USTR Not Preparing Case Against Thailand For Compulsory Licenses

Published at Inside U.S. Trade, Vol. 26 No. 9

The Office of the U.S. Trade Representative (USTR) late last week moved to quell rumors that it was on the verge of filing a World Trade Organization case as the new Thai government reviews whether to proceed with implementing compulsory licenses for three cancer drugs that had been invoked by the previous government.

“Speculation about a WTO case is frankly surprising,” according to USTR. “Any such consideration would only happen after a thorough review of the consistency of such measures with WTO rules and extensive discussion with the Thai government, neither of which has happened.”
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Fears of an imminent case had been expressed by activist groups, largely based on Thai press reports that the U.S. had threatened such action as the Thai government reviewed whether it would seek production of the three cancer drugs under a compulsory license arrangement.

Activist groups such as Essential Action, Knowledge Ecology International and Oxfam urged the Thai government in a Feb. 20 letter not to back away from implementing the compulsory licenses for the three cancer drugs. They stated that any threat of trade sanctions are not grounded in legal reality, and that all compulsory licenses issued were done in full compliance with the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.

TRIPS allows countries to invoke compulsory licenses without a reasonable period of time of negotiations with the patent holder in cases of national emergencies or for public, non-commercial use.

NGO sources were unclear on the nature and timeline for the Thai review, but Robert Weissman, director of Essential Action, said it will likely be completed within a month after the Thai cabinet examines the issue. They charged that the government review was likely done in response to pressures from the U.S. government and U.S. pharmaceutical companies.

They also pointed out that the new Thai government will likely be more sympathetic to Western nations on trade issues than the previous government, which was put in place after a military coup in September 2006.

The reports of a potential WTO case emerged at a time when the Biotechnology Industry Organization (BIO) and the Pharmaceutical Research and Manufacturers of America (PhRMA) petitioned the U.S. government, as part of the annual Section 301 process on intellectual property rights, for Thailand to be designated a Priority Foreign Country.

As a Priority Foreign Country, Thailand would be the target of an internal U.S. investigation assessing whether it is violating a trade agreement or imposes an unreasonable or discriminatory measure or burdens or restricts U.S. commerce. During the investigation, the U.S. would negotiate with Thailand to get it to change its policies or decide on appropriate action if it fails to do so.

In case USTR found such a violation, it would be forced to take action against the country unless certain exceptions applied, such as a finding that retaliation could cause serious harm to U.S. national security. Retaliation could not take the form of unilateral action to take away WTO benefits. But the U.S. could take action to revoke trade preferences the U.S. extends unilaterally, or it could pursue a challenge in the WTO. The initial investigation period under the Section 301 law is six months, which can be extended.

USTR designated no Priority Foreign Countries under the Section 301 proceedings last year, but instead opted for placing countries on various watch lists that are set up as a matter of USTR practice, not in the Section 301 law.

USTR Susan Schwab last year carefully avoided charging that Thailand is violating its WTO obligations in letters discussing the compulsory licensing issue. She has generally stated USTR respects the Thai government’s right to issue compulsory licenses according to its own laws and its obligations under the WTO (Inside U.S. Trade, May 29).

The previous Thai government invoked compulsory licenses for the three cancer drugs along with two other HIV/AIDS drugs and one blood thinner. One of the HIV drugs was Efavirenz, which is produced by Merck & Co, and for which Brazil has also issued a compulsory license (Inside U.S. Trade, April 27).

PhRMA and BIO complained about Thailand for invoking compulsory licenses, BIO particularly for the blood thinner and the cancer drugs. BIO alleged in its comments that the compulsory licenses invoked by Thailand “go well beyond the letter and spirit of the Doha Declaration provisions relating to health emergencies … the medical management of such non-communicable diseases may be complex and costly, but it does not rise to the level of a public health emergency.”

PhRMA implied that Thailand does not meet all thresholds under TRIPS. “In no instance has Thailand cited a national emergency, nor a situation of extreme urgency, as its justification,” it said.

Sources in favor of compulsory licenses pointed out that this argument has little bearing, as Thailand did not use national emergency as grounds to invoke the license but used the public, non-commercial use
grounds for doing so.

PhRMA also said if the newly elected government should “reverse its policy with regard to compulsory licensing, and continue collaborative dialog with industry … we would encourage the U.S. government to revisit” Thailand’s status and make it a Priority Foreign Country under Section 301.

Under TRIPS Article 31(b), a compulsory license may be issued without a “reasonable period of time” of negotiations with the patent holder in cases of “national emergency or other circumstances of extreme urgency,” as well as public non-commercial use.

Further, the 2001 Doha Ministerial Declaration on the TRIPS Agreement and Public Health states that each member has the right to determine what constitutes a national or extreme emergency, including public health crises related to HIV/AIDS.

