In Clash With Activists, Critics Charge Thailand Violation Of Trade Rules

by Martin Vaughan
Published at Intellectual Property Watch

WASHINGTON, DC – Critics of Thailand’s decision to issue compulsory licenses for several patented drugs said the Thai government violated global trade rules, as they clashed with public health activists at a 16 March briefing on Capitol Hill, home of the United States Congress.
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Ronald A. Cass, dean emeritus of Boston University Law School and chairman of the Center for the Rule of Law, a property-rights organisation, said the circumstances of the Thai case do not fall within narrow exceptions in the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) on when a government may use a patented technology without first negotiating with the patent holder.

Cass also defended the 14 March announcement by Abbott Laboratories that it has withdrawn requests to register in Thailand seven new medicines, including a new heat-stable version of the AIDS drug lopinavir/ritonavir, marketed by Abbott as Kaletra. “If you loaned someone your car and they stole it, would you then trust them with the keys to your home?” Cass queried.

Since last November, Thailand has announced it will import or manufacture generic versions of three drugs, including the AIDS drugs efavirenz, manufactured by Merck, and Kaletra. Health activists at the briefing vigorously asserted that in doing so, Thailand is fully within its rights under the TRIPS agreement and acted responsibly to deliver life-saving medicines to one of the largest HIV-infected populations in the developing world.

“TRIPS has no limitations whatsoever on the grounds under which a country can issue a compulsory license,” said Robert Weissman, director of Essential Action. “The only issue is whether it was legitimate for Thailand not to engage in prior negotiations with the patent holder.”

Participants dissected the Thai decision and Abbott Laboratories’ response at a forum sponsored by House Representative Tom Allen, a Democrat from Maine, and Senator Sherrod Brown, an Ohio Democrat. Todd Steyn, a staffer for Allen, moderated the discussion but no lawmakers were present. Also participating were: James Love, director of Knowledge Ecology International – which organised the event, Richard Kjeldgaard, associate vice president of international intellectual property at the Pharmaceutical Research and Manufacturers of America (PhRMA), and Dr. Buddhima Lokuge, US manager of the Campaign for Access to Essential Medicines at Médecins Sans Frontières (MSF).

Love said that Thailand’s action is legal under international trade law, and “is not shocking at all if you look at what we do in the United States,” adding that the US government has issued five compulsory licenses since June 2006 alone for non-essential consumer products such as software, car parts and set-top television boxes. KEI issued a paper at the event showing the legal basis for Thailand’s actions and countering assertions being made by industry.

Was a Consultation Necessary?

The dispute centres on language in Article 31 of TRIPS that explicitly permits a country to issue compulsory licenses if it has “made efforts to obtain authorisation from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time.” The Thai government says it did consult with Abbott and other drug companies, but that also is a matter of contention.

The consultation requirement may be waived in cases of “national emergency or other circumstances of extreme urgency or in cases of public non-commercial use,” according to the TRIPS provision.

Cass said that since a military coup toppled Thailand’s government last autumn, defence spending has increased by $1.1 billion while public health spending has been cut by $12 million, hardly indicative of a public health emergency, he claimed. In addition, under the compulsory license Thailand would have a for-profit, state-owned firm manufacture the drugs, which Cass argued does not fit the exception for public non-commercial use.

But nongovernmental groups read the public non-commercial use clause much more broadly, and argued that the exception applies since Thailand has ordered the manufacture of Kaletra and other drugs for supply to recipients of its government-sponsored health plan. There is no requirement in TRIPS that the manufacturing under a compulsory license be done on a not-for-profit basis, said Weissman.

In a February white paper, the Thai Health Ministry said that its public health budget represents 10 percent of its overall budget, and that expenditures on antiretrovirals to combat AIDS have increased ten-fold since 2001 to top $100 million this year. But even that amount will only supply 82,000 patients out of 500,000 infected with HIV, a Thai government representative said at the briefing.

The Bush administration so far has chosen at least publicly to stay out of the fray, and US supporters of the Thai government’s decision say this bolsters their contention that Thailand’s actions do not violate TRIPS. In a 17 January letter to Allen and other House members, US Trade Representative Susan Schwab stepped lightly around the question.

“We have not suggested that Thailand has failed to comply with particular national or international rules,” she wrote. “We have indicated that it would be appropriate for the Thai authorities to respond to any requests for direct discussions by concerned stakeholders, including among others, the patent holder; we have not sought to insert the US government into any such discussions.”

Calls for Renegotiation of FTA Provisions on IP

Also in Washington, a group of House Democrats led by Rep. Henry Waxman, a Democrat from California, are pushing the Bush administration to renegotiate intellectual property provisions in free trade agreements with Colombia, Panama and Peru. Intellectual property is one of several areas Democrats want to re-open as the White House seeks congressional approval for those deals before fast-track trade-negotiating authority expires on 30 June.

In a 12 March letter to Schwab, Waxman and other Democrats urged the reconsideration of several provisions they said hamper access to medicines in those and other developing countries with which the US has free trade agreements. “Protecting innovation is important, but the intellectual property provisions in current FTAs extend pharmaceutical monopolies without sufficient regard to consumer access and public health,” they wrote.

Recent US free trade agreements have required countries to protect clinical test data for a minimum of five years after a patented drug receives marketing approval. House Democrats wrote that such protections “ignore fundamental differences” between the history of US law on generics and the situation in developing countries, and create “the potential for serious harm.”

