[Ip-health] Doha para 6 implementation: EU proposal vs. Canadian legislation

[Richard Elliott]

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[ Picked text/plain from multipart/alternative ]

For those following the implementation of the WTO General Council Decision
of 30 August 2003, I did a quick comparative analysis of how the EU's
proposed regulation, released last Friday, compares to the Canadian
legislation passed earlier this year, since so far these are the most
detailed examples of implementation (by countries that are potential
exporters of generic pharmaceutical products).  I will leave it to someone
else to compare these against the Norwegian regulations, also promulgated
earlier this year, but which are less detailed than either the Canadian law
or the EU proposal.

Below is a modified version of an analysis shared with Canadian civil
society groups following this issue.  No doubt other aspects of the EU
proposal warrant comment, that will be forthcoming from others on the list.


EU proposal to implement legislation similar to Canada's Bill C-9

On Friday, 29 October 2004, the European Union released the text of its
proposed regulation that would implement the August 2003 decision of the
WTO to loosen patent rules so that compulsory licences can be issued on
pharmaceutical products to permit the export of cheaper generic versions to
countries needing them to address public health problems.

This is the EU's version of what in Canada took the form of Bill C-9, which
was passed by Parliament in May 2004 and is expected to come into force
sometime around January 2005, once the regulations to accompany the statute
have been finalized, following the current period of public comment.

To the best of my knowledge, to date Norway is the only other potential
exporting country to have taken steps to implement the WTO decision.  On
the same day that Parliament passed Bill C-9 in Canada, the Norwegian
government promulgated regulations providing a basis in Norwegian law for
compulsory licensing of pharmaceuticals for export, in accordance with the
WTO decision.

The full text of the EU proposal is available via:
http://europa.eu.int/comm/trade/issues/global/medecine/pr291004_en.htm
[English]
http://europa.eu.int/comm/trade/issues/global/medecine/pr291004_fr.htm
[fran=E7ais]


How does the EU proposal compare to the Canadian legislation?

In the process of drafting and enacting Bill C-9, Canadian civil society
organizations raised numerous concerns and engaged in sustained advocacy to
improve what was a seriously flawed bill. Those efforts led to some
significant improvements in the bill, although the final text retains
several deficiencies that should be remedied.  The Canadian HIV/AIDS Legal
Network, and other civil society groups, have stressed that the Canadian
legislation is an example that should be studied, both for its positive
features and to avoid replicating its remaining flaws when embarking on
similar initiatives in other countries.

So, how does the EU proposal, as currently drafted, compare to the Canadian
law?


(1)  Pharmaceutical products which may be subject to compulsory licence

Canadian civil society advocates have heavily criticized the Canadian
government for unnecessarily and unjustifiably limiting the scope of Bill
C-9 by including in the law a limited initial list of pharmaceutical
products for which a generic manufacturer may obtain a compulsory licence
to permit production and export.

Such an approach of limiting the diseases or medicines which developing
countries could import in generic form was emphatically rejected in WTO
negotiations that led to the decision that Bill C-9 was supposed to
implement. Canada's introduction of such a list is a demonstration of bad
faith in implementing a bitterly negotiated international consensus. The
inclusion of such a list opens the door for patent-holding pharmaceutical
companies to lobby against the addition of any further medicines or
products to the list.  Indeed, this has already happened, even before the
bill was passed by Parliament.  And the government itself has already
reneged on its repeated promises that the list would not be used to limit
the law to just medicines for HIV/AIDS, TB or malaria or just medicines on
the World Health Organization's Model List of Essential Medicines (on which
the Bill C-9 list is based), by voting against the addition of other
medicines (including ones used to treat people living with HIV/AIDS).

The EU proposal is far superior to the Canadian legislation on this
front.  It does not contain a limiting list. Rather, it contains an
open-ended definition of "pharmaceutical product".


(2)  Countries to which medicines may be exported

The EU proposal would only allow for export of generic pharmaceuticals,
produced under compulsory licence in an EU country, to countries that are
WTO Members.  This is less expansive than the Canadian legislation, which
will allow the export of medicines to a country that is not a WTO Member if
either

(a) it is recognized by the UN as a "least-developed country" (LDC), or

(b) it is a developing country that is eligible for "official development
assistance" according to a list maintained by the Organization for Economic
Cooperation & Development (OECD) that declares it is facing an "emergency
or other circumstance of extreme urgency". (This emergency requirement is
unjustified and unsound: it does not apply to developing countries who
belong to the WTO, so there is little reason that it should apply to
non-WTO countries.)

The EU regulation is deficient as long as it limits exports just to other
WTO Members.  It should be expanded to include all least-developed and
developing countries, whether they belong to the WTO or not.  And, unlike
the Canadian law, it should not re-assert the limitation that countries can
only import generic medicines in cases of "emergency". This restriction was
rightly criticized as unethical and as unsound public health policy during
the negotiations leading up to the WTO decision in August 2003 that these
measures are intended to implement.  Developing countries flatly rejected
such a limitation, and the final decision does not include any such
limitation.  There is no justification for re-introducing it now and
applying it to developing countries on the basis that they are not WTO memb=
ers.


