USTR Not Preparing Case Against Thailand For Compulsory Licenses

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

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

“Speculation about a WTO case is frankly surprising,” according to USTR. “Any such consideration would only happen after a thorough review of the consistency of such measures with WTO rules and extensive discussion with the Thai government, neither of which has happened.”

Fears of an imminent case had been expressed by activist groups, largely based on Thai press reports that the U.S. had threatened such action as the Thai government reviewed whether it would seek production of the three cancer drugs under a compulsory license arrangement.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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