[Ip-health] E.U. Demands on Thailand are based on Lies and Misrepresentations

[B.Baker@neu.edu]

E.U. Demands on Thailand are Based on Lies and Misrepresentations
Brook K. Baker, Health GAP
Aug. 14, 2007

The July 10th letter sent by Mandelson (EC) to the Thai government
concerning compulsory licenses is surely troubling, but mainly because it
purposefully misinterprets and exaggerates Thailand's stated position
concerning drug pricing and compulsory licenses.  The letter from Mandelson
misrepresents Thailand's position as follows:  "Your Government has ...
stated that if drug companies want to do business in Thailand they should
offer their drugs at no more than 5% above the generic cost."  The letter
continues:  "Neither the TRIPS Agreement or the Doha Declaration appear to
justify a systematic policy of applying compulsory licenses whereever
medicines exceed certain prices."

Thailand has demanded generic-price-plus-5% for only three medicines, those
for which it has issued compulsory licenses after collapse of protracted
price negotiations.  In essence, the Thai government has offered the drug
companies involved, Sanofi-Aventis, Abbott, and Merck, the option of
pricing themselves out of full prosecution of the issued compulsory
licenses by competing on price plus a 5% premium - equivalent to a very
generous royalty under a compulsory license.  If the patent holder has the
same economies of production as the generic competitor, it should be able
to meet the generic price, which itself has a built in profit margin.  Only
if the patent holder does not want to meet that price will Thailand
purchase its total needs from generic producers, who thereafter will pay a
percentage royalty to the patent-holder, all in full compliance with Thai
law and the TRIPS Agreement.

However, the EU suggests that the 5% premium is a new price control ceiling
for all patented medicines - a clear misrepresentation of Thailand's stated
intentions which is to consider compulsory licenses only for a very narrow
range of patented medicines.  Likewise, The EU misrepresents the three
licenses as somehow representing a "systematic policy of applying
compulsory licenses whereever medicines exceed certain prices."  Although
such a policy might indeed be legal, it is not the policy advanced by
Thailand, which instead has decided a restrained policy of selective
compulsory licenses on key monopoly-priced medicines.

The EU also makes a special point of singling out Sanofi-Aventis's Plavix
as a special case needing remediation, presumably because Thailand went off
the AIDS-only reservation and lawfully issued a compulsory license on
another grotesquely overpriced, but important blood-thinning medicine.  The
U.S. and the E.U. tried unsuccessfully during the post-Doha, Paragraph 6
negotiations to limit the issuance of compulsory licenses to an incomplete
list of infectious diseases only, and was fortunately beaten back in that
effort.  Perhaps Mr. Mandelson would care to explain in his next letter why
a Thai citizen should have to die of heart disease, or of hypertension,
diabetes, or cancer, for lack of access to affordable life-saving
medicines.  Report after report, with which the E.U. is quite familiar, has
chronicled the rise of chronic disease in developing countries.  And report
after report, even in Europe, laments the steady rise in the price of
pharmaceuticals, which results in multiple efforts to control drug prices
in Europe and elsewhere.

Finally, the letter suggests that Thailand should confirm its willingness
to negotiate with patent holders.  To the contrary, many would argue that
Thailand has gone overboard in trying to negotiate with the drug holders.
In the first instance, Thailand has no legal obligation to negotiate with
patent holders when issuing licenses for public, non-commercial use, the
stated grounds of the three licenses.  Furthermore, despite not needing to
do so, it negotiated nearly two years for lower drug prices.  Finally, it
continues to negotiate to this day with three drug companies.  There must
be 50 news stories about these negotiations and yet Mr. Mandelson has the
nerve to ask for further "assurances."

We can be assured that what Mandelson really wants is for Thailand to give
in and to yield to the drug companies' demands - higher prices and total
revocation of the licenses.  In this regard, it is deeply problematic that
the E.U. has not seen fit to condemn Abbott for withdrawing registration
application for seven products, including heat-stable Kaletra, an
absolutely essential medicine in Thailand's battle against the AIDS
pandemic.

The E.U. often likes to stay on the sidelines and let the U.S. do its dirty
work on intellectual property rights.  It pretends that it is more moderate
and that it helps to mediate between hyperbolic U.S. demands and developing
countries.  However, every TRIPS-plus measure that U.S. extracts in trade
negotiation inure to the benefit of E.U. companies and countries because of
the most favored nations principle in TRIPS.   Now, the E.U. has stepped
out from behind the curtain of moderation to add its weight to that of the
U.S., which has already placed Thailand on its Special 301 Priority Watch
List and withdrawn GSP trade preferences on three categories of products.

As the U.S. and E.U. mount their attacks on Thailand,  they necessarily
resort to lies and misrepresentations - about the TRIPS Agreement, about
the Doha Declaration, and about Thailand's actual policy.  Mr. Mandelson is
not stupid - he can read the TRIPS Agreement.  But instead of honestly
arguing his one plausible point - that middle-income countries like
Thailand should contribute somehow to future costs of innovation, he
prevaricates and issues veiled threats.  Thankfully, Thai leaders in the
Department of Health have stood firm against the $650 billion-a-year drug
industry and U.S. pressure, and now will do the same against the E.U.
specious arguments.

Professor Brook K. Baker, Health GAP
Northeastern U. School of Law
Program on Human Rights and the Global Economy
400 Huntington Ave.
Boston, MA 02115
617-373-3217 (office)
617-259-0760 (cell)