[Ip-health] U.S. Post-Doha Conditions Can Kill

[Prof. Michael H. Davis]

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One interesting fearture of Doha's language is that it addresses the
"pharmaceutical sector," not "pharmaceutical technology." Under TRIPS, a
country can exclude entirely from patentability varoius commercial areas, as
long as it does not exclude "fields of technology." It seems clear that all
agree the pharmaceuticals are not a "field of technology" but are, instead, an
economic sector. It would then be consistent with TRIPS for developing
countries--and others with normative concerns about patenting health-related
innovations--to exclud pharmaceuticals on those grounds. It would be more
direct, efficient, and administratively practical to do so as well.

Mickey Davis

Brook K Baker wrote:

> Although the U.S. has not yet committed itself in writing with respect to
> its proposals for addressing the production-for-export issue left open in
> paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public
> Health, it has informally shopped several ideas, most of which would
> dramatically limit the scope and effectiveness of a post-Doha solution,
> sacrificing lives while securing future profits for the patent
> pharmaceutical industry in the U.S.   These conditions, which have the
> potential to kill millions of people living with HIV/AIDS, include the
> following:
>
>      (1)  limits on the types of public health products to be covered by
> the agreement;
>      (2)  limits on the sectors which might be supplied by the agreement,
> specifically excluding the private sector (and perhaps the NGO and
> mission sectors);
>      (3)  limits on the importing countries that might benefit from the
> agreement:
>           (a)  no application to small market countries that theoretically
> have technical capacity to produce medicines but insufficient market size
> to achieve economies of scale,
>           (b)  strict application of the "insufficient manufacturing
> capacity" standard to exclude countries where production is nontheless
> infeasible or impractical,
>           (c)   income limits that would exclude many developing countries,
> especially middle-tier countries;
>      (4)  a preference for Article 31(f) compulsory licensing solutions in
> the exporting state that create multiple barriers to implementation
> including:
>           (a)  prior negotiation on commercially reasonable terms with the
> patent holder who might itself impose onerous conditionalities,
>           (b)  costly, burdensome, and protracted individual determinations
> in administrative or judicial proceedings to grant each license on a
> case-by-case basis,
>           (c)  dependence on the willingness of a third country to go
> through such burdensome procedures because of a public health need in a
> third countries,
>           (d)  proof in these proceedings both of a triggering public
> health need in the affected country and of technical incapacity to produce
> a particular medicine,
>           (e)  determination of the level of license compensation in the
> producing country rather than in the importing country and imposition of a
> licensing fee even with respect to imports into a no-patent country and
> possibly of double-license fees for CL importing countries;
>      (5)  a probable limitation that export licenses be limited to
> addressing "serious" or "urgent" public health needs, such as HIV/AIDS, TB,
> and  malaria;
>      (6)  supply limitations or limitations on re-export, especially to
> developed countries, but perhaps even regionally between or to developing
> countries with comparable public health needs.
>
> Each of these conditions (except the first part of #6) go against the
> letter and spirit of the Doha Declaration, each of them reflects erroneous
> assumptions and poor public policy, each of them has the potential to kill.
>
> PHARMACEUTICALS ONLY VS. PUBLIC HEALTH PRODUCTS
>
> Admittedly, paragraph 6 makes reference to the "pharmaceutical sector" and
> paragraph 4 makes reference to the imperative "to promote access to
> medicines for all."  Likewise, there is little doubt that one of the most
> pressing needs with respect to infectious and pandemic diseases in
> developing countries is affordable medicines, especially those like
> anti-retrovirals which have been priced so exorbitantly in the recent past
> and which are still three times cheaper when supplied by generic producers.
> But, treatment activists and public health specialists have clearly
> foreseen the need to achieve economies in other public health products,
> like blood tests and testing equipment.  Given that paragraphs 1 and 4 make
> explicit reference to a broad public health exception (not just
> pharmaceuticals) and given that the TRIPS Agreement contains a principal of
> non-discrimination against a field of technology, it makes sense to broaden
> the category of products and processes covered beyond pharmaceutical alone
> to "health need products" as previously recommended by treatment NGOs in
> their letter to the TRIPS Council dated January 28, 2002.
