NGO Letter on the Paragraph Six Issue

Dear Members of the TRIPS council,
We are writing to present our views on the issue of exports of medical technologies under the WTO TRIPS rules for patents. Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health instructed the Council for TRIPS to find a “solution” to difficulties in using compulsory licenses when countries have insufficient or no manufacturing capacity.
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28 January 2002

Dear Members of the TRIPS council,

We are writing to present our views on the issue of exports of medical technologies under the WTO TRIPS rules for patents. Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health instructed the Council for TRIPS to find a “solution” to difficulties in using compulsory licenses when countries have insufficient or no manufacturing capacity.

“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.”

Paragraph 6 of the Doha Declaration addresses one particular concern with the TRIPS agreement, namely the case where a country that has a patent on a medicine cannot find an efficient, affordable and reliable source of medicines, due to TRIPS restrictions on production and export of medicines. Of course the same problem exists also for countries where there is no patent on a medicine or other health care technology, including the least developed countries that avail themselves of the automatic extended transition period (until 2016) recently agreed at Doha. We urge the members of the WTO to find solutions that address both cases, in order to ensure that poor persons, wherever they live, will have opportunities to obtain better access to health care.

The Doha Declaration on TRIPS contains both a promise and an obligation to interpret and implement the TRIPS Agreement in a manner supportive of a WTO members right to protect public health and promote access to medicines for all. Now that the Doha meeting has been concluded, it is the duty of the TRIPS council to implement the entire Doha Declaration in good faith, ensuring that the safeguards of the TRIPS work for both rich and poor countries, for countries with large or small domestic markets, and for countries with different levels of technological development.

Of particular interest are proposals that Article 30 of the TRIPS Agreement be interpreted to permit countries to export medicines and other inventions to address health needs. This approach was endorsed by public health groups in the 1999 “Amsterdam Statement” on trade and public health, in several resolutions adopted by the Trans Atlantic Consumer Dialogue (TACD is a US/EU trade consultation group), by a group of public health groups engaged in recent European Commission (EC) consultations on trade policy and access to medicines, and in a developing countries proposal submitted prior to the Doha meeting.

We urge the WTO to consider an interpretation of Article 30 that is similar to that proposed in Paragraph 9 of the October 4, 2001 communication by the developing countries,(1) perhaps with modifications to ensure that it is broader than medicines, and does not raise concerns regarding Article 27.1 restrictions on discrimination by field of technology. One possible statement would be:

Under Article 30 of the TRIPS agreement, Members may provide an exception to the exclusive rights conferred by a relevant patent to permit all acts associated with the production for export to a third country of a patented product or a product produced by a patented process; where the export addresses health needs in the third country; and the product and/or process is either (a) not patented; or (b) a compulsory license has been granted or government use made of the relevant patent in the third country.

The Article 30 approach to addressing the issue of exports of medicines (and other health care inventions) is not the only possible solution to this problem, but it has many advantages, including for example:

1. It is the most direct, administratively simple, and least contentious approach to addressing the need to permit exports, in that an activity falling within a ‘classic’ Article 30 exception is not an infringement of the patent and does not therefore need permission from the patent holder (or even that notice be given to the patent holder) or compensation to the patent holder. In addition, it could be limited to only the health problems the Doha declaration seeks to solve.

2. It would permit a mechanism where the patent owner is compensated in the country where the product is consumed, according to the norms for compensation in that country. This approach would avoid problems of double compensation where patents exist in both the producing and exporting countries, and would only fail to provide compensation when consumption took place in countries where the inventor did not have a patent (typically in smaller markets of marginal economic importance). This ensures that the inventor benefits when the product is used in countries where the inventor obtained a patent, while permitting patients to seek the most efficient suppliers of medicines and other medical technologies.

3. It would also permit exports to countries that lack the capacity for local production including those that have granted a patent, countries where the patent has not been filed or granted, or countries that do not issue patents. In contrast, some proposals from the EC would restrict exports to those countries that have patents and have issued a compulsory license.

4. It would permit exports from the widest number of countries, including those, for example, that could not under domestic law implement some of the alternative approaches(2).

5. Unlike an Article 31 approach, it would not imply that the necessary conditions for the grant of a compulsory license be determined in the exporting countries, which would result in tying the problems of the exporting and importing countries together (3).

We also urge the WTO to reject proposals to tie Article 30 export exemptions to overly restrictive or complex conditions, such as those proposed in the 2001 UK/French non-proposal, that would require, inter alia, importing countries to justify their rejection of various tiered pricing schemes. The WTO does not have the competence to regulate price negotiations, and we are very wary of any measures that add additional uncertainly and complexity to the TRIPS framework.

While we support a strong Article 30 approach to the export issue, we also urge the WTO to ensure that other solutions (4) to the export issue are available to developing countries, thus making good the promise in Doha that the WTO will seek to implement the TRIPS in a manner consistent with seeking to promote access to medicines for all. Anything less would be a failure to implement the Doha Declaration in good faith, and would undermine future trust in the fairness of the trading system.

Yours sincerely,

Ellen ‘t Hoen
Coordinator Globalisation Project
Access to Essential Medicines Campaign
M‚decins Sans FrontiŠres
Email : [email protected]

James Love
Director
Consumer Project on Technology
Email: [email protected]

Michael Bailey
Oxfam International
Email: [email protected]

Asia Russell
Coordinator, International Advocacy
Health Gap Coalition
Email: [email protected]

Cecilia Oh
Third World Network
Email: [email protected]

Robert Weissman
Co-director
Essential Action
Email: [email protected]

1 “9. Under Article 30 of the TRIPS Agreement, Members may, among others, authorize the production and export of medicines by persons other than holders of patents on those medicines to address public health needs in importing Members”. (WTO, IP/C/W/312, WT/GC/W/450, 4 October 2001, (01-4803), Council for Trade-Related Aspects of Intellectual Property Rights, General Council, Proposal by the African group, Bangladesh, Barbados, Bolivia, Brazil, Cuba, Dominican Republic, Ecuador, Haiti, Honduras, India, Indonesia, Jamaica, Pakistan, Paraguay, Philippines, Peru, Sri Lanka, Thailand and Venezuela.)
2 For example, legal traditions vary on such topics as exhaustion of patent rights or in accepting a foreign country decision to issue a compulsory license, two of the alternative approaches considered in recent TRIPS council discussions.
3 In a typical Article 31 approach, the producing country would have to make the determination regarding the grounds for issuing a compulsory license.
4 Developing countries have explored a number of options for addressing the export issue, including those mentioned in the October 4, 2001 communication to the TRIPS council, the EC consultations have considered such issues as permitting exports within trade unions, and there are opportunities to export under Article 31.k of the TRIPS when the use is authorized to remedy anticompetitive practices.

NGO Comment on the Attaran/Gillespie-White and PhRMA surveys of patents on Antiretroviral drugs in Africa

The following is a comment on two reports being circulated by the pharmaceutical industry regarding the importance of patents in Africa as a barrier to treatment for AIDS. These include an October 17, 2001 paper in JAMA, by Amir Attaran and Lee Gillespie-White (AGW), titled “Do Patents for Antiretroviral Drugs Constrain Access to AIDS Treatment in Africa,”[1] and “Facts and Figures on Patenting and Access in Africa,” a report of an August 2001 PhRMA survey on patents in Africa, presented by Tom Bombelles on September 30, 2001, at the American Society of Law, Medicine & Ethics (ASLME) conference on Law and Human Rights.
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Consumer Project on Technology
Essential Action
Oxfam
Treatment Access Campaign
Health Gap

October 16, 2001

Version 1

Introduction

The following is a comment on two reports being circulated by the pharmaceutical industry regarding the importance of patents in Africa as a barrier to treatment for AIDS. These include an October 17, 2001 paper in JAMA, by Amir Attaran and Lee Gillespie-White (AGW), titled “Do Patents for Antiretroviral Drugs Constrain Access to AIDS Treatment in Africa,”[1] and “Facts and Figures on Patenting and Access in Africa,” a report of an August 2001 PhRMA survey on patents in Africa, presented by Tom Bombelles on September 30, 2001, at the American Society of Law, Medicine & Ethics (ASLME) conference on Law and Human Rights.

The assertion in both documents is that patents are not an important barrier for access to antiretroviral drugs in African countries, while poverty and limited public and donor spending on health care are important barriers. These are long time industry talking points.

Poverty is of course a terrible problem in Africa, and without support from donors, it will not be possible to extend treatment to everyone in Africa who so desperately needs it. This however does not mean that there are not actions that can be taken immediately, without donor aid, that would benefit many HIV+ patients. And regardless of the success or failure of donor efforts to address the lack of funding for health care, there is still an urgent need to address the barriers to competition presented by patents on pharmaceutical drugs, particularly since donor aid is expected to fall far short of universal coverage. This comment therefore focuses on the question of patents, as a barrier to access for antiretroviral drugs.

Both AGW and PhRMA present data on patents in various African countries. The AGW paper finds 172 antiretroviral drugs or combinations of drugs protected by patent in 53 countries, and the August 2001 PhRMA survey finds 150 drugs or combinations of drugs under patent in 52 countries. The question is, how important are the patents on thse 150 to 172 drugs or combinations of drugs. According AGW and PhRMA, they are not important. According to NGOs working on the access to medicines campaign, they are important barriers.

Which cocktails are blocked by patents?

A three drug HAART regime consists of two NRTI products, plus a third drug consisting of abacavir, a NNRTI or a protease inhibitor. The best choices based upon toxicity and efficacy for the 2 NRTI drugs are d4T, 3TC, AZT or ddI. Among these d4T and AZT cannot be taken together. D4T and 3TC require the smallest amount of active ingredients (80 and 300 milligrams per day), and are the least expensive drugs to manufacture. Among the NNRTI products nevirapine requires the smallest amount of active ingredient, and is the least expensive product of its class to manufacture. The least expensive generic three drug regime is d4T/3TC/nevirapine.

The most significant omission from both the AGW and PhRMA survey are for patents on Trizivir, an important three-drugs- in-one-pill twice a day product sold by GSK involving AZT+3TC+Abacavir that is reportedly widely patented in Africa. Nor do AGW or PhRMA mention generic three-drugs-in-one-pill versions of d4T+3TC+Nevirapine or AZT+3TC+Nevirapine, which combine products sold by different US or European companies, and which are now only available from Indian generic suppliers.

Only briefly noted in the AGW paper is the issue of patents on improvements on existing drugs. Not noted is that while ritonavir is not patented anywhere in Africa, Lopinavir(80%)+Ritonavir(20%) together, a regime that is easier to take, is patented in South Africa. This of course is what GSK has often done, filing patents on new ways of combining older drugs into easier to use presentations such as Combivir or Trizivir.

In South Africa every three drug ARV cocktail is blocked by patents. In the PhRMA survey 15 of 16 ARV products are protected by patent in South Africa. In the AGW paper 13 of 15 products are protected by patent in South Africa. The South Africa market is important for several reasons. First, there are 4 to 5 million HIV+ persons in South Africa. Second, the South Africa economy has more than 40 percent of the GDP for sub-Saharan Africa, a per capita income of more than $3 thousand and a relatively good health care infrastructure, making ARV treatment feasible, if drug prices are low enough. Third, entry into the South Africa market is necessary for generic suppliers to reach the economies of scale (volume) needed for the most efficient production, particularly for those products with post 1996 patents that are patented in Brazil, such as efavirenz or nelfinavir, and currently lack a significant generic market outside of Africa.

