The Guardian November 1, 2000


TRIPS and pharmaceuticals:
A case of corporate profits over public health

by Cecilia Oh

With the obligations it imposes on member countries of the trade body to 
recognise and strengthen patent protection on pharmaceuticals, the World 
Trade Organisation's Agreement on Trade-Related Aspects of Intellectual 
Property Rights (TRIPS) is denying patients in the developing world access 
to life-saving essential medicines. The countries of the South now find 
themselves ranged against Northern governments and powerful pharmaceutical 
lobbies in their fight, at the WTO and beyond, to ensure public health 
takes precedence over corporate profits.

The recent International AIDS Conference in Durban, South Africa (July 9-
14) has put the spotlight yet again on the issue of affordability of 
essential medicines.

The studies and statistics presented at the Durban conference inform us 
that one year's worth of the standard treatment of anti-retroviral drugs 
costs between US$4,000-6,000. This puts it out of the reach of most of the 
people in the developing world, where most HIV infections are recorded.

A key factor in determining the cost of a particular drug is the patent on 
it.

Of the 50 per cent of the patients in developing countries who lack access 
to essential drugs, many die because the drugs are patented and therefore 
too expensive. These patented drugs include treatment for tuberculosis and 
AIDS as well as the Hepatitis-B vaccine.

Public health activists and consumer groups warn that the World Health 
Organisation (WHO) estimates  one third of the world's population lacks 
access to essential drugs  will further increase.

The problem with TRIPS

The TRIPS Agreement now requires all WTO members to adapt their laws to the 
minimum standards of Intellectual Property Rights (IPRs) protection.

During the 1980s, the gradual erosion of the developed countries' supremacy 
in manufacturing and technology, due to the rise of the Asian countries as 
competitors, was a cause for concern.

The industrial lobbies convinced developed-country governments on the need 
to link trade with IPRs, in order to prevent imitation and to increase 
returns on research and development.

Monopoly rights granted by IPRs were regarded as crucial to prevent the 
developing countries from further undergoing the "catching-up" process 
towards industrialisation based on imitating and copying technologies, as 
the developed countries themselves had done.

In other words, IPR protection was a tool to guarantee the comparative 
advantage that had so far ensured the developed countries' technological 
supremacy.

Prior to the negotiation of the TRIPS Agreement, over 50 countries 
(including developed countries) did not confer patent protection on 
pharmaceuticals.

Many developing countries regarded the absence of protection as necessary 
to promote access to drugs at competitive prices. Implementation of the 
TRIPS Agreement may lead to high drug prices, low access and a weakening of 
national pharmaceutical industries.

Twenty-year protection

The minimum term of 20-year patent protection required by the TRIPS 
Agreement effectively allows a pharmaceutical company a monopoly over its 
patented drug.

Free from competition, the company will be able to keep the price of the 
drug high during the protection period. By virtue of TRIPS protection, no 
generic equivalent can come into the market until expiry of the 20 years, 
denying patients cheaper alternatives.

The TRIPS Agreement extends the scope of patent protection to both products 
and processes. Product patents provide for absolute protection of the 
product, whereas process patents provide protection in respect of the 
technology and method of manufacture.

Monopoly protection would be extended through minor changes to the existing 
medicines where the product patents have expired.

Threat to domestic industry

Developing-country pharmaceutical producers will find themselves pushed out 
of the market, having to compete with the large transnational corporations 
(TNCs).

For the smaller producers in the developing world which specialise in and 
depend on manufacturing cheaper generic alternatives, this would no longer 
be possible (until the expiry of the 20-year period).

The TRIPS Agreement further requires patents to be granted regardless 
whether the products are imported or locally produced.

This rubbishes TRIPS supporters' argument that strict patent regimes will 
increase the flow of technology and investment into developing countries.

Overriding patent rights

Notwithstanding the above, some provisions in the TRIPS Agreement do 
provide certain exceptions to patent protection of pharmaceuticals.

Parallel imports: Parallel importing is a means by which developing 
countries could lower drug prices.

Where there are price differences for the same product in different 
markets, it is possible to import the product from the cheaper market for 
resale.

Compulsory licensing: The government or court of law may grant a 
licence to a third party to use a patent, without the patent holder's 
consent, under specified conditions, such as in cases of national emergency 
or extreme urgency, or to remedy anti-competitive practices.

Experts consider compulsory licensing a crucial element in increasing the 
affordability and availability of drugs, while ensuring that the patent 
holder is compensated for the use of the patent.

Battle lines drawn

But some developing countries have been reluctant to use these options for 
fear of trade sanctions by the developed countries.

A report from Medecins sans Frontieres (MSF) details the US Government's 
pressure on Thailand to restrict its use of parallel imports and compulsory 
licences.

