Lead Author: K M Gopakumar
Additional Author: Sangeeta Shashikant
Organization: Third World Network
International intellectual property (IP) rules and pressures from industrialized countries and the pharmaceutical industry has severely incapacitated the ability of developing country governments to take measures to ensure prompt availability of affordable medical products. This has greatly compromised the fulfilment of human rights especially the right to health and the right to science. Use of flexibilities within and outside of the TRIPS Agreement has become the dominant approach to address concerns over access to patented medical products following the TRIPS patent regime. However, the strategy of using TRIPS flexibilities to facilitate access to affordable medical products is based on several assumptions, which are unrealistic and flawed in the context of developing countries. Apart from these assumptions, TRIPS-plus provisions in the free trade agreements (FTAs), bilateral investment treaties (BIT), pressures from developed countries, voluntary licenses and IP enforcement initiatives are adversely impacting the use of TRIPS flexibilities. Against this background this submission proposes reform of the existing international IP regime to facilitate access to new medical products at affordable price. It proposes replacing the mandatory product patent regime with a mechanism that allows the manufacturing and marketing of generic alternatives subject to payment of a fix royalty for a fixed duration. This mechanism is based on the principle of non-exclusivity and reasonable royalty. Compared to the patent system this mechanism has minimal transaction cost. Further it effectively address existing policy incoherence and advances human rights.
Intellectual Property (IP) and Access to Affordable Medical Products: A New Paradigm
There is a need to separate the issue of access to off-patent medical products1 from access to patented medical products. In the former situation, medical products are usually available at affordable prices, however due to various factors patients may not have access to the needed medical products. Governments however do have sufficient policy space to overcome these obstacles.
Where medical products are patented, the monopoly conferred to the right holders results in exorbitantly priced medical products unaffordable to patients especially living in developing countries. International IP rules2 , and pressures from industrialized countries and the pharmaceutical industry has severely incapacitated the ability of developing country governments to take measures to ensure prompt availability of affordable medical products. This has greatly compromised fulfilment of human rights especially the right to health and the right to science.
This submission elaborates on the constraints in using TRIPS flexibilities, and explains why voluntary licenses are not appropriate solutions for facilitating access to affordable medical products. It also discusses the policy incoherence between international human rights law and trade law arising from the international IP regime. Finally this submission proposes a simple, cost effective and efficient solution to facilitate access to affordable new medical products, while compensating originator companies for their efforts.
II. Use of TRIPS Flexibilities: Is it a Solution?
Use of flexibilities within and outside of the TRIPS Agreement became the dominant approach to address concerns over access to patented medical products following the TRIPS patent regime. The past political consensus to address “access” concerns is articulated in the Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration).3 Following the Doha Declaration, a handful of countries have used TRIPS flexibilities to gain access to affordable generic alternatives. However developments in the last two decades of the TRIPS Agreement suggests that use of flexibilities alone does not provide a viable and sustainable solution for addressing concerns of high prices of medical products emanating from the patent monopoly.
The strategy of using TRIPS flexibilities to facilitate access to affordable medical products is based on several assumptions, which are unrealistic and flawed in the context of developing countries.
First, it is assumed that every country has pharmaceutical manufacturing capacity. Most developing countries and almost all LDCs except Bangladesh, lacks such capacity. The vast majority of developing countries are net importers of pharmaceutical products, especially the active pharmaceutical ingredients (APIs). Thus many developing countries cannot use TRIPS flexibilities effectively without depending on another country. Further, as there are a number of entry barriers, the growth of generic industry is limited.4 3
Article 31(f) of the TRIPS Agreement does not allow use of compulsory licenses predominantly for export purpose. WTO members attempted to rectify this situation with the 30th August 2003 decision (subsequently translated into a proposed amendment of the TRIPS Agreement), which waived the requirement of Article 31(f) when a compulsory license is used to export to a country with inadequate manufacturing capacity. However this decision has failed to offer an effective solution.5
Therefore for countries that do not have manufacturing capability, the successful use of TRIPS flexibilities is dependent on the availability of affordable generic versions in another country and the willingness and ability of such a country and its generic producers to promptly facilitate export of the needed pharmaceutical products.
