By Kevin E. Noonan —
There have been two distinct stages in the developing world’s reaction to the patent-related provisions of the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) that established the World Trade Organization (WTO). The first is illustrated by Article 78 of Brasilian statue 9279/96, the national implementing statute for the TRIPS agreement:
In cases of national emergency or of public interest, declared in a decision of the Federal Executive Power, and where the patent owner or his licensee do not satisfy such need, a temporary non-exclusive compulsory license to exploit the patent may be granted ex officio, without prejudice to the rights of the owner of the patent.
(emphasis added).
This type of compulsory license was a necessary accommodation by Western drug companies (and their governments) in their efforts to procure patent rights for pharmaceuticals in countries (like Brasil) that did not consider drugs appropriate subject matter for patenting prior to TRIPS. As illustrated by the Brasilian statute, such compulsory licenses had several limiting provisions. They were to be temporary and non-exclusive, and to only be invoked under conditions where the patent owner or any existing licensees could not satisfy the needs of the public in conditions of national emergency (although the "public interest" provisions provided additional justification in the absence of a national emergency).
Article 68 of Brasilian statue 9279/96 permitted compulsory licensing of patents granted to Western drug companies in favor of indigenous (and in some cases nascent) generic drug companies. Compulsory licenses can be granted under circumstances of:
the non-exploitation of the subject matter of the patent in the territory of Brasil, by lack of manufacture or incomplete manufacture of the product or, furthermore, by lack of complete use of a patented process, except in the case of non-exploitation due to economic inviability.
(emphasis added).
These provisions (and similar ones in other developing countries) could provoke any or all of the following reactions by the patentee. First (and what eventually happened most often), the government of the developing country could use the threat of a compulsory license to extract concessions on drug pricing from the foreign patentee. This was a particularly prevalent approach with regard to anti-AIDS drugs, which in Brasil, for example, were supplied to infected citizens from the government without charge, so that negotiations were directly between the foreign drug company and the government. Alternatively, the patentee could build a manufacturing plant in Brasil and thus satisfy the "in the territory of Brasil" provisions of Article 68. Finally, the company could provide technology to a native drug company (generic or innovator) and have the drug produced in a partnership with the patentee, promoting development of the country’s (perhaps nascent) pharmaceutical industry. Roche Holdings AG used this approach for its anti-AIDS drug saquinovir in Ethiopia and Zimbabwe (see "Africa (Still) Depending on the Kindness of Strangers in Anti-AIDS Drug Pricing").
The focus of the developing world’s approach to high patented drug prices changed significantly in 2001 with the adoption of the Doha Declaration by the WTO. Specifically, the Declaration provides:
Article 4. The TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, 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 medicines 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.
Article 5. Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:
(a) In applying the customary rules of interpretation of public international law, each provision of the TRIPS Agreement shall be read in the light of the object and purpose of the Agreement as expressed, in particular, in its objectives and principles.
(b) Each Member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.
(c) Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.
(d) The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4.
Article 6. We recognize that WTO 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. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.
The developing world has interpreted the Doha Declaration to authorize importation of generic drugs from foreign generic companies, particularly those in India and China (see "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries").
And this leads to the neocolonial paradox. Before Doha, developing countries had means to motivate patentees to partner with native drug companies for producing needed patented pharmaceuticals. Although developing countries often used the threat of compulsory licensing to coerce lower drug prices from the patentee, these instances involved anti-AIDS drugs obtained under conditions of national medical emergency, where the political and medical situation denied the developing countries the luxury of putting economic development over addressing the AIDS crisis in their country.
Thailand’s inclusion of Plavix® within its parallel importing scheme, however, removed the pretext that only drugs relating to "medical emergency" would fall under the scope of the Doha exemption. This action merely illustrated the attractiveness to developing countries of parallel importing of patented drugs rather than making the extensive investment needed to develop an indigenous pharmaceutical industry. By definition, the developing world has limited resources available for industrial development, and the AIDS crisis has exacerbated the needs in such countries for affordable drugs while at the same time reducing any willingness to do anything other than obtain these drugs immediately and at the lowest price.
But the consequence of this treatment of the Doha provisions is that the source of these drugs has merely shifted, from Western drug companies to generic manufacturers in China and India. Using these sources is itself not without immediate risk (see "The Effect of Foreign Generics on the U.S. Drug Supply" – Part I, Part II, and Part III), but their most pernicious effects are longer-term: by having a relatively "cheap" source of generic drugs readily available, production and control of patented pharmaceuticals has passed not to the individual developing countries, but to those "more" developed countries that have already developed a pharmaceutical industry. Although the translocation of source from the Western countries to "fellow" developing countries may carry with it some short-term political caché, ultimately following this course forecloses a path to independent development of an important industry in these countries. A vibrant pharmaceutical industry might, among other things, provide for development of drugs for treating diseases long neglected in Western countries where these diseases are not prevalent (such as schistosomiasis); this result is unlikely to happen otherwise. Accordingly, use of the Doha schema for providing cheaper versions of generic drugs may be much less of a boon to developing countries in the long term than any of them currently appreciates.
For additional information regarding this and other related topics, please see:
- "More on the Global Drug Patenting Crisis," August 14, 2007
- "Trying to Find a Solution to the Global Drug Pricing Crisis," July 16, 2007
- "Pharma Sanity Lacks Global Reach," July 13, 2007
- "Brasil Prevails in Dispute with Abbott over AIDS Drug Pricing," July 9, 2007
- "Africa (Still) Depending on the Kindness of Strangers in Anti-AIDS Drug Pricing," May 29, 2007
- "U.S. Trade Policy Becoming Less Pharma-Friendly," May 18, 2007
- "The "Unfairness" of World Intellectual Property Protection According to The New Yorker," May 17, 2007
- "Worldwide Drug Pricing Regime in Chaos," May 9, 2007
- "Not Getting It about Patented Drug Prices at The Wall Street Journal," May 6, 2007
- "A Modest Proposal Regarding Drug Pricing in Developing Countries," May 2, 2007
- "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries," May 1, 2007
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