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The rising prices of medicines and the tragedy of millions of AIDS
victims in poor countries, who cannot pay for the medicines they need to
stabilize the disease, have aroused widespread concern and put on the
agenda a debate on the generally high cost of these drugs and medicines.
The other important issue under discussion is that of equal
opportunities for both developed and developing countries to obtain the
medicines that their populations need in order to fight a range of
diseases, among which the AIDS epidemic in sub-Saharan Africa
constitutes a real tragedy. The debate received a new lease of life in
November 2001, during the Fourth World Trade Organization Ministerial
Conference held in Doha (Qatar). There the right of countries to take
measures to protect public health and promote access to medicines was
recognized.
Introduction
A global health crisis is at hand. Millions of people die each year from
infectious diseases that are treatable and preventable in many cases.
The death toll is unacceptably high in developing countries, where many
die because they do not have access to effective and affordable
medicines. The public outrage over the high prices of HIV/AIDS medicines
has also raised public awareness on the problem of access to medicines
and the role of patents in increasing the prices of medicines. Patents
on pharmaceutical products and processes provide drug companies with
monopolies over the production and marketing of medicines, allowing them
to fix prices at high rates to maximize profits. The WTO-TRIPs Agreement
has come under criticism for facilitating the extension of these patent
rights around the world. The obligation under TRIPS to implement high
standards of intellectual property protection, including the 20-year
protection for patent rights and the obligation to recognize product and
process patents, will effectively eliminate competition from generic
pharmaceutical producers and allow for increased prices of medicines
beyond the reach of even more patients in the developing countries.
Public criticism has been mounting, as are questions about the
legitimacy of patents on life-saving medicines. This has led to calls
for changes or amendment to the Agreement, which many feel is too
heavily in favour of private rights and commercial interests, and
against public interests. The process in the WTO TRIPS Council to have
special discussions on TRIPS and Public Health (as a result of requests
from developing country Members) provides an opportunity for WTO Members
to consider the means of addressing the negative impacts of the TRIPS
Agreement on public health and access to medicines.
This paper discusses some issues relevant to the discussion on the TRIPS
Agreement, patents and access to affordable medicines. This paper has
been divided into five parts, namely: -
Part I - Provides a background to the public concerns on the worldwide
health crisis, the TRIPS Agreement and patents on drugs, and the process
of the Special Discussion on patents and medicines in the TRIPS Council.
Part II -
Examines the effect of patents and monopolies on the prices of
medicines.
Part III -
Looks at some of the limitations on exclusive property rights
of patent holders, specifically provided for within the TRIPS Agreement.
These include compulsory licensing and parallel imports, which can be
used to curb anti-competitive practices and abuses of intellectual
property rights. Compulsory licences and parallel imports are important
tools in the context of protection public health and promoting access to
affordable medicines.
Part IV -
Examines the proposal for a global tiered-pricing or
differential pricing system, first mooted by the EU and currently under
discussion in WHO and WTO.
Part V -
Deals with the Indian scenario.
Part VI -
Conclusion
I
Background
I.1 Health Crisis In Developing Countries
About 14 million people die each year from infectious diseases, many of
which preventable or treatable, such as acute respiratory infections,
diarrhoeal diseases, malaria and tuberculosis. Up to 45% of deaths in
Africa and Southeast Asia are thought to be due to an infectious disease
. The death toll is unacceptably high in developing countries, even as
health indicators show improvements in many countries of the world. This
health crisis is caused by several inter-linked factors - poverty, lack
of access to health services, water and sanitation being some of them.
However, a vital factor in the promotion of public health - and very
often, a matter of life and death - is the supply of effective and
affordable medicines and peoples' access to such medicines and
treatments.
In the case of HIV/AIDS, a human
tragedy of mind-boggling dimensions is now at hand. Of the 36 million
people with HIV/AIDS in the world, 25 million of them are in sub-Saharan
Africa. In certain African countries, more than a quarter of the adult
population has HIV, and life expectancy is projected to decline
dramatically in the next ten years. For example, life expectancy in
South Africa is projected to fall by 20 years by the year 2010 due to
the spread of HIV/AIDS. The HIV/AIDS epidemic has put the spotlight on
the issue of affordability of essential medicines. In industrialized
countries, AIDS deaths have been dramatically reduced partly because of
the availability of life-saving medicines. However, a year's worth of
the standard treatment of three-antiretroviral combination is estimated
at US$10,000-15,000 . This price level puts such treatment out of reach
of most people in the developing world, where 95% of the people with HIV
are from developing or under developed countries.