Second, many developing countries do not incorporate TRIPS flexibilities in their domestic law in an optimal manner. This is usually due to pressures from the pharmaceutical industry and developed countries as well as the technical assistance programs of developed countries and international organizations such as WIPO, which are known for promoting adoption of stronger IP standards and reducing the scope of flexibilities6 . Without incorporation of flexibilities in the domestic law, it is impossible to use the TRIPS flexibilities. 7 Further, due to the lack of capacity (financial and human resource) many developing countries do not undertake substantive examination of patents or are heavily dependent on foreign IP offices (e.g. the European Patent Office, the US Patent and Trademark Office, Japan Patent Office) to conduct the substantive patent examination8 . Thus most developing countries are not in a position to effectively apply flexibilities related to the scope of patentability (such as with regard to novelty, inventive step and industrial applicability). 9
Third, the effective use of TRIPS flexibilities also depends on the existence of robust public health institutions. To invoke a compulsory license or government use, adequate information about a particular disease and its burden is imperative. Absence of such information hinders use of TRIPS flexibilities10. However, usually developing countries struggle to monitor and collect information on its national public health situation thus making it challenging to use TRIPS flexibilities as such decisions may be challenged by the patent holder.
Fourth and most importantly, it is assumed that there is global legal and political consensus with regard to use of TRIPS flexibilities. This is far from reality. There is ample evidence that developing countries that have used TRIPS flexibilities have come under immense pressure from developed countries and/or been threatened with sanctions by developed countries. 11 12 This political pressure is aimed at deterring developing countries from using TRIPS flexibilities.
Additionally, in the last 20 years developed countries have made numerous efforts to prevent/deter developing countries from using TRIPS flexibilities.
Developed countries have insisted on the inclusion of TRIPS plus obligations in free trade agreements (FTAs) that extends monopoly of the right holder as well as limits the scope of flexibilities available to developing countries. 13 Developed countries also insist on investor-state dispute settlement (ISDS) measures either in FTAs or in bilateral investment treaties (BITs). These provisions create a chilling effect on countries with regard to use of TRIPS flexibilities, as there is constant fear of a pharmaceutical company initiating ISDS measures that may result in the government being penalized.14 4
Additionally, numerous IP enforcement initiatives sponsored by the pharmaceutical industry and developed countries have emerged at the national, regional and international levels. These initiatives are about introducing TRIPS plus enforcement measures (including criminal sanctions and border measures) and conflating IP issues with issues concerning quality of medical products. As a result, generic medicines have been seized in transit, and anti-counterfeiting laws threatened access to generic medicines.15
In a nutshell, two decades of TRIPS has shown that the mere existence of TRIPS flexibilities does not automatically translate into availability of affordable medicines. There are significant barriers to developing countries utilizing TRIPS flexibilities, and thus it does not offer a sustainable solution coherent with the right to health.
Voluntary license (VL)
Voluntary licenses are often considered to be a solution to address access concerns. However VLs have significant shortcomings. It is an ad hoc approach to access to medical products. Whether or not a VL is to be issued, for which products, on which terms depends on a particular company. Originator companies prefer VLs as it allows them to impose restrictive conditions that forestall or control competition in the market. VLs are also geographically restricted, often excluding many middleincome countries from the scope of the license.16 VLs may also undermine use of TRIPS flexibilities. For example, VLs issued by the Medicine Patent Pool covers patents that are facing pre-grant opposition in major generic manufacturing countries like India, which may deter effective prosecution of oppositions.17 VLs do not offer comprehensive and effective solution consistent with the fulfillment of the right to health.
III Policy Incoherence International human rights law obligates countries to respect, to protect and to fulfill socio, economic and cultural rights such as the right to health and right to science. Access to affordable generic alternatives is a prerequisite to fulfillment of the right to health. The right to science obligates states to ensure its citizens enjoy the benefits of scientific progress and its applications. However, this is not possible without affordable access. Similarly, the existing IP regime creates policy incoherence with sustainable development goals (SDG) especially with targets sets in SDG 3 on communicable and noncommunicable diseases, which cannot be met without access to new affordable medical products. The international IP regime, especially product patent protection and data exclusivity, incapacitates developing countries from fulfilling their human rights obligations, thus resulting in policy incoherence between the international obligations on human rights and trade law. Twenty years of experience with TRIPS shows that the strategy of using TRIPS flexibilities to address the incoherence between human rights and trade law has not delivered the desired result. Therefore it is important to address the root cause of the policy incoherence i.e. process and products patents on medical products.
Against this background we propose amending the TRIPS Agreement to explicitly exclude mandatory patenting of medical products and processes for the manufacturing of medical products. Developing countries should be given full policy space to devise their patent regime related to medical 5 technologies. In line with the TRIPS amendment, IP provisions of FTAs and BITs should be reformed to exclude medical products from IP protection or investment enforcement especially product patents and data exclusivity. As an interim measure, the TRIPS Council should adopt a waiver for medical products from the mandatory patenting provisions under Article 27.
We also propose a new mechanism based on the principle of non-exclusivity.
