TRIPS, Doha and Access to Medicines: Recent Lessons CARSTEN FINK Globalization, Intellectual Property Rights and Social Equity: Challenges and Opportunities of Free Trade Agreements Bogotá, Colombia, July 21 & 22, 2004

Overview Introduction: 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 players Research-based companies: Create intellectual property Multinational in scope, limited number of firms Generic drug companies Produce 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 Agreement Negotiated during Uruguay Round of Trade Negotiations ( ) 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 obligations Article 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 periods Developing 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 flexible TRIPS 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

Context Issued 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 mandate Can 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 Decision Two 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 elements Voluntary 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 situation Generic 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