The 2003 WTO Decision on TRIPS and Public Health gave countries a temporary waiver from the obligation of Article 31(f), that compulsory licenses must be granted mainly to supply the domestic market. The effect of this waiver was to open up new access to cheaper drugs for countries that lack production capacity and would like to import generic copies made under compulsory licenses from third countries under certain conditions.

Technically, this works by having the country that makes the drug for export invoke a separate compulsory license with certain conditions.

In this case, Thailand does not need to use the 2003 waiver for the three drugs in production under compulsory licenses, because the country producing them is India and the drugs were patented before 2005. Under TRIPS, India and other developing countries were exempt from protecting drugs with patents up to 2005, and this means the drugs are not under patent there. Therefore, no second compulsory license is needed for India to produce them for Thailand, according to NGO sources.

Thailand’s Ministry of Public Health issued a paper earlier this month explaining a step toward issuing notifications for compulsory licenses of the three cancer drugs. It maintained that it gave sufficient time for negotiations with patent holders, starting in mid-October of 2007, but that these were ultimately not successful as they would still hinder “universal access” to the medicines with an undue financial burden. The demands of the pharmaceutical companies would also create administrative burdens, the paper said.

The International Intellectual Property Alliance (IIPA) in its Feb. 11 comments said Thailand should remain on the Priority Watch List for copyright violations. IIPA said USTR should do “an out of-cycle review” on the country to determine whether it makes sufficient progress in the next year on issues such as curbing optical disc piracy.

Wall Street Journal Letter: Thai medicines policy is legal; has made life-saving treatments available to thousands

by Sarah Rimmington and Robert Weissman
Submitted to The Wall Street Journal

To the Editors,

In a recent editorial (Bangkok’s Drug War, Part Two, February 27, 2008) you criticized Thailand’s efforts to lower drug prices, and praised the new Thai government’s ongoing review of the policy to provide affordable generic versions of important treatments for HIV/AIDS, heart disease and cancer.

Contrary to what your editorial states, the previous Thai government’s decision to issue “compulsory licenses” permitting the use of generic versions of brand-name drugs was legal under both international and Thai law. Thanks to the cheaper generic drugs that Thailand is able to purchase due to the compulsory licenses, thousands of Thais are being given life-saving treatments they otherwise would have been denied.
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Under World Trade Organization rules, governments can issue compulsory licenses under circumstances of their own choosing. Negotiations with patent holders are not required if the licenses are issued are for “public non-commercial use” (government use), as is the case in Thailand. The Thai compulsory licenses only cover the public health system, used primarily by lower-income Thais; upper-income Thais who obtain private medical care must still use brand-name products and pay brand-name prices.

It is worth noting that the United States, among many other countries, makes frequent use of compulsory licenses for government use.

The three licenses implemented in Thailand thus far have led to dramatic cost savings and enabled the Thai public health system to expand access to life-saving medicines. Not just Thailand has benefited; the first round of Thai compulsory licenses led brand-name drug companies to cut their prices for key products on a worldwide basis. After Thailand issued its compulsory licenses, Abbott dropped its middle-income country price for the crucially important AIDS drug Kaletra from US$2,200 to $1,000, for example.

The Thai government should conduct its review of health policy on the merits, not based on misguided fears — stoked by Big Pharma and its allies — that it risks trade sanctions. But it has no legitimate fear that implementing or issuing more licenses will lead to a WTO challenge from the United States, or that it will result in any of the various penalties and trade sanctions available under the U.S. trade programs. Officials of the U.S. government say they are not considering a WTO action against Thailand, and the other concerns have no basis in US law or political reality.

We support policy frameworks that would have middle-income countries make a fair-share contribution to the costs of innovation. But such policy approaches must be designed to expand access to essential medicines, not restrict access through high and unaffordable drug prices.

Robert Weissman, Director, Essential Action, USA
Sarah Rimmington, Attorney, Essential Action, USA

Essential Action is a non-profit international public health and corporate accountability group in Washington, DC

Here is the story referred to in the letter to the editor above.

Bangkok’s Drug War, Round Two
February 27, 2008
The Wall Street Journal Asia

Thailand’s military government may be gone, but its war on drug patents is still very much alive. Just ask the new Health Minister, Chaiya Sasomsup, who is thinking about restoring intellectual property rights to their rightful owners — the pharmaceutical companies.

Mr. Chaiya, who took office this month, is trying to clean up the mess bequeathed by his predecessor, Mongkol na Songkhla. Citing a World Trade Organization loophole, Dr. Mongkol seized patents on Merck’s HIV/AIDS drug Efavirenz in 2006. In 2007, he took another HIV/AIDS patent — Abbott Laboratory’s Kaletra — and Sanofi-Aventis’s patent for a heart drug, Plavix. His last act before leaving office last month was to sign an order to seize four cancer drug patents: two from Novartis, one from Sanofi-Aventis, and one from Roche.