Outside of South Africa there are several combinations that are frequently blocked, and some that are never blocked. AGW argue that countries seeking to provide ARV treatment could simply use the ones that are off patent, or negotiate lower prices for the cocktails that are blocked by a single patent. AGW concedes that cocktails based upon the NRTI combinations of 3TC, AZT or 3TC+AZT are frequently blocked by patents, as are the third drugs of nevirapine, abacavir, amprenavir and nelfinavir. But they suggest countries can substitute cocktails based upon a d4T+ddI NRTI combination, and third drugs such as efavirenz, indinavir or ritonavir which are off patent outside of South Africa. While technically true, this would accept severe limits on the available products, including limits on the least expensive combinations, and also present difficult medical problems.

For example, according to Asia Russell from the Health Gap, ddI’s food restrictions make it problematic to take with indinavir and some other protease inhibitors, such as indinavir or ritonavir, and combinations involving ddI and nelfinavir are difficult, as both give diarrhea, and one should be taken on an empty stomach while the other absorbs better with food. Russell makes the point that ddI’s often cumbersome requirements and dosing schedule inherently limit the options of a clinician for some patients. On the other hand for other patients in some combinations ddI may be a drug of choice. The important point is to ensure that clinicans have access to as many use drugs as possible, to be used in as many combinations, including twice or single day dosing and single pill formats.

Of particular interest to treatment advocates for first line ARV treatment are three drug cocktails that could be cheaply manufactured in a three-drug-in-one-pill combination with twice daily or less dosing. The most important patents for these products are those that involve d4T, 3TC, AZT, abacavir, nevirapine and efavirenz. These cocktails are highly rated in the UK Treatment guidelines in terms of compliance and toxicity[2], and with generic entry into the South Africa market, could be manufactured for $200 to $500 per year or less in large quantities.

Both the AGW and PhRMA surveys lump together large and small countries, and do not examine patent coverage by population, HIV+ patients or measures of income such as GDP. If one does look at these factors, the concentration of patents is clearly focused where the patients and income are. For example, in the PhRMA Survey, the 23 countries in Sub-Saharan Africa that have 4 or more ARV products on patent have 53 percent of the HIV+ patients and 68 percent of the Region GDP. The 20 Sub- Saharan countries that have patents on 6 or more ARV products have 46 percent of the patients and 56 percent of the regions GDP[3].

All of the least expensive generic cocktails — those that can be currently manufactured for less than $500 per year — are blocked by patents on 3TC, AZT, AZT+3TC or Nevirapine.[4]

AGW’s suggestion that countries can make do with the US and European offers of concessionary prices does not deal realistically with the factors that lead to those price decreases (threats of compulsory licenses, extraordinary and unsustainable NGO and UN pressures, the existence of a competitive market for ARVs created by Brazil), nor does it recognize the substantial price differences that still exist. Merck is selling efavirenz for $500 per year, a single NNRTI, which is about double to price quoted for the cheapest three drug NNRTI combination by generic producers. The least expensive two drug NRTI regime by a branded company, BMS, is $1 per day for ddI and d4T, and this must be used with a more expensive third drug. The BMS 2 drug ddI/d4T combination is more expensive than the price of a three drug d4T/3TC/Nevirapine combination by the generic producers, in part because ddI is a more expensive product to manufacture than 3TC, a product that is widely patented in Africa. For the African market, every dollar that can be cut off the price of a cocktail is important. Given the extent of AIDS and poverty in Africa, we cannot afford to pay 50, 100, 300 or 500 percent more than the competitive price for drugs.

Patients also need as many choices as possible, and high prices on any products can create unneeded burdens on a system. In Brazil a single drug (nelfinavir) on patent was costing the government 28 percent of its entire ARV drug budget, until the government used the threat of a compulsory license to drive the price down.

It bears repeating that today’s lower prices for ARV drugs in Africa are due to creditable threats of generic entry that have been made possible by the existence of a competitive market for ARV drugs. This competitive market existed because Brazil did not adopt patents on medicines until 1996, and India does not yet issue product patents for pharmaceuticals. This will change. WTO and African Growth and Opportunity Act (AOGA) rules require nearly all African countries to adopt 20 year patents on medicines, and this will affect both new products and improvements of older products. There is no benefit to understating the significance of changes in trade rules. One must also note that both the AGW and PhRMA surveys were timed to appear a few weeks before the WTO Doha meeting, where TRIPS rules will be debated.

Finally, AGW and PhRMA both make the observation that the lower prices in HIV drugs have not by themselves led to substantial treatment opportunities. This is an understatement of the expected impact of the changes in prices, as it will take time to obtain financing for treatment programs, and to overcome registration and patent barriers in many countries. That said, we agree that donor aid is extremely important, and continue our work to advocate for such aid. But it is entirely irrational, and in our opinion, deeply cynical, to pit donor aid against efforts over overcome patent barriers. Everything possible needs to be done. Every barrier for cheaper medicine needs to be removed.

Essential Action Comments on Free Trade Area of the Americas

Dear Ms. Blue:
Essential Action submits these comments in response to a request from the Office of the U.S. Trade Representative for public comment on negotiating objectives for the proposed Free Trade Area of the Americas (FTAA) (Federal Register, July 12, 2001).
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Robert Weissman
Co-Director Essential Action
P.O. Box 19405
Washington, D.C. 20036

August 22, 2001

Gloria Blue
Executive Secretary TPSC
Office of the USTR 600 17th Street, NW
Washington, DC 20508

Attention: Free Trade Area of the Americas Draft Text Release

Dear Ms. Blue:

Essential Action submits these comments in response to a request from the Office of the U.S. Trade Representative for public comment on negotiating objectives for the proposed Free Trade Area of the Americas (FTAA) (Federal Register, July 12, 2001).

Essential Action is a corporate accountability group that focuses especially on international issues. We have been involved in trade and intellectual property policy debates for more than a decade.

We preface our comments by noting that we are opposed altogether to negotiation of an FTAA on the North American Free Trade Agreement (NAFTA) model. Our view is that measured by any of numerous people-centered indicators (as opposed to corporate-oriented standards), NAFTA has been a complete failure, and highly detrimental to people and the environment in all three member countries. It is an agreement that should be reversed, not expanded.

These comments, however, focus on the potential intellectual property and investment provisions of an FTAA as they relate to issues regarding access to medicines and compulsory licensing. We hope in the near future to provide separate comments on the FTAA with regard to another pressing public health issue, tobacco control.

These comments are based on the official draft of the FTAA made public in early July 2001, and published on the FTAA website at http://www.ftaa-alca.org/alca_e.asp. That text is highly inadequate for purposes of public policy analysis. It suffers from serious citation shortcomings, a problem we seek to overcome as best we can in these comments. A more serious problem is that the draft text fails to identify which countries have introduced or support which provisions, making it difficult to assess which of multiple contradictory bracketed provisions are most likely to likely to enter a final agreement, and which are the most likely operative negotiating provisions.

Given these limitations, what can be said is this: There are numerous proposed provisions in the FTAA that would go far beyond WTO rules and that would dramatically limit countries’ ability to promote access to medicines. Lives are at stake in the negotiations that determine whether these provisions are incorporated into the final agreement, and in the national deliberations over whether a final agreement is adopted. To take one example, under these harmful provisions, Brazil, which runs what may be the developing world’s most effective HIV/AIDS treatment program, may find itself facing difficulties in making new drugs available.

We conclude that, should there be an FTAA, intellectual property and investments should be excluded from the agreement. If these chapters are included, a variety of the U.S.-backed proposals on intellectual property should be abandoned, and intellectual property should be excluded from the investment chapter.

I. THE INTELLECTUAL PROPERTY CHAPTER

THE CASE FOR EXCLUDING INTELLECTUAL PROPERTY FROM THE FTAA

There is no reason for inclusion of intellectual property provisions in the FTAA. All FTAA negotiating countries are members of the World Trade Organization and have committed themselves to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS establishes a comprehensive international standard for intellectual property protection, with a heavy tilt towards the interests of intellectual property (IP) holders.

The TRIPS rules constitute a floor of IP protection. With TRIPS already establishing a high level of IP protection in every Member country, there is no reason to include IP rules in regional agreements among TRIPS Members.

Because WTO TRIPS establishes a floor for all FTAA negotiating countries, including IP in the FTAA will almost certainly serve only one of two harmful purposes.

First, the FTAA may incorporate enhanced IP protection (“TRIPS-plus” provisions). Such provisions are not only unnecessary, but, as discussed below, dangerous and injurious to public health.

Second, many of the FTAA provisions are likely to mirror those already in TRIPS. This will impose no new obligations on FTAA members, but it will work to further lock in place TRIPS provisions that diminish the public domain, and to enhance the power of intellectual property holders. Under this scenario, if reforms ever occurred in the TRIPS that expanded the public domain, the FTAA members would still be required to maintain the pre-reformed policies that favor intellectual property holders. This is not a two-way street, however; changes in the TRIPS that work to expand the exclusionary and monopolistic rights of intellectual property holders would be binding on the FTAA member countries.

The duplicative obligations under TRIPS and the FTAA would benefit IP holders even in the absence of any changes in TRIPS. That is because the overlapping jurisdiction of the WTO and the FTAA on these issues would enable plaintiff countries in IP cases to forum shop, seeking to bring cases wherever they believe adjudicators to be most friendly.

There is a third possible effect of inclusion of some IP provisions in the FTAA. Where there is uncertainty in the margins of TRIPS, inclusion of provisions in the FTAA that expand the public domain could be operative. This might relate to such issues as the right to export under a compulsory license, whether under Articles 6, 30 or 31(f) of the TRIPS. Other limitations on intellectual property may have no binding effect, given the TRIPS floor, but would at least establish a positive example. There are some such proposals in the current FTAA text, including exclusions on the patentability of lifeforms, business methods and computer programs (pages 8.47, 8.49). We would support such pro-public domain provisions — they are the only IP provisions we would support in an FTAA — though we are skeptical of the likelihood of their inclusion given the U.S. role in the negotiations, and we note the possibility of working out such TRIPS ambiguities in the TRIPS Council, if the United States operates there with some respect for the public interest and public health, instead of maintaining a single-minded focus on defending the interests of intellectual property holders.

COMPULSORY LICENSING AND THE PUBLIC/PRIVATE SECTOR DIVIDE

Perhaps the most troublesome provision of the FTAA IP chapter is a proposed limitation on compulsory licensing to the public sector only (page 8.64 (6)). This provision would limit the grounds for compulsory licensing for non-public use far more than does the TRIPS agreement. Compulsory licensing, a critical policy tool to prevent price-gouging and promote competition, enables a government to instruct a patent holder to license the right to use its patent to a company, government agency, or other party. Compulsory licensing lowers prices to consumers by creating competition in the market for the patented good. Its impact is similar to the introduction of generic competition at the end of a drug’s patent term — prices come tumbling down.

