitation Patenting Pharmaceutical products: The concept of patenting pharmaceuticals has always been contentious because of the moral argument arising from its effect on the needy communities as well as massive profiteering derived from blockbuster drugs. Jonas Salk, the creator of the polio vaccine in 1905, when asked why he did not obtain a patent for the polio vaccine, responded by asking whether you could patent the sun. In his mind, he believed that something so vital to society at the time had to be 5 Article 27 of the TRIPs Agreement. 6 This means that the invention was not something that existed as something known to a particular class of professionals. In this context, for a drug to be considered as new/novel, it had to be a drug that did not exist at the time. 7 In the field of pharmaceuticals, the inventive step would have been seen in whether the combination of the substances to form the drug and the result of such combination was obvious to a person skilled in that field - Teva UK Limited and Teva Pharmaceutical Industries v Leo Pharma A/S and Leo Laboratories Limited [2014] EWHC 3096 (Pat), Patents Court, England and Wales, 6 October Basically, one should be able to sell and use the drug. 10

12 readily available to the public that was ravaged by the disease 9. However, this remark is not without criticism 10. Monopoly of the market basically suffocated competition. In the absence of such competition, the drug manufacturer comfortably adjusted the prices of the pharmaceutical products in order for pharmaceutical companies to recover the costs of research, development/production, marketing and distribution. Price became an issue because of affordability of the drugs. One of the popular exaggerations on the pricing of drugs is that drugs cost two-pence a bucket to make and sell at 10 per pill 11. When looking at the production of pharmaceuticals and its effect on pricing, the stages of the technological capability play a decisive role in determining whether the said country can actually ensure access to medicines. The economic development of a country will therefore determine its ability to develop essential drugs 12 which is why the countries driving for easier and unencumbered access to essential drugs are the ones that possess insufficient technology. This drives us to the material legal issue in the debate and that is the utilisation of the TRIPs flexibilities while patent protection subsists. In an attempt to regulate and, in effect, reduce the cost of the essential medicines, most governments in the developing nations of the world have tried to utilise the flexibilities 13 of the 9 Dr. ElsTorreele, Should Patents Be Extended To Encourage Innovation: Wall Street Journal, January 23 rd, Available at 10 It has been remarked by most writers that the statement made by Jonas was misleading in that it lacked the core reason as to why the patent was never obtained. They say it was because upon investigating the application for the patent, the National Foundation on Infantile Paralysis or the University of Pittsburgh refused to grant the patent on the grounds that it was part of prior art/state of the art at the time in which case it lacked the core elements needed for an invention to be regarded as one deserving of patent protection. Jonas believed that the grounds for denial of the patent were purely moral based on his belief that his application was denied because the public desperately needed the polio vaccine and not because he did not meet the requirements. Jane. S, Smith, Patenting the Sun: Polio and the Salk Vaccine, published by Anchor, June 1 st, Walton, A. The Copyright, Designs and Patents Act 1988 (1) (1989) 133, Solicitors Journal 646 at 650. Walton s comment was made in the context of compulsory licenses. 12 J. Davidson Frame, National Commitment to Intellectual Property Protection: An Empirical Investigation, 2 J.L. & TECH. 209, 219, 223 (1987) (He clarified that the most industrial countries possessing a strong commitment to the protection of IPRs have the necessary technological capabilities to effectively compete in the global market while developing countries which have weak protection wish to build on their technological capacity but must first grant the stronger protection so as to receive technology transfers from the developed countries. 13 The major flexibilities in the TRIPs Agreement were the compulsory license and the parallel imports as well as the extension for the period of granting patent protection which applied to the developing and least developed 11