Mr. Chaiya is worried both about Thai patients’ access to new drugs and trade sanctions against Thailand for seizing patents. Fair enough: The WTO provision Dr. Mongkol used specifies patent seizures are allowed only after “efforts to obtain authorization from the right holder on reasonable commercial terms and conditions,” or in cases of “national emergency.” It’s unclear that Thailand’s actions fit either circumstance.

But woe be to Mr. Chaiya to utter such heresy in Thailand, where nonprofit groups such as Oxfam and Doctors Without Borders have inculcated the public with scare stories about how Big Pharma has it in for Thai consumers. The NGO packhounds immediately flooded the Thai media with scare stories about Mr. Chaiya’s proposal, forcing him to do a political backstep last week and say compulsory licensing policy has been “maintained.” The matter is still under review.

What’s missing here is the other side of the argument. Many drug companies tier their pricing, charging developed countries more and developing countries such as Thailand, less. Thailand also faces a range of delivery problems that raise the ultimate cost of drugs to consumers, including high taxes on imports. Not least, seizing patents also puts patients at risk of importing nonbranded, lower-quality drugs.

Mr. Chaiya’s job is to look after the health of the Thai people, not the political motivations of NGOs. It’s clear what serves Thais best: drug companies that are incentivized, through the profit motive, to research and develop new drugs.

Compulsory Licences are the Right Medicine

by Robert Weissman, Guest Columnist
Published at The Nation (Bangkok)

The compulsory drug licences Thailand has issued over the past year have shown the world how to balance public health priorities with international and national legal obligations to patent holders. The implemented compulsory licences have led to dramatic cost savings and enabled the Thai public health system to expand access to life-saving medicines. The recently issued compulsory licences for cancer drugs promise to do the same, if they are implemented.

The benefits have not been for Thailand alone. The first round of Thai compulsory licences led brand-name drug companies to cut their prices for key products on a worldwide basis. Abbott dropped its middle-income country price for the crucially important Aids drug Kaletra from US$2,200 to $1,000, for example.
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The new Thai government is now undertaking a review of the set of compulsory licences on cancer drugs issued by the previous minister of public health. These licences offer the prospect of making essential medicines available to people who need them but otherwise will be denied access. It is hard to imagine a legitimate policy reason for the licences not to be implemented, but it is the right of the government to review the policy.

Whatever the government decides to do, however, it should make its decision on the merits, not influenced by the reprehensible but groundless threats from the brand-name drug companies.

News accounts indicate that PhRMA, the US brand-name pharmaceutical industry trade association, has threatened that, if Thailand implements the compulsory licences on cancer drugs, it will lobby to have Thailand designated a “Priority Foreign Country” under the US Special 301 process. It has also been intimated that the United States might deprive Thailand of other trade benefits, including reduced tariffs on exports to the US available under the Generalised System of Preferences (GSP).

Although PhRMA is a powerful lobby, Thailand should not take these threats seriously. They have no basis in US law or political reality.

As a matter of US law, the US Trade Representative (USTR) may designate a country a Priority Foreign Country if it has “the most onerous and egregious acts, policies, and practices which have the greatest adverse impact (actual or potential) on the relevant US products”. Since there is no doubt whatsoever that Thailand’s actions are compatible with its obligations under TRIPS, a point that USTR has never disputed, the USTR could not make such a designation.

In the past, the USTR has complained about an alleged failure of the Thai government to negotiate with patent holders before issuing compulsory licences. But there is no question that the government undertook extensive negotiations before issuing the recent licences on cancer products. It is also clear that, because the Thai compulsory licences are for government use, Thailand has no obligation under World Trade Organisation rules to engage in negotiations with patent holders. As the WTO says, in cases of government use, “there is no need to try first for a voluntary licence”.

Thailand did lose some GSP privileges in the United States last year. But this was part of the normal process of reducing privileges for growing and competitive economies like Thailand’s. It is likely to continue over time, with no connection at all to Thai decisions on compulsory licensing.

Even more important for the Thai government and people to understand than the legal rules around US trade preferences are rapidly changing political realities in the United States. PhRMA is an industry whose power and influence is on the wane.

Each of the three leading US presidential contenders is much more critical of the industry than the current president. Hillary Clinton has emphasised her support for the Doha Declaration on the TRIPS Agreement and Public Health and has pledged to “support trade policies that protect and expand poor countries’ right to affordable, quality-assured generic drugs for important health needs”. Barack Obama likewise has emphasised that he “supports the rights of sovereign nations to access quality-assured, low-cost generic medication to meet their pressing public health needs”. John McCain has not issued a detailed policy statement on these matters, but he has characterised brand-name pharmaceutical companies as “the big bad guys”.

Whichever of these candidates is the next US president, it is a virtual certainty that US policy will place much more emphasis on public health and patient concerns, and be far less responsive to Big Pharma’s policy agenda.

Over the past year, Thailand has demonstrated how to ensure that essential medicines are made available to people who need them. Now is the time for Thailand and its people to reap the benefits of the government’s courageous actions, not to succumb to the empty bluster of Big Pharma.