Public interest worldwide has been aroused by the health crises in the
developing countries, caused by the exorbitant prices of drug
treatments. HIV/AIDS medicines are a high profile example, but there are
also many cases of medicines for other life-threatening diseases being
made unaffordable, simply because companies owning or controlling
patents on the medicines have been able to block competition from other
firms and other products. Prices of patented medicines are very much
linked to the monopolies enjoyed by pharmaceutical companies, protected
and maintained by patent rights .
I.2 The Trips Agreement And Patents On Drugs
Patent rights are being extended around the world through the provisions
of the WTO Agreement on Trade-Related Aspects of Intellectual Property
Rights (TRIPS). Proponents of the TRIPS Agreement argue that patents and
other intellectual property rights are essential for promoting research
and development (R&D), as well as, stimulating innovation. Yet, there
has been scant evidence that the introduction of TRIPS-compliant
standards of IPR protection has promoted transfer of technology, R&D, or
innovation in developing countries.
The intensive use of the patent system by corporations is intended to
protect their competitive edge and markets, by keeping out their
competitors. This strategic use of the patent system has the effect of
stifling R&D, preventing innovation and restricting information flows in
the developing countries. Patent protection is sought to be justified on
grounds that the negative effect of monopoly rights will be outweighed
by the incentive for creative activity, innovation and research and
development. This trade-off is beginning to be questioned because the
price and competition costs of strict patent protection have been very
high. In the health and pharmaceuticals sector, this trade-off often
comes with life or death consequences.
The implementation of the TRIPS Agreement will give rise to factors that
can put access to medicines out of reach for millions of people in the
developing world. The TRIPS Agreement obliges WTO Members to adopt and
enforce high standards of intellectual property rights protection, which
were derived from the standards used in developed countries. Conforming
to TRIPS - by recognising and strengthening protection of intellectual
property rights over pharmaceutical products and processes - will cause
problems for developing countries. Implementation of the TRIPS Agreement
may lead to high drug prices, low access to medicines and a weakening of
pharmaceutical industries in the developing countries.
It is feared that patent protection for pharmaceutical products and
processes will have the effect of reducing or eliminating competition
from generic production of medicines. There are about 10 industrialised
countries with the pharmaceutical industry and research base, capable of
developing new chemical entities or new medicines. The multinational
drug companies in these countries own most of the pharmaceutical
technologies and products through patents.
The minimum term of 20-year patent protection required by TRIPS
effectively allows a pharmaceutical company a monopoly over the
production, marketing and pricing of patent protected medicines. It will
be able to keep the price of the drug high during the protection period,
free from competition. By virtue of TRIPS protection, no generic
equivalent can come into the market until expiry of the 20 years,
denying patients cheaper alternatives.
Domestic manufacturing of pharmaceutical products in developing
countries will come to a standstill. Developing countries are able to
produce new medicines by a process of reverse engineering; that is,
researchers in developing countries may develop a new process different
from the process invented (and protected by patent) to manufacture the
new medicine or chemical entity. Reverse engineering is possible only in
countries where the patent law protects processes but not products. The
TRIPS Agreement extends the scope of patent protection to both products
and processes. It would therefore be possible to apply for patent rights
over products for 20 years, and thereafter, further periods of 20 years
each could be applied for products covered by patented processes. Some
experts also caution that the 20-year protection can also be abused to
extend the monopoly through process patents as well as patents on usage
form, dosage form and combination form. In the US for example, patents
have been taken on new combinations of drugs even when the product
patent on the basic drug - the active ingredient - has long expired.
Monopoly protection would be extended through minor changes to the
existing medicines where the product patents have expired.
Developing country pharmaceutical producers will find themselves pushed
out of the market, having to compete with the large MNCs. For the
smaller producers in the developing world, which specialise and depend
on manufacturing cheaper generic alternatives, this would no longer be
possible - at least, until the expiry of the 20-year period. In some
developing countries, domestic production capacity may never be
developed.