Under the public sector-only provision of the FTAA, compulsory licensing to achieve the public health aim of making medicines more accessible would only be permissible if the licenses were granted to the “Government of the Party or by a private entity acting on behalf of the Government of the Party” (page 8.64 (6)). Under the more permissive TRIPS arrangement, by contrast, compulsory licenses could as a matter of course be granted to private parties for commercial, non-public use, so long as TRIPS procedures and rules, including payment of reasonable compensation to the patent holder, were complied with.

The public sector-only provision of the FTAA would permit compulsory licensing only for “the making, using or importing of the patented invention solely to satisfy the requirements of the Government use, and shall not entitle a private party acting on behalf of the Government to sell products produced pursuant to such authorization to a party other than the Government.” The public sector-only provision would prevent, for example, Peru from issuing a compulsory license on HIV/AIDS drugs to an Indian generic manufacturer, for sale in the private sector. There is no conceivable public policy rationale for such an outcome.

The provision does include a national emergency exception, but there is no reason for private sector compulsory licensing to be limited to these circumstances. Certainly, there are many instances, especially in developing countries, where access to medicines is a pressing issue but where national emergency conditions do not exist. And, for better or worse, it is the case that access to pharmaceuticals and medical treatment throughout the Americas is often obtained through the private sector. Why should price gouging be permitted in these instances? Why should people be denied access to treatments in these circumstances?

By contrast, TRIPS Article 31 contemplates a much more rational position, in which compulsory licensing is part of the basic schema of the intellectual property system, not a limited set of exceptions. Article 31(b) permits compulsory licensing generally, so long as certain procedural conditions are met. (1) Significantly, the FTAA provisions would impact on compulsory licenses outside of the pharmaceuticals sector, and on the United States, not just on our trading partners. Some of the IP provisions of the FTAA appear to conflict with existing U.S. law, and with various legislative proposals recently introduced in Congress. For example, 42 USC Sec 2183 permits compulsory licensing of atomic energy inventions. In the 107th Congress, Representative Sherrod Brown introduced HR 1708, which would permit compulsory licensing of pharmaceuticals and patented medical inventions.(2) In the 106th Congress, Representative Dennis Kucinich introduced HR 4739, which would permit compulsory licensing of patents on reformulated gasoline.(3) Compulsory licensing is likely to become increasingly important in the United States in the field of biotechnology, where patents on foundational inventions and multiple overlapping patents on single consumer products have the potential to seriously impede medical progress.

COMPULSORY LICENSING AND THE EXPORT ISSUE

One of the most serious TRIPS impediments to effective compulsory licensing involves limitations on exports. The FTAA appears poised to worsen this problem dramatically.

TRIPS Article 31(f) poses significant difficulties in making compulsory licensing operational. It specifies that compulsory licenses must be “authorized predominantly for the supply of the domestic market” of the country issuing the license.

This poses serious potential difficulties for small countries. These countries may wish to issue compulsory licenses to foreign producers, on the grounds that it would be inefficient or impossible to source from a domestic supplier that would have a license only to sell in a limited size market. Under TRIPS and the FTAA, this right to import is unimpeded. But there is the matter as well of whether a manufacturer would be able to obtain a license to export. The prospect of obtaining such a license under TRIPS is complicated by Article 31(f)=D5s predominantly for this supply of the local market requirement. However, a compulsory license proposal in the FTAA would raise the bar much higher, prohibited compulsory licensees from exporting altogether (page 8.64 (6)(b)).

In the context of TRIPS, countries and advocates have proposed a variety of means of dealing with the compulsory license for export problem. One of those proposals, involving a flexible interpretation of 31(f) itself, would be impossible for the Americas under the FTAA proposal. The other such proposals may also be undermined, since the firm language of page 8.64 (6)(b)) banning compulsory licenses for exports would make it much more difficult to interpret an FTAA provision that paralleled TRIPS Article 30, or an FTAA provision related to exhaustion of rights, in such a way as to permit compulsory licenses for export.

The impact of this provision would fall heaviest on people, especially poor people, in small population countries. There is simply no defensible rational for a policy that requires people in Central America or the Caribbean to pay more for medicines than people in Brazil, Mexico or Argentina, with people living in small countries denied the price reductions and greater accessability to medicines following from compulsory licensing, just because they live in smaller countries. This economically inefficient and illogical provision, which would exacerbate the most serious TRIPS impediment to compulsory licensing, must be abandoned.

LINKING MARKETING APPROVAL TO PATENT STATUS

A proposed provision of the FTAA would link marketing approval for a drug — based on a finding of safety and efficacy, or bioequivalence to a safe and efficacious product, granted by FDA-equivalent agencies — to patent expiration (page 8.65 (3)).

This arrangement establishes drug safety agencies as de facto IP enforcement agencies. In practice, this kind of arrangement is likely to yield unjustified patent extensions, as drug safety agencies, operating outside of their field of competence, improperly deny marketing approval to generic competitors.

In the United States, where marketing approval is linked to patent expiration, the FDA almost automatically grants 30-month monopoly protection to patent holders who claim a new patent on claims related to dosage levels or similar grounds of renewed patents for drugs nearing the end of patent protection. In deference to these patent claims, the FDA denies marketing approval to generic companies — even though many are subsequently found illegitimate. The result is that consumers are denied the benefits of competition, and lowered prices, for two-and-a-half years.

There should be no linkage between marketing approval and patent term. If a generic company markets an on-patent drug without license, under TRIPS the patent holder has adequate remedy at law. Stated differently, linkage can only serve to protect invalid IP claims — valid claims receive protection through normal judicial means.

Again, it bears emphasizing that the artificial inflation of the price of medicines that stems from such misuses of the IP system is often a life-and-death matter. Seemingly obscure IP provisions will have enormous consequences for how much preventable suffering is averted or endured by the poor.

IMPROPER GRANTS OF DATA EXCLUSIVITY

Article 39.3 of the TRIPS agreement requires members to grant “reasonable” protection to “undisclosed” pharmaceutical test data, the study data showing safety and efficacy. To gain marketing approval, generic companies typically show their product is bioequivalent to a patented product, and then rely on the patented product’s safety data to earn approval.

In many instances, if a generic company cannot use the already-generated registration data, it will not introduce a generic version of the patented product; the price of generating the data may be too high, or, just as important, take several years to replicate. If the company does choose to re-generate the data, consumers suffer from the delay in the introduction of the generic product that occurs while the generic firm re-conducts the relevant tests. Moreover, from a social point of view, retracing old tests to reach an already-known result is a tremendous waste of resources.

In those countries that establish set terms for registration data exclusivity (5 years in the United States, 10 years in the European Union), the period of exclusivity typically runs shorter than the patent term. Thus, registration data protections are not normally an impediment to the introduction of generics.

They are an issue, however, for new drugs that are not patent-protected or in cases of compulsory licensing. Where a compulsory licensing is granted for a drug for which registration data exclusivities remain in force, the data exclusivity can block the generic from gaining market approval.

An effective system of compulsory licensing must therefore permit compulsory licensing of registration data.

The FTAA includes TRIPS-plus proposals on registration data that would mandate five years protection for the data submitted to show drugs are safe and efficacious (page 8.65 (1)).

TRIPS language itself is quite vague on registration data.(4) It only covers “undisclosed” data, stipulates protection from “unfair” commercial use, does not address the issue of reliance upon published studies or foreign government drug approvals, and sets out no standards for how governments should protect against unfair commercial use.

It is unacceptable for trade agreements to contain language that increases monopolistic protection for registration data beyond that contained in TRIPS. Such measures may significantly impede efforts at compulsory licensing of pharmaceuticals and rapid introduction of generic competition.

EXTENSION OF THE PATENT TERM

The FTAA contains a proposal for patent extensions to offset delays in marketing approval for pharmaceuticals (page 8.65(8)). Like the harmful provisions on improper grants of data exclusivity and linking marketing approval to patent status, USTR has listed this provision as among the U.S. negotiating objectives for the FTAA.(5) The result of the patent extension provision would again be extended monopoly protection for drug manufacturers and gouging of consumers.

TRIPS obligates member countries to grant 20-year patents. Those patents provide a two decade monopoly on inventions. Patent terms seek to create a balance between providing incentives for inventors and the public interest in maintaining and promoting competition. The 20-year term manifested such a balance — albeit one tilted in favor of the corporate patenting sector — taking into account the known delays sometimes associated with marketing approval. Adding additional time to the patent term after a balance has been struck improperly tips the IP scheme too significantly for patent holders.

OTHER INTELLECTUAL PROPERTY CONCERNS

The FTAA contains other harmful TRIPS-plus provisions which should not be adopted.

These provisions include:

-A proposal to deepen dramatically the monopoly power of the holders of gene patents.(6)

-A mandate that FTAA countries rely on the private, unaccountable ICANN to resolve disputes over domain names, including disputes with significant free speech implications (page 8.14).

II. THE INVESTMENT CHAPTER

In addition to the intellectual property chapter, the investment chapter of the draft FTAA would provide an additional set of protections to intellectual property holders.

Essential Action is strongly opposed to the inclusion of an investment chapter in the FTAA. The NAFTA experience with an investment chapter shows how far-reaching and pernicious can be the effects of an investment agreement on a wide range of public interest considerations.(7)

But the implications are especially dire for intellectual property. To whatever extent there is a logic to investment agreements, it does not apply to intellectual property. Especially since intellectual property is a form of investment that is already protected under existing international trade agreements (and likely to be contained again in the FTAA), intellectual property should be excluded from any investment provisions contained in the FTAA.(8)

PERFORMANCE REQUIREMENTS

The FTAA investment proposal prohibits “performance requirements” imposed on investors (Article 7, page 3.5). Compulsory licensing would be such a performance requirement, as listed in Article 7.1(f) (page 3.6): “No Party may impose or enforce any of the following requirements … : to transfer a particular technology, production process or other proprietary knowledge to a person in its territory” [brackets excluded].

There are two important proposed exceptions to this provision. In Articles 7.1(f) and 7.4.2(b) is a proposed exception for such requirements resulting from an antitrust enforcement action. In Article 7.4.2(a) is a proposed exception for “measures relating to the transfer of intellectual property rights as set forth in and that are consistent with the provisions of Articles XXX (CITE TO SPECIFIC ARTICLES) of Chapter XX (Intellectual Property Rights)” [IN ORIGINAL].

Article 7.4.2(a) may well provide protection for compulsory licensing, though it is impossible to know this at this point, since the proposal is in brackets (as is the entire text) and the referenced articles in the IP chapter are unspecified.

But even if Article 7.4.2(a) does provide protection for compulsory licensing, the coverage of all performance requirements not compatible with the as yet unspecified provisions of the FTAA IP chapter will dramatically chill countries=D5 willingness to undertake compulsory licensing, as explained below.