Robert Weissman is the director of Essential Action, USA.

Thai-ing to Change the System: U.S. advocates join call for Thailand to stand up to PhRMA and continue life-saving generic drug program

Published at Housing Works AIDS Issues Update

This week, U.S. AIDS advocates joined allies in Thailand and throughout the world in calling on Thailand’s newly elected ruling party to continue to enforce compulsory licenses on three cancer drugs. Thai Minister of Public Health Chaiya Sasomsab, under pressure from PhRMA, the U.S. brand-name pharmaceutical industry trade association, voiced plans this month to end compulsory licensing for three generic cancer drugs.

Failing to enforce the licenses would undermine Thailand’s struggle to produce generic medication, a critical aspect of the country’s fight against AIDS. PhRMA had threatened to push the U.S. to impose sanctions if Thailand stops enforcing the licenses. In their letter to Sasomsab, U.S. advocates called PhRMA’s tactic a bluff that “has no basis in U.S. law or political reality.” The letter was signed by more than 30 groups including Health GAP, Oxfam, Housing Works and Essential Action.

“We wanted to communicate the flimsiness of PhRMA’s threat and to voice how the U.S. public views the pharmaceutical industry,” said Sarah Rimmington, an attorney with Essential Action, which drafted the letter.
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Even though compulsory licenses are legal under international law, many countries have hesitated to implement them for fear of retribution. Thailand’s compulsory licensing policy, enacted in 2006 under the military junta that took control of Thailand in a military coup—and under accordance with the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement— temporarily suspends patent protections for some older medications and allows production of cheaper ones, helping to treat people with HIV/AIDS, cancer and other life-threatening diseases.

The best medicine

One in a hundred people in Thailand has HIV/AIDS, and affordable antiretrovirals have decreased the number of deaths due to AIDS-related causes by 80 percent. Compulsory licensing prompted Abbott Pharmaceuticals to lower its price on Kaletra in Thailand, but not other countries, showing that the competition worked to exert pressure. Continuing Thailand’s compulsory licensing program is important, not just for the Thai people, but also symbolically, giving other countries the courage to defy Big Pharma and follow the TRIPS and Doha agreements.

“We know there are benefits already of compulsory licensing and would hate to see that stop and not be shared globally,” Rimmington said. “It would really be a blow to the world if progress is stalled in Thailand.”

While officials inside the Thai government have determined that compulsory licensing can’t be revoked, The Bangkok Post reported, there is still the chance that the new health minister might take action to bypass the patents of drugs in the future.

Should Sasomsab go through with ending compulsory licenses, he’s sure to incur the wrath of well-mobilized patient advocacy groups throughout Thailand and the world. In 2006, such organizations fought hard for the compulsory licenses and know that they are both legal and worth fighting for.

To get involved in the fight to maintain Thailand’s compulsory licenses, contact Sarah Rimmington at [email protected]

Paris protest against ending drug licensing: Threats of retaliation overblown, they say

by Achara Ashayagachat
Published at Bangkok Post

Foreign activists and academics have lent their support to the struggle by the Thai civic sector to save compulsory licensing (CL) of patented medicines. Health Minister Chaiya Sasomsab is pushing for a review on the CL of three cancer drugs, which was approved by his predecessor Mongkol na Songkhla.

On Wednesday, members of the group Act-Up staged a peaceful protest in front of the Thai embassy in Paris. On the same day, activists and academics from various institutions issued a letter to Mr Chaiya, urging him to resist pressure from foreign pharmaceutical firms to abandon CL.

”Thailand’s review of compulsory licences on three high-priced cancer drugs should not be distorted by groundless threats of potential trade sanctions from the brand-name pharmaceutical industry,” the letter said.
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The Pharmaceutical Research and Manufacturers of America (PhRMA) said this week it would push the US Trade Representative to impose trade sanctions if Thailand implements compulsory licensing and imports low-cost generic drugs.

However, activists said the threat has no basis in law or political reality. A WTO mission had found that Thailand’s policy was legal, said a letter signed by Essential Action, American Jewish World Service, the American Medical Students Association, Global Aids Alliance, Health GAP, Knowledge Ecology International (KEI), Oxfam America and the Student Global Aids and Trade Justice Campaigns.

They said that PhRMA always asks for more than it has any hope of achieving.

In 2006, for example, PhRMA asked that Canada and Germany be designated Priority Foreign Countries, a request the US Trade Representative rejected. Threats that PhRMA would push for Priority Foreign Country status were less significant than they may seem, activists said.

They said leading US presidential contenders should take a more critical stance towards the pharmaceutical industry than US President George W Bush.

Both Hillary Clinton and Barack Obama of the Democratic party have endorsed poor countries’ rights to affordable, quality-assured generic drugs for important health needs.

John McCain of the Republican party has not issued a policy on the matter, but he has been critical of the brand-name pharmaceutical industry, recently characterising the companies as ”the big bad guys”.