The TRIPS Agreement further requires patents to be granted, regardless
whether the products are imported or locally produced. The means that
patent holders can merely import their product, without having to work
the patent in the country granting the right. This will mean that a MNC
can supply global markets under the patent monopoly, exporting the
finished product instead of transferring technology or making foreign
direct investment. This rubbishes the argument of TRIPS proponents that
strict patent regimes will increase the flow of technology and
investment into developing countries.
TRIPS proponents and the pharmaceutical industry argue that patent
protection is essential to ensure R&D for new drugs, but there has been
little evidence to demonstrate that the patent system will ensure
investment in R&D for diseases of the poor. Of the 1,223 new chemical
entities developed in the 21-year period between 1975-1996, only 11 were
for the treatment of tropical diseases. The last major new tuberculosis
drug was developed 30 years ago, but tuberculosis remains a major cause
of death in many developing countries. Furthermore, there is concern
that R&D in the pharmaceutical sector is concentrated on products
intended for the lucrative developed country markets. Hence, the
increased investments for R&D on drugs for impotence, obesity and
baldness, instead of R&D on new and more effective drugs for
life-threatening or poverty-related "Third World diseases", including
malaria and tuberculosis.
Civil society groups and NGOs have called for amendment of the TRIPS
Agreement so as to ensure a proper balance between the protection of
private rights and corporate interests, and the promotion of public
interests in socio-economic, technological development of member
countries, including that of public health. Public criticism is
mounting, as are questions about the legitimacy of patents on life
saving drugs and the global monopolies provided to pharmaceutical
companies by such patents. There is increasing public opinion that the
present model for intellectual property rights protection advocated by
TRIPS is too heavily tilted in favour of private right holders and
against the public interest. The public outrage over HIV/AIDS medicines
has added fuel to the negative public perception about the IPR system
and about the role of TRIPS.
All this is leading to a crisis of legitimacy for TRIPS. In the 6 years
since its coming into force, there has been increasing evidence of many
social and economic problems caused by the introduction of stricter
intellectual property rights, as a result of the implementation of the
TRIPS obligations.
II
Patents And Prices
II.1 Effects Of Patents And Monopolies On Prices
Patents enable prices of medicines to be sold at levels that are
artificially high due to the curbing of competition. When medicines are
under patent protection, the patent holder has a monopoly on the
production and sale of the product for a minimum period of 20 years, and
is thus, able to exercise a monopoly in the pricing of the product.
A key factor in fixing the price of a particular medicine is the patent
on it, because of the monopoly on the medicine enjoyed by the patent
holder. Patent rights enable the patent owners to fix prices of
medicines at high levels, and the effect of patents and monopolies on
prices is demonstrated by data; which compare prices of patented or
branded products, and those of generic producers; prices of the same
product sold in different countries; and the prices of raw materials
used in the production of medicines, in the open competitive market, and
in transfer pricing practices of MNCs. Patent protection is the most
effective tool for drug MNCs to keep out competition from generic
producers and thus, maintain a monopoly control on the production,
marketing and pricing of medicines.
Despite the clear need for developing countries to enable their people
to have access to affordable medicines, a major and perhaps the most
disturbing aspect of the crisis of patents and drugs is that obstacles
have been, and are being put, in the way of developing countries seeking
to make use of TRIPs provisions on compulsory licensing or parallel
imports in order to buy or produce drugs at more affordable prices.
The case of access to affordable medicines has illustrated a disturbing
aspect of TRIPs: that this Agreement has facilitated, and is continuing
to facilitate, anti-competitive behaviour and the flow of trade in
products at prices that are influenced or determined by monopolistic
elements, which hinder trade at free-market prices. This runs counter to
the trade-liberalisation principle of WTO.
III
The Trips Agreement And Access To Medicines: Compulsory License And
Parallel Imports
For a number of developing countries, the interpretation and
implementation of the TRIPS Agreement requires resources and capacity in
excess of those already existing. Implementation of the TRIPS Agreement
represents a very significant extension in scope and duration of patent
protection for developing countries, many of which had not hitherto
provided patent protection for pharmaceutical products. Experts from
developing and developed countries fear substantial increases in drug
prices in the countries that had not granted such patents in the past.
The TRIPS Agreement, in its present form, contains certain provisions
that can be used to limit patent rights. These limitations or exceptions
are to be effected through national legislation, in order to curb abuses
of intellectual property rights and anti-competitive practices, and
generally, to offset the negative impact of patent monopolies.
