Submission: South Centre
Limitations of the paragraph 6 system of the TRIPS agreement and the need for WTO members to be dissuaded from ratifying the protocol to the TRIPS Agreement incorporating the system under Article 31bis of TRIPS and should instead undertake a comprehensive review and evaluation of the paragraph 6 system.
The Need for Revision of the WTO mechanism under the 30th August 2003 decision for the export of pharmaceuticals to countries with insufficient or no manufacturing capacity
Pursuant to paragraph 6 of the 2002 Doha Declaration on TRIPS and Public Health the WTO General Council adopted a decision on August 30, 2003 allowing WTO members with insufficient or no pharmaceutical manufacturing capacity to import generic medicines under a compulsory license, as a waiver from the general requirement under Article 31 (h) of TRIPS that a CL can be issued only predominantly for being used by domestic manufacturers. In 2005 the WTO General Council adopted a Protocol amending the TRIPS Agreement which incorporated this mechanism as an amendment to the TRIPS Agreement (Article 31bis).
Till date, only a limited number of countries have adopted legislation to implement the August 30th Decision as an exporting country. The WTO Secretariat has been urging member States to ratify the August 30th Decision to bring Article 31bis of the TRIPS Agreement into force. However, there has been very limited use of the system. Only one importing country (Rwanda) used the mechanism to import cheaper life-saving medicines from the Canadian generic company Apotex for 21000 HIV/AIDS patients.
Therefore, while the Paragraph 6 system has been celebrated as a ‘solution’ to the problems faced by developing countries and LDCs in accessing affordable medicines, in actual practice it has not contributed to address such problems.
This is largely due to the fact that the system is unnecessarily burdensome and complicated. The Paragraph 6 system places obligations on importing countries making use of the system that are more onerous than those for countries that can issue a CL to supply the domestic market.
The experience in making use of the system also suggests that there are hurdles within the Decision that make it difficult for countries to import a generic drug under a CL, and also makes it difficult for generic manufacturers to export a drug under CL. In the Canada-Rwanda case, the only instance in which the Paragraph 6 system has been used, it took almost 27 months to meet all of the requirements. Thus, the system is less effective than it should be. Therefore, it is important that WTO members carefully examine the reasons behind the limited use of the system and address systemic deficiencies before making it permanent as article 31bis of the TRIPS Agreement (currently in the process of approval by WTO members).
Some of the key problems in using the Paragraph 6 system are:
Generic companies need to undertake negotiations for voluntary licenses with the patent holder before applying for a CL. Such negotiations may be protracted and complex, and a source of considerable delay and discourage generic manufacturers to participate in the process.
The Decision comprises a succession of complex procedural steps. First, a potential purchaser has to forecast the need for a medicine and identify a generic producer willing to participate in the process and fill the drug order. Second, the manufacturer has to try to negotiate a voluntary license with the patent holder. Third, if the negotiations are unsuccessful, a CL application must be filed in the home country of the generic producer. Fourth, if a patent exists in the country of export the generic producer has to apply for and obtain a CL in that country too. Each of these steps is time-consuming, involves substantial financial expense and holds no guarantee of success.
A country importing medicines using this system must also give a written notification to the TRIPS Council which must include the specific names and expected quantities of the product needed. Unless the importing country is classified as an LDC, it must also specify whether the product is under patent, and provide information that establishes that it lacks sufficient manufacturing capacity in the pharmaceutical sector to develop the drug being ordered.
The system also imposes conditions for commercialization of the products made under the CL. They must be clearly identified as being produced under the system through specific labelling; they should be specially packaged to be distinguishable from the branded product and in respect of its shape or colour. The generic manufacturer must post specific information about the quantity of the product, its destination and distinguishing features. These ‘anti-diversion’ measures are to ensure that the product will only be exported to the destination stated in the CL.
The Paragraph 6 system requires a drug-by-drug, country-by-country and case-by-case decision-making process. Indeed, the CL application must stipulate the destination and the quantity of drugs that are to be purchased and exported under the licence. Drug needs must therefore be determined with precision beforehand. If more patients are included, the only way to purchase more drugs is to begin the process again. A stock-out due to the procedural hurdles may lead to the treatment being interrupted and as a consequence patients may develop increased drug resistance (as in case of HIV/AIDS), creating the need for more expensive treatment. Conversely, if the needs have been overestimated, re-exportation of medicines imported under the system to another developing or least developed country in a similar situation is not permitted, unless there is a regional trade agreement between the two and the majority of its members are LDCs.
There is substantial scope for the patent holder to undermine the system. For example, the patent holder may decide at any time to offer the medicines at lower cost or for free, thus frustrating any efforts made to use the system in that particular case. This creates a huge uncertainty and additional risk and disincentives for potential suppliers.
In view of these limitations of the paragraph 6 system, WTO members should be dissuaded from ratifying the protocol to the TRIPS Agreement incorporating the system under Article 31bis of TRIPS and should instead undertake a comprehensive review and evaluation of the paragraph 6 system.
Bibliography and References
World Trade Organization, Members’ laws implementing the ‘Paragraph 6’ system, http://www.wto.org/english/tratop_e/trips_e/par6laws_e.htm
South Centre, The Doha Declaration on TRIPS and Public Health Ten Years Later: The State of Implementation, Policy Brief No.7, 1 November 2011, http://www.southcentre.int/wp-content/uploads/2013/06/PB7_-Doha-Declaration-on-TRIPS-and-Health_-EN.pdf
Stacey B. Lee, “Can Incentives to Generic Manufacturers Save the Doha Declaration’s Paragraph 6?”, Georgetown Journal of International Law, vol.44, 2013, p.1387, https://www.law.georgetown.edu/academics/law-journals/gjil/recent/upload/zsx00413001387.PDF