The Article 7.1(f) provision raises a separate and distinct problem with regard to registration marketing approval data protection. Even if the United States does not succeed in winning inclusion of its proposal for five years data protection in the FTAA IP chapter, Article 7.1(f) would appear to provide independent protection of the registration data, with no clear endpoint, perhaps not even the five-year period sought by the United States. At what point could a country impose the “performance requirement” of enabling a generic competitor to rely on the registration data? No time limit appears contemplated in Article 7.1(f). Would reference to an IP provision on registration data exclusivity matter in this instance, given the nature of the IP language and the special nature of the registration data “investment?” These are pressing questions to which we do not see obvious and satisfactory answers.

EXPROPRIATION

Following the NAFTA model, Article 10 of the FTAA investment chapter includes a prohibition on expropriation absent payment of market value compensation. Article 10.9 would exclude compulsory licensing and intellectual property limitations from coverage under the expropriation provision, so long as these provisions are TRIPS-compliant, though again these exclusions, like the rest of the draft agreement, are in brackets.

It is absolutely vital that compulsory licensing and intellectual property be excluded from expropriation provisions. Failure to do so would make doing compulsory licensing extremely difficult and maybe impossible.

The expropriations/compensation language in the FTAA would likely mean that a government issuing a compulsory license would owe massive compensation to the patent holder. Under TRIPS Article 31 compulsory licensing, the licensee owes a reasonable royalty to the patent holder. By contrast, under the FTAA expropriation language, the patent holder would be entitled to compensation for an “expropriation” and for the fair market value of the “taken” property. This might well be the value of the lost sale (at the patent holder’s price) minus the paid royalty. The patent holder might quite likely seek more: the patent holder could also argue for lost profits on sales of the patented good, if the patent holder is forced to lower prices in the face of competition.

In such a scenario, no government would issue a compulsory license. Even the possibility of such a scenario, given the fact that liability would rest with the government, would be enough to chill any issuance of a compulsory license.

There must therefore be a crystal clear exclusion of intellectual property from the expropriations provision — not just TRIPS-compliant measures related to intellectual property. Absent such an exclusion, the chill from this provision may freeze out compulsory licenses altogether, as detailed below.

INVESTOR STANDING TO SUE

Following on the NAFTA model, the FTAA would give standing to investors to sue governments for violations of the investment chapter (Article 14).

Such standing would have devastating consequences for protection of the public domain and improving access to essential medicines.

With patent holders given rights to sue governments directly over intellectual property disputes, the “flexibility” that the United States says characterizes its present approach to intellectual property and public health matters would be largely meaningless. Even where the U.S. government chose to exercise its discretion not to challenge another country’s law, regulation or rule, a patent holder could proceed to do so. Under some of the proposed provisions of the FTAA, it appears even those contemplating making an investment could bring such a challenge and seek compensation for lost future profits (see for example, page 3.36 (3)).

The prospect of private actors bringing such suits would have a deep chilling effect on national governments. They would have to operate against the backdrop of private patent holders bringing investment chapter lawsuits against them regarding controversial provisions in the IP chapter. Given the potential severe compensation requirements under the IP chapter, and the pro-investor record established under NAFTA investment tribunals, governments would be strongly deterred from taking measures which might even conceivably contravene the investment provisions.

That is why the intellectual property exclusions in the investment chapter, if there is to be an investment chapter, must be broad, and not limited to TRIPS-compliant or FTAA IP chapter-compliant measures. Intellectual property holders must not have standing to sue under the investment chapter.

It is also worth noting that TRIPS already requires countries to maintain adjudicative remedies for alleged infringements on intellectual property rights, meaning intellectual property holders already have a direct remedy at law. But in these instances, at least, intellectual property right holders’ ability to sue and prospects for compensation are bounded by the TRIPS and IP chapter of the FTAA, and the adjudicative context is not the biased arbitration panels used by NAFTA and proposed in the FTAA.

CONCLUSION

It is unconscionable and unacceptable to negotiate provisions relating to access to medicines without first running them through a public health screen. If those provisions will harm public health, and meaningfully and unreasonably impede people’s access to medicines and medical treatment, then they must not be adopted. The intellectual property and investment provisions of the draft FTAA do not pass this test.

If there is to be an FTAA, there should be no intellectual property chapter included. If it is included, it must be stripped of all TRIPS-plus measures, though even replicating the TRIPS agreement in the FTAA will have harmful consequences for public health. And if there is an FTAA, there should be no investment chapter. If there is an investment chapter, then intellectual property must be excluded completely. Failing to do so will contravene and make irrelevant the “flexible” policy regarding public health that the USTR claims it applies to disputes regarding access to medicines.

More to the point, failing to take these steps will tend to make it more difficult for people to gain access to essential and lifesaving medicines, will deepen the monopolistic power of intellectual property holders and will facilitate price gouging of consumers throughout the Americas, including in the United States. No U.S. government agency should be pursuing such an agenda.

Sincerely,

Robert Weissman

FOOTNOTES

1. These conditions include: a prior effort by the proposed user to obtain authorization from the right holder on reasonable commercial terms (TRIPS Article 31(b)), that the compulsory license be granted for a specific purpose only (TRIPS Article 31(c)); that the license be non-exclusive, non-assignable and predominantly for use in the domestic market (TRIPS Article 31 (d), TRIPS Article 31 (e), TRIPS Article 31 (f)), that the license be terminated if the conditions giving rise to it cease (TRIPS Article 31 (g)), that the legal validity of the license and the terms of remuneration be subject to appeal to a judicial or administrative authority (TRIPS Article 31 (i), TRIPS Article 31 (j)).

2. The bill was co-sponsored by Representatives Marion Berry, Fortney Pete Stark, Thomas Allen, Bernie Sanders, David Bonior, Barbara Lee, Steven LaTourette, Albert Wynn, James Langevin, Danny Davis, Thomas Barrett, John Baldacci, Janice Schakowsky, Gene Green, Stephanie Tubbs Jones, Jerrold Nadler, John Lewis, George Miller of California and Peter DeFazio.

3. The bill was co-sponsored by Representatives John Elias Baldacci, Thomas M. Barrett, William Lipinski, Cynthia McKinney, Eleanor Holmes Norton and Frank Pallone, Jr.

4. “Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that data are protected against unfair commercial use.” TRIPS, Article 39.3.

5. USTR, “FTAA Negotiating Group on Intellectual Property, Public summary of U.S. Position,” http://www.ustr.gov/regions/whemisphere/intel.htm (No date, but released January 17, 2001).

6. On page 8.51 are provisions to: “=C9 2. When the patent protects a biological product that claims to have specific characteristics, the protection shall also cover any biological material derived through multiplication or propagation of the patented product and having the same characteristics. 3. When the patent protects a biological product procedure that claims to have specific characteristics, the protection shall also cover all biological material derived through multiplication or propagation of the material directly obtained from the procedure and having the same characteristics. 4. When the patent protects a specific genetic sequence or biological material containing that sequence, the protection shall also cover any product that includes that sequence or material expressing that genetic information.”

7. See, for example, Mary Bottari, “NAFTA’s Investor “Rights” A Corporate Dream, A Citizen Nightmare,” Multinational Monitor, April 2001.

8. Intellectual property is defined as a form of investment covered by the FTAA in several proposed provisions (pages 3.33, 3.34)

Essential Action Preliminary Assessment of FTAA Intellectual Property Proposals’ Effect on Access to Medicines

The just-released draft of the FTAA chapter on intellectual property rights is primarily in brackets, meaning that terms have not been agreed on. This makes it impossible to say precisely what is “in” the FTAA, because a single provision may be followed by an alternative that directly contravenes it.
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For Immediate Release,
Contact: Robert Weissman,
202-387-8030

The just-released draft of the FTAA chapter on intellectual property rights is primarily in brackets, meaning that terms have not been agreed on. This makes it impossible to say precisely what is “in” the FTAA, because a single provision may be followed by an alternative that directly contravenes it. [The text is at < http://www.ftaa-alca.org/alca_e.asp>.]

What can be said is this: There are numerous proposed provisions in the FTAA that would go far beyond WTO rules and would dramatically limit countries’ ability to promote access to medicines. Lives are at stake in the negotiations that determine whether these provisions are incorporated into the final agreement, and in the national deliberations over whether a final agreement is adopted. To take one example, under these harmful provisions, Brazil, which runs what may be the developing world’s most effective HIV/AIDS treatment program, may find itself facing difficulties in making new drugs available.

The text does not indicate which country or countries proposed or support specific provisions. But it is a safe bet that the United States is backing many of the worst proposals, which also appear in the U.S. summary FTAA proposals. These proposals were released several months ago, and are on the USTR web page www.ustr.org.

Among the worst proposals are the following:

-A limitation on compulsory licensing to the public sector (see page 8.64 (6)). Under this proposal, compulsory licenses could only be issued to a government, or private parties selling exclusively to the government. This would prevent, for example, Costa Rica from issuing a compulsory license on HIV/AIDS drugs to an Indian generic manufacturer, for sale in the private sector.

-An extension of patent terms to compensate for delays in granting the patent (see page 8.65 (8)). This provision would extend monopoly protections for drug manufacturers and permit further gouging of consumers. WTO rules already obligate countries to grant 20-year patents, a period reached taking into account potential delays in the granting of patents. Adding additional time to the patent term is simply a gift to brand-name drug companies and other patent holders, at the expense of consumers.

-New protections for marketing approval (“registration”) data (see page 8.65 (1)). The FTAA proposal would require five years protection for the data submitted to show drugs are safe and efficacious. (WTO rules are vague on registration data, requiring protection of the data against unfair commercial use but imposing no clear mandates.) To gain marketing approval, generic companies typically show that their product is bioequivalent to a patented product (that is, that the generic is chemically similar and works the same in the human body) and then rely on the patented productÕs safety data to earn approval. In many instances, if a generic company cannot use the already-generated registration data, it will not introduce a generic version of the patented product; and if it regenerates the data, consumers suffer from delay of introduction of the generic version. Registration data protections are important for new drugs that are not patent-protected or in cases of compulsory licensing. If a compulsory license is granted for a drug for which registration data exclusivities remain in force, the data exclusivity can block the generic from gaining marketing approval.

We will have a fuller analysis of the effect of the intellectual property provisions of the draft FTAA on access to medicines — as well as an assessment of how the investment proposals might impact access to medicines — as soon as possible.

CPTech-Essential Action Comments on World Health Assembly

The World Health Assembly meeting in Geneva is now winding down. Brazil introduced two controversial resolutions, on HIV/AIDS and on a revised drug strategy. Both of the resolutions emphasized the importance of generic drugs and local production of pharmaceuticals. The HIV/AIDS resolution also emphasized the importance of treatment in addressing the AIDS pandemic. We were strongly supportive of the thrust of both resolutions.
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The World Health Assembly meeting in Geneva is now winding down. Brazil introduced two controversial resolutions, on HIV/AIDS and on a revised drug strategy. Both of the resolutions emphasized the importance of generic drugs and local production of pharmaceuticals. The HIV/AIDS resolution also emphasized the importance of treatment in addressing the AIDS pandemic. We were strongly supportive of the thrust of both resolutions.