Two of the most important measures include the right of government to
grant compulsory licences and the application of the principle of
exhaustion of intellectual property rights, which allows for parallel
importation of patented products. There are other important exceptions
to patent rights provided for in the TRIPS Agreement, including
exceptions for experimental use which are relevant in the discussion on
pharmaceutical products. This part of the paper focuses on the use of
compulsory licensing and parallel importation measures.
III.1
Compulsory Licensing
The basic approach of the patents law is to strike a balance between the
interests of an inventor and those of the consumers and to ensure that
the benefits of the new technological developments reach the people, and
not exploited by the inventor alone for the monopoly control.
Compulsory licensing enables a government to issue a licence to a third
party, whether a private company or government agency, for the right to
use or exploit a patent without the patent holder's consent. Compulsory
licensees generally compensate the patent holder through payment of
remuneration.
Many developed countries make available some forms of compulsory
licences, either in their patent laws or under the specific sector
legislation. Such licences are regarded as a crucial element in their
patent laws and are mechanisms used to promote competition and prevent
abuse of patent rights and monopolies. The mere existence of a legal
provision may be enough to persuade patent holders on the need to act
reasonably in cases of requests for voluntary licenses, whilst
strengthening the bargaining position of potential licensees. In the
context of pharmaceutical patents, such licences constitute an important
tool to promote competition and increase the affordability of drugs,
without depriving the patent holder of reasonable compensation.
Provisions relating to compulsory licences or "non-voluntary licences"
are contained in Article 31 of the TRIPS Agreement. Article 31 makes
specific mention of five possible grounds for the granting of compulsory
licenses; that is, in cases of refusal to deal, in situations of
national emergency and extreme urgency, to remedy anti-competitive
practices, in cases of public non-commercial use and to facilitate the
use of dependent patents. Questions have arisen as to whether WTO
Members may issue compulsory licences on other grounds not specified
within the TRIPS Agreement.
On this point, reference should be made to the provisions of Paris
Convention related to compulsory licences, which have been incorporated
into TRIPS Agreement. The Paris Convention allows countries a wide
discretion to issue compulsory licences "to prevent the abuse which
might result from the exercise exclusive rights conferred by the
patent". During the Uruguay Round negotiations, efforts were made by a
number of developed countries to limit the freedom available to
countries under the Paris Convention in the grant of compulsory licences.
However, these efforts failed due to strong resistance from developing
countries. The compromise was to leave open the grounds on which such
licences could be granted.
The Paris Convention on the Protection of Industrial Property recognises
the right to grant compulsory licensing on the ground of failure to work
or insufficient working (Article 5A). This provision of the Paris
Convention is incorporated into the TRIPS Agreement. On this basis,
failure to work, or insufficient working of, a patent should be a
legitimate ground for the issuance of compulsory licences. From a
developing country perspective, the local working of a patent is
desirable, apart from its being necessary for making products available
and affordable, but also for technology transfer opportunities and
reduced foreign exchange expenditure caused by purchasing imports.
However, the developed countries, EU and the US, in particular have
tried to press for a very narrow interpretation of the TRIPS Agreement,
one which seeks to prohibit the grant of compulsory licences on the
ground of non-working of a patent.
Where a developing country finds that it is in the public interest to
encourage domestic production of patented medicines, for the purposes of
controlling and preventing diseases, and in the interests of
availability and affordability, compulsory licensing will be a vital
policy tool.
The compulsory licence provision in the TRIPS Agreement would be
meaningless for the rest of developing country Members of the WTO, which
do not have the domestic manufacturing capacity. This raises the
question of whether these countries would be able to grant a compulsory
licence for the importation of the patented medicine product. This may
be, in fact, the only viable means to use a compulsory license in cases
where domestic manufacturing capacity does not exist, or the size of the
local market does not justify local manufacturing, or where there is a
need to promptly address and emergency situation. The compulsory
licensee may import from a compulsory licensee, or from other sources,
in another country.
There is a further question of whether a compulsory licensee producing a
patented drug could be allowed to export the patented product. The TRIPS
Agreement stipulates that a compulsory licence must be "predominantly"
for the supply of the domestic market. Therefore, exports are possible,
although they should not constitute the main activity of the licensee
with regard to the licensed product. In cases when a compulsory licence
has been granted to remedy anti-competitive conduct, this limitation
need not apply. This is the practice in the US in cases of compulsory
licences granted under anti-trust legislation.