13 TRIPs agreement. By doing so, they have come under pressure and received ridicule as well as the threat of sanctions from the developed countries who argue against the use of such flexibilities in light of the effect they have on the patent. Most countries, especially the DCs and LDCs, opted to manufacture cheaper copies of these drugs. This was by way of reverse engineering in order to meet their national public health requirements. For the countries that had no productive or manufacturing capacity, they bought these copies soon to be known as generic drugs, from the countries that manufactured them. Such manufacture was mostly made possible by the use of one of the TRIPs flexibilities known as the compulsory license. This complicated the implementation of the TRIPs agreement. It was frequently argued that whereas the TRIPs agreement offered safeguards that could be exploited by developing countries and LDCs, it remained unclear how they would be used in light of the continued prohibitive access to essential drugs and whether such flexibilities should indeed be left to stand. Why? Because at the end of the day, the inventor is justified to fear that his/her patent could suffer dilution TRIPS Flexibilities: As previously mentioned, this was the fundamental aspect of the debate from a legal point of view. The general nature of the TRIPS Flexibilities is that they gave the DCs and LDCs the possibility to exempt themselves from the strict implementation of the TRIPs Agreement as was the case in the developing countries. Consequently, by these flexibilities, there was always a clash between those that held the patent and those that avoided it. While the DCs and LDCs focused so much attention on mainly three forms of flexibilities, namely the compulsory license, parallel imports and the extension of deadlines for the implementation of the TRIPs Agreement, some other alternatives did exist within the agreement, but the legal effect of such provisions was one, to my knowledge, the LDCs and DCs sought to avoid as it would not give them the price reduction and availability that they sought. Article 30 of the Agreement, for example, stipulates as follows: countries as exceptions to the general rule. The waiver of obligations was, as shall be later discussed, introduced through the Doha Declaration. 12

14 Members may provide limited exceptions to the exclusive rights conferred by a patent, provided that such exceptions do not unreasonably conflict with a normal exploitation of the patent and do not unreasonably prejudice the legitimate interests of the patent owner, taking account of the legitimate interests of third parties Emphasis mine. This looks like a viable option. But why was it avoided? The legal effect of this provision was elaborated in the W.T.O case of Canada-Pharmaceuticals 15. Briefly, this was a complaint by the European Community ( The Community ) in which the Community alleged that Canada was in breach of its international obligations when it refused to grant patent protection to some pharmaceutical products. As such, the Community was of the view that Canada s Patent Act, in particular Section 55.2(1) which provided for a regulatory review exception, was in breach of the TRIPs Agreement because it lacked the protection envisaged by Article 27.1, 28 and 33 of the TRIPs Agreement. Under the said Section, potential competitors were allowed to use a patented invention without prior authorisation of the patent owner during the term of the patent. The Panel begun by pointing out that this Section was not inconsistent with Article 27.1 of the TRIPs Agreement and was covered by Article 30 where the said Article was interpreted to allow governments to grant exceptions to the exclusive rights of production of patented drugs by third parties while the patent was still in force. Of extreme importance is the purpose for which this was granted. The Panel went on and stated that such was the case where the authorisation was for the purpose of obtaining government marketing approval, so that they have regulatory permission to sell in competition with the patent owner by the date on which the patent expires 16. However, the second part of the said Section referred to a stockpiling exception which allowed competitors to reproduce the goods during the subsistence of the patent while keeping them in stock until the patent expired. The Panel stated that this fell out of Article 30 s ambit as such an act would amount to a substantial curtailment of the exclusionary rights that are granted to the patent holder upon the grant of the patent. This is because by stockpiling, the competitors would wait until the patent expires and then sell the same drugs as generics. This shows the limited and narrow interpretation that the Panel gave to Article 30 to the effect that the only exceptions that 14 TRIPs Agreement. 15 DISPUTE - DS114 Available at 16 Point 1 by the Panel. 13