The rich countries were not supportive. The EU introduced an alternative HIV/AIDS resolution, which was eventually merged with the Brazil resolution. The revised drug strategy resolution was also revised to become a Brazil/EU resolution. In both cases, the revisions watered down dramatically the substance of the original Brazil proposals, weakening the language on conflicts between trade agreements and health and substantially watering down the operational language where the WHA provides specific action-oriented instructions for the WHO director general.

The US worked hard to undermine the stronger Brazilian language. In the case of the revised drug strategy, when a number of developing countries proposed amendments that would have strengthened the Brazil-EU resolution, the US moved to push the negotiations to a small group and away from the full committee discussion. In the process, all of the strengthening proposed amendments from developing countries were discarded.

Tomorrow, a resolution from the Non-Aligned Movement on health systems will be debated. It promises to again raise similar issues – and the US is likely to again play a counterproductive role.

Statement for the press: “With the world finally beginning to move in the direction of a proportionate response to the AIDS pandemic, the US has decided it is more important to defend commercial interests than the public health. It has been a disgraceful few days for the United States and its delegation led by Tommy Thompson,” said Robert Weissman, co-director of Essential Action.

“In the middle of this horrific public health catastrophe, the US government played a shameful role, protecting Big Pharma at the expense of the poorest and least powerful persons, millions of whom are going to die. Brazil was a real hero in this meeting,” said James Love, director of the Consumer Project on Technology.

U.S. Consumer Groups Response to Industry Capitulation in South Africa Drug Case,

“Today, Big Pharma capitulated in the face of worldwide outrage,” said James Love, director of the Consumer Project on Technology, in response to news that the Pharmaceutical Manufacturers’ Association of South Africa (PMA) and 39 multinational brand-name drug corporations would drop their suit against the government of South Africa.
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For Immediate Release,
April 19, 2001

Contact:
James Love in South Africa:
27-72-224-3069
Robert Weissman in Washington, DC:
202-387-8030

“Today, Big Pharma capitulated in the face of worldwide outrage,” said James Love, director of the Consumer Project on Technology, in response to news that the Pharmaceutical Manufacturers’ Association of South Africa (PMA) and 39 multinational brand-name drug corporations would drop their suit against the government of South Africa.

“Now is the time for the South African government to issue compulsory licenses for HIV/AIDS drugs to generic manufacturers,” said Robert Weissman, co-director of Essential Action. Compulsory licensing permits generic competition for on-patent products. “By authorizing generic competition, South Africa will see prices fall dramatically and steadily, and will enable those with HIV/AIDS to gain access to the medicines they need to survive.”

“The South African government deserves enormous credit for withstanding over the last several years massive pressure from the Clinton-Gore administration, the European Union and the drug companies themselves,” Love said. “Other countries in Africa and the developing world have benefitted greatly from the South African efforts,” Love said.

“The case was about U.S.-style generic substitution and European-style parallel importing, and whether African countries can do what countries in the North have done for years,” Love said.

“The next step involves something that was not really resolved in the court case,” Love said, “which is whether South African can and will proceed with compulsory licensing of cheap generics to the African market. Unless the South African government authorizes compulsory licensing on patents, people who live in South Africa will not get access to dollar-a-day AIDS cocktails. Nothing that happened today is sufficient to make that happen.”

“The brand name drug companies must once and for all get out of the way of efforts to deliver life-saving medicines to people in South Africa,” Weissman added.

The Consumer Project on Technology and Essential Action are both Ralph Nader-founded advocacy groups.

“Free Trade” and Medicines in the Americas

Key Points:
-Generic competition is crucial to reducing the price of medicines in developing countries.
-The U.S. is pushing a negotiating agenda for the FTAA that would dramatically limit each country’s ability to undertake compulsory licensing, an important tool to promote generic competition.
-The U.S. negotiating position would make it difficult for other countries to emulate Brazil’s success in providing treatment to all persons with HIV/AIDS.
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Key Points

-Generic competition is crucial to reducing the price of medicines in developing countries.
-The U.S. is pushing a negotiating agenda for the FTAA that would dramatically limit each country’s ability to undertake compulsory licensing, an important tool to promote generic competition.
-The U.S. negotiating position would make it difficult for other countries to emulate Brazil’s success in providing treatment to all persons with HIV/AIDS.

The U.S. is aggressively pushing for negotiation and completion of the Free Trade Area of the Americas (FTAA) agreement, a proposed trade deal involving the economies of 34 countries in the Western Hemisphere, stretching from Canada to Chile. It is effectively an effort to expand NAFTA, the North American Free Trade Agreement, to include all of North, Central, and South America and the Caribbean (except for Cuba).

FTAA negotiations are under way with a scheduled completion date of 2005. Although the negotiating text remains secret, it is clear that the agreement will be modeled on NAFTA. The U.S. has released a summary of its negotiating objectives for the agreement, indicating what Washington would like to achieve.

According to its summary position statement, the U.S. wants to include provisions that would require countries to adopt rules concerning intellectual property rights (IPRs) even more favorable to patent holders than required by the World Trade Organization (WTO). These new obligations would dramatically limit each country’s ability to constrain pharmaceutical pricing to ensure that essential medicines are affordable and accessible. In a variety of ways, the U.S. proposals would limit the ability of countries in the Americas to promote generic competition, including through compulsory licensing. Generic competition is the most important means (along with direct price controls) to reduce drug prices.

Compulsory licensing enables any government to grant a license to a company, government agency, or other party to use a patent without the authorization of the patent holder. The Costa Rican government, for example, could issue a license to a local company for an HIV/AIDS drug manufactured by Bristol-Myers Squibb. The Costa Rican firm would then manufacture the drug for sale in Costa Rica under a generic name and would pay a reasonable royalty to Bristol-Myers Squibb on each sale.

The generic competition created by compulsory licensing can lower the price of medicines by as much as 95%. For example, two Indian generic drug makers have offered to supply triple-drug combinations to people with HIV/AIDS for $350 per person per year. Aside from very limited discount programs that appear to be available only to African countries, the cost of the same “drug cocktails” produced by brand-name companies is $10,000 to $15,000 per person per year.

AIDS is not the only disease causing large numbers of preventable deaths in developing countries, but it is certainly one of the most devastating. Although the HIV/AIDS epidemic in Latin America and the Caribbean is nowhere near as serious as it is in Africa, infection rates are still high. The UN estimates that 1.4 million people have HIV/AIDS in Latin America, with 150,000 people newly infected with HIV in 2000 and more than 80,000 dying from AIDS.

If compulsory licensing brought prices for triple-drug treatments down to even $500 per person per year, most countries could provide pharmaceutical treatments to their HIV/AIDS populations. Although poor, these countries are considerably wealthier than African nations, and their HIV/AIDS populations are considerably smaller. Thus, universal access to treatment in the region is certainly within reach.

Brazil has led the way in showing how generic production can drive down prices and enable developing countries to make drug treatments universally available. It manufactures generic HIV/AIDS drugs (which are not patent-protected, because Brazil has only recently adopted a WTO-style patent system for pharmaceuticals). By doing so, it can guarantee pharmaceutical treatment to every person with HIV/AIDS.

Brazil has shown that developing countries can administer an effective HIV/AIDS treatment program, providing drugs to those with HIV/AIDS and maintaining high rates of compliance with treatment regimes. It has proven that generic production drives down prices: its cost for drug cocktails is far below that of the multinational pharmaceutical firms, and the price continues to decline. And the Brazilian experience—where infection rates are now roughly half what the World Bank had predicted in 1994—strongly suggests that treatment is an important component of prevention; healthier people are less likely to spread HIV, and people are more likely to be tested for HIV and then adopt safer practices if they know that those with HIV/AIDS have hope of being treated. However, the U.S. thrust in the FTAA negotiations significantly diminishes the prospect of other countries in the Americas emulating Brazil’s public health accomplishments in curbing HIV/AIDS and other diseases.

Problems with Current U.S. Policy
Key Problems

-If the U.S.-Jordan Free Trade Agreement serves as a model, the FTAA will sharply limit the grounds for issuance of a compulsory license.
-The U.S. negotiating objectives for the FTAA inappropriately seek to link marketing approval to patent status.
-The U.S. is attempting in the FTAA negotiations to extend patent terms and create new intellectual property protections that will undermine Latin American and Caribbean country efforts to promote access to affordable medicines.

It is not possible to know exactly what the U.S. is advocating in FTAA negotiations because Washington has only released a summary of its negotiating objectives. Draft FTAA texts remain secret. However, the U.S. summary proposals, along with the recently completed U.S.-Jordan free trade agreement (FTA), provide some insight into the positions for which Washington is lobbying. These include both the basic framework of the WTO’s Trade-Related Aspects of Intellectual Property (TRIPS) and a series of ill-advised “TRIPS-plus” measures, which would require countries to adopt intellectual property rules that extend or grant new monopolistic patent and intellectual property claims and diminish the public’s rights regarding intellectual property.

Perhaps the most worrisome U.S. initiative would directly limit the grounds for compulsory licensing. Under the U.S.-Jordan FTA, compulsory licenses to achieve a public health aim—even in case of a national emergency—can only be granted to “government entities or legal entities operating under the authority of a government.” Under the more permissive TRIPS arrangement, by contrast, compulsory licenses could as a matter of course be granted to private parties for commercial, nonpublic use, so long as TRIPS procedures and rules, including payment of reasonable compensation to the patent holder, are obeyed. TRIPS contemplates compulsory licensing as part of the basic schema of the intellectual property system, not as a limited exception.

If the U.S.-Jordan FTA provisions are adopted as part of the FTAA, it would still be permissible for Argentina, say, to issue a compulsory license to procure lower-priced AIDS or cancer drugs for its public health service. But it would not be possible for a private Argentine drug company to obtain a compulsory license to make lower-priced AIDS or cancer drugs available generally on the market. The narrowing of scope for compulsory licensing would tend to make governments less certain about their authority to use this critical public health tool and more worried about facing domestic lawsuits from industry if they do attempt compulsory licensing—thus inhibiting action to advance public health interests.

A second troubling proposal contained in the U.S. summary of its negotiating objectives for the FTAA would link marketing approval for a drug—based on a finding of safety and efficacy (or bioequivalence to a safe and efficacious product) granted by U.S. Food and Drug Administration (FDA)-equivalent agencies—to patent expiration. Under the U.S. proposal, unless they were sure there were no patent claims on a drug, FDA-equivalent agencies could not grant marketing approval to generics.

There should be no linkage between marketing approval and patent term. If a generic company markets an on-patent drug without license, under TRIPS, the patent holder has adequate remedy under the law. Stated differently, linkage can only serve to protect invalid intellectual property claims since valid claims receive protection through normal judicial means.

A third TRIPS-plus proposal from the U.S. would create new restrictions on the use of “undisclosed” pharmaceutical test data, the study data submitted by drug companies to show that a product is safe and efficacious. To gain marketing approval, generic companies typically show that their product is bioequivalent to a patented product (that is, that the generic is chemically similar and works the same in the human body) and then rely on the patented product’s safety data to earn approval.

