Policy recommendations

 

TRIPs and medicines

Updated Spring 2009

Every year, 14 million people in developing countries unnecessarily die of poverty-related and infectious diseases, such as malaria, diarrhoea, tuberculosis and HIV/AIDS. The required medicines often exist, but patients in developing countries simply cannot afford them, largely because of patents on these drugs. There is little coherence in policies when the European Commission’s Directorate General for Development prioritizes access to affordable medicines for developing countries, while the Directorates General for Trade and Industry & Enterprise promote policies that will delay or complicate the access to developing countries’ markets of affordable drugs.

The fact that medicines are prohibitively expensive for many people in developing countries is partly due to patents on drugs. More than 96 per cent of these patents are held by companies in Western countries. According to the pharmaceutical industry, patent protection is necessary to enable research into new drugs. Years of research are required to develop a medicine. The industry argues that the investments necessary for conducting this research will not be made if the research costs cannot – through patents – be recouped. A patented drug cannot be manufactured by others than the patent holder without the latter’s explicit consent. Thus, in order stimulate innovation, drug prices are substantially increased by an artificial temporary monopoly of many years.

The research agenda is largely determined by the Western pharmaceutical industry, which means that new medicines are mainly developed for Western markets. Pharmaceutical companies conduct little or no research into tropical diseases, because the potential profit is negligible. Without a lucrative market, hardly any investments will be made in diseases from which millions of people are suffering in developing countries.

‘It is not a market failure, it is failure because there isn’t a market’, says Angel Gurría, Secretary General of the OECD¹. ‘While patents on medicines bring little benefit to developing countries, they do keep existing medicines out of reach of the poor and without greater clarity this situation will persist,” concludes the World Health Organization².

TRIPS Agreement

Patents on medicines are part of the TRIPS Agreement (Trade Related Aspects of Intellectual Property Rights) of the World Trade Organization (WTO). A company owning a patent possesses the worldwide exclusive right on the manufacture and sale of the new medicine for at least twenty years. Only when a patent expires can generic drugs (which have the same substance, but carry no brand name) be marketed and will the former patent-holders be forced to drop the prices on their brand medicines. On average, generic medicines are four times cheaper than brand medicines.

Since January 2005, all WTO members (except the least developed countries, which are allowed to wait until 2016) are obliged to adapt their national patent legislation to the minimum standards of the TRIPS Agreement. Countries such as India, which until recently had less stringent patent legislation, are now obliged to implement the stricter TRIPS regulations. These minimum standards result in a higher level of patent protection. At the same time though, these standards significantly hamper the availability of cheap, generic medicines to the poorest owing to the impediments to non-brand competition.

The original TRIPS Agreement (Art. 30 and 31) contains an exception to the recognition of patents on medicines: in case of an emergency, or for public health reasons, a country is allowed to issue a ‘compulsory licence’ to produce patented medicines domestically³. A compulsory licence can be granted by a government to a medicine to be copied without the permission of the patent-holder. For the poorest countries, which mostly lack pharmaceutical production facilities, this exception is not a realistic option. These countries have to import medicines, while producing countries are no longer allowed to export generic medicines.

To cater for the poorest in the framework of the Doha Declaration, the WTO decided, in August 2003, that cheap generic drugs may under specific conditions be exported to developing countries which cannot produce these themselves. In this way ‘compulsory licensing’ would also enable developing countries with insufficient manufacturing capacity to get access to patented drugs. To make the temporary waiver permanent, it was added as a protocol to the TRIPS Agreement in 2005. This protocol was foreseen to into force in December 2007 once two thirds (around a hundred) of the WTO member countries have ratified the protocol. However, in September 2007 only nine nations had done so. In December 2007, the deadline for acceptance was extended to December 2009. By February 2009, with Albania ratifying the protocol in January 2009, the total number of WTO countries having ratified the protocol was 21.

Ratification of the protocol would oblige all WTO-members to implement its provisions in their national legislation, which would increase the likelihood of its being used. In July 2007 the European Parliament adopted a resolution⁴ to delay its vote on ratification of the protocol. It rightly demanded that the EU give more political and financial support to providing medicines to the least developed countries. In November 2007, the European Communities ratified the Protocol.

Regardless of the success of this ratification process, the temporary waiver is also valid if its conditions are implemented into national legislation of both the importing and the exporting country. The European Union incorporated the conditions of the waiver into European law in 2006 by adopting a regulation on the compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public-health problems⁵. It thereby incorporated the conditions of the protocol for TRIPS into its legislation, which could be an improvement in access to generic medicines for the least developed countries.

As stated above, this was important in enabling developing countries to make use of the temporary waiver even if the necessary two-thirds of WTO members have not yet ratified the protocol. However, an EU Council regulation is not enough: it took four years before the temporary waiver was used for the first time, which clearly shows that more real efforts have to be made to alleviate the burden of diseases on the poorest.