>
> SECTOR LIMITS, ESP. PRIVATE SECTOR EXCLUSIONS
>
> The U.S. is shameless in trying to preserve the "right" of U.S. patent
> holders to make profits off of a narrow spectrum of rich elites in
> developing countries.  In the era of highest pricing, only 10,000-15,000
> Africans could afford medicines, even when treatment was partially
> subsidized by private medical aid schemes.  (U.S. companies made
> $9000-$14,000 profit per patient per year for a total of
> $90,000,000-$210,000,000 a year.)  However, as important as it is to
> achieve universal coverage through the public sector (such as Brazil has
> done so successfully), at present it is important to extend access to
> affordable medicines in the private sector as well as the public sector for
> several reasons.  First, there is considerable capacity in the private
> business sector to deliver treatment and care through workplace clinics
> already provided by some of the larger employers.  Some of these employers,
> for example AngloGold, are refusing to supply anti-retroviral therapy to
> their non-central-office employees because of the price of ARV medicines
> which have not been heavily discounted in the private sector by
> pharmaceutical patent-holders, e.g., GlaxoSmithKline.  Secondly, most
> medical aid schemes extended to private and public sector employees have
> benefit limits that make it impossible to pay for anti-retroviral medicines
> and associated testing unless they are heavily discounted.  Third, the
> private sector technically includes NGOs and mission hospital systems which
> are also well poised to deliver high quality treatment and care but only if
> medicines are made available at a more affordable price.  What is
> particularly cynical about the U.S. position is that it coincides with U.S.
> backed imperatives in the World Bank requiring borrowers to privatize
> health systems and as it presses further for health care privatization in
> the General Agreement on Trade in Services.  There is no reason in the
> world to exclude untreated private and public sector employees and their
> families from the benefit of more affordable medicines and medical
> products.
>
> IMPORTING COUNTRY LIMITS
>
> The U.S. is trying to dramatically limit that countries that might benefit
> from the production-for-export exception in three ways.  First, the U.S.
> refuses to consider application of the new rule to countries with a small
> market for a particular medical product through fear of benefiting
> customers in small but rich markets.  Many African countries are "small
> market" both in terms of absolute population and number of citizens
> suffering a particular disease and in terms of consumers who can afford
> medicines.  Even though these countries might theoretically have, or in the
> future develop, some limited technological capacity, production for
> domestic use only will remain impractical because it will be impossible to
> achieve meaningful economies of scale by domestic production.  Certainly it
> is important in the long run to promote technological transfer and to
> develop pharmaceutical capacity in Africa and in other developing nations.
> But in terms of AIDS and many other diseases of poverty, it is important
> to achieve both economies of scale and some degree of competition so that
> high quality medicines can be made available on a low-cost basis as soon as
> possible.  Thus, any post-Doha agreement must address the importing needs
> of small-market countries as well as limited capacity countries.
> Parenthetically, there are many instances where U.S. and E.U. consumers can
> and should benefit from this same principle.  There are many so-called
> orphan diseases which have a small incidence, but where orphan drugs are
> available but only at truly exorbitant prices.  Likewise, in times of
> threats of bio-terrorism (remember anthrax and Cipro?) or epidemic
> outbreaks of certain infectious diseases, developed countries should have
> the flexibility in their national legislation to address public health
> needs as well through import of critically important medicines.  Although
> the NGO letter clearly addresses this public health need, the U.S. position
> staunchly ignores health market needs in both developed and developing
> countries in order to preserve profits.
>
> Second, the U.S. is trying to narrowly interpret the meaning of "no and
> insufficient manufacturing capacity countries" to impose an onerous
> pharmaceutical capacity test which will exclude several countries with
> theoretical or marginal capacity or even capacity in some sectors but not
> in others.  Many developing countries have some residual capacity to finish
> medicines (press them into pills) from raw ingredients manufactured abroad.
> However, few of these countries have current capacity to make ingredients
> from scratch (nor would it be economically sensible to do so).  Even fewer
> of them have the current productive capacity to manufacture the newest
> generation of sophisticated drugs, especially anti-retrovirals where
> production and quality control standards are extraordinarily important
> because of the risk of drug resistance and/or toxicity where the
> bio-availability of medicine is not maintained in a very narrow range.  The
> NGO letter has opted to drop any "capacity" requirement whatsoever in favor
> of addressing a public health mandate that might affect all countries, even
> those with theoretical capacity.  Even if countries eventually negotiate
> something narrower with respect to capacity, the definition should err on
> the side of over- rather than under-inclusion and it should be easy to
> administer to avoid complex determinations in the country of production.
>
> Third, the U.S. is trying to preserve pharmaceutical monopolies in
> low-middle and middle-income countries by refusing to automatically include
> all "developing countries" in its coverage provisions.  As previously
> stated, the NGO letter has urged a broader inclusion of all WTO members who
> face a public health need - the interests of consumers in developing
> countries could be addressed in this new agreement and there is no sound
> reason not to do so.  Moreover, if the U.S. or the E.U. or Japan decided
> that their consumers somehow did not need the benefit of public health
> imports in times of dire need, they could simply keep their current
> generic/import exclusion rules in place.  In other words, the developed
> countries can always protect their own domestic markets from generic
> competition but means of their national legislation.  However, the U.S. is
> also trying to figure out how to exclude some of the bigger developing and
> middle income markets because that is an area of future growth for the
> patent pharmaceutical industry.  Once again, pharmaceutical profits and
> intellectual properties rights are being put ahead of the health rights of
> people in South Africa, Brazil, and other middle income countries.