In many instances, if a generic company cannot use the already-generated registration data, it will not introduce a generic version of the patented product. The price of generating the data may be too high or may take several years to replicate. If the company does choose to regenerate the data, consumers suffer from the delay in the introduction of the generic product that occurs while the generic firm reconducts the relevant tests.

In those countries that establish set terms for registration data exclusivity, the period of exclusivity typically runs shorter than the patent term. Thus, registration data protections are not normally an impediment to the introduction of generics. They are an issue, however, for new drugs that are not patent-protected or in cases of compulsory licensing. If a compulsory license is granted for a drug for which registration data exclusivities remain in force, the data exclusivity can block the generic from gaining marketing approval. An effective system of compulsory licensing must also permit the use of registration data, and this does not appear to be contemplated in the U.S. negotiating position, which seeks to establish for the entire hemisphere a minimum exclusivity period of five years for registration data. In contrast, TRIPS is quite vague on registration data, requiring protection of the data against unfair commercial use but imposing no clear mandates.

A fourth problem with the U.S.’ negotiation position is that it calls for patent extensions to offset delays in marketing approval for pharmaceuticals. The result would again be extended monopoly protection for drug manufacturers and further gouging of consumers. TRIPS obligates member countries to grant 20-year patents. Those patents provide a two-decade monopoly on inventions. Patent terms seek to create a balance between providing incentives for inventors and enhancing the public interest by maintaining and promoting competition. The 20-year term manifests such a balance—albeit one tilted in favor of the corporate patenting sector—taking into account the known delays sometimes associated with marketing approval. Adding additional time to the patent term after a balance has been struck improperly favors patent holders.

Toward a New Foreign Policy
Key Recommendations

-The U.S. should drop its efforts to include TRIPS-plus provisions in the FTAA.
-Because all FTAA negotiating countries are already members of the WTO and are bound by TRIPS, there is no reason to include any intellectual property provisions in the FTAA.
-The U.S. should stop working to expand monopolistic intellectual property rights and begin to explore protections for the public’s rights regarding intellectual property.

The FTAA negotiating countries are all members of the World Trade Organization and have already committed themselves to adhere to TRIPS. TRIPS establishes a comprehensive international standard for intellectual property protection, with a heavy tilt toward the interests of intellectual property holders. The only reason to include intellectual property provisions in the FTAA is to force countries to adopt TRIPS-plus obligations—many of which are dangerous and injurious to public health.

Even inclusion in the FTAA of rules identical to the WTO’s would be harmful, because if positive changes were achieved in the WTO intellectual property rules, the FTAA countries would still be required to adhere to the old, more restrictive rules. By contrast, if harsher rules were adopted at the WTO, the FTAA countries would be required to adhere to them due to their WTO membership. These overlapping obligations can complicate and sometimes thwart positive reform of international trade rules to enhance public rights.

More than just access to HIV/AIDS medicines is at stake in the FTAA negotiations. People in Latin America and the Caribbean, as well as generally throughout the developing world, are regularly denied access to needed medicines because of price. (Of course, similar problems are not unknown in the U.S.)

Although per capita income is dramatically less in Latin America than in the U.S. or the other rich countries in the Organization of Economic Cooperation and Development (OECD), drug prices in Latin America are comparable to or even higher than those in OECD nations. A pharmaceutical pricing study conducted by Health Action International analyzing more than a dozen frequently prescribed drugs concluded, “The average retail prices of 11 out of 13 dosage forms are higher in Latin America than in the OECD.” There are many reasons for these price discrepancies, including the maintenance of price control regimes in many OECD countries and the brand-name companies’ differential drug pricing, with higher prices charged in some developing countries where the targeted market is limited to wealthy consumers. The most effective way for Latin American and Caribbean countries to address these pricing problems is through compulsory licensing and promoting generic competition.

It is time for the U.S. to endorse compulsory licensing and to begin to conceptualize ways to expand the public’s rights regarding intellectual property. The agreement between the U.S. and the United Kingdom to put basic data about genes in the public domain, rather than allowing this information to be monopolized by private companies, is an example of how public rights can be protected. International agreement is needed in several other areas: to prohibit patents on life forms (the U.S. wants to allow such patents in the FTAA); to guarantee minimum rights for educators, researchers, and others concerning a wide range of “fair use” issues regarding intellectual property for public benefit; to resolve particular difficulties or uncertainties in TRIPS that make compulsory licensing difficult for smaller countries (notably, a requirement that compulsorily licensed products be made primarily for domestic consumption); and to ensure that health and other vital public interests take priority over commercial considerations in the crafting of intellectual property policy.

Washington’s foremost challenge is to ensure that no harm is done in intellectual property trade negotiations; this means foregoing intellectual property provisions (especially TRIPS-plus conditions) in the FTAA. Current official U.S. policy is that all health-related concerns regarding intellectual property can be addressed through a “flexible policy,” by which the U.S. will review its actions in individual cases to ensure that health is not undermined. But even if it is administered in good faith, such a policy is insufficient on numerous grounds. It does not provide countries with the certainty they need to proceed with compulsory licensing and the promotion of generic competition. It ignores how the very existence of baseline rules tilted against compulsory licensing and access to medicines makes it harder for developing countries to pursue compulsory licensing. Even if the U.S. chooses not to enforce those rules, other countries can still choose to enforce the rules and thus undermine access to generic medicines. And Washington’s current flawed policy is based on a very narrow understanding of when legitimate health interests conflict with intellectual property rules.

Finally, provisions of the FTAA outside of the intellectual property sphere pose a series of threats to public health. The services provisions may facilitate the privatization of public health services, and the investment provisions might give corporations standing to sue to block the implementation of environmental and public health regulations or to deny the issuance of compulsory licenses. Protecting public health must be prioritized over commercial interests in these areas as well.

Robert Weissman is the editor of Multinational Monitor magazine and a co-director of Essential Action, a corporate accountability group. He is also a co-author of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, ME: Common Courage Press, 1999; see http://www.corporatepredators.org/).

Letter to Tommy Thompson, urging the U.S. Dept of Health and Human Services provide the World Health Organization with access to U.S. government-funded medical inventions

Dear Mr. Thompson:
We are writing to request that the Department of Health and Human Services (DHHS) enter into an agreement that would enable the World Health Organization, UNICEF and other public health organizations to use US government rights in patents on medicines and other health care inventions. We made a similar request to the Clinton Administration, in a September 3, 1999 letter to NIH Director Dr. Harold Varmus.
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Ralph Nader
P.O. Box 19312
Washington, DC 20036

James Love
Consumer Project on Technology
P.O. Box 19367
Washington, DC 20036

Robert Weissman
Essential Action
P.O. Box 19405
Washington, DC 20036

March 28, 2001

Secretary Tommy Thompson
Department of Health and Human Services
200 Independence Avenue, SW
Washington, DC 20201

Dear Mr. Thompson:

We are writing to request that the Department of Health and Human Services (DHHS) enter into an agreement that would enable the World Health Organization, UNICEF and other public health organizations to use US government rights in patents on medicines and other health care inventions. We made a similar request to the Clinton Administration, in a September 3, 1999 letter to NIH Director Dr. Harold Varmus. Dr. Varmus responded on October 19, 1999, indicating the matter was still under review, but also expressing opposition to our request. I am attaching our correspondence, which includes this statement by Dr. Varmus:

On balance, I am not convinced of the benefit of the standardized transfer of manufacturing and distribution rights to the WHO or any other nonprofit organization.

Subsequently Congresswoman Jan Schakowsky wrote to Secretary Shalala making a similar request, and received a nearly identical response.

What is at stake is an important moral and economic issue. The US taxpayers are now asked to fund more than $20 billion in R&D for health care annually. These expenditures lead to a plethora of patents and other intellectual property rights, not only for HIV drugs such as the patents on products such as ddI, d4T, ddC, Ziagen, Norvir or Kaletra, but also for many other medicines, diagnostic devices and tests and other inventions. It is morally repugnant for the US government to permit private parties to obtain exclusive rights to market these inventions in South Africa, the Philippines, Brazil, Kenya, Romania and other countries, without provisions to help make these products available to save the lives of poor and middle class people.

The recent announcement by Bristol-Myers Squibb that it will reduce the price for d4T, an HIV drug invented at Yale on a government grant, from ten dollars per day to fifteen cents per day, for some patients in some Africa countries, is a positive step, but it came only after student pressure at Yale, a request by CIPLA, an Indian generic drug company, for a compulsory license for the d4T patent in South Africa, and years of criticism from many quarters of the d4T price. The fact that it took so long, and required pressure from so many, in a period when there are 20,000 persons per month dying from AIDS in South Africa alone, shows that our current public policy is broken. Not only should the d4T price gouging in South Africa have ended years ago, but policymakers have to be more responsive and pro-active to public health concerns. In particular, there needs to be a more systematic and comprehensive solution, rather than a few isolated corporate PR damage control responses under only the most extreme forms of pressure.

Under the federal Bayh-Dole Act and regulations enacted thereunder (18 USC 200 et seq.) the government can enter into an agreement with the World Health Organization or other international public health and development groups, such as UNICEF or UNAIDS, giving the organizations the right to use foreign rights in patents that benefited from federal funding. Your department can write any safeguards that it feels are appropriate for such authorizations, and could for example, simply create a procedure whereby the WHO or another organization could request use, subject to whatever restrictions and conditions were deemed appropriate to protect the public interest for a particular license. The fact that this has not happened, after years of requests, shows a disregard for the public health in poor countries. It is also short-sighted, because with increasing globalization, diseases in other countries intensify dangers for our citizens. This is not a proud chapter in our government’s history, and we ask that the Bush Administration correct this longstanding failure, and do what is best for the public health.

We ask to meet with you and your staff to discuss these matters further.

Sincerely,

Ralph Nader

James Love

Robert Weissman

Letter to Bristol-Myers-Squibb, Re: Discount Deals for South Africa

Dear Charles A. Heimbold, Jr.
We are writing to follow up on Bristol-Myers Squibb’s announcement earlier this week of concessionary terms for the provision of d4T and ddI in Africa.
We support the issuance by patent holders of voluntary, royalty-free, non-exclusive licenses of essential life-saving medicines to all potential bona fide manufacturers and suppliers, for all non-OECD countries plus Mexico.
———-

March 16, 2001

Charles A. Heimbold, Jr.
Chief Executive Officer,
Bristol-Myers Squibb
345 Park Avenue
New York, NY 10154

Dear Charles A. Heimbold, Jr.

We are writing to follow up on Bristol-Myers Squibb’s announcement earlier this week of concessionary terms for the provision of d4T and ddI in Africa.

We support the issuance by patent holders of voluntary, royalty-free, non-exclusive licenses of essential life-saving medicines to all potential bona fide manufacturers and suppliers, for all non-OECD countries plus Mexico.

Your recent announcement seems to represent a near-first step to achieving this aim.