Until Rwanda called on the temporary waiver in July 2007, no single developing country had ever used it, although public health reasons are abundant in developing countries. The waiver was never used before, because of its complexity and lack of clarity – e.g. a country is required to have attempted to strike a deal with a patent-holder for ‘a reasonable period’ at ‘a reasonable commercial’ price, neither of which is specified. Another crucial defect of the temporary waiver is its case-by-case, country-by-country scope, which does not allow for cheap mass production for countries with similar problems. This way the poor will still miss out on their medicines because lack of economies of scale keeps prices high. On the supply side, some impediments remain as well: European companies are holding back on producing generic medicines owing to the complicated set of rules they have to obey to when making use of the waiver.

European Development and Health Policies

Health is one of the priority areas of the Millennium Development Goals (MDGs) adopted by the United Nations in 2000. The EU is committed to “reduce by two thirds the mortality rate among children under five” (MDG4) and “halt the spread of HIV/AIDS, malaria and other major diseases” (MDG 6) before 2015. Access to essential medicines is pivotal to attaining these goals.

In its health and development policies, the European Union stresses the importance of improved healthcare for economic growth and development. The European Commission recognizes that “the price of essential medicines is one of the major obstacles to improved health and access to healthcare for the poorest people in developing countries.”

In its Action Plan to combat HIV/AIDS, malaria and tuberculosis⁶, the EU explicitly prioritizes access to essential medicines. The European Commission wants to achieve this goal by a system of tiered pricing, by which the pharmaceutical industry would voluntarily sell drugs at lower prices in developing countries. Experts doubt its effectiveness. An evaluation of the Action Plan shows that little progress has been made. As long as the Commission will not encourage – or at least allow – developing countries to make use of flexibilities in the TRIPS agreement there is little hope for progress in the future either.

EU Trade Policy

The European Union was one of architects of the TRIPS Agreement. By favouring ‘the highest international intellectual-property standards” in its Trade Policy it seeks to protect domestic industry at the expense of people in poor countries. Until 2006, however, it did not actively or aggressively seek to strengthen international intellectual-property standards outside of WTO negotiations.

Recently the European Union seems to have joined the United States in their TRIPS-plus lobby to pressure developing countries to apply  “the highest intellectual property standards”. Among its trade goals the European Commission now explicitly states that ‘the EU should seek to strengthen IPR (Intellectual Property Right) provisions in future bilateral agreements...’⁷ Draft proposals for trade agreements with various groups of ACP countries (ECOWAS, CARIFORUM and SADC, but also CAN) that have surfaced in the last year contain more stringent clauses for intellectual property than TRIPS requires. If these proposals were to be accepted they would put a “substantial burden” on ACP countries and could have adverse consequences for public health, according to law professor Frederic Abbott⁸.

In a resolution adopted on 12 July 2007, the European Parliament rightly asked “to restrict the Commission's mandate so as to prevent it from negotiating pharmaceutical-related TRIPS-plus provisions affecting public health and access to medicines, such as data exclusivity, patent extensions and limitation of grounds of compulsory licences, within the framework of the EPA negotiations with the ACP countries and other future bilateral and regional agreements with developing countries.”

Incoherence

In its Health and Development Policies, the EU prioritizes access to essential medicines in developing countries. In the pharmaceutical domain, however, the European Union actively promotes the interests of its industry at the expense of poor people’s access to existing essential medicines. Patents on medicines do not stimulate research into diseases of the poor. For developing countries they only hamper access to already-existing drugs. The EU should advocate the use of compulsory licences for urgent public-health problems in developing countries. Moreover, in pursuing TRIPS-plus clauses in bilateral trade agreements with ACP-countries, the European Commission blatantly disregards the health issues at stake in developing countries.

 

Notes

1 http://www.ip-watch.org/, 27-6-07, OECD Meeting Highlights New Drug Purchasing Model Despite NGO Doubts

2 WHO, Commission on Intellectual Property Rights, Innovation and Public Health (December 2006)

3 TRIPS: agreement on trade-related aspects of intellectual-property rights: http://www.wto.org/english/tratop_e/trips_e/t_agm0_e.htm

4 European Parliament resolution of 12 July 2007 on the TRIPS Agreement and access to medicines:

http://www.europarl.europa.eu/sides/getDoc.do?Type=TA&Reference=P6-TA-2007-0353&language=EN

5 2006 Regulation on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public-health problems. (http://europa.eu/scadplus/leg/en/lvb/l21172.htm)

6 Communication from the Commission to the Council and the European Parliament dated 21 February 2001

7 European Commission, Global Europe: competing in the world. EC Policy Review (4 October 2006). (http://ec.europa.eu/trade/issues/sectoral/competitiveness

/global_europe_en.htm)

8 http://www.ipwatch.org/, 6 June 2007

25-06-2009 Seizure of generic medicines: problem solved? Not by far! »

11-03-2009 MEPs ask questions about seizures of generic medicines on their way to developing countries »

23-02-2009 MEPs: “We will do everything in our power to make sure IPR provisions do not hinder access to medicines in Andean countries!” »

22-02-2009 Coherence star for MEPs Helmuth Markov and Thijs Berman »

06-11-2008 The EU and Intellectual Property Rights »

Documents

News archive TRIPS and Medicines 2005-2008