>
> PREFERENCE FOR COSTLY, INEFFICIENT, AND NULLIFYING COMPULSORY LICENSE
> SOLUTIONS
>
> Both the E.U. and the U.S. have stated a preference for an Article 31(f)
> solution liberalizing the "predominantly for the supply of the domestic
> market" rule so as to permit production for export.  Although an Article
> 31(f) solution without onerous conditions would certainly be better than no
> solution, it is inferior to an Article 30 solution because of the numerous
> procedural and practical hoops that will inevitably delay implementation of
> production for export.  First, a production for export license (except one
> granted under 31(k)) would ordinarily required protracted negotiations with
> the license holder seeking commercially reasonable terms for a commercially
> reasonable period of time.  During these negotiations, there is little
> doubt that patent holders would attempt to impose the same limitations and
> conditions on voluntary licenses that the U.S. seeks to impose in its
> post-Doha proposals, e.g., product limits, country limits, sector limits,
> etc.  Moreover, at a minimum, these negotiations are likely to drag out for
> months if not years and might result in time-limited rather than
> life-of-patent agreements.  Second, compulsory license procedures are
> costly, burdensome and protracted, imposing substantial procedural and
> substantive barriers that many countries seek to avoid.  Compulsory
> licenses, even under administratively streamlined procedures, take lawyers,
> bureaucratic decision-makers, and other official resources, are subject to
> pharmaceutical company opposition and subversion, and can give rise to
> covert bilateral trade pressure from the U.S. which wants CLs to remain
> "exceptional" rather than "ordinary."  Paradoxically, however, the U.S. is
> attempting to impose a system that requires dozens of separate applications
> - one for each and every required medicine and perhaps one for each and
> every importing country.  Third, these kinds of burdens may well make many
> countries loath to permit compulsory licenses on humanitarian grounds
> merely to serve public health needs in distant countries.  As previously
> stated, many countries have been reluctant to even consider imposing
> licenses for their own needy populations.  (Remember, no developing country
> has yet issued a compulsory license for AIDS medicines, though Brazil has
> threatened to do so and although a current CIPLA application is pending in
> South Africa.)  What makes the U.S. think that countries will readily go
> through this grief even to benefit a fledgling generics industry?  Fourth,
> the license-granting, export-producing country will have to undertake a
> determination both of the public health need and the level of technical
> capacity in distant countries, at least under the U.S. proposal.  Once
> again, this is an unreasonable and impractical burden.  Finally, under this
> scenario, it is the producing/exporting country that will determine and
> impose a license royalty fee to be paid to the patent holder and tacked
> onto the product price.  It makes a lot more sense for the licensing fee to
> be determined in the importing country where local realities and markets
> are affected.  (It makes no sense that an importing country that has issued
> its own compulsory license might have to pay double compensation!)
> Moreover, there is no justification for any fee whatsoever to be imposed on
> products destined for no-patent countries.  If the pharmaceutical company
> has not bothered to secure a patent in a particular country, why should it
> get a royalty on sales there?  The extension of the transitional time
> periods in the Doha Declaration expressly permits least developed countries
> to remain non-patent or to revert to non-patent status.  Why should these
> poorest countries pay a premium just because they can't manufacture medical
> products on their own?
>
> LIMITATION TO SERIOUS OR URGENT PUBLIC HEALTH NEEDS
>
> At Doha, the U.S. famously negotiated for an AIDS, TB, and malaria platform
> only.  The E.U. has partially resurrected the U.S. position in its proposal
> that talks about "serious" public health needs rather than any legitimate
> public health need whatsoever.  The Doha Declaration makes not such
> distinction except in the paragraph 1 preamble and with respect to
> paragraph 5(c) dealing with the emergency rules of Article 31.  Indeed, the
> Doha Declaration is significant for having adopted a much broader public
> health perspective, particularly in paragraph 4:  "We agree that the TRIPS
> Agreement does not and should not prevent Members from taking measures to
> protect public health.  Accordingly, while reiterating our commitment to
> the TRIPS Agreement, we affirm that the Agreement can and should be
> interpreted and implemented in a manner supportive of WTO Members' right to
> protect public health and, in particular, to promote access to medicines
> for all."  Although the U.S. and E.U. language would undoubtedly permit
> production and export of medicines for AIDS, TB, and malaria, it would not
> give member countries the option of accessing most or all of their
> pharmaceutical and other medical products at more affordable price should
> public policy so mandate.  Thus, scarce resources, otherwise available for
> public and private health care and poverty alleviation,  would be "wasted"
> on high cost antibiotics, or diabetes medicines, or the like.  Since the
> TRIPS Agreement places no limits on the public health issues that Member
> Countries might address, there is no sound reason for limiting the scope of
> paragraph 6 solutions to "serious" or "urgent" needs only.