The BMS press release and statements attributed to BMS spokespeople suggest that you are willing to forgo enforcement of patent rights in South Africa, and that you do not claim intellectual property rights on these products anywhere else in sub-Saharan Africa. [Footnote: “The particular mechanism could be just non-enforcement of the patent by us,” he [John McGoldrick, BMS executive vice president] said. “It could be some kind of technical mechanism. . . . It doesn’t really matter to us. . . . Our key decision is: Take that patent off as any factor in availability of Zerit in South Africa.” (“Another Firm Cuts HIV Drug Prices,” by Karen DeYoung and Bill Brubaker, Washington Post, March 15, 2001); ” Bristol-Myers Squibb has made an agreement with Yale University to grant a free license under the patent for Zerit (rights to which are owned by Yale and Bristol-Myers Squibb) to treat AIDS in sub-Saharan Africa.” BMS News Release, March 14, 2001.] BMS seems to have been ambiguous as to whether this purported release on patent right claims extends to both ddI and d4T, or just to d4T.

If you are sincere in your claim to forego patent rights in sub-Saharan Africa, there is no conceivable reason for you to refuse to issue formal, voluntary, royalty-free, non-exclusive licenses for both ddI and d4T to all potential bona fide manufacturers and suppliers. Indeed, you should prefer such an approach to encouraging other manufacturers and suppliers to violate your intellectual property claims in Africa.

From our point of view, which is focused on achieving access to life-saving medicines, the issuance of a license is vital. First, companies may reasonably be reluctant to forge ahead with production in South Africa or export to South Africa on the basis of an informal and imprecise statement from Bristol-Myers Squibb. Indeed, many may reasonably take the position that they respect intellectual property claims, and will refuse to sell in a market without a formal license. Second, it is possible that companies may confront registration difficulties if they do not have a valid, formal license for a product patented by another.

To effectively enable others to produce and market the drugs, we ask that you also issue a similar license to the registration data (marketing approval information showing safety and efficacy) connected to the drugs. If protections on such data still exist, they could effectively bar introduction of generic competition for years.

It is also vital that BMS provide to the public the fullest knowledge it has on other intellectual property claims related to ddI and d4T, held by entities other than BMS, in South Africa and elsewhere in Africa. These entities will also need to issue licenses for generic makers and suppliers to produce and supply the drug for South Africa.

As you know from experience, there is little technical difficulty in issuing such licenses. We urge you in the strongest terms to issue such licenses today, on both ddI and d4T. Doing so will represent a genuine first step in the effort to deliver medicines needed to save the lives of the millions in the developing world now living with an HIV/AIDS death sentence hanging over their heads.

You must also extend the voluntary licenses to all non-OECD countries. For the vast majority in these countries with HIV/AIDS, lifesaving pharmaceuticals are out of reach. Their lives are no less important than those in Africa.

Issuance of voluntary licenses is not a cure-all, nor does it represent the full extent of what the pharmaceutical companies must do. Certainly, if BMS is acting in good faith, it must immediately withdraw from the lawsuit challenging South Africa’s Medicines Act. Attached, you will find a set of criteria that we believe should apply to all drug companies making life-saving medicines, including criteria for assessing concessionary offers and outlining the moral imperatives resting with the companies to enable poor countries to achieve sustainable access to life-saving medicines.

We look forward to your immediate response to these requests.

Sincerely,

Robert Weissman
Co-Director
Essential Action
P.O. Box 19405
Washington, D.C. 20036

Essential Action Comments on the US-Chile Free Trade Agreement

Attention: U.S.-Chile Free Trade Agreement

Dear Ms. Blue:
Essential Action and the Consumer Project on Technology submit these comments in response to a request from the Office of the U.S. Trade Representative for public comment on negotiating objectives for the proposed U.S.-Chile Free Trade Agreement (FTA) (Federal Register, December 14, 2000).
———-

Robert Weissman
Co-Director
Essential Action
P.O. Box 19405, Washington, D.C. 20036

James Love
Director
Consumer Project on Technology
P.O. Box 19367, Washington, D.C. 20036

January 29, 2001

Gloria Blue
Executive Secretary
TPSC
Office of the USTR
600 17th Street, NW
Washington, DC 20508

Attention: U.S.-Chile Free Trade Agreement

Dear Ms. Blue:

Essential Action and the Consumer Project on Technology submit these comments in response to a request from the Office of the U.S. Trade Representative for public comment on negotiating objectives for the proposed U.S.-Chile Free Trade Agreement (FTA) (Federal Register, December 14, 2000).

Essential Action is a corporate accountability group that focuses especially on international issues. The Consumer Project on Technology is a consumer group that brings a consumer perspective on emerging policy debates on technology issues. Both groups are Ralph Nader-founded organizations. We have been involved in trade and intellectual property policy debates for more than a decade.

Our comments focus on the potential intellectual property provisions of a U.S.-Chile Free Trade Agreement (FTA), and particularly on provisions relating to access to medicines and compulsory licensing.

THE CASE FOR EXCLUDING INTELLECTUAL PROPERTY FROM THE U.S.-CHILE FTA

There is no reason for inclusion of intellectual property provisions in the U.S.-Chile FTA. Both the United States and Chile are members of the World Trade Organization and have committed themselves to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). TRIPS establishes a comprehensive international standard for intellectual property protection, with a heavy tilt towards the interests of intellectual property (IP) holders.

The TRIPS rules constitute a floor of IP protection. With TRIPS already establishing a high level of IP protection in every Member country, there is no reason to include IP rules in bilateral agreements among TRIPS Members.

Efforts to incorporate enhanced IP protection (“TRIPS-plus”) in bilateral agreements are not only unnecessary, but, as discussed below, dangerous and injurious to public health.

THE JORDAN FTA PRECEDENT AND COMPULSORY LICENSING

The provisions in the recently concluded U.S.-Jordan FTA include requirements that signatory countries grant IP protections over and above those mandated by TRIPS. As the United States enters FTA negotiations with Chile, the intellectual property provisions of the U.S.-Jordan FTA must not be used as a template for negotiations with Chile (or any other trade negotiations).

Especially troublesome is Article 20 of the U.S.-Jordan FTA, which limits the grounds for compulsory licensing for non-public use far more than does the TRIPS agreement. Compulsory licensing, a critical policy tool to prevent price-gouging and promote competition, enables a government to instruct a patent holder to license the right to use its patent to a company, government agency, or other party. Compulsory licensing lowers prices to consumers by creating competition in the market for the patented good. Its impact is similar to the introduction of generic competition at the end of a drug’s patent term — prices come tumbling down.

In the case of AIDS drugs, for example, a three-drug cocktail may cost consumers, including in developing countries, $10,000 – $12,000 a year. These costs are obviously far out of reach for all but a tiny few in developing countries, and especially in Africa, where the AIDS epidemic is most severe. Generic producers report that they could lower the price for triple-drug therapy into the $250-a-year range. Compulsory licensing would allow these savings to be realized — and hundreds of thousands, or more, to access therapies that are now out of their financial reach. The experience of Brazil in making affordable generic medicines available to people with HIV/AIDS illustrates the spectacular public health and humanitarian achievements that are possible with compulsory licensing and making affordable generic products available to people with HIV/AIDS.

Chile’s per capita income is less than $5,000, according to the World Bank. Even with its small HIV-positive population — estimated by UNAIDS at 15,000 — providing combination therapies would be a heavy annual burden of $150 million. If compulsory licensing were able to bring prices down to even $500 a year, the national cost of providing anti-retroviral therapy to Chile’s HIV-positive population would be a very affordable $7.5 million.

Under the model of the Jordan FTA, compulsory licensing to achieve this public health aim — even in case of a national emergency — would only be permissible if the licenses were granted to “government entities or legal entities operating under the authority of a government.”(1) Under the more permissive TRIPS arrangement, by contrast, compulsory licenses could as a matter of course be granted to private parties for commercial, non-public use,(2) so long as TRIPS procedures and rules, including payment of reasonable compensation to the patent holder, were complied with.

Article 20 of the Jordan FTA permits compulsory licensing only in three cases: to address anti-competitive practices; for public non-commercial use, including emergencies; or to address failure to meet working requirements.(3)

By contrast, TRIPS Article 31 contemplates compulsory licensing as part of the basic schema of the intellectual property system, not as a limited set of exceptions. Article 31(b) permits compulsory licensing generally, so long as certain procedural conditions are met.(4)

Of course, compulsory licensing can be used for other essential medicines and other products besides AIDS medications. But the AIDS medicines example clearly highlights the life and death consequences of IP provisions in trade agreements. It would be unconscionable to include IP provisions in the Chilean FTA or any other trade agreement that would consign thousands of people to preventable death.

THE BROADER CONSEQUENCES OF REPLICATING THE JORDAN FTA LANGUAGE ON COMPULSORY LICENSING

Indeed, perhaps the most serious consequence of inclusion of Jordan FTA-style TRIPS-plus language in a U.S.-Chile FTA would be its precedential effect for other trade agreements. The establishment of anti-compulsory language as a standard feature of trade agreements is likely to infect negotiations of the Free Trade Agreement of the Americas, and perhaps other trade agreement negotiations, including renegotiation of the TRIPS. Generalizing Jordan-style restrictions on compulsory licensing could be devastating to public health.

The IP provisions of the Jordan FTA also appear to conflict with existing U.S. law, and would conflict with various legislative proposals recently introduced in Congress. For example, 42 USC Sec 2183 permits compulsory licensing of atomic energy inventions.(5) In the 106th Congress, Representative Sherrod Brown introduced HR 2927, which would permit compulsory licensing of pharmaceuticals and patented medical inventions. Also in the 106th Congress, Representative Dennis Kucinich introduced HR 4739, which would permit compulsory licensing of patents on reformulated gasoline.(6) Compulsory licensing is likely to become increasingly important in the United States in the field of biotechnology, where patents on foundational inventions and multiple overlapping patents on single consumer products have the potential to seriously impede medical progress.

Compulsory licensing is a valuable policy tool in the United States. It should not be sacrificed in trade negotiations, especially when it is the United States, not the nation’s trading partners, which is pushing for compulsory licensing restrictions.

LINKING MARKETING APPROVAL TO PATENT STATUS

The Jordan FTA and the recently released U.S. negotiating guidelines for IP for the Free Trade of the Americas Agreement (FTAA) include other inappropriate TRIPS-plus measures or proposals that will set back the goal of making essential medicines affordable and accessible.

Under the U.S. government FTAA proposal, the United States proposes to link marketing approval for a drug — based on a finding of safety and efficacy, or bioequivalence to a safe and efficacious product, granted by FDA-equivalent agencies — to patent expiration.(7)

This arrangement establishes drug safety agencies as de facto IP enforcement agencies. In practice, this kind of arrangement is likely to yield unjustified patent extensions, as drug safety agencies, operating outside of their field of competence, improperly deny marketing approval to generic competitors.

In the United States, where marketing approval is linked to patent expiration, the FDA almost automatically grants 30-month monopoly protection to patent holders who claim a new patent on claims related to dosage levels or similar grounds of renewed patents for drugs nearing the end of patent protection. In deference to these patent claims, the FDA denies marketing approval to generic companies — even though many are subsequently found illegitimate. The result is that consumers are denied the benefits of competition, and lowered prices, for two-and-a-half years.

There should be no linkage between marketing approval and patent term. If a generic company markets an on-patent drug without license, under TRIPS the patent holder has adequate remedy at law. Stated differently, linkage can only serve to protect invalid IP claims — valid claims receive protection through normal judicial means.