They also raised objections to requirements that countries grant patent extensions to reflect delays in approval, but set no limits on the period of those extensions. They also pointed to things they said are left out of bilateral trade agreements, noting that the text of agreements do not refer directly to countries’ right to issue compulsory licenses, although those rights are mentioned in side letters to some agreements, for example the US-Colombia accord.

Access to medicines is one of a handful of second-tier issues – along with environmental safeguards and port security provisions – in negotiations between the Republican Bush administration and congressional Democrats over the bilateral trade deals. Democrats at the centre of the talks, including House Ways and Means Committee Chairman Charles Rangel of New York and Rep. Sander Levin of Michigan, have trained nearly all of their focus on hammering out a compromise on labour provisions that are seen as the linchpin to any agreement.

Neither Rangel nor Levin signed the Waxman letter, although Levin has said he supports changes to provisions on intellectual property and health. Democrats and trade officials are seeking agreement prior to the end of March, in order to meet notification deadlines under the US fast-track law.

Congressional Briefing on Thailand’s Compulsory Licenses

On Friday, March 16 2007, Essential Action’s Director Robert Weissman was a panelist at a Capitol Hill briefing on Thailand’s recent compulsory licenses for two HIV/AIDS drugs and one heart disease medicine. The briefing was sponsored by Senator Sherrod Brown and Congressman Tom Allen. A summary of Weissman’s comments (based on notes prepared by Knowledge Ecology International) follow.
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Robert Weissman (a graduate of Harvard Law School and occasional adviser to the World Health Organization on intellectual property law) explained to the audience that the three compulsory licenses recently issued by Thailand are legal under Thai and international law, commendable from a public health perspective, and consistent with U.S. interests.

Weissman commenced by referring to the relevant sections of the WTO TRIPS Agreement and the Doha Declaration aloud (The relevant sections were also made available to attendees). “It is clear,” he said, that Thailand’s compulsory licenses were legal under these international norms. He pointed out that TRIPS places no restrictions on the grounds for which countries may issue compulsory licenses, a point specifically reiterated by the Doha Declaration on the TRIPS Agreement and Public Health. Weissman also noted that Article 31(b) of TRIPS clearly states that prior negotiations with patent holders are not required when patents are licensed for public non-commercial use. The licenses issued by Thailand are for public non-commercial use, and the private sector monopolies of the three pharmaceutical companies (Abbott, Merck and
Sanofi Aventis) remain protected. This is significant: the private sector, which serves higher income Thais and medical tourists, comprises 20% of the Thai market, and the Thai public health system primarily serves poor Thais who cannot afford to buy brand-name drugs.

Responding to earlier comments by Ronald Cass (President of Cass & Associates, former Reagan and H.W. Bush Administration trade official and former Dean of Boston University Law School) Weissman explained that that technology subject to compulsory licensing for non-commercial use may and typically is implemented by a for-profit contractor on the public’s behalf. Weissman cited the example of U.S. government use licenses of patented military technology. When the United States forces a patent owner to license its missile patent for public use, it doesn’t mean that the resulting missiles must be manufactured within the walls of the Pentagon. That would be impractical and defeat the purpose of the license. Instead, the U.S. contracts the work to a for-profit company like Boeing. Similarly, in Thailand, profit generating drug companies have been contracted to manufacture drugs for the Thai government’s non-commercial use.

Weissman’s then argued that Thailand’s compulsory licenses were to be applauded as a measure to expand access to treatment. Contrary to Cass’ claims, Weissman pointed to a Thai white paper that explains that Thailand will spend more on treatment as a result of the licenses, not less – as public funding will now be devoted to previously unaffordable drugs.

Weissman’s final point was that Thailand’s compulsory licenses are in America’s national interest. The United States is the world’s largest purchaser of AIDS drugs for developing countries through publicly funded programs like the President’s Emergency Plan For AIDS Relief (PEPFAR). PEPFAR relies on cheap generic drugs to achieve its treatment objectives, and the Thai licenses stand to further lower generic drug prices by expanding economies of scale, particularly for second line AIDS drugs. Without such cheaper second line drugs, either U.S. taxpayers will bear the burden of rapidly increasing costs, or PEPFAR will be forced to scale back its treatment objectives.

Click here to see the comments of the other panelists.

Briefing Note: Pepfar, Generics, Price

by Robert Weissman
Essential Action

Pepfar has released its 2007 annual report to Congress. There’s a huge amount of information in the report.

Information on treatment provision is in chapter two. Through Sept 2006, Pepfar says it is providing support to 822,000 people receiving antiretroviral therapy.
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The treatment chapter also contains important and useful information on Pepfar’s use of generics and pricing data, starting on page 67. Key points:

– Fourteen of 15 focus countries are said to be using some generics.

– Overall expenditure in FY 2006 for ARVs was just under $110 million, with about 27 percent of that spent on generics.

Comparison of brand-name vs. generic prices for combination therapies (page 72):

AZT/3TC/NVP
Brand-name: $701
Generic: $273

AZT/3TC/EFZ
Brand-name: $606
Generic: $487

D4T/3TC/NVP
Brand-name: $594
Generic: $165

D4T/3TC/EFV
Brand-name: $498
Generic: $380