>
> SUPPLY LIMITS AND RESTRICTIONS ON RE-EXPORT
>
> The U.S. and E.U. are understandably concerned about preventing the leakage
> of TRIPS sanctioned medicines back into developed countries markets where
> pharmaceutical companies make the vast majority of their profits.  As
> previously discussed, however, the U.S. and E.U. are in the driver's seat
> with respect to this alleged problem because they will certainly maintain
> or expand their existing legislation to prohibit importation of
> "production-for-export" medicines into their national markets.  However,
> even with these legislative barriers and with their capable customs
> systems, the E.U. and U.S. still want some protections against grey market
> or black market re-export.  As a practical matter, this grey market danger
> has never materialized, but if the U.S. and E.U. can fashion some
> reasonable language on this issue, it might not be so bad.  Unfortunately,
> in an effort to protect their own markets from generic competition, the
> U.S. and E.U. are attempting to impose barriers that impede regional
> procurement and distribution of medical products among developing
> countries, whether mediated by international agencies or not.  This is
> unconscionable.
>
> MORATORIUMS AVOID SOLUTIONS
>
> The U.S. has floated the idea of a moratorium, which in the view of
> treatment activists delays a solution rather than implements one.
> Unfortunately, the problem of public health needs and access to medical
> products in the developing world is not going to go away quickly,
> especially for the pandemic diseases of AIDS, TB, and malaria.  When a
> moratorium ends, the same conundrum about how to structure a workable
> solution will still exist.  Even worse, a moratorium, especially a short
> moratorium, does not give producing countries and generic manufacturers the
> legal security they need to pass enabling legislation or to invest in
> production for export.  In particular, it is clear that generic
> manufactures seek to avoid all risk of litigation with patent holders,
> whose army of lawyers terrifies both companies and nations.  (Note, it took
> South Africa three years and 400,000 lives to beat off the litigation by
> the pharmaceutical industry over its legislation permitting generic
> substitution of off-patent medicines and parallel importation.)
> Accordingly, clear rules are preferable to vanishing moratoriums.
>
> ARTICLE 30
>
> The E.U. has at least considered the possibility of an Article 30 limited
> exception to supply a compulsory license issued in the importing country
> (ignoring the right of no-patent countries to access medicines.)  The NGO
> paper has stated many of the advantages of an Article 30 limited-exception
> solution and has proposed implementing language broader than the E.U.
> proposal.  Similarly, the Africa Group and other countries proposed Article
> 30 language that would "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."  These solutions are streamlined,
> easily negotiated, and even easier to implement once authorizing
> legislation is enacted in producing and importing countries.  The U.S. has
> argued that negotiating an Article 30 limited exception is more time
> consuming than negotiating an amendment to Article 31(f) or a highly
> conditional moratorium on its enforcement.  This is sophistry.  Surely,
> amending the text of TRIPS is more time consuming and procedurally
> burdensome than a binding interpretation of the TRIPS Council on an Article
> 30 limited exception.
>
> LIVES HANG IN THE BALANCE
>
> Once again, the U.S. seems to have forgotten that lives - millions of
> lives, 13,000 lives everyday with respect to AIDS, TB, and malaria - hang
> in the balance.  The U.S., the E.U., and the rest of the world made a
> promise at Doha, that the WTO would find an expeditious solution to the
> production-for-export issue left open on November 14, 2001.  Now the U.S.
> and the E.U., but particularly the U.S., are threatening to renege on that
> promise - to break their word - and to conditionalize the Doha Declaration
> to death.  Although the U.S. might decide to callously ignore the current
> and future public health needs of its own citizens in times of
> bio-terrorism or with respect to orphan medicines, it should not be
> permitted to kill countless others in its drive to preserve pharmaceutical
> profits.  Developing countries and treatment activists worldwide must
> protest the U.S.'s narrow, Doha-strangling conditions at the upcoming TRIPS
> Council negotiations.
>
> Brook K. Baker
> Northeastern University School of Law
> HealthGAP
> 617-373-3217
>
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