[Ip-health] TWN INFO: Developing countries attack Dutch seizure of generic medicines

[Sangeeta]

Trade: Developing countries attack Dutch seizure of generic medicines
Published in SUNS #6633 dated 5 February 2009

Geneva, 4 Feb (Sangeeta Shashikant) -- Developing countries at the WTO
General Council on 3 February launched a scathing attack on the action by
the Dutch government in seizing a cargo of generic medicines in transit in
Rotterdam (en route from India to Brazil) for alleged patent infringement.

The seizure of 500 kilos of Losartan Potassium, an active pharmaceutical
ingredient (API) used in the production of medicines for arterial
hypertension (a common and serious disease that often leads to death), was
instigated by an administrative request lodged by the corporation which
holds the patent of the API in Holland. The API is not patented in either
India or Brazil.

The Dutch action was taken in line with procedures set out in the EC Council
Regulation 1383 of 22 July 2003 which empowers the EU member states' customs
authorities to detain goods in transit on suspicion of an infringement of
intellectual property rights.

This case is the latest in a recent spate of seizures of several
consignments of generic drugs of Indian companies by the Dutch customs
authorities on the ground of alleged IP violations.

The strong criticisms at the WTO's General Council were made by Brazil and
India, countries most affected by the Dutch seizure, and supported by more
than 15 other developing countries. They fear that the Dutch action is an
example of increasing attempts to put in place measures that go beyond the
TRIPS Agreement and that result in extraterritorial enforcement of IP
rights.

According to a diplomat, the EC response to the criticisms at the WTO was
"defensive in an offensive way". The EC said that it was ready to engage
bilaterally on the issue but also spoke of the need to enter into a
"non-emotional" debate about it. The EC also said, jokingly, that if you get
emotional, we have a non-generic medicine to treat that.

The heated discussion at the WTO's General Council follows an equally
controversial session at the World Health Organization's Executive Board
meeting last month wherein developing countries strongly criticized the WHO
Secretariat for its report and draft resolution on "Counterfeit Medical
Products".

The developing countries objected to the WHO's approach of attempting to
deal with the quality and safety of medicines under the rubric of
"Counterfeits" at the WHO's Executive Board meeting on 19-27 January. They
feared that the real effect of the WHO documents would be to undermine the
production and trade of good quality generic medicines, and consequently
access to generic medicines.

The attempt by developed countries to make use of international agencies,
standards and agreements to mandate the use of national customs, health,
police, postal and other government agencies to enforce the rights of IP
holders has become a controversial subject. This is especially since the
effect may be to adversely affect the public's access to medicines as the
actions proposed for IP enforcement is intended to protect the interests of
multinational companies holding the patents while endangering the viability
of generic drug producers.

The developed countries have been attempting to use various international
forums such as the World Customs Organisation, World Health Organisation,
the Universal Postal Union and WIPO to further their IP maximalist agenda.

On 3 February, the controversy surrounding this issue finally erupted at the
WTO, the home of the TRIPS Agreement.

The incident that sparked off the outrage felt on this issue was the seizing
by Dutch customs authority on 4 December 2008 of a cargo of 500 kilos of
Losartan Potassium in transit in Rotterdam, en route from India to Brazil.
Losartan Potassium, an active pharmaceutical ingredient, is used in the
production of medicines for arterial hypertension. The substance was being
exported by the Indian company Dr. Reddy's and imported by the Brazilian
company EMS.

The cargo was detained on request of a company which allegedly holds the
patent of Losartan Potassium in the Netherlands pursuant to procedures set
out in the EC Council Regulation 1383, of 22 July 2003, wherein the EU
customs are empowered to detain goods in transit on suspicion of an
infringement of IPR.

Losartan is not patented in Brazil or in India. According to news reports,
it is patented in the Netherlands by DuPont, while US-based company Merck
and Co. holds the marketing rights.

According to reports, the cargo was held back by the Dutch authorities for
36 days after which it was released to return to India.

As a result of the Dutch authorities' actions, the medicines critically
required by patients with hypertension (a common, serious disease that often
leads to death) never reached Brazil.

This case is the latest in a recent spate of seizures of several
consignments of generic drugs of Indian companies on the grounds of alleged
IP violations.

Brazil and India have protested against the seizures at the WHO Executive
Board meeting as well as at the recent World Economic Forum in Davos.

During the General Council meeting, the ambassadors of Brazil and India
called on the EC to urgently review the relevant regulations and the actions
of the EU's national authorities based on such regulations and to bring them
in conformity with the letter and spirit of the TRIPS Agreement and the WTO
system. Their call was strongly echoed by many other developing countries.

Brazil's Ambassador, Roberto Carvalho de Azevedo, said that the measure
taken by the Dutch authorities clearly violates the freedom of transit,
which is a right enshrined in GATT Article V, wherein only very exceptional
circumstances warrant restrictions on that freedom. He added that Brazil was
not aware of any such circumstance in the Losartan case.

He said that the decision to impede the transit of a cargo of generic
medicines, which was not headed for the Dutch market, was "unacceptable" and
"sets a dangerous precedent", adding that "whether or not the medicines were
generic under the law of the country of transit is an irrelevant question".