Under this mechanism once a new medical product obtains marketing approval from the US Food and Drug Authority (USFDA) or the European Medicines Agency (EMEA) manufacturers from developing countries should be allowed to produce and market generic versions of the new medical product against payment of a fixed royalty for a duration of five years following the marketing approval of the generic version from respective national or regional medical products regulatory agencies. The royalty rate should be determined as per the development status of each country but in any case should not exceed 5% of sales in the country. The permission to manufacture is automatic and not based on a licensing agreement with the Originator Company. Royalties will be collected by the DRAs as an escrow and transferred to the originator companies that developed the medical products. The administration of royalties collection should be governed in a transparent manner. Royalties will not be given for modifications of existing NCEs approved for human or animal use such as new use, new formulation or new drug delivery system or modified diagnostic or vaccines. DRAs should have full freedom to rely on originator’s data to approve the generic products.
Compared to the patent system this mechanism would be more cost effective as it is focused on access to medical products and not on patents. Automatic, voluntary or compulsory licenses are about managing patents, which requires significant institutional capacity and resources, often lacking in developing countries. Further, right holders obtain multiple patents on the same medical product leading to patent evergreening and confusion in identifying the relevant patents.18 Under the proposed mechanism there is no need for a complicated institutional mechanism. Additionally as discussed above, there are significant obstacles in the use of TRIPS flexibilities, thus justifying the need for an easier mechanism to facilitate access to affordable medical products.
Unlike patents, which compromises access, the proposed mechanism ensures prompt access to affordable new medical products to people living in developing countries. It also compensates the originator for their efforts, avoiding claims of free riding.
Impact on Policy Coherence: The scrapping of patent protection for medical products and restoration of policy space for developing countries will ensure coherence between human rights law and international trade law as developing countries will be capacitated to meet their human rights obligations especially the right to health and right to science. The freedom to produce medical products against a royalty payment would further also incentivize local production and contribute towards the achievement of other SDGs especially SDGs 8, 9 and 10.
Impact on Public Health: The suggested mechanism would further the SDG 3 by ensuring the availability of medical products at affordable cost, enabling also the introduction of new and efficacious products in the public health programs.
Advancing Human Rights: Human rights jurisprudence recognizes state’s obligation to fulfill human 6 rights of their citizens. Non-availability of new medical products at an affordable cost coupled with limitations of TRIPS flexibilities prevents countries from fulfilling their human rights obligations.19 This proposal simplifies access to affordable medical products thus strengthening government’s ability to fulfill their human rights obligations, leading to the advancement of human rights.
Implementation: The proposed mechanism is easy to implement without any additional cost. As mentioned above the patent system and use of flexibilities requires huge institutional and administrative capabilities. The current system is also susceptible to pressure from industry and developed countries, which in turn paralyzes developing country governments, adversely impacting the right to health and science. The proposed mechanism moves away from the patent system, and focusing instead on access to the final product, which has received marketing approval from regulatory authorities. It would not require huge institutional and administrative capabilities as existing regulatory authorities may be used. The only additional task is for DRAs to act as royalty collectors on behalf of the originator companies. This mechanism thus ensures that people enjoy the benefit of scientific progress while at the same time making an appropriate contribution to advance the further research and development.
Bibliography and References
1 The term “medical products” hereafter should be understood to include medicines, vaccines, diagnostics and medical devices.
2 International IP rules includes the compulsory product patent regime under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and TRIPS Plus provisions containing in regional and bilateral Free Trade Agreements including data exclusivity provisions. It also includes the investment treaty provisions.
3 The Declaration clearly states that ““… we affirm that the 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 pharmaceutical products for all. In this connection, we reaffirm the right of WTO members to use, to the full, the provisions in the TRIPS Agreement, which provide flexibility for this purpose”. Doha Declaration on the TRIPS Agreement and Public Health .
4 The existing trade and invest regime creates obligations on developing countries, preventing them from providing a policy environment to promote local manufacturing. The Agreement on Trade Related Investment Measures (TRIMS) and other investment rules, which are part of the Free Trade Agreements (FTAs), also compromise the efforts of many developing countries to achieve self-sufficiency in manufacturing of medical products by making the application of many local production stimulation tools like local content rule, export obligation, etc. as illegal.
5 The offered solution contains cumbersome procedures and makes it almost impossible for countries, which do not have manufacturing capabilities to use the mechanism to obtain pharmaceutical products through a CL exclusively for export purpose from another country. So far, there have only been one instance where this mechanism has been used to facilitate access to pharmaceutical products for HIV/AIDS. See MSF, Seven Years On, ‘August 30 Decision’ has Failed to Improve Access to Pharmaceutical products and Remains Virtually Unused WTO Must Reform the Rules .