15 may be utilised are those that do not substantially curtail the enjoyment of the exclusive rights granted to the patent holder. It is therefore submitted that the limited application of Article 30 became unattractive to the developing countries as none seem to have visited this exception. It was clear that whatever they tried to do to bring about access to affordable would be shot down as a move or policy with the cumulative effect of substantially curtailing the rights of the patent holder. This being the case, the compulsory licensing system, the use of parallel imports and the utilisation of deadline extensions were viewed as the more practical means for the governments of developing countries to answer the needs of public health in their communities Compulsory license: This has been defined as an authorisation that is granted by a competent national authority allowing a third party, having failed to acquire a voluntary license from the patent right holder, to manufacture a patented drug without the authorisation of the rights holder provided the set criteria is met 17. However, the need to negotiate a voluntary license is an element that a country can do away with in a situation of a national emergency, extreme urgency or to combat anticompetitive behaviour which shall be addressed later. The compulsory license is rather unique especially following the Doha Declaration on TRIPs and Public health and the Paragraph 6 implementation decision that followed, which will be considered in detail later on in this paper. The initial position of the TRIPs Agreement was that the compulsory license would only be issued in situations in which the generic drugs were manufactured only for the domestic market and not for purposes of exportation 18. As will be discussed, the Paragraph 6 Implementation Decision provided a waiver of this provision. However, while this would dilute the exclusive rights of the patent owner, his/her rights would 17 Surga Subudi, The Road from Doha: The issues for the Development Round of the W.T.O and the future of International Trade: International and Comparative Law Quarterly, Vol 52, No. 2 p Article 31(f) of the TRIPs Agreement. 14

16 continue to subsist which is what would entitle the holder of the rights to a right of adequate remuneration 19 for the reproduction of the drugs under a compulsory license. While Article 31 of the Agreement does not explicitly make mention of the term compulsory license, it does however refer to situations in which patented inventions may be utilised without the authorisation of the patent owner. This, if read in conjunction with Article 2(1) of the Agreement and Article 5(A)(2) of the Paris Convention for the Protection of Industry Property ( The Paris Convention ) would link those provisions to the issue of compulsory licenses. Beginning with Article 2(1) of the Agreement, member states are required to comply with the particular Articles of the Paris Convention such as Article 5(A)(2) 20 (and the later paragraphs in the Article) which provides for the use of compulsory licenses. The TRIPS Agreement, Article 31, therefore lists various conditions that are to be met before the compulsory license can be issued. First of all, there should have been a failure by the member state that seeks to issue the compulsory license, to obtain a voluntary license on reasonable commercial terms and conditions within a reasonable period of time 21. One thing that is not clear though is how this provision is to be interpreted. Pharmaceutical companies would obviously seek out the most favourable terms during the negotiations with the Member States so as to obtain a profit or something close to a profit as they would have obtained if they were to have sold the drug at the market price. The member states on the other hand would prefer to get the drug at a much cheaper price not just because of making it affordable to the public but also due to budgetary constraints. So one can only imagine how the negotiations would go. Secondly, the holder of the patent rights is to be paid an adequate remuneration whose calculation shall take into account such aspects as economic value 22. Again, the ambiguity in this provision stems from the fact that neither adequate remuneration (which is determined by the national competent authorities) nor economic value of the authorisation is defined in this 19 supra Article 31(h). 20 Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work Article (5)(A)(2) of the Paris Convention, available at 21 supra Article 31(b) 22 Ibid footnote

17 provision. Thus the test appears to be on a case by case basis. I opine that the expectations of the patent holder should also be considered owing to the fact that in producing the drug in question, the patent holder reasonably expected a substantial return. Secondly, the legal protection initially granted is likely to compromised to the extent that would make it fair and equitable to not only remunerate but compensate the manufacturer ridding him/her/it of the possible peaceful enjoyment of the invention s benefits. It may not be definite at the time, since it will be a mere speculation, but the costs incurred in R&D would be known and based on facts and as such, would provide valuable information in determining the economic value of such authorisation and eventually, remuneration. Negotiating for a voluntary license, however, may be waived under conditions characterised as national emergencies, circumstances of extreme urgency, government use or anti-competitive practices 23. These circumstances were given a fairly clear meaning in the Doha Declaration and shall thus be considered later on in the paper. While Article 31 sets the tone for determining whether to issue the compulsory license, it does not generally prohibit situations in which the compulsory license may not be issued 24. Because of this, it is likely that as a consequence, it would become possible to characterise difficult situations that may face member states as situations of extreme urgency or matters of national emergency because what amounts to a national emergency obviously depends on the State in question. No State is the same. Suffice to note that the position of the domestic nature of the compulsory license was substantially affected by the Decision on the Implementation of Paragraph 6 of the Doha Declaration which is considered later on in this paper. It basically provided a mechanism by which the restriction under Article 31(f) would be waived where an exporting country was requested by an eligible importing country to supply it with products under the compulsory license issued in the exporting country. As mentioned, how this concept worked will be considered later on. 23 Article 31 (b) of the TRIPs Agreement. 24 Rojina Thapa, Waiver Solution in Public Health and Pharmaceutcial Domain under TRIPS Agreement, Kathmandu School of Law, Nepal, 22 September 2011, p.1. Available at 16