Since Article 31 does not lay down an exhaustive list of grounds for the
issuance of licences, Member should be free to determine further grounds
for the issuance of compulsory licenses. Therefore, the TRIPS Agreement
does not limit the right of countries to establish compulsory licences
on other grounds not explicitly mentioned.
Developed countries have largely relied on compulsory licences, as a
tool to limit exclusive rights and prevent or remedy abusive practices.
Recent legislative changes in developed countries prove that compulsory
licence system is still much in use. The grounds and conditions on which
compulsory licences have been regulated and granted in developed
countries illustrate the flexibility and potential of the compulsory
licensing system to address a multiplicity of public interests and
concerns.
Such evidence indicates that arguments - voiced by developed countries
governments and industry - against compulsory licenses as a deviation
from acceptable standards for intellectual property rights are not
reflected in the policies actually applied in such countries. In so
doing, they practise a double standard - denying developing countries
the use of effective policy mechanisms that they themselves have used
and continue to use.
In India, Chapter XVI (sections 82 to 95) deals with working of patents,
compulsory licences and revocation. Section 82 defines "patented
article" to include any article made by a patented process. Section 83
sets out general principles applicable to working of patented inventions
and section 89, general purposes for granting compulsory licenses.
Section 89 emphasises that the main purpose for which the patent is
granted is to have the invention worked in the India to its advantage.
The purpose is to encourage invention and to secure that the inventions
are worked on a commercial scale and to the fullest extent that is
reasonably practicable without much delay and that interests of persons
working on an invention is not unfairly prejudiced. Section 84 deals
with the grant of compulsory licences where a complain is made that the
patent has been worked in such a manner as to satisfy the reasonable
requirements of the public or that the patented invention is not
available to the public at a reasonable price. Section 85 vests
residuary power in the Controller to revoke a patent in the event of the
invention not being worked to an adequate extent in the country or not
being available to the public at a reasonable price notwithstanding the
compulsory licensing provision. Section 87 deals with the procedure to
be followed for granting a compulsory licence. Section 90 regulates the
terms and conditions that may be imposed in respect of compulsory
licence. Section 94 deals with the termination of compulsory licence.
With a view to securing the objects of the patent law system, the
Controller has the power to grant any person interested who has made an
application, a compulsory licence upon such terms as he may deem fit, if
satisfied that: -
1. the reasonable requirements of the public have not been satisfied, or
2. the patented invention is not worked in the country, or
3. that it is not available to the public at a reasonably affordable
price .
Also under section 92 the Central Government can grant compulsory
license after notification. The difference between section 84(4) and
section 92 is that while in the former any interested person can apply,
under section 92 only the Central Government has power to grant
compulsory licence in case of national emergency.
III.2
Parallel Imports
Parallel imports involve the import and resale in a country, without the
consent of the patent holder, of a patented product that was put on the
market of the exporting country by the patent holder. The underlying
concept for parallel imports is based on the principle of exhaustion of
rights. This principle is premised on the fact that where the patent
holder has been rewarded through the first sale or distribution of the
product, he/she no longer has the right to control the use or resale of
the product. It would also be in line with WTO's trade liberalisation
objective that from the moment a product is marketed, the patent holder
can no longer control its subsequent circulation.
Nothing in the TRIPS Agreement prohibits parallel importation.
Specifically, Article 6 allows each member country the freedom to
incorporate the principle of international exhaustion of rights - the
underlying justification for parallel imports - in its national
legislation. It further states that Members are not subject to the WTO
dispute settlement system for disputes relating to exhaustion of rights.
Parallel imports are of particular importance for public health
interests, since the pharmaceutical industry generally sets prices
differently throughout the world for the same medicines. Parallel
imports would prevent market segmentation and price discrimination by
patent holders on a regional or international scale. Parallel
importation of a patented medicine from a country where it is sold at a
lower price will enable more patients in the importing country to gain
access to the medicines. Such measure would also not prevent the patent
owner from receiving remuneration for the patented invention in the
country where the product is first sold. In this regard, parallel
importation must be regarded as a legitimate measure, which WTO Members
are permitted to adopt to protect public health and nutrition as is
provided for in Article 8 of the TRIPS Agreement.
In order to avoid a possible discrimination complaint under Article 27.1
and benefit all sectors of the economy, it is recommended that parallel
importing should be permitted within national legislation, for patented
goods in all fields of technology, and not only for health-related
inventions.