6 An external review of WIPO’s technical assistance programme notes: “the Review Team found that when discussing international treaties, the orientation of plans was toward promoting accession to international treaties administered by WIPO. While the importance of flexibilities was noted, practical and proactive advice on how to use such opportunities was limited.” See WIPO, An External Review of WIPO Technical Assistance in the Area of Cooperation for Development. < http://www.wipo.int/edocs/mdocs/mdocs/en/cdip_8/cdip_8_inf_1-annex1.pdf>. Also see , According to Prof. Peter Drahos, “[o]ver the years the steady drip of technical assistance leads to the formation of technocratic trust in the EPO’s systems. A strong belief forms that the EPO’s systems produce quality results and that belief in turn forms the basis of decision-making by patent examiners in underresourced developing country patent offices. Technocratic trust thus fosters a circle of decision-making in which the EPO trains developing country examiners to make decisions in their own countries that predominantly benefit foreign companies, including European companies”. Peter Drahos, “Trust Me”: Patent Offices in Developing Countries, Working Paper, Centre for Governance of Knowledge and Development . 7
7 According to the MDG Gap Taskforce Report, many countries are yet to amend their national laws to incorporate TRIPS flexibilities fully. MDG Gap Taskforce Report 2012 < http://www.un.org/millenniumgoals/2012_Gap_Report/MDG_2012Gap_Task_Force_report.pdf.
8 According to Prof. Drahos, “[o]ver the years the steady drip of technical assistance leads to the formation of technocratic trust in the EPO’s systems. A strong belief forms that the EPO’s systems produce quality results and that belief in turn forms the basis of decisionmaking by patent examiners in under-resourced developing country patent offices. Technocratic trust thus fosters a circle of decisionmaking in which the EPO trains developing country examiners to make decisions in their own countries that predominantly benefit foreign companies, including European companies."Peter Drahos, “Trust Me”: Patent Offices in Developing Countries, Working Paper, Centre for Governance of Knowledge and Development .
9 For instance, South Africa does not have a substantive patent examination system in place. Government of South Africa, National Policy on Intellectual Property (IP) of South Africa, 31-32, http://ip-unit.org/wp-content/uploads/2013/09/DRAFT-IP-POLICY.pdf.
10 For instance, the Indian Patents Office rejected a compulsory license application for diabetic medicine Saxagliptin. One of the ground for rejection was the lack of evidence to prove whether the said medicine is available at affordable price. The decision states that “ in the absence of exact quantum of Saxagliptin required and the number of patients vis-a-vis doctors prescriptions as against the opther options existing in the market, the question of accessibility and affordability cannot be determined”. Lee Pharma Ltd v Astra Zenaca AB C.L.A No 1of 2015
Ellen t' Hoen, The Global Politics of Pharmaceutical Monopoly Power ( AMB Publishers, Diemen, 2009) 44--58.
12 In 2007 when Thailand issued a CL, the EU Commissioner wrote a letter stating “neither the TRIPS Agreement nor the Doha Declaration appear to justify a systematic use of compulsory license wherever medicine exceeds certain prices”. See Letter from Peter Mandelson (then EU Commissioner) on Compulsory licensing of pharmaceutical patents in Thailand, http://www.wcl.american.edu/pijip/documents/mandelson07102007.pdf . In the case of India, after it issued its first CL, political pressure forced India to enter into a bilateral discussion with the US on the protection and enforcement of IP, which in turn seems to have created a chilling effect on India’s effort to declare certain patents as public health important to facilitate speedy issuance of CL. Dilasha Seth & Soma Das, DIPP Defers Decision on Issuance of Compulsory Licence for Cancer Drug Dasatinib, The Economic Times (16 October 2014) < http://articles.economictimes.indiatimes.com/2014-10-16/news/55106950_1_cancer-drug-dasatinib-health-ministry-compulsorylicence >. Also see The US pressure forced India in 2014 to set up a bilateral process with the US to discuss IP issues. The US India Joint Statement dated 30 September 2014 states: “Agreeing on the need to foster innovation in a manner that promotes economic growth and job creation, the leaders committed to establish an annual high-level Intellectual Property (IP) Working Group with appropriate decisionmaking and technical-level meetings as part of the Trade Policy Forum” https://www.whitehouse.gov/the-press-office/2014/09/30/usindia-joint-statement.