Regardless of who is the next US president, it is certain that the next US administration will be less responsive to pharmaceutical industry interests than the current administration.

It was also likely that the next administration would support efforts in developing countries to speed up the introduction of generic competition to make essential medicines available.

A senior Thai diplomat told the Bangkok Post that there was only a slight possibility that the US would petition the World Trade Organisation (WTO) over Thailand’s CL implementation as the stakes were too high and the case might damage the industry if Thailand won.

Taking legal action at the multilateral level needs careful consideration – in this case trade issues relating to public health are a sensitive topic worldwide and if the chance of a US win is not 100%, it should not take the risk because there are several developing countries which might benefit from the ruling, he said.

Mr Chaiya yesterday said he expected a final decision on CL would come in a month.

He confirmed that the permanent secretaries of Health, Commerce and Foreign Affairs agreed that CL on cancer drugs be kept intact.

He said he would discuss the matter with the commerce and foreign affairs ministers before forwarding any proposals to cabinet for approval.

Thailand Urged to “resist pressure” Over Compulsory Licensing

by Lynne Taylor
Published at Pharma Times

As ministers in Thailand’s new government prepare for a meeting next week which will finally decide whether or not they will abandon the country’s programme of compulsory drug licensing, international pressure from both critics and supporters of the policy is growing.

Immediately upon taking office, new Minister of Public Health Chaiya Sasomsab cancelled the licensing programme, fearing international trade retaliations, particularly from the USA, and said he would review the most recent batch of licences issued by his predecessor, Mongkol Na Songkhla. These covered four cancer drugs – Novartis’ Glivec/Gleevec (imatinib), though that case has been settled, plus the firm’s Femara (letrozole), Sanofi-Aventis’ Taxotere (docetaxel) and Genentech’s
Tarceva (erlotinib).
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However, charities and non-governmental organisations have urged Mr Chaiya to stand firm. “These compulsory licences are completely legal and permit the government to provide cheaper and lifesaving drugs to their people,” said Sarah Ireland, regional director for East Asia at the UK-based aid charity Oxfam, while the group’s HIV/AIDS programme director Chalermsak Kittitrakul warned that if Thailand failed to continue to enforce compulsory licensing on key cancer drugs, it could affect other developing countries’ attempts to follow suit.

Opponents of the Minister’s plans also point out that a World Health Organisation-led mission has this month confirmed the legitimacy of compulsory licensing. The policy “is one of several cost-containment mechanisms that may be used for patented essential medicines not affordable to the people or to public health insurance schemes,” said the team, which also included representatives of the World Trade Organisation, the United Nations Development Programme and legal experts. Moreover, health care activists in Thailand say they are in discussions with lawyers about taking the Minister to court if he attempts to revoke the policy, the national Chamber of Commerce has also urged him to retain it, and further backing has come from a group of law professors and other experts from Argentina, Australia, Canada, South Africa and the USA.

Meantime, a letter signed by over 40 US public health, consumer and development organisations and academics has been sent to Mr Chaiya, urging him not to allow the review to become distorted by “reprehensible but groundless threats” of potential trade sanctions from the brand-name pharmaceutical industry.

Thai government officials believe that the Pharmaceutical Research and Manufacturers of America is set lobby the US Trade Representative to have Thailand designated a Priority Foreign Country under the Special 301 process, a move which carries the possibility of trade sanctions. The industry petition is reportedly based on claims that issue of the licenses was not discussed with the drugs’ patent holders.

The US letter assures Mr Chaya that such a threat is “empty bluster” which he should not take seriously as it has “no basis in US law or political reality.” As there is little doubt that Thailand’s actions are compatible with its WTO obligations, and the USTR has never disputed this, the official could not make such a designation, it says.

The letter also tells the Minister that PhRMA “routinely asks…the USTR…for more than it has any hope of achieving,” and assures him that the US public holds the pharmaceutical industry “in shockingly low regard.” Moreover, it is certain that the next US president “will be much less responsive to pharmaceutical industry interests than the current administration” and will likely support efforts in developing countries to speed the introduction of generic competition to make essential medicines available, according to the signatories.

Thai government officials say that discussions with the patent holders did take place, but no agreement was reached as the companies’ response was an offer to lower their prices gradually. The Health Ministry has also said that it has evidence to prove it offered 13 invitations to the patent-holders for talks since last October, which it will produce if the USA decided to take action.

Thailand currently appears on the USTR’s Priority Watch List of intellectual property transgressors.

Thailand’s Compulsory Licensing Review Should Not be Distorted by PhRMA

Thailand’s review of compulsory licenses on three high-priced cancer drugs should not be distorted by groundless threats of potential trade sanctions from the brand-name pharmaceutical industry. That is the central message of a letter sent by more than 40 U.S. public health, consumer and development organizations and experts, and sent to Thailand’s new Minister of Public Health, Chaiya Sasomsab.