(3)  Notification of parallel applications

The EU proposal requires that a generic pharmaceutical manufacturer must,
when applying for a compulsory license on a product in one EU country, also
provide information about any other applications regarding the same product
that it is submitting in any other EU country.  The stated rationale is
that this is "to avoid facilitating overproduction and possible diversion"
of generic medicines. This is a feature peculiar to the EU supra-national
structure. Quaere whether this is really necessary; the concern that it
ostensibly addresses is likely overstated, and it is more likely to be an
additional administrative inconvenience for generic producers.


(4)  No possibility of NGO procurement from generic producers

Under the EU proposal, the generic producer applying for a compulsory
licence has to submit evidence of a specific request for the pharmaceutical
product in question "from authorised representatives" of the importing
country, "indicating quantity of product required."  This likely means that
only governments of importing developing countries can purchase products
from generic manufacturers.  Non-governmental organizations (NGOs), such as
humanitarian organizations operating health care services and delivering
treatment cannot contract with generic producers in EU countries to obtain
needed products, unless those NGO are "authorised representatives" of the
government in question.

De facto, this is similar (although worse) than a limitation that
ultimately made its way into Canada's Bill C-9.  Civil society groups
argued to the Canadian government that cutting NGOs out in this way was
unnecessary, undesirable and unjustifiable.  They pointed out that NGOs are
already purchasing medicines, for use in their programs, from both
brand-name and generic manufacturers, so why would this avenue to obtaining
cheaper medicines for their patients be cut off?  They also stressed the
importance of non-governmental organizations maintaining their independence
from government; that they could not accept being "agents" of government,
as this would compromise not only their independence, but also their
effectiveness.  (It was also pointed out that clearly maintaining
independence from government was particularly important to some NGOs, whose
personnel could be at greater risk if they were perceived as government
agents).

Eventually, the Canadian government accepted this submission and amended
Bill C-9 accordingly.  Sadly, the government permitted a Liberal MP to
re-introduce a further amendment that re-imposed a condition that any NGO
wishing to purchase generic medicines produced under compulsory licence by
a Canadian manufacturer would need to get the "permission" of the
government of the importing country. This significantly weakened the Martin
government's own changes that had responded to NGOs concerns. Nonetheless,
they allowed it to stand in the final text of Bill C-9.

Unfortunately, the EU proposal's language of "authorized representatives"
seems to represent a similarly narrow approach.  The EU regulation could
definitely improve on the Canadian model, on this front, if it were to take
a more expansive approach and not limit contracts with generic producers
solely to governments or their "authorised" agents/representatives.


(5)  Requirement to first seek a voluntary licence from patent-holder

Under WTO rules, before a compulsory licence may be issued, first the
generic producer must attempt to negotiate a voluntary licence with the
patent-holder "on reasonable commercial terms and conditions".  If those
efforts do not succeed "within a reasonable period of time", then a
compulsory licence (ie, without the consent of the patent holder), and the
competent authority that issues the compulsory licence will fix the terms
and conditions (such as the amount of the "adequate remuneration" that must
be paid to the patent-holder).  These terms are not more precisely defined
in WTO rules, and it is up to individual WTO Members as to how they
implement this in their own laws.

Canada's Bill C-9 is reasonably good in its approach to implementing this
requirement.  It specifies that 30 days is the "reasonable period of time"
during which the generic producer must make efforts to obtain a voluntary
licence from the patent holder on reasonable terms.  After that time, the
Canadian Commissioner of Patents "shall" issue a compulsory licence if all
the other requirements of the law are met.  (It would, of course, be
desirable to shorten this period even further, eg, to 7 or 15 days, but
nonetheless 30 days is not bad.)

Canada's law is also positive in that it is expected to set out a formula
for calculating the royalty rate that needs to be paid in the event that a
Commissioner issues a compulsory licensing: it provides a sliding scale,
with the royalty rate directly tied to the ranking of the importing country
on the UN's "Human Development Index", which reflects such things as per
capita income. The overall effective cap is a maximum royalty of 4%; most
developing countries will pay considerably less than this.  By setting out
what is deemed "adequate remuneration" in the event of a compulsory
licence, the law de facto signals what is a "reasonable" rate that the
generic company and the patent-holding company should be able to agree to
in negotiating the terms of a voluntary licence during the 30 day
negotiation period.  (There may be better approaches than linking royalty
rates to the UN HDI, but it is certainly a reasonable approach that
correlates, at least in some rough way, the ability of a country to pay
with the royalty in question, and it provides certainty.)

By contrast, the EU regulation is dangerously vague on these points.  It
does not provide any guidance as to what is a "reasonable term and
condition" of a licence, nor as to what constitutes a "reasonable period of
time" for trying to negotiate a voluntary licence before the way is clear
to applying for a compulsory licence.  It simply repeats the undefined
terms from the original WTO agreement.