Again, it bears emphasizing that the artificial inflation of the price of medicines that stems from such misuses of the IP system is often a life-and-death matter. Seemingly obscure IP provisions will have enormous consequences for how much preventable suffering is averted or endured by the poor.

IMPROPER GRANTS OF DATA EXCLUSIVITY

Article 39.3 of the TRIPS agreement requires members to grant “reasonable” protection to “undisclosed” pharmaceutical test data, the study data showing safety and efficacy. To gain marketing approval, generic companies typically show their product is bioequivalent to a patented product, and then rely on the patented product’s safety data to earn approval.

In many instances, if a generic company cannot use the already-generated registration data, it will not introduce a generic version of the patented product; the price of generating the data may be too high, or, just as important, take several years to replicate. If the company does choose to re-generate the data, consumers suffer from the delay in the introduction of the generic product that occurs while the generic firm re-conducts the relevant tests. Moreover, from a social point of view, retracing old tests to reach an already-known result is a tremendous waste of resources.

In those countries that establish set terms for registration data exclusivity (5 years in the United States, 10 years in the European Union), the period of exclusivity typically runs shorter than the patent term. Thus, registration data protections are not normally an impediment to the introduction of generics.

They are an issue, however, for new drugs that are not patent-protected or in cases of compulsory licensing. Where a compulsory licensing is granted for a drug for which registration data exclusivities remain in force, the data exclusivity can block the generic from gaining market approval.

An effective system of compulsory licensing must permit compulsory licensing of registration data.

The Jordan FTA includes TRIPS-plus language on registration data that requires Jordan to provide exclusivity for the same period as granted by the country where the data was filed, if it was filed outside of Jordan.(8) Thus Jordan may be made to honor U.S. terms of protection — or even the longer term of protection afforded in the EU, which is not a signatory to the U.S.-Jordan FTA, and requires a longer exclusivity period than the United States — without specified exceptions.

Similarly, the U.S. negotiating position for the FTAA seeks to establish for the entire hemisphere a minimum exclusivity period of five years for registration data.(9)

TRIPS language itself is quite vague on registration data.(10) It only covers “undisclosed” data, stipulates protection from “unfair” commercial use, does not address the issue of reliance upon published studies or foreign government drug approvals, and sets out no standards for how governments should protect against unfair commercial use.

It is unacceptable for trade agreements to contain language that increases monopolistic protection for registration data beyond that contained in TRIPS. Such measures may significantly impede efforts at compulsory licensing of pharmaceuticals.

EXTENSION OF THE PATENT TERM

Both the Jordan FTA and the U.S. FTAA negotiating position call for patent extensions to offset delays in marketing approval for pharmaceuticals.(11) The result will again be extended monopoly protection for drug manufacturers and gouging of consumers.

TRIPS obligates member countries to grant 20-year patents. Those patents provide a two decade monopoly on inventions. Patent terms seek to create a balance between providing incentives for inventors and the public interest in maintaining and promoting competition. The 20-year term manifested such a balance — albeit one tilted in favor of the corporate patenting sector — taking into account the known delays sometimes associated with marketing approval. Adding additional time to the patent term after a balance has been struck improperly tips the IP scheme too significantly for patent holders.

The United States should not seek to extend the patent terms in negotiations for the U.S.-Chile FTA, and it should abandon such efforts in the FTAA.

OTHER INTELLECTUAL PROPERTY CONCERNS

The Jordan FTA and the U.S. FTAA negotiating position contain other TRIPS-plus provisions which should not be part of the U.S. negotiating objectives for the U.S.-Chile FTA.

Both the Jordan FTA and the U.S. FTAA negotiating position include specific language on enforcement that goes beyond TRIPS and improperly limits enforcement approaches available to countries, and the Jordan FTA contains enforcement provisions that do not clearly respect due process rights.(12)

The Jordan FTA and the U.S. FTAA negotiating position also inappropriately require the extension of patent protection to products and processes that are not required to be covered under TRIPS. Both require the patenting of genetically modified plants and animals,(13) removing fundamental moral (as well as agricultural, environmental and economic) decisions from national decision-making — both in U.S. trading partners and in the United States itself. The Jordan FTA also requires the patenting of business methods,(14) even though these do not meet the basic patentability requirement of inventiveness and are subject to frequent abuse in the United States.(15)

The United States should not seek in its negotiations with Chile to force such unmerited expansion of patent monopolies.

CONCLUSION

Discussion of the specific problematic provisions in the Jordan FTA and the U.S. FTAA negotiating position should emphasize rather than obscure the fundamental issue: Expansion of intellectual property rights is not a proper subject for inclusion in an FTA between two WTO members, and should not be included in the U.S.-Chile negotiations. The only purpose of such inclusion is to advance a TRIPS-plus agenda which is improperly biased to IP holders and against the public interest and the public domain, and which threatens dire public health consequences.

If intellectual property is to be addressed at all in new international agreements, it should be to address concerns regarding the public’s rights in intellectual property. For example, the agreement between the United States and the United Kingdom to put basic data about genes in the public domain should be expanded to other countries, and international agreement should also be reached to avoid overly broad and anti-competitive patents on e-commerce or the Internet. International agreement should clarify that trademark rights should not be used to stop persons from comparative advertising, criticism, parody or other legitimate uses of a company name, for example, in Internet domains. There should also be an agreement on the minimum rights for educators, researchers and others on a wide range of “fair use” issues, to protect U.S. fair use traditions in intellectual property in the new global trading regimes.

Sincerely,

Robert Weissman

James Love

1. U.S.-Jordan FTA, Article 20(b).
2. It will still remain possible under the Jordan FTA for private parties to gain licenses if “they are operating under the authority of a government.” For example, it would be government use for a compulsory license to be issued to a private party producing a drug on behalf of a public health agency. See footnote 1.
3. Under Article 20, “Neither party shall permit the use of the subject matter of a patent without the authorization of the right holder except in the following circumstances:
a) to remedy a practice determined after judicial or administrative process to be anti-competitive;
b) in cases of public non-commercial use or in the case of a national emergency or other circumstances of extreme urgency, provided that such use is limited to use by government entities or legal entities acting under the authority of a government; or
c) on the ground of failure to meet working requirements, provided that importation shall constitute working.”
4. These conditions include: a prior effort by the proposed user to obtain authorization from the right holder on reasonable commercial terms (TRIPS Article 31(b)), that the compulsory license be granted for a specific purpose only (TRIPS Article 31(c)); that the license be non-exclusive, non-assignable and predominantly for use in the domestic market (TRIPS Article 31 (d), TRIPS Article 31 (e), TRIPS Article 31 (f)), that the license be terminated if the conditions giving rise to it cease (TRIPS Article 31 (g)), that the legal validity of the license and the terms of remuneration be subject to appeal to a judicial or administrative authority (TRIPS Article 31 (i), TRIPS Article 31 (j)).
5. The bill was co-sponsored by Representatives Thomas Allen, Thomas M. Barrett, Marion Berry, Danny Davis, Dennis Kucinich, Major Owens, Bernard Sanders, Janice Schakowsky, Fortney Pete Stark, Ted Strickland and Albert Wynn.
6. The bill was co-sponsored by Representatives John Elias Baldacci, Thomas M. Barrett, William Lipinski, Cynthia McKinney, Eleanor Holmes Norton and Frank Pallone, Jr.
7. “The U.S. proposal also addresses the limited situation in which generic pharmaceutical or agricultural chemical manufacturers can make, use or sell a patented product or process to obtain government marketing approval during the term of the patent so that they can compete with the patent owner soon after the patent expires. Under the U.S. proposal, FTAA countries would agree that so long as the patent remains valid the product or process may be made, used, or sold in their country by competitors only to meet marketing approval requirements.” USTR, “FTAA Negotiating Group on Intellectual Property, Public summary of U.S. Position,” http://www.ustr.gov/regions/whemisphere/intel.htm (No date, but released January 17, 2001).
8. It is understood that, in situations where there is reliance on evidence of approval in another country, Jordan shall at a minimum protect such information against unfair commercial use for the same period of time the other country is protecting such information against unfair commercial use.” U.S.-Jordan FTA, Article 22, footnote 11.
9. “The U.S. proposal also serves to clarify Article 39.3 of the TRIPS Agreement, which requires governments to protect against ‘unfair commercial use’ any undisclosed test data they receive as part of an application to market a new pharmaceutical or agricultural chemical product. The U.S. proposal makes clear that to implement this requirement, FTAA countries must prohibit any firm other than the company that produced the data from using or relying upon them without the latter’s consent to obtain marketing approval for generic versions of the new product for at least five years after the country has granted marketing approval for the new product.”
“Some FTAA countries currently do not have the capacity to review data for purposes of granting marketing approval and instead rely on marketing approvals in other countries. Accordingly, for purposes of complying with TRIPS Article 39.3, the U.S. proposal clarifies that FTAA countries will prohibit companies from submitting evidence of marketing approval for a new product in another country as a basis for seeking marketing approval in their country for a generic version of that product for at least five years after marketing approval for the new product was granted in the other country, unless the firm that obtained marketing approval in the other country consents to use of the evidence. In addition, the U.S. proposes that FTAA countries agree to prohibit non-consensual use of evidence of foreign government marketing approval in support of an application to market for a new use of an existing agricultural chemical or pharmaceutical product.” USTR, “FTAA Negotiating Group on Intellectual Property, Public summary of U.S. Position,” http://www.ustr.gov/regions/whemisphere/intel.htm (No date, but released January 17, 2001).
10. “Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that data are protected against unfair commercial use.” TRIPS, Article 39.3.
11. Jordan FTA, Article 23(a); USTR, “FTAA Negotiating Group on Intellectual Property, Public summary of U.S. Position,” http://www.ustr.gov/regions/whemisphere/intel.htm (No date, but released January 17, 2001).
12. Including, for example, a presumption against defendants even in criminal copyright infringement cases as to where copyright subsists. Jordan FTA, Article 27.
13. The permissible exclusion on plants and animals in TRIPS Article 27(b) is absent from the Jordan FTA and U.S. negotiating position category of permissible categories of patent exclusions.
14. “Memorandum of Understanding on Issues Related to the Protection of Intellectual Property Rights Under the Agreement Between the United States and Jordan on the Establishment of a Free Trade Area,” Article 4.
15. Prominent among many examples of such abusive business methods patents is Priceline.com’s claim to a patent on internet auctions. See Mark Gimein, “Jay Walker’s Patent Mania,” Salon, Aug. 27, 1999, http://www.salon.com/tech/feature/1999/08/27/priceline/print.html. For a broader look at the issue, see http://www.cptech.org/ip/business/ipurchasing.html.
There are similar controversies over the appropriateness of using patents for software, a product that is protected also by copyright, trade secret and contracts. Many feel that patents should not be granted for software, due to the availability of other mechanisms for protection, the inability of patent examiners to provide adequate patent examination or evaluate prior art, and the potential for anti-competitive use of patents, for example to cover fundamental technologies and standards used in Internet communications.