Life, Death, and Property Rights Thomas Abraham Ivy Arcos Josh Choi Gregor Henneka Judy Im

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1 Life, Death, and Property Rights Thomas Abraham Ivy Arcos Josh Choi Gregor Henneka Judy Im

2 TRIPS Meeting the rising concerns of multinational companies about copying and plagiarizing of their products in foreign countries, the WTO Uruguay Round Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was put into action in 1994 to protect the trademarks, copyrights, industrial designs, data secrets and patents of companies outside their own countries. Since then, WTO member states are obliged to enforce property rights of foreign firms in case of plagiarism by domestic firms by introducing minimum standards for intellectual property protection. Among other sanctions, a minimum patent period of 20 years was defined and limits were imposed on governments in their ability to deny patents and demand compulsory licensing (when a government allows someone else to produce the patented product or process without the consent of the patent owner). On the other hand, the developed countries committed themselves to provide incentives for firms to provide technology transfer to developing countries. On the basis of this agreement, in 1998 the South African Pharmaceutical Manufacturers Association (SAPMA) went to court against the government of South Africa. The government had just passed the so-called Amendment Act allowing generic substitution of off-patent medicines, enforcing transparent pricing and allowing parallel importation to ensure availability of affordable medication to meet the exigent public health needs in South Africa. Backed by the US government as well as the European Commission, the SAPMA argued that the Amendment Act profoundly violated TRIPS. However AIDS activists worldwide brought this case to public, generating a public outcry of disgust about the course of action of the pharmaceutical industry. Under severe public pressure, government supporters backed out and instead demanded companies to withdraw from the case. Consequently, the trial became a huge PR disaster for the pharmaceutical industry, which finally dropped the case in In another precedent, the US took action against Brazil at the WTO Dispute Settlement Body in The US argued that Brazilian patent law violated the TRIPS agreement by requiring patent holders to manufacture the product in Brazil, otherwise allowing compulsory licensing and parallel import (import of patent drugs from the cheapest legitimate source). However the production of generic drugs locally without the approval of the patent holder lead to a price drop of 82% in Brazil AIDS medication, resulting in the reduction of AIDS-related mortality by more than 50%. Therefore in this case as well, the US came under fire of AIDS activists and finally had to draw back the allegations. Considering these defeats and continuously being under attack of NGOs, the WTO finally had to back down, resulting in the 2001 Doha Declaration on TRIPS and Public Health at the WTO Ministerial Meeting, which clearly affirmed the primacy of public health over intellectual property rights. 1

3 Regarding medication needed for public health, this declaration entitles governments to: allow compulsory licensing predominantly for the domestic market after a reasonable negotiation period with the patent holder define emergency situations where the negotiation period forfeits allow parallel imports In the first two cases, an adequate compensation is to be paid to the right holder if a patent exists in this country. The implementation of this agreement into national law was due in 2006, with granting the least developed countries (LDCs) an adjournment of 10 more years until Issues The 2001 Doha Declaration allows developing countries to produce generics locally. The vast majority of developing countries however lacks adequate manufacturing capacities. TRIPS limits these countries ability to import generics so that in fact these countries are mostly unable to profit from this regulation. On the other hand, the restriction on exports of generics prohibits developing producer countries of generic drugs to export them into countries in need, even if there is no patent in force. This restriction of manufacturers in developing countries predominantly to the domestic market thus excludes them from accessing larger markets to produce even more affordable generics and developing their business. Also, the TRIPS agreement does not encourage foreign investment in poor countries nor research targeting their specific needs. Furthermore it does not help developing countries to develop own patents and narrow the gap of patents filed between residents and foreigners, which in certain countries reaches a ratio of 1:100. From these points of view, it can be argued that the Doha Declaration is helping the humanitarian situation but not supporting industrial transformation in developing countries. Another main problem of TRIPS is the fact, that the obligation of developed countries to accelerate technology transfer to developing countries is not enforceable, in contrast to the developing countries obligations. Consequently there are doubts whether the developed countries will indeed deliver their promise so far, pharmaceutical companies still spend far more money in advertising than in research and development (R&D). Generally speaking, the TRIPS regulation increases the price of patentable knowledge and makes such products unaffordable for people in poor countries. Moreover, the World Bank estimates that TRIPS will also raise the flow of money from developing countries to developed countries by $20bn. 2

4 Positions of different institutions NGOs call for lifting TRIPS restrictions on exports of public health-related products to countries that cannot manufacture it themselves. Also they call on developed countries to enforce the legislation of TRIPS into national law to avoid lawsuits of companies against the developing world. Developed Countries argue that TRIPS encourages the domestic industry, boosts foreign investments and improves access to new technologies. The European Commission on the other hand signaled their willingness to discuss the production of generics for export to countries without patents as well. Developing Countries claim that TRIPS only helps TNCs to establish monopolies, diverts R&D away from the needs of poor countries and generates price increases in poor countries making basic needs unaffordable. The WTO accepts the supremacy of human against intellectual rights, however it warns the use of property rights policy as a tool of industrial strategy is not acceptable. The Pharmaceutical Industry takes the stand that patents are not the main problem as other problems like general health, poverty, proper nutrition and lack of political will are more important. Such problems pose devastating effects on R&D spending for developing countries as the R&D Costs of a new drug equaling $ m cannot be recuperated under these circumstances and see no commercial incentive to develop drugs for e.g. sub-saharan Africa. From their point of view, a lack of patent rights in the developing world may do far more harm in the long run than helping on the short run. Also the pharmaceutical industry is afraid, that smaller wealthy countries without manufacturing capacity will also demand use of this exception. The World Bank finally addresses the topic of corruption as from their estimate for every $100 African governments spend on drugs, only $12 worth of medicine effectively reaches the patient. Possible Solutions NGOs need to keep up the public pressure to ensure that the solution is not limited to a small number of countries or health emergencies only. The WTO must act as an advisor for developing countries in implementing legislation to avoid their vulnerability to diplomatic and economic pressure. The Doha Declaration itself needs further clarification in the following points: Clear restriction to health products only Clarify the definition of a reasonable period of time for negotiations before compulsory licensing Clarify the definition of national emergency and Clarify the definition of adequate remuneration for patent holders 3

5 The Developed Countries should pass an agreement not to make use of this exception to invalidate the apprehension of the pharmaceutical industry. Also they should return to a real desire to solve the problem and overcome the delaying strategy they currently follow, under pressure from the pharmaceutical industry. The Pharmaceutical Industry as the patent holders should consider international price discrimination. By offering massively lower prices of patented products for developing countries, they can avoid the desire for generics in the developing countries and keep the revenues within their companies. Moreover, they could in exchange obligate developing countries to avoid compulsory licensing or parallel imports and use the discounted drugs for the poorest only and not for wealthy citizens who can afford current prices. Together with the developed countries, the developing countries can also approach another method of resolution: the public funding of health treatment in developing countries at current prices. Since the developing world of course cannot cope with these costs on their own, this approach will depend on the help from developed countries, which in turn will please the pharmaceutical companies as important tax payers. As an example, the G8 Summit in Genoa assigned $1.3bn economic aid against AIDS for developing countries. The various stakeholders of TRIPS, individually and as a group, will therefore need to monitor their experience in the implementation of the agreement very carefully. 4