18 Parallel imports: Article 6 of the TRIPs Agreement provides that: Nothing in the Agreement shall be used to address the issue of exhaustion of intellectual property rights. Parallel imports are products which, being manufactured under a patent, are put on the market with the consent of the proprietor of the patent and imported into another country without the consent of the proprietor 25. Herein lays the element of exhaustion against which the TRIPs Agreement shall not be used. In essence, once the producer of pharmaceutical product places the product on the market/stream of trade, he/she would essentially have no rights over the resale of the product. This means that once on the market with the consent of the proprietor of the patent, the goods may be imported into another country without his/her consent and this will not be an infringement because the rights in the product with regards to subsequent sale would have been exhausted 26. A good example of the concept of parallel imports can be seen in Case 15/74 Centrafarm BV v Sterling Drug Inc 27. In this case, Sterling Drug licensed two of its subsidies; one in the UK and another in the Netherlands for the same drug. Due to the government regulations in the UK at the time, the product there cost almost half the price of the same product in the Netherlands. The UK subsidy exported large quantities of the product to the Netherlands with the effect of undercutting the Dutch company. The court held that this was permissible because the product had been placed on the market with the parent company s consent thereby exhausting its rights under the patent. What the Dutch company wanted was for the parent company to exercise its rights under the patent by preventing the importation of the product from the UK, but once the product had been lawfully placed on the market in the UK, its importation into the Netherlands was viewed as a parallel import to the product of the Netherlands subsidiary. 25 W.T.O, FACT SHEET: TRIPS AND PHARMACEUTICAL PATENTS, Obligations and exceptionsavailable at 26 Exhaustion of the patent rights may either be regional, domestic or international. By putting the goods on the market, the owner exhausts his/her patent rights. 27 [1974] ECR

19 Another example could be the decision of the court in the United Kingdom case of Roussel Uclaf v. Hockley 28. This case involved the sale by a patent holder of his patented product to a third party in China that was not bound to any license in reference to the product. He then sought to levy a restriction that would ban any further sales of the same product. The court held that once the product was put on the market with the consent of the patent holder, a subsequent purchaser had the freedom to import or offer for sale such product due to the fact that the purchaser had no prior notice of any restriction against such acts. The combined effect of these cases and many more shows that by using parallel imports upon the exhaustion of the rights of the patent holder, DCs and LDCs are able to import patented drugs at a price lower than was charged by the pharmaceutical companies in which case the pharmaceutical companies would sometimes be forced to reduce their prices to ably compete with the retailers Transitional Arrangements: Of particular interest in this section is the arrangement that is enjoyed by the LDCs. According to the TRIPs Agreement, under Article 66.1, it was observed that due to the status of LDCs with regard to their economic development, financial and administrative constraints amongst other factors, they were not required to implement the Agreement for a period of 10 years from the date of application, this being one year following the date of entry into force of the W.T.O Agreement 29. This flexibility had been the subject of any contention, except when the LDCs started seeking for extensions, and its legality has not been questioned. The idea is that it basically takes into account the particular nature of LDCs. Nevertheless, the laws of most Member States to the W.T.O have clearly set this out in their laws and at for now, currently, a new extension was requested by the Member States and is now set for 1 st January, This means that LDCs do not need to grant patents for otherwise patented drugs in which case they can be sold for a much 28 R.P.C. (1996) 113 (14): , available at 29 Article 65.1 of TRIPs Agreement. 30 Decision on the Extension of the Transition Period under Article 66.1 of the TRIPS Agreement for Least- Developed Country Members for Certain Obligations with Respect to Pharmaceutical Products. 18

