Letter from CPTech, Oxfam, MSF and HAI to WTO delegates regarding December 16, 2002 Chairman's Text for "solution" to Paragraph 6 of the Doha Declaration on TRIPS and Public Health
Dear Delegate to the WTO:
We are writing to ask that the WTO delegates reject the 16 December 2002 TRIPS Council Chairman's text on the "solution" to paragraph 6 of the Doha Declaration. We do not make this request lightly. Like others, we expected the WTO negotiations on paragraph 6 to signal a new sensitivity to public health concerns, and to demonstrate that the Doha Declaration on TRIPS and Public Health would have tangible benefits for persons who lack access to medicines. Central to this promise was the statement, in paragraph 4 of the Declaration, that the TRIPS Agreement:
can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.
Paragraph 6 was the unfinished business of the Doha Declaration. It imperfectly raised a well-known problem in the TRIPS. While the TRIPS accord permits compulsory licensing of patents for a variety of public interest objectives, including the protection of the public health, it's practical use is constrained by Article 31.f of the TRIPS, which normally limits exports to predominate use in the domestic market. It is simply economically inefficient to have domestic production for every medicine a county may need, and there are also other barriers to local production such as scarce know how, trade secrets and regulatory barriers. Paragraph 6 of the Doha Declaration recognized explicitly one aspect of the problems presented Article 31.f, namely that:
Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement.
At the outset, public health and development groups urged the WTO delegates to address the larger issue of the economics of the health care sector and to craft a "solution" to this paragraph that would allow the WTO to address the mandate in paragraph 4 of the Doha Declaration, and to make certain the well known flexibilities that are outlined in Paragraph 5 of the Declaration are meaningful for the poor. In this regard, it was noted that only a handful of countries with large domestic markets could effectively use compulsory licensing for domestic only production. It was pointed out endlessly that it was both irrational and unfair that countries with small domestic markets would not benefit from compulsory licensing in the same way.
The solution to this problem was well known, and had been presented to the WTO in 1999 in Seattle. Article 30 of the TRIPS could be used to allow exports of health care inventions allowing firms to achieve economies of scale. The case for Article 30 was compelling. Health Care inventions like medicines, vaccines and many medical devices are regulated items, and patent owners can easily protect their legitimate interests in the markets where products are consumed. If patents exist in the market where products are consumed, compulsory licenses would have to be obtained, and patent owners would have all of the existing Article 31 safeguards.
In 2000, a WTO panel in the Canadian "early working" case (WT/DS114/R) involving pharmaceuticals, held that Canada could freely export medicines to foreign markets for purposes of foreign registrations, under Article 30 of the TRIPS. In the Canadian early working case, the panel cited the Canadian argument that:
Smaller countries that did have generic industries did not have domestic markets sufficiently large to enable those industries to operate on an economic scale. Those industries had to export in order to be able to manufacture in sufficient quantities to achieve economies of scale, so that domestic consumers could receive the benefits of cost-effective generic products. . . . exceptions that had the effect of confining all activities to a single country were of little use to countries that, unlike the United States, depended on international trade to obtain generic products.
The case for a more general export provision can plainly be read from the Canadian early working case. Other governments have also considered such measures. Representative Sherrod Brown has proposed in the United States Congress that Article 30 of the TRIPS be used to permit exports of medicines to address public health emergencies, in a bill introduced following the United States and Canadian experiences with Anthrax. On October 23, 2002, the European Parliament adopted Amendment 196 to the European Medicines Directive. This amendment provided the precise solution that the TRIPS Council should have adopted.
Manufacturing shall be allowed if the medicinal product is intended for export to a third country that has issued a compulsory licence for that product, or where a patent is not in force and if there is a request to that effect of the competent public health authorities of that third country.
The European Parliament Amendment 196 is only 52 words, but it provides exactly the correct policy framework to balance the objectives of Paragraph 4 of the Doha Declaration, while protecting the legitimate interests of patent owners.
Unfortunately, the WTO negotiations on paragraph 6 took an entirely different direction. Shortly after the Doha Declaration on TRIPS and Public Health was adopted, the largest pharmaceutical companies directed an effort to undermine the Declaration, to divide developing countries, and to fashion new and dangerous precedents that were designed to undermine the use of compulsory licensing, even in cases where there were enormous social costs for not addressing abuses of patent rights.
We have now a proposed "solution" to paragraph 6 that has few benefits, diminishes the importance of the Doha Declaration itself, and which will risks prejudice to other more important strategies to address the export issue.
Stripped to its core, the 6 December 2002 Motta text would allow countries to export some medicines to least developed countries, and to a very small number of developing countries that meet the severe test set out in the proposed Annex on manufacturing capacity.
Scope of Diseases
The European Union has noted the text has "creative ambiguities," and one of these is in area of the scope of diseases. Paragraph 1.a says:
"Pharmaceutical product" means any patented product, or product manufactured through a patented process, of the pharmaceutical sector needed to address the public health problems as recognized in paragraph 1 of the Declaration.
The debate over the scope of diseases has been bitter and offensive. The notion advanced by the United States, Japan and other countries that diseases such as cancer, heart disease or asthma do not constitute public health problems in developing countries is outrageous. There are also a number of treatments for infections that would not be included in the proposals to limit the scope to epidemics. Vaccines were explicitly included in earlier drafts, but removed after Japan objected on the ground that vaccines technically are not pharmaceuticals, a concession that is appalling to every public health expert, and given the well known barriers to domestic production for vaccines, truly evidence of how far we have wandered from the patient interest. The current text allows the issues of scope to be argued later, and undoubtedly will be a basis for US bilateral pressure on weak countries.