Developed countries and their corporations discourage parallel imports
on the grounds that companies would then charge a single price worldwide
- thus leading to an increase in the price that may otherwise be charged
in low-income countries - were parallel importation to be implemented.
This argument is a weak one, and available evidence provides
contradictory proof, that in many developing countries, the prices of
the same medicines are much higher than in developed countries.
III.3
Obstacles In The Use Of Compulsory Licences And Parallel Importation
It is vital that the right of governments to use compulsory licences and
parallel importation measures are upheld and respected. Such measures
must also be capable of effective implementation.
These TRIPS provisions are coupled with numerous conditions, making them
difficult to operationalise effectively and speedily. More
significantly, although the TRIPS Agreement allows for these measures to
be undertaken for the protection of public health, some developed
countries have sought to give a narrow interpretation of the provisions
relating to compulsory licences and parallel imports, with the purpose
of restricting of scope of such measures. This situation has led to the
perception that there is a lack of legal clarity or common understanding
of the TRIPS provisions.
This situation has led to some unease and uncertainty on the part of
developing country Members, who are now hesitant, or feel circumscribed
in their ability, to undertake such measures in their national
legislation.
Equally disturbing is the fact that some developed countries, in
conjunction with their corporations and industry lobbies have been
exerting political pressure on developing countries to prevent them from
exercising their rights under TRIPS, and from enacting policies and laws
on compulsory licensing and parallel imports for HIV/AIDS drugs and
other drugs.
It is therefore, necessary for the WTO Members to clarify and come to a
common and agreed understanding of the TRIPS provisions. Compulsory
licensing and parallel imports are clearly allowed within the TRIPS
framework. Therefore, developing countries should be allowed the maximum
flexibility in interpreting and implementing the TRIPS Agreement
provisions, and should be allowed to do so, without fear of litigation
or other pressures. It is vital that interpretations allow full
flexibility for developing countries to exercise their rights to provide
affordable medicines to their people, rather than interpretations that
may restrict the scope and ability of developing country members to
adopt measures to ensure access to medicines.
IV
Differential Or Tiered Pricing
In response to the growing controversy over the issue of access to
medicines, the European Commission has proposed a "tiered pricing"
system that would work to offer lower drug prices to developing
countries, whilst maintaining prices in the developed countries. The
concept of differential pricing has also been taken up by the WHO and
WTO Secretariats.
Whilst these initiatives signal an effort to respond to the public
demands that the issue be tackled, there must also be caution in
adopting the differential or tiered pricing approach. Lessons should be
taken from the UNAIDS Accelerating Access Initiative which involves
industry discounts on AIDS drugs. The process has been described as
"slow, grudging and piecemeal". After almost a year since the
announcement of the initiative, the medicines are still too expensive
for the majority of the AIDS patients.
The fact that the pharmaceutical industry favours the differential
pricing concept has also raised questions about a hidden agenda - to
offer the differential pricing scheme in exchange for restrictions on
countries' rights to adopt compulsory licensing or parallel importation
measures. The EU, in proposing the differential pricing system has also
raised the issue of the need for safeguards against the "leakage" of
low-priced medicines destined for specific markets into the markets of
developed countries.
It will be crucial for discussions or negotiations for such a system to
be carried in an equitable, fair and transparent process, given the
circumstances. Most importantly, a differential pricing scheme must not
be offered as a substitute for countries' rights to adopt compulsory
licensing or parallel importation laws and measures. The tiered pricing
system must not result in conditions being imposed on participating
countries that restrict such rights.
If an initiative on differential pricing is to be considered, it must be
approached on a multilateral basis, and not on a country by country
basis. It should not be limited either by place (the countries involved)
or time (i.e. limited to only a number of years). It must be negotiated
and have results that are transparent, that involve all countries (and
certainly all WTO Members) in a fully participatory way; and it must
also involve transparent prices, rules and regulations. The
beneficiaries must include all developing countries, and not limited to
only the poorest countries. Some life-saving medicines are priced beyond
the reach of most of the world's population This requires dramatically
reducing medicine prices to a level that is reasonably affordable to the
patient so that the medicines will not simply cost less but will truly
be affordable to the patients who need them.
