Intellectual Property Rights in Medicines Procurement A Technical Guide to the Contemporary Context of HIV/AIDS Procurement of Medicines and Supplies under Bank funding Intellectual Property Rights in Medicines Procurement Strengthening Fiduciary Management in Multi-Sectoral National HIV/AIDS Program for Sub-Saharan Africa Network of National HIV/AIDS Program Practitioners in Africa (NAPPA) and World Bank July 2003 Presentation # 7 Duration = 30 min

The Two-Fold Nature of IPRs Intellectual property rights (IPRs) such as patents are used to encourage research and development (R & D) into new medicines by providing “higher than competitive-market” rates of return. Higher prices present real problems for procurement authorities with limited budgets – patients cannot afford expensive R & D programs.

The Doha Declaration WTO Ministers meeting in Doha in November 2001 offered strong support for countries addressing public health problems - including HIV/AIDS - acknowledging the right of all countries to protect public health and “to promote access to medicines for all”. Procurement authorities should take advantage of WTO support for use of TRIPS Agreement flexibilities that allow acquisition of lower priced medicines. Special rules favor least developed countries. They are permitted to disapply existing patents.

What is a patent? A “patent” is an exclusive right granted to the inventor of a medicine to prevent others from making and marketing the same medicine. Term of 20 years from patent application Issued on country-to-country basis Patent status on same medicine often differs between countries May prevent importation except when parallel imports allowed

Generic Alternatives? A medicine under patent in Country A may be available off-patent in Country B at a much lower price Some countries, such as India, do not yet grant pharmaceutical product patents Originators have not secured patents in many countries Least developed countries (see discussion following) need not enforce patents Quality must be maintained and assured

Can you procure and import generics? Yes, but depending on the country and its patent situation administrative steps may be required. Least developed or developing country? “Least developed” given special flexibility by World Trade Organization (WTO) rules – may elect not to implement rules or “enforce” patents “Developing” may take advantage of WTO TRIPS Agreement built-in flexibilities Whether country is least developed or developing is matter of self-selection – there is no formal WTO list

Least Developed Benefit from Paragraph 7 of Doha Declaration on the TRIPS Agreement and Public Health that provides action-space at least until January 1, 2016. If medicine (e.g., an ARV) is under patent “in country”, government may decide not to enforce. Each LDC makes decision not to enforce within its own constitutional framework – executive or parliament may, for example, delegate decision to Health Minister or procurement authority. Such a decision is appropriate to address HIV-AIDS.

Developing Is medicine under patent “in-country”? Refer to list prepared by Medecins sans Frontieres, or contact WHO Essential Drugs and Medicines division If no, then there is no patent barrier to acquiring locally or importing If yes, then may issue “government use” license or “parallel import” May also seek voluntary license from patent holder (or price break)

Government Use WTO TRIPS Agreement permits granting of “compulsory” or “government use” licenses (Article 31). National patent law typically provides that the government (and third parties acting on its behalf) may use private patents. A government use license may authorize importation or local production without the consent of the patent holder. The procedural requirements for government use licensing are normally much less burdensome than for compulsory licenses requested by private parties. U.S. patent law authorizes the government or its contractors to use any patent without notice to the patent holder and with no possibility to be enjoined. It is automatic. Prior negotiations with the patent holder are not required when addressing urgent situations such as HIV-AIDS or for public non-commercial use. Adequate remuneration in the circumstances of the case must be paid to the patent holder, but this may be determined after-the-fact. The remuneration level may take into account the public health budget and the severity of the problem. Although private enterprises may apply for compulsory licenses, and procurement authorities may purchase from them, the procurement authority should for itself rely on a government use license.

Compulsory License for Export The WTO is presently working on rules to address the situation when medicines are under patent in exporting countries, and importing countries lack adequate capacity to produce them under compulsory or government use license. These are the so-called “Paragraph 6” negotiations (referring to the numbering of the Doha Declaration). A country without adequate capacity should be able to request a potential exporting country to manufacture and sell to it under compulsory or government use license. New rules concerning this situation are hoped for by the September 2003 WTO meeting in Cancun.