This "creative" effort to narrow the scope of diseases and to raise doubts about the inclusion of vaccines, or at least to give the United States government the space it needs to pressure developing countries on these issues, is a disgrace, and its only redeeming feature is that the United States was unable to more clearly limit the scope of diseases and technologies.
Limits on Importing Countries
The new Annex which provides the "Assessment of Manufacturing Capacities in the Pharmaceutical Sector" will be used to exclude many non-LDC countries. In earlier drafts there was text to indicate that the issue of manufacturing capacity would be determined on a medicine by medicine basis, and there were references to economic issues, acknowledging at least that the high cost of domestic manufacturing could be the cited as a rationale for importing medicines. The current text would automatically allow the LDCs to quality as importers, but would provide a two-part test for all other countries.
The first test would be a determination that there exists no manufacturing capacity on the pharmaceutical sector. Very few countries could meet this test. Certainly South Africa, Kenya, Ghana, Nigeria, Zimbabwe, Uganda and many other countries have some manufacturing capacity. The second test, paragraph (ii), requires a determination that manufacturing capacity is insufficient for purposes of meeting its needs. Some delegates argue that this will provides flexibility for a member to consider the economic feasibility of local manufacturing, but of course, the United States, Switzerland, Canada and the European Union, countries that seek to narrow the import eligibility, were successful in eliminating explicit language on these very points. We are left with what the United States and others can argue is an engineer's definition of capacity. They will say that any significant capacity to manufacture in a country will render a member country ineligible for imports. PhRMA and its Member country allies will clearly argue that Kenya, Ghana, Zimbabwe, South Africa, Brazil, Malaysia, Argentina, Chile, Mexico, the Philippines, and virtually any non-LDC with any amount of economic development will be excluded as an importer. This issue is too important to be ambiguous.
This unfortunately is also an area where the Motta text is completely at odds with the requirement in paragraph 4 of the Doha Declaration that we seek to implement TRIPS in a manner to "promote access to medicines for all." The greatest opportunities for extending greater coverage for medicines exist in the middle-income developing countries. Brazil has indicated that its current program of universal access to necessary medicines is not sustainable without the ability to import cheap medicines, or to creditably use the threat of a compulsory license to negotiate better prices. Malaysia and Thailand are considering universal access to HIV medicines, but will not do this unless they can obtain low prices based upon imported materials. And there is also a close link between the fate of the middle income countries and the poorer countries. The existence today of cheap generic antiretroviral (ARV) drugs is due to the earlier decision by Brazil to purchase generic AIDS drugs. The Brazil purchases created a competitive market of generic suppliers, and this has benefited the poorest countries in Africa. What the Motta text seeks is to marginalize the generic suppliers by limiting their market to LDCs only. Had this been the case before, Brazil would never have been able to offer universal access to HIV drugs, and Africa and other countries would never have obtained cheap ARVs. The United States knows this. Switzerland knows this. Canada knows this. And the European Union knows this. But these countries have been relentless in excluding the middle- income countries as importers, in order to protect this market for the European and North American big pharma companies.
Article 31.f of the TRIPS is 20 words. The Motta "solution" to 31.f is eight pages. Most of this concerns the extensive "safeguards" the European Union, Switzerland and others have sought to attach to the agreement, including paragraphs 2, 4 and 5. None of the provisions in paragraphs 2, 4 or 5 are necessary or desirable. The TRIPS already has extensive safeguards for patent owners in Article 31 and other in other existing TRIPS provisions, and these additional requirements should be rejected. We are particularly critical the provisions that raise costs to generic producers, impose costly and difficult expectations that developing countries will police diversion, when there is no evidence that generic products have been diverted in significant amounts to OECD countries, and the provisions that require the WTO TRIPS Council to be notified of individual licenses. Once patent owners have their individual licenses sent directly to the TRIPS council it is a matter of time before those right owners ask the TRIPS council to resolve disputes regarding those licenses.
The TRIPS Chair has defended the extensive notice and other safeguard provisions in part on the basis that transparency is beneficial. In our view, the transparency for this system should be exactly the same as it is for the Article 30 and Article 31 exceptions that the North America and European Countries routinely use, and not something extraordinary such has been proposed.
The OECD countries have clearly imposed a non-permanent, litigious, complex and irrational legal mechanism. There is no benefit except to big pharma to have requirements for dual compulsory licenses issued. There is no rational basis for having the compensation determined in the exporting country, since the most important issue is affordability in the importing country.
Prejudice to other export strategies
A big concern is that the Motta proposal may have the practical effort of prejudicing a county's unilateral efforts to adopt a much better Article 30 solution, based upon the European Parliament's Amendment 196. The norms adopted in this proposal will undermine any national Article 30 approach that works differently.
Opposition for developing country generic industry
Generic industry groups from Africa, Asia and Latin America have all opposed the approaches outlined in the Motta text. Any "solution" that does not address their legitimate concerns should be rejected, since the developing country generics industries will be key to any solution that actually works.
Given these and other concerns, we regretfully ask the WTO delegates to reject the Motta text.
Consumer Project on Technology
Ellen 't Hoen
Health Action International, Europe