20 lower price authorised by the law of the LDCs or by a policy statement from a department in the country that is in charge of health. At the end of the day, it is clear that this flexibility has been the most exploited and has facilitated the transfer of technology from the developed countries in a bid to get these LDCs to a stage where they can locally manufacture such products. These flexibilities were the most prominent throughout the debate and went on to shape the interaction between the developing countries and the developed countries as they sought to arrive at a compromise, or was this even possible? 1.4. Fundamental events and opinions of various international organs and Member States before 2001that affected the outcome of the debate: The situation before the debate was such that civil societies, governments of the developing countries and the LDCs sought for a solution to the problem of insufficient access. In as much as the TRIPs Agreement provided flexibilities that would be exploited by these countries, it was difficult for them to do so. This was because using these flexibilities, particularly the compulsory license, was viewed as a threat to the patents that were owned by most of pharmaceutical countries in the developed countries. Much of this period was politically motivated. But such motivation, in the end, had an impact on the legal framework embodying IP protection in world trade law. While they may have framed the discussions surrounding the aspect of access to medicines, it is worth noting that the following instances pre-dating the Doha Declaration on TRIPs and Public health fundamentally had an influence on the consequent interpretation and implementation of the TRIPs Agreement which is of utmost importance in this paper The case of the Association of Pharmaceutical Manufacturers of South Africa ( The Association ) vs President of the Republic of South Africa Case No 4183/98 filed on Feb 18, 1998: In February 1998, the Association and 39 pharmaceutical companies took the Government of South Africa to court on the grounds that an attempt to increase the accessibility to cheap 19

21 medicines authorised by the Medicines and Related Substances Control Amendment Act 31 was a violation of South Africa s Constitution and the TRIPs Agreement 32. This was an Act that provided for substitution of off-patent drugs by generic drugs 33, transparency in the pricing for all medicines, and in cases of patented medicines, for parallel importation 34. Because of international pressure and the public outcry towards to the action, it was eventually dropped in 2001 but this was not without the point being made as to how the South Africans perceived the use of TRIPs Flexibilities. The AIDS crisis preceding this case made it abundantly clear that the drugs available at the time were not within the price range of what a large number of the South Africans could afford hence, there was a need to revisit the interpretation of the Agreement. Upon close scrutiny, it is clear that the provisions in the contentious Section 15C of the Act were in line with the TRIPs Agreement particularly in relation to the issue of Parallel imports. Basically, the Minister was granted the power to issue a compulsory license where the product had been placed on the market with the authorisation of the patent holder without any express limitation 35. The relevance of this case can be seen from the fact that the interpretation of the flexibilities of the TRIPs agreement should be handled in a manner that is consistent with the aims of public health with consideration being given to the special circumstances at play in the Member States that seeks to utilise the flexibilities of the TRIPs Agreement. This interpretation, as shall be seen later on in this paper, was lent to the Doha Declaration and was also seen to drive most theories and solutions throughout the debate. 31 No.90 of 1997 ( Amendment Act) particularly Section 15C on the Measures to ensure supply of more affordable medicines, available at 32 MSF, 1998: Big Pharma versus Nelson Mandela, Last updated: January 2009 available at 33 A generic drug is identical--or bioequivalent--to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use. Although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price F.D.A, what are generic drugs, available at /ucm htm visited on the 25th of January, 2016) 34 Health Care and Intellectual Property Available at (visited on 25th January, 2016) 35 The Medicines and Related Substances Control Amendment Act, available at 20