This kind of uncertainty constitutes a major disincentive to any generic
manufacturer.  It inspires little confidence that the generic
pharmaceutical industry would respond by spending time and money to use
such a system to obtain licences permitting them to export their products
to countries that will already provide far lower profit margins than
concentrating on high-income country markets.  On this front, the EU
regulation requires significant improvement.  (Perhaps national patent laws
of EU member countries can address this shortcoming by specifying the
negotiating period and royalties payable in the event of compulsory licensi=
ng.)


(6)  Opportunities for legal harassment of generic pharmaceutical producers

The Canadian law contains a provision allowing a patent-holder to claim
that a generic manufacturer's contract with a purchaser of pharmaceuticals
is too "commercial" in nature, because it exceeds certain price or profit
caps that are found in the law.  This provides an opportunity for vexatious
litigation against generic producers, as a further disincentive to using
this system.  (If, after court-supervised investigation, it is found that
the generic producer is charging too high a price or making too much
profit, the compulsory licence that was issued can be revoked.)
This provision is unnecessary and should be removed from the Canadian law.

The EU proposal does not contain such a provision; in this respect it is
better than the Canadian approach.  (Both the Canadian and EU measures
contain provisions for terminating a compulsory licence if its conditions
are not respected.)

However, the EU proposal does contain some explicit provisions for
"detention and disposal" of product "where there is reason to suspect" that
it is being re-imported into the European Community contrary to the terms
of a compulsory licence.  This term could be overly vague and broad,
inviting allegations of re-importation in order to create additional
inconvenience for generic producers.  How it is interpreted and applied
will determine whether it has such an effect.  Firmer, more defined grounds
for triggering such interventions would be preferable, to minimize the
potential for abuse.


(7) Regulatory review of generic product

Before a drug can be marketed in Canada, it must go through a review
process, governed by detailed regulations and policies, to assess its
safety, quality and efficacy.  Before Bill C-9, Canadian law did not
require that a drug manufactured for export be subject to the regulatory
review regulations and process administered by Health Canada's Therapeutic
Products Directorate.  However, Bill C-9 has imposed these requirements
specifically on any pharmaceutical product manufactured for export under
compulsory licence (and only on these products).  Generic producers
selling, in Canada, versions of existing products that have already been
approved for sale in Canada ("Canadian reference product") usually need
only go through an abbreviated review process demonstrating the equivalence
of their generic formulation to the already-approved brand-name product.

But in the case where there is no "reference product" approved in Canada,
insisting that a generic drug for export, manufactured under a Bill C-9
compulsory licence, go through the full regulatory process poses additional
challenges.  This is the case, for example, with numerous "fixed dose
combination" (FDC) ARVs for treating people living with HIV/AIDS that
combine multiple products in one pill, thereby facilitating adherence to
ARV regimens; these are among the "first-line" therapies recommended by the
WHO as part of its initiative to dramatically scale up access to treatment
in developing countries.  But few FDC ARVs have been approved for sale in
Canada, because they combine drugs which are patented by different,
competitor brand-name companies.

Overcoming this regulatory hurdle, in a way that adequately protects
patient safety while at the same time making the system work for some of
the most-needed pharmaceutical products, is a challenge that Health Canada
must now face in finalizing regulations to accompany Bill C-9 and ensuring
its policies and review practices are sufficiently flexible.

Unlike the Canadian approach, which absolutely mandates this kind of
regulatory review, the EU proposal provides that a generic producer "may"
avail itself of the "scientific opinion procedure" provided for under a
separate EC Regulation, "or any similar procedure provided under national
law" (of an EU country).  While the Canadian approach is mandatory, the EU
approach is permissive.


Conclusion

The proposed EU regulation is better than the Canadian legislation in that
it does not include a limited list of pharmaceutical products.  But the
proposed EU regulation is worse in that: (i) it does not recognize the
needs of non-WTO developing countries; and (ii) it provides no clear
definition of how long a generic manufacturer must attempt to negotiate a
voluntary licence before a compulsory licence may be issued, nor any
certainty about the royalties to be paid in the event of compulsory
licensing.  There is certainly considerable room to improve the EU
proposal, and to produce a regulation that is better than the Canadian
approach.  At the moment, they each have flaws that should be remedied.

Richard Elliott


Richard Elliott
Director, Legal Research & Policy / Directeur, politiques et recherche
juridique
Canadian HIV/AIDS Legal Network / R=E9seau juridique canadien VIH/sida
890 Yonge Street, Suite 700
Toronto, Canada  M4W 3P4
Tel : +1 (416) 595-1666
Fax +1 (416) 595-0094
E-mail: relliott@aidslaw.ca
Web: www.aidslaw.ca

The Canadian HIV/AIDS Legal Network is a partner organisation of the
AIDS Law Project of South Africa, and a non-governmental organization in
Special Consultative Status with the Economic and Social Council of the
United Nations. //
Le R=E9seau juridique canadien VIH/sida est un organisme partenaire  du AID=
S
Law Project
de l'Afrique du Sud et ONG dot=E9 de statut consultatif sp=E9cial aupr=E8s =
du
Conseil =E9conomique
et social des Nations Unies.
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