13 A WTO working paper states that some 54 Regional Trade Agreements (RTAs) were found to contain at least one of the pharmarelated provisions. Further, it also found that the provision most frequently included in RTAs relates to patentability criteria and exclusions, with over one-quarter of the 165 agreements in the sample. See Raymundo Valdés & Runyowa Tavengwa, Intellectual Property Provisions in Regional Trade Agreements, WTO Economic Research and Statistics Division, . See Expert Memo on Effects of TRIPS Plus Provisions on Access to Medicines , < http://infojustice.org/wp-content/uploads/2015/06/Effects-of-TRIPS-Plus-IP-Provisions-on-Access-to-AffordableMedicines.pdf>, UNDP and UNAIDS, The potential Impact of Free Trade Agreements on Public Health, Issue Brief, < http://www.unaids.org/sites/default/files/en/media/unaids/contentassets/documents/unaidspublication/2012/JC2349_Issue_Brief_FreeTrade-Agreements_en.pdf >
14 Pharmaceutical MNC Eli Lilly already filed arbitration notice against Canada seeking CND 500 million compensation for the rejection of patents on Strattera and Zyprexa under the investment protection provisions of the North American Free Trade Agreement (NAFTA), See Public Citizen, U.S. Pharmaceutical Corporation Uses NAFTA Foreign Investor Privileges Regime to Attack Canada’s Patent Policy, Demand $100 Million for Invalidation of a Patent < http://www.citizen.org/documents/eli-lilly-investor-state-factsheet.pdf>.
15 In 2008 alone there were 17 seizures of generic medicines in transit by the authorities of Netherlands. In 2009 Germany also seized a consignment of generic medicine in transit. This was seized after the government of India approached the WTO dispute settlement mechanism challenging the EU customs regulation , See Brook Baker, Settlement of India/EU WTO Dispute re Seizures of In transit Medicines: Why the Proposed EU Border Regulation isn’t Good Enough, PJIP Research Paper Series , http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1026&context=research. See also Kenya’s High Court Strikes down Anti-Counterfeit Act, https://www.opensocietyfoundations.org/press-releases/kenya-s-high-court-strikes-downanti-counterfeit-act
16 The Gilead VL on Sobofusvir allows the licensee to market the medicine in 91 countries but it excludes countries accounted for 73 million people living with HCV, which is roughly 46% of people need HCV treatment. See Hep C Coataion, Gilead’s License on Hepatitis C drugs, Sofosbuvir and Ledipasvir: a Fool’s Bargain < http://www.hepcoalition.org/advocate/advocacy-tools/article/gilead-slicense-on-hepatitis-c >
17 For a critique of Medicine Patent Pool ‘s initial VL see ITPC –IMAK , The Implications of the Medicines Patent Pool and Gilead License on Access to Medicines Treatment , < http://static1.1.sqspcdn.com/static/f/129694/13358037/1312910374040/ITPC+I-MAK+- +The+Broader+Implications+of+the+MPP+and+Gilead+Licenses+on+Access+-+FINAL+25-7- 2011.pdf?token=oZDgMnwEbDsZWo9yYiUuzdbDtOk%3D > 8
18 An investigation by EU Competition Commission found that pharmaceutical companies files numerous patent application on the same medicine to prevent generic entry. Further these companies also use divisional application to delay the patent examination and create legal uncertainty to prevent the generic introduction. See the Executive Summary of Pharmaceutical Sector Inquiry Report , < http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/communication_en.pdf> . According to a study by the Initiative for Medicines and Access to Knowledge (I-MAK), pharmaceutical TNC Abbot has obtained multiple patents for its antiretroviral combination of ritonavir and lopinavir known as Kaletra, and it would extend the patent monopoly from its original patent expiry of 2014 (ritonavir) and 2016 (lopinavir) to 2028. This study states that the Harvard University researchers found 108 patents filed by Abbot, which can be used to extend the market exclusivity. See < I-MAK, Secondary Patenting: A Threat to Affordable, Generic ARVs (December 2012) .
19 The following medicines are part of WHO’s essential list of medicines: trastuzumab (cancer), daclatasvir (hep C), sofosbuvir (hep C), bedaquiline (TB) and delaminid (TB) but are not available at an affordable price in most developing countries due to patent protection or pending patent applications. Even though, there are voluntary licenses available for daclatasvir (hep C), sofosbuvir (hep C) the price is still very high compared to prices patients would get as a result of normal generic competition. It is worth noting that many countries with a high Hep C burden are excluded from these licenses. High prices of these medicines deter cash strapped developing country governments from including these new and effective medicines into their public health programs. Certain countries have included Sofosbuvir in their public health programmes but restrict access to patients at critical stage. Despite the availability of effective anti-virals that can cure patients, treatment has not been scaled up nor universal access provided due to exorbitant prices. This is also true even in the case of developed countries such as Spain.