The full text of the letter appears on the continuation of this post.
—–

February 19, 2008

Mr.Chaiya Sasomsab
Minister of Public Health
Tiwanont Rd.
Talad Kwan District
Nontaburi Province 11000
Thailand
Sent via facsimile

Dear Minister Chaiya Sasomsab,

Re: Possible influence of groundless threats from U.S. brand-name pharmaceutical industry on Thai Compulsory Licensing Policyo

According to news accounts in the Thai press, the Thai government is reviewing a series of compulsory licenses for cancer drugs issued by the previous government, but not yet implemented. We support the implementation of these licenses, because they offer the prospect of making essential medicines available to people who need them but otherwise will be denied access.

News accounts we have seen report that PhRMA, the U.S. brand-name pharmaceutical industry trade association, has threatened that, if Thailand implements the compulsory licenses on cancer drugs, it will lobby to have Thailand designated a “Priority Foreign Country” under the Special 301 process.[1] This designation poses the possibility of accompanying trade sanctions.

Although PhRMA is a powerful lobby, Thailand should not take this recent threat seriously. It has no basis in U.S. law or political reality. Thailand should conduct its policy review of the compulsory licenses on the merits, without regard to PhRMA’s empty bluster.

As a matter of U.S. law, the U.S. Trade Representative (USTR) may designate a country a Priority Foreign Country if it has “the most onerous and egregious acts, policies, and practices which have the greatest adverse impact (actual or potential) on the relevant U.S. products.”[2] Since there is little doubt that Thailand’s actions are compatible with its obligations under TRIPS, a point that USTR has never disputed, USTR could not make such a designation.

As a matter of normal practice around the Special 301 process, it is important to note that PhRMA routinely asks for more than it has any hope of achieving. In 2006, for example, PhRMA requested that Canada and Germany be designated Priority Foreign Countries,[3] a request USTR of course rejected. So the threat that PhRMA is going to push for Priority Foreign Country status is much less significant than it may seem.

There are other political realities that the Thai government should take into account in assessing the seriousness of PhRMA’s threat. The pharmaceutical industry is held in shockingly low regard by the U.S. public. A recent poll found only 11 percent of the U.S. public believes the pharmaceutical industry to be “generally honest and trustworthy.”[4]

Additionally, each of the three leading U.S. presidential contenders is much more critical of the industry than the current president. Hillary Clinton has emphasized her support for the Doha Declaration on the TRIPS Agreement and Public Health and has pledged to “support trade policies that protect and expand poor countries’ right to affordable, quality-assured generic drugs for important health needs.”[5] Barack Obama likewise has emphasized that he “supports the rights of sovereign nations to access quality-assured, low-cost generic medication to meet their pressing public health needs.”[6] John McCain has not issued a policy statement on these matters, but he has been very critical of the brand-name pharmaceutical industry, recently characterizing the companies as “the big bad guys.”[7]

Thus, regardless of who is the next U.S. president, it is certain that the next U.S. administration will be much less responsive to pharmaceutical industry interests than the current administration; and it is likely the case that the next administration will affirmatively support efforts in developing countries to speed the introduction of generic competition to make essential medicines available. U.S. policy changes are already underway; the New Trade Policy, worked out between the Congress and the Bush administration provides much more latitude to U.S. trading partners on access to medicines-related policies than has previously been the case.[8]

The world has looked to Thailand as a leader in ensuring that essential medicines are made available to people who need them. The compulsory licenses issued over the past year have shown that developing countries have lawful policy tools available at their disposal to overcome patent barriers to making life-saving medicines accessible. We hope that the government maintains this policy. But whatever it does should be decided on the merits, not influenced by the reprehensible but groundless threats from PhRMA.

Sincerely,

Essential Action, Washington, DC

ACT UP New York, New York, NY

ACT UP Philadelphia, Philadelphia, PA

Africa Action, Washington, DC

African Services Committee, New York, NY

AIDS Treatment News, Philadelphia, PA

American Jewish World Service

American Medical Student Association (AMSA)

CPATH (Center for Policy Analysis on Trade and Health), San Francisco, CA

Global AIDS Alliance, Washington, DC

Global Justice, Columbia University Chapter, New York, NY

Health GAP (Global Access Project)

Housing Works, New York, NY

Initiative for Medicines, Access & Knowledge (I-MAK), New York, NY

Knowledge Ecology International (KEI), Washington DC

Missionary Oblates of the Mary Immaculate, Justice, Peace/Integrity of Creation Office, Washington, DC

National Association of People with AIDS (NAPWA), Silver Spring, MD

Oxfam America

Progressive Intellectual Property Law Association, Cleveland, Ohio.