V
Indian Scenario
Some of the amendments to the Patents Act required by the Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS) have just
been adopted by Parliament. Among the many issues dealt with by the
amendments, one of the most debated questions has been their impact in
the health sector and more specifically on access to medicines. The
debates are unlikely to subside with the adoption of the Bill. On the
one hand, the amendments have already been attacked for not going far
enough to allow compliance with the TRIPS Agreement. On the other hand,
the amendments are fundamentally changing the 1970 Patents Act and are
likely to negatively affect people's access to medicines.
V.1 Positive Impacts
To understand how significant the adopted amendments are concerning
access to medicines, it is necessary to look back at the regime adopted
in 1970. The law adopted then drastically restricted the rights of
holders of medical patents to foster the availability of cheaper
medicines. The patents legislation together with other measures such as
price control have had significant positive impacts: Medicine prices
have, for instance, decreased significantly since the 1960s compared
internationally. Further, there is now a vibrant local generic
pharmaceutical industry. In addition, some local companies have
developed sufficient expertise to produce their own new medicines.
The TRIPS Agreement has imposed the wide-ranging changes that have just
been adopted. The controversial nature of these amendments explains in
fact why the Government was initially reluctant to accept TRIPS in the
WTO context and why Parliament initially refused to adopt the first
Patent Amendment Bill in 1995. The changes imposed by TRIPS on India
include increasing the duration of all patents to 20 years, broadening
the scope of patentability and the introduction by 2005 of product
patents on medicines. These legislative modifications will eventually
lead to higher medicine prices in India.
While the TRIPS Agreement lays down a number of precise standards and
rules, it also includes a number of exceptions and qualifications. Over
the years, the exceptions and qualifications have been largely ignored
or sidestepped in most developing countries. Following increasing
controversies concerning the impact of TRIPS in the health sector, the
last WTO ministerial conference addressed the issue of health and
adopted a Declaration on the TRIPS Agreement and Public Health (Doha
Declaration). The Doha Declaration does not modify TRIPS but restates
that member States are allowed to fully use the exceptions provided in
the treaty to foster public health goals. In other words the Declaration
gives countries like India further authority to fully use the exceptions
and qualifications provided in TRIPS. The amendments just adopted by
Parliament must be read in the context of the recently adopted Doha
Declaration.
V.2 Two Main Trends
The new Patents Act is characterised by two main trends. On the one
hand, it generally follows quite closely the requirements of the TRIPS
Agreement. The amendments thus generally alter the balance between the
interests of patent holders and the interests of society at large in
favour of the former. The duration of patents in the health sector is,
for instance, dramatically increased from seven to 20 years. The
amendments also strike out an important provision of the Act seeking to
oblige patent holders to manufacture their inventions in India.
On the other hand, the new Patents Act uses some of the exceptions and
qualifications included in TRIPS to foster public health goals. It uses,
for instance, the health-related exceptions in Sec. 3 of the Act which
determines which inventions are not patentable. Some of the most
interesting and most controversial new provisions are found in the
chapter on compulsory licensing. While TRIPS generally imposes a
stricter compulsory licensing regime than what was provided under the
Patents Act, 1970, the amendments strive to make use of some of the
possibilities opened by the Doha Declaration. The section of the
compulsory licensing chapter (Sec. 83) which sets out the general
principles applicable to compulsory licensing is particularly
noteworthy. It specifically mentions that patents granted should not
`impede protection of public health' and should not prohibit the Central
Government from taking measures to protect public health. Further, it
recalls that patents should be granted to make the benefits of the
patented invention available at reasonably affordable prices to the
public.
On the whole, the framework for compulsory licensing set out in Sec. 83
is quite progressive from the point of view of access to health.
However, the most noteworthy feature of the principles set out is that
they only inform the specific chapter on compulsory licensing. The Doha
Declaration generally recognises member States' right to take measures
to protect public health. This is not limited to compulsory licenses but
applies generally to patenting in the health sector. In other words,
there is no reason why the principles enunciated at Sec. 83 should only
apply at the level of the implementation of patents. It is noteworthy
that while the amended Patents Act does not make innovative use of the
leeway provided by the Doha Declaration beyond Sec. 83, some members of
the Joint Parliamentary Committee on the Patents Bill did propose an
exception to the uniform 20-year rule for medical patents. The fact that
these progressive principles do not inform the whole Patents Act are
indicative of the increasingly regressive nature of the debates
concerning patents in the health sector. Indeed, while ten years ago the
issue of patentability in the health sector was a subject of intense
discussion, the amended Patents Act shifts the debate to the single
issue of compulsory licensing, and thereby indirectly creates a
situation where it will become extremely difficult to discuss broader
issues in the future.
