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The US is facing growing isolation at the WTO after it blocked Trade Related Aspects of Intellectual Property Rights (TRIPS) in December last year.

While the Financial Times editorial on January 3rd blamed it on the powerful US pharmaceutical lobby and terms its reasons as widely exaggerated, it also singles out India and Brazil for willfully stoking fears that diseases such as obesity and asthma may be taken under the purview of compulsory licensing.

The argument, it appears, primarily attempts to bail out the US government that has come under severe criticism from all quarters, including the European Commission.

The fact is that the Doha Declaration does not refer to a particular disease but to public health problems. Attempts therefore to restrict the scope of diseases, and that too, infectious diseases, are an unjustified dilution of the Doha Declaration.

The US pharma lobby believes that unless the scope of TRIPS is restricted, profit- driven pharmaceutical companies would not invest in research & development.

What it does not disclose is that major pharma companies spend little on research that is relevant to poor countries. Most pharma companies in the US reap higher profits through anti-ageing creams, obesity and impotency related medicines than specific drugs related to poor countries.

According to a statement to WTO made by Oxfam International, an organisation working in over 100 countries on poverty, suffering and injustice, US companies in the year 2000, earned $ 36.5 billion abroad from royalties and licensing fees alone, more than half of the world total.

Prior to the 1999 Seattle summit, over a hundred developing nations called for changes to the TRIPS Agreement to make it less damaging for public health. The proposals fell on deaf ears till it triggered off a widespread public concern, forcing the pharmaceutical giants to change tack.

WTO, under the TRIPS law, obliges all countries, rich and poor, with at least 20 years patent protection for new medicines, thereby delaying production of the inexpensive generic substitutes upon which developing country health services and poor people depend.

Many companies in private also admit that the increased profits harvested by international drug firms from the developing world markets are not ploughed back into extra research into poor people’s diseases.

For example, over 2 million children die from pneumonia, almost all of them in developing countries. But the concerned antibiotic ‘azithromycin’ (Zithromax) known to be good for treating child pneumonia continues to be out of reach of the common man due to patent laws.

India produces its generic version at one-fifth the cost. But Kenya, which spends only $17 per head each year on healthcare against Norway’s $2,300, is forced to pay a huge premium for the patented azithromycin that originates from the US. It is this disparity that essentially brings out the essence of compulsory licensing.

The U.S. refusal to countenance pro-public health interpretations of TRIPS could provoke a backlash against patent systems, reduce the chances of consensus over a new round of trade talks and further damage the public standing of the WTO, says the Oxfam note.

TRIPS, according to a WHO paper, is feared to lead to higher prices for patented drugs and could make essential medicines out of reach of the poor. Compulsory licensing therefore provides the only alternative option to a developing nation.

TRIPS authorises a third party to make use of or sell a patented innovation without the consent of the patent owner. It does not draw a line on circumstances under which patented products could be subjected to compulsory licensing. National emergency, extreme urgency and non-commercial public use are some of the methods under which compulsory licensing can be immediately brought into effect.

There is a growing fear amongst pharma majors that compulsory licensing could be misused as and when developing nations decide to distribute essential drugs at subsidized or zero rates through its public healthcare network using the non-commercial public use route.

During the 1950s and early 1960s, the US Department of Defence too had exercised its right to procure patented pharmaceutical products at substantially reduced prices from sources other than the patent holder. The US also led the world in issuing compulsory licenses to restore competition.

Under the new laws, developing countries invoking compulsory licensing are required to consult the patent holder. The article provides a detailed list of cases under which compulsory licensing could be authorised to and generally aims at stoppage of abuse.

Besides, many nations have also included in their patent laws provisions for terminating compulsory licensing of patents under specified conditions. In addition, there are many other obstacles for issuing of compulsory licenses.

First, the compulsory licensee is expected to have the technical know-how to ‘reverse-engineer’ a product without the cooperation of the patent holder. Though, some of the developing nations have established in-house R&D, most nations still have a long distance to cover in this ground.

Second, exports of compulsory licensed products from large markets to small and least developing countries can only work where the disease patterns are common to both markets. And third, volume of drug requirement has to be substantial and profitable to make a cumbersome exercise such as this worth its effort.

TRIPS interpretation and implementation therefore could be of tremendous consequence for the developing and least developed nations. Those countries, that have in the past encouraged generic substitution for patented drugs, could experience a huge economic shock. This could on the other hand, also bring about an increased pharmaceutical innovation.

Either way, the consequences could resound throughout the world health system and need to be carefully viewed by the companies. Having discussed and agreed to these provisions at the Doha round, a change of heart by the US at this juncture has indeed set a bad precedent which could lead to many complications in future.

Medecins Sans Frontiers (MSF), an independent humanitarian medical relief organization operating in 85 countries since 1971 has in its note to WTO stated, “access to essential medicines should not be a luxury reserved for the wealthy, but should be reinforced as a critical component of the human right to health. Patents are not an end in themselves but public policy tools to achieve benefits for society as a whole”.

While the US is attempting to put a lid on the simmering controversy through diversionary tactics, it overlooks the fact that impoverished developing countries in Sub-Saharan Africa, that can barely spend money to take care of life threatening diseases, would not be keen to use their thin resources on obesity and impotency related drugs.

What the WTO member states do now about TRIPS and access to medicines is widely seen as a decisive test for whether global trade is managed for people or merely for profits. The developing nations hope that the WTO will support the TRIPS as declared at the Doha Development Round, cease putting pressure on developing countries to alter the definition of TRIPS and look beyond the financial profits to the real need of the suffering poor.

The final outcome of the WTO therefore will decide whether vital medicines will be easily available in future or whether the WTO patents rule price them out of reach of the poor.

(The writer is senior president, corporate affairs, Nicholas Piramal India Limited)