22 United States of America v. Brazil - DISPUTE DS199: In this case, the Brazilian Ministry of Health designed a programme that would substantially reduce the growing number of AIDS cases between 1996 and Brazil began locally producing antiretroviral (ARV) drugs with such production effectively decreasing the price of imported drugs. The success of this programme was due to Brazil s local production of Zidovudine, an ARV drug through its health system while using this to negotiate for reduced prices on the patented drugs by using the threat of compulsory licensing. This saved the country over US$472 million in health related costs for AIDS-related infections and by 2002, local production had encouraged lower costs on the imports by approximately 83% of the import prices 37. On 8 th January 2001, the US Trade Representative filed a complaint against Brazil in the W.T.O Dispute Settlement Body, concerning Article 68 of the Brazil s Intellectual Property law, which permitted the use of compulsory licensing when patent holders do not manufacture their products domestically (the local working requirement). So if the company holding a drug patent failed to manufacture the product in question within Brazil, the patent would be subjected to a compulsory license after a period of three years. This was unless the patent holder satisfactorily showed that it was not economically reasonable to manufacture the product within Brazil. Secondly if the company was allowed to use its patent by importation of the product instead of manufacturing the same within Brazil, then parallel imports (grey products of the patented product) would be brought in by other companies. The US argued that a failure to be worked in the Act was interpreted as the failure to manufacture or incomplete manufacture of the product or failure to make full use of the patented process 38. As expected, Brazil argued that the provision was in line with the flexibilities of the TRIPs Agreement. Pressure from the NGOs eventually saw the US drop the claim against Brazil because Brazil was one of the Nations offering support in the form of technology transfer and know-how to 36 Rosenberg Tina.: Look at Brazil. NY Times at paragraph 28 (Jan 28, 2001) ( The treatment programme has cut the AIDS death rate nationally by about 50% so far ). Available at read on 25 th January, PIHIP, Timeline of Brazil s compulsory licensing, page United States v Brazil- DISPUTE DS199, available at 21

23 developing countries helping them to increase on their manufacturing capacity. These NGOs feared the claim against it by the US would jeopardise Brazil s ability to continue offering such support. So on June , US withdrew the complaint against Brazil 39. It has also been argued that the decision to drop the claim against Brazil was made when the US and Brazil reached a compromise in which Brazil agreed to consult with the US before its decision to pass its legislation on compulsory licensing 40. This concept of local working basically looks at a situation in which the patent holder manufactures the product in a place other than the territory of the State that grants the patent. It is argued that the US suggestion that the interpretation can be negated by importing the product rather than by locally producing the drug would fail on grounds that it would be in contravention of the Paris Convention provisions on the grant of a compulsory for non-working of the patent. 41 The question in such circumstances is whether it prohibits member states from adopting and utilising the local working requirement. Article 27.1 of the TRIPs Agreement does not make explicit mention of the term local working but rather talks about the concept of nondiscrimination. From the case of Canada-Pharmaceutical Patents 42, it can be concluded that the Panel left it open for the local working requirement to be adopted by member states usually where it was bona fide, that is to say, for a non-discriminatory purpose 43. This being the case, the result of the dispute, had it been concluded could have been vital in understanding the failure to work requirement. At the moment, it could be that local manufacture would be based on conditions that warrant the production of products, such as pharmaceuticals to be locally manufactured World Health Organisation: 39 Cooper Helene.: White House drops W.T.O complaint against Brazilian Patent Law, Wall Street Journal Europe, A2 (June 26, 2001). Available at read on 25th January, International Center for Trade and Sustainable Development, Us Drops TRIPs Dispute Against Brazil s Patent Law, Bridges Between Trade and Sustainable Development, Year 5, No.5,2001, p Daya Shanker, Access to medicines, Paragraph 6 of the Doha Declaration on Public health and developing countries in International Treaty Negotiations, The Indian journal of Law of technology, Volume 2, 2006, p DS Federico Ortino, The W.T.O Dispute Settlement System, , Kluwer Law International, 2004, p