Parallel Importation Pharmaceutical companies often hold patents on the same medicine in many countries, and these are referred to as “parallel” patents. A country may decide to follow “international exhaustion” of patent rights. If so, the patent holder cannot block the importation of the medicine after it is lawfully first sold in ANY country. The procurement authority may look for the lowest price patented medicine on the world market and “parallel import” it. WTO Ministers confirmed this right in the Doha Declaration on TRIPS and Public Health.

Differential Pricing A patent-holder company may offer to sell ARVs or other medicines to a developing or least developed country at a discount to its developed country price(s), provided there is a contractual commitment not to re-export the lower-priced medicines. In principle, a commitment not to export in these circumstances is reasonable. However, the procurement authority should be careful to put in place adequate control mechanisms to meet its commitments. Rules permitting parallel imports and rules restricting exports of differentially-priced medicines are not inconsistent. Developed countries may elect to block parallel imports to prevent low-priced medicines from entering their markets. This should not affect imports into developing countries.

Registration Most (and perhaps all) countries require that a medicine be locally “registered” before it is marketed. Registration requirements vary widely and sometimes involve only payment of a fee. In the U.S. and European Union, registration is a complex, costly and time-consuming process. The “data” submitted to regulatory authorities for approval of certain “new chemical entities” may be protected against certain disclosures to third parties and “unfair commercial use” (Article 39.3, TRIPS Agreement). Originator companies may attempt to block registration of medicines (whether or not under patent) based on “data protection” claims. Data protection rules of TRIPS Agreement do not prevent registration of medicines for public non-commercial use.

Other IPRs “Trademarks” are names given to medicines by companies for purposes of commercial identification in the marketplace. A generic producer should not use the trademark of the originator. The generic producer will use the INN or its own trademark. Originator companies may try to block parallel imports using their registered trademarks, and a rule of “international exhaustion” should also be adopted to prevent this. “Copyright” is used to protect author’s and artist’s expression, but is sometimes claimed to protect copying of doctor and patient inserts that accompany medicines (including translation into local language(s)). Since copyright does not protect scientific information, these claims should be rejected.

Country Case Study Country A is recipient of World Bank Multi-Country Acquisition Program (MAP) funds. Procurement authority seeks most cost-effective use of funds and asks Bank whether it may purchase generic ARVs from India. World Bank policy is that there is no preference for purchasing from originator/patent holder or generic producer, provided that procurement is lawful and that ARVs meet standards of quality, safety and efficacy.

Availability of Lawful Generics? WTO TRIPS rules do not require pharmaceutical product patent protection until January 1, 2005 for developing countries. India does not yet provide such protection. ARVs are available lawfully from Indian generic producers. This situation will change in 2005 as new medicines come under patent and some in “mailbox” pipeline also are protected, but a number of important ARVs will not be under patent. The changed circumstance in 2005 is being addressed in the so-called “paragraph 6” negotiations.

Are ARVs Patented in Country A? Even though ARVs may be off-patent in India, they may be under patent in Country A. Patents are granted on country-by-country basis. Country A has a patent law in force that allows for the patenting of pharmaceutical products, including ARVs. MSF maintains a list of the ARVs under patent in a number of countries, including Country A. Ten ARVs were found to be patented in Country A, several of which are on Country A’s standard HIV-AIDS treatment list.

Features of Country A’s Patent Law The law of Country A allows the Minister that administers patents to direct that any patent may be exploited by the government “in the vital public interest”, including the “public health” interest, and to fix adequate remuneration for the patent holder. If Country A were a developing country, the procurement authority could request use of this government authority. However, Country A is a “least developed country”, giving the procurement authority greater flexibility.

Least Developed Country Option Because it is “least developed”, Country A can elect not to “enforce” existing patents under paragraph 7 of the Doha Declaration. This is a decision that should be taken by the appropriate governmental authority in Country A. The World Bank advised the procurement authority that if Country A exercised its discretion not to enforce patents and to import generic ARVs from India this would raise no concerns from the Bank’s standpoint.