The Thai Government passed a law banning parallel imports in 1992, under 
the threat from the US to limit textile imports (parallel imports are 
allowed again after amendments to the patent law which came into force in 
1999).

Although patent law in Thailand provides for compulsory licensing, MSF 
reports that the Thai Government  this time under threat of high tariffs 
on imports of wood products and jewellery  passed ministerial regulations 
in 1998 to restrict the use of compulsory licences.

Without the life-prolonging AIDS drugs, hundreds of thousands of people in 
Thailand will die. Already 300,000 have died.

Health experts and AIDS activists insist that one crucial method of 
improving access to drugs is compulsory licensing, and have condemned the 
US Government's policy of protecting big business over people's lives.

When the South African Government sought to enact the Medicines and Related 
Substances Control Bill, the US Government accused it of failing to 
adequately protect American drug patents.

The US objection was directed at provisions in the law which would allow 
for compulsory licences and parallel importing.

Despite the considerable pressure exerted on the Government and Parliament 
of South Africa, the bill was passed in 1997.

The pharmaceutical industry in South Africa, backed by the TNCs and the 
pharmaceutical lobby in the US, filed a legal challenge to the new law.

The US Government, taking its cue from its pharmaceutical lobby, began a 
process of negotiations and threats to get the South African Government to 
change its stance.

It was only after intense campaigning by AIDS and health activists  
successfully embarrassing Presidential candidate Al Gore and marring his 
campaign efforts  that the US retreated from its position and eventually 
reached a resolution of the matter.

From reports, it is understood that South Africa has made clear its 
intention to use compulsory licensing and parallel importing in a TRIPS-
compliant manner, and that the offending provisions in the act remain.

These incidents of unilateral pressure have provoked outrage from many 
developing countries.

Commentators also point to the irony of the situation. The US, like most 
developed countries, provides for compulsory licensing in its national 
laws.

The US also grants perhaps the largest number of compulsory licences (more 
than a hundred such licences have been granted) to address anti-competitive 
practices and for government uses.

It would appear that in the battle between the right to health and the 
right to monopolies and profits, the battle lines have been drawn between 
countries of the South on one side, and the Northern governments and their 
industrial lobbies on the other.

World Summit for Social Development

The North-South battle lines were clearly drawn during the recent UN World 
Summit for Social Development, held in Geneva.

The G77 group of developing countries had proposed to exclude essential and 
life-saving medicines from patentability, in order to ensure access to such 
medicines.

The developed countries  including the US, the EU, Canada and Japan  
vehemently rejected this proposal, citing the need for patents to stimulate 
research and development.

In response to Canada's call to delete the proposal, the South African 
delegate had said: "When you are going to lose 25 per cent of your 
productive work force due to HIV/AIDS, you cannot be so blase with your 
comments".

The final agreed text does not include the G77 proposal to exclude 
essential medicines from patentability, but affirms countries' right to 
"freely exercise" their legal options in an unrestricted manner.

At the WTO

With respect to the TRIPS Agreement, developing countries are concerned 
over the costs and the socio-economic and developmental implications of 
establishing the strict IPR regimes required. In this connection, 
developing countries had tabled proposals for the reform of the TRIPS 
Agreement.

Of relevance is a joint submission from the Like-Minded Group of developing 
countries (comprising Cuba, the Dominican Republic, Egypt, El Salvador, 
Honduras, India, Indonesia, Malaysia, Nigeria, Pakistan, Sri Lanka and 
Uganda), which proposed that "the list of exceptions to patentability in 
Article 27.3(b) of the TRIPS Agreement shall include the list of essential 
drugs of the World Health Organisation".

Judging from the prolonged negotiations on the issue during the World 
Social Summit, it can be expected that the proposal of the Like-Minded 
Group to exclude patentability of essential drugs will generate heated 
debate.

It is a legitimate concern that the TRIPS Agreement does not adequately 
take into account public health needs. The agreement has instead been 
described as a "charter of rights for patent holders".

There are no specific obligations towards the governments granting the 
patent rights. The interests of the consumers and patients have also been 
ignored.

In this regard, developing countries must be allowed to exercise the 
options already provided for in TRIPS and other international agreements, 
free from pressure.

At the WTO, developing countries will have to fight for their concerns to 
be effectively and promptly addressed.

With respect to the TRIPS Agreement, developing countries have submitted 
proposals for changes to the agreement, in order to ensure that IPR 
protection does not undermine their economic and developmental prospects.

In this regard, the proposal of the Like-Minded Group should be supported 
and adopted as a necessary first step to ensuring access to essential 
medicines and their affordability.

* * *
Cecilia Oh is a research officer with Third World Network. The above article is abridged. For the full text and other articles on the same subject visit the Third World Network's website: http://www.twnside.org/

Back to index page