24 After the conclusion of the Uruguay Round that brought the TRIPs Agreement into being, 44 the WHO believed the agreement could have a huge impact on the production of and access to cheap drugs, especially in developing countries. This prompted the Organisation to adopt a Resolution in 1996 that gave it the mandate to publish the first guide with recommendations to Member States for implementing the Agreement while limiting the negative effects of more demanding levels of protection 45. This was known as the Revised Drug Strategy Resolution 46. This move would later be welcomed owing to the lack of a sufficient involvement of health experts to give a considered opinion on the impact of the Agreement on public health during the trade negotiations. The WHO came up with another medicine strategy of In this strategy, it was noted that the effect of international trade agreements on access to or domestic production of essential drugs 48 and on the production of new drugs needed to be further assessed to the effect that Member States were urged to take effective measures to ensure improved access to medicines, to pursue measures focused on ensuring that the public could access these drugs, including the implementation of the Resolution by the Fifty-Second World Health Assembly 49. The relevance of the WHO s take on the matter is based the fact that public health is outside the competence of the W.T.O s mandate. By combining ideas, the WHO and W.T.O would eventually come up with a framework that effectively and practically gives legal effect to the th April, Velasquez G. Boulet P.: Globalisation and Access to Drugs: Perspectives on the W.T.O/TRIPS Agreement. WHO, d ed, available at read on January 27th World Health Organisation: Revised Drug Strategy Resolution. The World Health Assembly Resolution WHA49.14 of WHO Medicines Strategy. World Health Assembly Resolution WHA 54.11, Essential medicines are those that satisfy the priority health care needs of the population. Essential medicines are intended to be available within the context of functioning health systems at all times in adequate amounts, in the appropriate dosage forms, with assured quality, and at a price the individual and the community can afford. WHO Doc IP/C/W/305/Add3 athttp:// accessed on 26 th January, The Revised Drug Strategy -WHA52.19 :- In this Resolution, what was basically considered was the issue of costeffectiveness of rational drug use as well as affordability and most importantly, in order to increase access to medicines, and in accordance with the health needs of people, especially those who could not afford the drugs, and recognising the efforts of Member States, to expand access to drugs and promote domestic industry. It also recognised that there was a need by the Member States to cooperate constructively in strengthening pharmaceutical policies and practices, including those applicable to generic drugs, and intellectual property regimes in order further to promote innovation and the development of domestic industries, consistent with applicable international law. This Resolution is available at 23

25 provisions of the TRIPs Agreement while considering public health. In short, this combination of ideas would provide some kind of equilibrium between the legal aspects of the world trade law in intellectual property and access to essential medicines in the field of public health The third W.T.O Ministerial Conference in Seattle (1999): This Conference ran from 30 th of November 1999 to 3 rd December In a briefing document focusing on the negotiations, implementation and TRIPs Council work, one of the focal points for discussion was in relation to the compulsory licenses. Some members proposed that the World Health Organisation s list of essential drugs be exempt from patentability 50. Alternatively, they said that developing countries should be able to issue compulsory licenses for these drugs, that is to say, force the owner of the patent to license other manufacturers, subject to fitting conditions such as royalties, so that the drugs can be provided at reasonable prices 51. What followed in Washington gave the impression that the US also had a rather relaxed interpretation of the Agreement especially where LDCs were involved. President Bill Clinton, as he was then, used the stage at Seattle to declare a change in the United States healthcare in a way that supported the people living in dreadful conditions around the world to have access to medicines. On 10 th May 2000, he issued the Executive Order on the Access to HIV/AIDS Pharmaceuticals and Medical Technologies. According to this Order, in administering sections of the Trade Act of 1974, the United States would not seek, through negotiation or otherwise, the revocation or revision of any law governing intellectual property law or strategy of a recipient sub-saharan African country, as determined by the President, that controls HIV/AIDS drug products or medical technologies. This would apply where the law or policy of the country promoted the access to pharmaceuticals or technologies for patients and provided 50 This could have had far reaching consequences because the essential drugs are known to take up the most costs in R&D and also take up the most time to develop while being the highest grossing in the market. That said, one wonders how from an economics view, this would have been plausible and from a legal point, how this would reflect on the relevance on patents. I opine that it would have been extremely devastating to intellectual property legal framework and faith in the system if this proposal had been accepted. 51 W.T.O Press Pack, W.T.O 3 rd Ministerial Conference, Seattle, issued 28 th November, 1999 and available at read on 26th January