Salud y Farmacos, Austin, TX

Stop HIV/AIDS in India Initiative (SHAII), Washington, DC

Student Campaign for Child Survival (SCCS)

Student Global AIDS Campaign (SGAC)

Student Trade Justice Campaign (STJC)

Test Positive Aware Network (TPAN), Chicago, Ill

Transafrica Forum, Washington, DC

Treatment Action Group (TAG), New York NY

Universities Allied for Essential Medicines (UAEM)

Vermont Global Health Coalition (VGHC), Burlington, VT

Wilson Resource Center, Arnolds Park, IA

Individual Endorsements

Professor Brook K. Baker, Northeastern University School of Law, Program on Human Rights and the Global Economy, Boston, MA

Chris Curry, MD/PhD Candidate, Loyola University, Chicago, IL

Professor Michael H. Davis, Cleveland State University, College of Law, Cleveland, OH

Professor Sean Flynn, Associate Director, Program on Information Justice and Intellectual Property, American University, Washington College of Law, Washington, DC

William (Bill) Haddad, Chairman/CEO, Biogeneric Partners, Inc.

Professor Nuria Homedes, University of Texas School of Public Health, Austin TX

Tom McCaney, Associate Director, Corporate Social Responsibility, Sisters of St. Francis of Philadelphia, Philadelphia, PA

Mike Palmedo, Research Coordinator, Program on Information Justice and Intellectual Property, American University, Washington College of Law, Washington, DC

Anthony Robbins and Phyllis Freeman, Co-Editors. Journal of Public Health Policy, Boston, MA

Eric Sawyer, Co-founder of ACT UP New York, Health GAP and Housing Works, New York, NY.

Professor Susan Sell, Director, Institute for Global and International Studies, George Washington University, Washington, DC

Anuja Singh, Research Associate, Poverty Action Lab, Columbia University, New York, NY

Professor Patricia Siplon, Department of Political Science, St. Michael’s College, Burlington, Vermont

Dr. Anthony So, Director of the Program on Global Health and Technology Access, Terry Sanford Institute of Public Policy, Duke University, Durham, NC

Meredy Throop, Global Campaigns Associate, RESULTS Educational Fund, Washington, DC

Professor Rudolf V. Van Puymbroeck, Senior Scholar, O’Neill Institute for National and Global Health Law, Adj Associate Professor, School of Nursing & Health Studies, Georgetown University, Washington, DC

cc: Mr. Samak Sundaravej, Prime Minister of the Kingdom of Thailand
Mr. Krit Garnjana-Goonchorn, Ambassador of the Kingdom of Thailand to the United States of America

[1] Phusadee Arunmas, “Thailand Could Face Sanctions After Lobbying by Drug Firms,” Bangkok Post, January 31, 2008.

[2] 19 USC 2242 (b).

[3] PhRMA 2006 Special 301 Submission, available at: .

[4] The Harris Poll #107, November 1, 2007, “Oil, Pharmaceutical, Health Insurance, Managed Care, Utilities and Tobacco Top the List of Industries That Many People Think Need More Regulation,” available at: .

[5] “Clinton Announces Plan to Fight HIV/AIDS At Home And Abroad,” November 27, 2007, available at < http://www.hillaryclinton.com/news/release/view/?id=4392>.

[6] “Barack Obama: Fighting HIV/AIDS Worldwide,” available at: .

[7] John Distaso, “Romney, McCain Clash on Illegal Immigration,” Manchester Union-Leader, January 6, 2008, available at: < http://www.unionleader.com/article.aspx?headline=Romney%2C+McCain+clash+on+illegal+immigration&articleId=0691e300-20ec-495c-8cbf-f692481f81de>.

[8] Congress and Administration Announce New Trade Policy, U.S. House of Representatives Way & Means Committee (news release), May 11, 2007, available at: .

Global Access to Medicines Bulletin: High Drug Prices, Access to Medicines and the Cost of R&D

The latest issue of Essential Action’s Global Access to Medicines Bulletin discusses the pharmaceutical industry’s most frequent justification for high drug prices in the developing world: the cost of research and development (R&D) for new treatments.

Our conclusion? That Pharma’s R&D cost estimates are often overblown, and that generic competition in the developing world will not significantly undermine industry’s ability to develop new drugs.

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Click here to download an rtf version of Issue #2: AccessBulletinNo2.rtf.

A text version of the bulletin appears after the continuation of this post.
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Essential Action’s
Global Access to Medicines Bulletin
Issue No. 2, February 14, 2008

Whenever developing countries seek to improve access to essential medicines by hastening the introduction of generic competition and reducing prices, they invariably must confront a single overriding claim: their actions will undermine incentives for research and development (R&D) of important new drugs.

“PhRMA is deeply troubled by the recent trend toward the issuance of compulsory licenses for pharmaceutical products,” said Billy Tauzin, President and CEO of PhRMA, the U.S. pharmaceutical companies’ trade association, in 2007.Tauzin’s statement followed Thailand’s decision to import significantly cheaper generic versions of three life-saving drugs and Brazil’s decision to use the generic version of a key treatment for HIV/AIDS. “This misguided focus on short-term ‘budget fixes’ could come at a far greater long-term cost, potentially limiting important incentives for research and development that are necessary to positively impact the lives of millions of patients worldwide.”[1]

It is expensive to develop new drugs, but not nearly as costly as the pharmaceutical industry suggests.