On the whole, the amended Patents Act is noteworthy for dismantling most
of the specificities of the 1970 Act. The 1970 Act constituted a
carefully crafted response to specific socio-economic challenges that
has served India well over the past three decades. It is therefore
surprising that the removal of exceptions meant to foster better access
to medicines has happened without any revision of the underlying policy.
In fact, the socio-economic needs are more or less the same as before as
universal access to medicines has not been achieved. Further, while
India's intellectual property obligations have changed with the TRIPS
Agreement, its obligations in the field of the human right to health
have not changed in recent decades. A significant shift in the
orientation of the patent policy in the field of health without careful
consideration of the implications for the right to health is thus
surprising. There is still scope for debate in the next few years since
product patents on medicines do not have to be introduced before 2005.
This may give a chance for a further broad-based debate on the
advantages and shortcomings of strengthening the patents system in the
health sector.
VI
Conclusion And Proposals
The deepening health crisis in many developing countries has raised
public concern about the lack of access of poor people to affordable
medicines. Public outrage over the exorbitant prices of HIV/AIDS drugs
has also put the spotlight on the negative effects of global patent
rules on the price and affordability of essential and vitally-needed
medicines. Each year about 11 million people die from preventable
infectious diseases. The AIDS epidemic is claiming millions of lives, to
the extent that in some countries over a quarter of the population is
affected.
Around the world, public concern is mounting at how the introduction of
strict patent regimes in developing countries required by the WTO's
TRIPS Agreement is causing the price of patented drugs to be set at
high, often exorbitant levels. The effective monopolies granted by TRIPS
allow pharmaceutical giants to suppress competition from alternative,
low-cost producers and to charge prices far above what is reasonable.
This is done at the expense of many ordinary consumers who are too poor
to afford treatment.
Before the establishment of the TRIPS Agreement in 1994, countries were
allowed more options to exclude sectors from patent rules in their
national laws. Approximately 50 countries (both developed and
developing) excluded pharmaceutical products from patenting. However,
with the implementation of the TRIPS Agreement, member countries are no
longer allowed to do this. The Agreement does allow member countries to
take compensatory measures to counter the effective monopolies of
companies owning patents. Two of the most important measures are the
issuing of compulsory licences, whereby a government can give permission
to other parties to produce or import products on which patents had been
given without the permission of the patent holder, and the practice of
parallel imports. Since TRIPS does not limit the grounds on which
compulsory licences can be given, a country should not be prevented from
issuing compulsory licenses on other grounds that it may consider
necessary to meet public health and other public interest objectives.
However, pressures have been put on many developing countries by
governments and companies in some developed countries not to exercise
their rights to compulsory licensing or parallel importation. Recent
examples of harassment faced by developing countries include the case
brought by 39 pharmaceutical companies against the South African
government over its Medicines and Related Substances Control Amendment
Act, and the dispute settlement case lodged by the USA against Brazil in
the WTO in relation to its Industrial Property Law. People everywhere,
in developing and developed countries, are outraged at these kinds of
pressures imposed on poor countries to prevent them from using the
flexibility of TRIPS to improve the access of ordinary people,
particularly the poorest, to medicines.
In developing countries, the TRIPS Agreement has exacerbated conflicts
between private corporate interests, and the public interest including
public health. The controversy over access to medicines has highlighted
just one aspect of the imbalances within the TRIPS Agreement, which is
too heavily tilted in favour of private right holders and against the
public interest. There is growing evidence of social and economic
problems caused by the introduction and enforcement of stricter
intellectual property rights, which developing countries are obliged to
implement as part of their obligations under TRIPS. This has resulted in
calls for a re-assessment of the Agreement itself.
The key principle that should guide the discussions in the WTO is that
access to essential and vitally-needed medicines is a fundamental human
right. Poor people have the right to good health, and therefore to
medicines for the treatment of poverty-related diseases. Protecting
people's health and saving their lives must take precedence over the
strict protection of intellectual property and the very high profits
which drug companies derive from this. Governments need a permanent
guarantee that they can put public health and the welfare of their
citizens before patent rights, without having to face legal pressures or
threat of trade sanctions.
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