Pharma R&D by the Numbers

Numerous independent studies and investigations[2] show that the world’s largest drug companies’ R&D spending claims are misleading and overblown, and that they spend much more on marketing than on R&D for new products. These findings undermine the pharmaceutical industry’s repeated assertion that high drug prices are justified by the cost of research, and that generic competition in the developing world will undermine the industry’s ability to develop new treatments.

Although PhRMA asserts that U.S. brand-name pharmaceutical companies invest more in R&D than marketing, independent investigators reach different conclusions. A January 2008 article, published in the peer-reviewed journal PLoS, concluded that U.S. drug companies spent almost twice as much on marketing as on R&D.[3] Researchers Marc-Andre Gagnon and Joel Lexchin of York University in Toronto, found that U.S. companies spent 24.4% of their U.S. sales on marketing and 13.4% on R&D in 2004. U.S. sales that year totaled US$235.4 billion. Gagnon and Lexchin based their findings on data and estimates drawn from industry sources.

“These numbers clearly show how much promotion predominates over R&D in the pharmaceutical industry, contrary to the industry’s claim,” wrote Gagnon and Lexchin. “[This] confirms the public image of a marketing-driven industry and provides an important argument to petition in favor of transforming the workings of the industry in the direction of more research and less promotion.”

And while companies argue that high drug prices are necessary to cover the cost of R&D – implying that companies make only modest profits after the cost of R&D is paid for – pharmaceuticals remain one of the world’s most profitable industries. The industry’s 2006 return on investment was 19.6 percent, according to Fortune, second only to the oil and mining industry.[4] Pharmaceuticals almost always rank in the top three industry sectors by this measure.

Current R&D incentives often result in limited health benefits as well as high prices

The investments that Big Pharma does make in R&D are driven by market demand, not public health need. One result is a surplus of “me-too” drugs, treatments that are similar to existing products and offer limited therapeutic benefits over existing medicines.

When new drugs are submitted to the U.S. Food and Drug Administration (FDA) for marketing approval, the agency classifies them as meriting either “priority review” (conferred for drugs that offer “major advances in treatment, or provide a treatment where no adequate therapy exists”) or “standard review” (applied to a drug that offers “at most, only minor improvement over existing marketed therapies”). Only about one third of FDA approvals are “priority.”[5]

Other reviews find that only about one in ten new drugs offer substantial therapeutic gains:

* Between 1999 and 2004, 122 new active substances were introduced into Canada. Only 10 percent were designated as major therapeutic advances or breakthrough products, according to a report by the Patented Medicine Prices Review Board of Canada.[6]

* Since 1981, Prescrire, a leading review offering independent comparative information on drugs and other therapeutic interventions has been evaluating new drugs and new indications for older drugs. By 2003, it had done almost 2900 such assessments and found that only 11 percent of medications constituted substantial advances.[7]

Developing country markets only a fraction of Pharma’s sales

Big Pharma is very concerned about developing country markets, where drug sales are growing at a faster clip than in rich countries. However, it remains the case that developing countries represent only a small fraction of Big Pharma’s revenues. Developing country markets account for less than 13 percent of global pharmaceutical sales, according to IMS Health. Slightly more than 1 percent of sales are attributed to Sub-Saharan Africa, the world’s poorest region.[8]

Any lost revenue from developing countries therefore by definition can only have a limited impact on Big Pharma’s capacity to undertake R&D.

The limited contribution that developing countries are now making to Pharma’s R&D budget opens the possibility of exploring new methods of funding R&D.[9] Developing countries should be able to pay a fair share of drug development costs through means other than high drug prices unaffordable to most people in those countries.

Web links:
[1]www.phrma.org/news_room/press_releases/phrma%3a_compulsory_licensing_trend_dangerous/
[2] www.cptech.org/ip/health/econ/rndcosts.html
[3]http://medicine.plosjournals.org/perlserv/?request=getdocument&doi=10.1371%2Fjournal.pmed.0050001&ct=1
[4]http://money.cnn.com/magazines/fortune/fortune500/2007/performers/industries/return_on_revenues/index.html
[5] www.fda.gov/oashi/fast.html
[6] www.pmprb-cepmb.gc.ca/english/view.asp?x=653&all=true
[7] www.prescrire.org/
[8] www.imshealth.com/ims/portal/front/articleC/0,2777,6599_80528184_80528215,00.html
[9] www.who.int/phi/en/

Published by Essential Action’s Access to Medicines Project
P.O. Box 19405, Washington, DC, 20036, USA
Tel: (1) (202) 387-8030
www.essentialaction.org/access/
Editors: Sarah Rimmington [email protected]
Robert Weissman [email protected]

To subscribe to the Global Access to Medicines Bulletin go to:
http://salsa.democracyinaction.org/o/1678/t/5144/signUp.jsp?key=2959