The concept of generic must not be mistaken with counterfeit or pirated and
that generic medicines are not substandard or illegal, said Brazil. The
Dutch customs authorities' decision to block transit impeded Brazilian
hypertension patients' access to safe and price-competitive generic
medicines, and hypertension is a common, serious disease that often leads to
death.

Brazil also expressed grave concern with the setting of a precedent for
extraterritorial enforcement of IP rights, adding that such attempts have
"critical systemic implications" and "affront fundamental canons of the
multilateral trade system, in particular the well-established principle of
territoriality", a fundamental pillar of the international IP regime.

It further said that extraterritorial enforcement of patent rights cannot be
reconciled with the terms of the Doha Declaration on TRIPS and Public
Health. The protection of public health and the promotion of the public
interest are still part of TRIPS fundamental principles.

The undue interference of Dutch authorities with the transit of the generic
medicines may have other serious systemic consequences, particularly that it
could undermine countries' ability to address public health needs by
cross-licensing arrangements, Brazil added. In this regard, it referred to
the "Paragraph 6 system" (i. e. the 30th August Decision 2003/Article 31bis
of TRIPS) which permits a Member without manufacturing capacity to import
medicines from other Members under a compulsory cross-licensing arrangement.

Brazil asked: "What would happen to the Doha Declaration on TRIPS and Public
Health and, in particular, to the "paragraph 6 system if the denial of
transit to generic medicines becomes a systematic and widespread practice
and if countries commence to create impediments to the legitimate trade of
generic medicines based on the wrongful allegation that it violates national
patent rights? In such cases, trade in generic medicines would be rendered
virtually impossible."

Brazil stressed that the IP protection cannot supersede protection of life
and the right to promote public health, which are more fundamental values.

Brazil also highlighted that application of enforcement procedures to goods
in transit is being advocated in the World Customs Organization and in the
World Health Organization. It added that in WCO, some countries were pushing
for the adoption of standards that would give customs the authority to seize
goods in transit suspected of infringing IP rights. Similarly, in the World
Health Organization, the International Medical Products Anti-Counterfeit
Task Force (IMPACT) initiative claims that national legislation should
provide for enforcement procedures over goods in transit, it said.

Brazil cautioned that "neither the WCO nor the WHO are adequate fora for
discussing IP rights enforcement", adding that in WHO, the focus should be
on the quality, safety and efficacy of medicines, as well as on the issues
of access, while the WCO should concentrate on developing methodologies to
enhancing customs' performance, rather than venturing into TRIPS-plus
norm-setting.

Brazil stressed that interfering with the freedom of transit for the sake of
enforcing IP rights violated trade disciplines negotiated by WTO Members. IP
rights can and should be enforced in a Member's own market and such
enforcement, however, cannot reach goods that are not intended for that
market.

Brazil called on the Netherlands and/or the European Communities to clarify
the circumstances and legal basis for Dutch authorities' decisions and
stressed that the Netherlands and the EC should bring their legislation into
conformity with multilateral trade disciplines.

India's Ambassador Ujal Singh Bhatia recalled not only the seizure of
Losartan Potassium but also other Indian shipments by the Dutch customs on
grounds of alleged IP violations, adding that such instances cause great
concern due to their systemic and far-reaching implications. He said that
such acts represent a distorted use of the international IP system and
circumscribe the flexibilities in the TRIPS Agreement.

India also stressed that the "WTO rule-based system provides for freedom of
transit by the most economical and convenient routes and without unnecessary
delays and restrictions", and that the acts of the Dutch authorities are
therefore, "a denial of the rule-based system".

It further added that the concept of "territoriality" is a key stone in the
edifice of the TRIPS Agreement and that there are no indications that the
drug consignment was meant for the markets of the EC. Thus, the seizure and
initiating procedures for destruction of such consignments violates this key
principle.

India stressed that WTO Members have strived for a balance between public
health concerns and protection and enforcement of IPRs, and that the Public
Health decisions are a valuable part of the WTO acquis and need to be
adhered to in letter and spirit.

Ambassador Bhatia added that it was ironical that while on one hand, the WTO
has taken steps to promote access to affordable medicines and remove
obstacles to the proper use of TRIPS flexibilities, on the other hand, some
Members seek to negate the same by seizing drug consignments in transit.

He emphasized the importance of generic drugs, adding that their
essentiality may vary in inverse proportion to the level of development of a
country. Barriers to legitimate trade of generic drugs will seriously impair
the efforts of organizations like Medecins Sans Frontieres (MSF), Clinton
Foundation, Bill and Melinda Gates Foundation and a whole lot of other
organizations engaged in providing medicines and improving public health in
the least developed parts of the world.

He also drew attention to the emerging trend of efforts "to implement the
protection and enforcement of IPRs in a maximalist manner and thereby upset
the delicate balance between rights of IPR holders and the public policy
objectives under the TRIPS Agreement".

India said that a coordinated approach is being witnessed in several
international fora like the World Customs Organisation, World Health
Organisation, Universal Postal Organisation etc. to promote the IP
maximalist agenda and noted with dismay the efforts by some Members to link
safe and efficacious but low cost generics with counterfeit medicines, which
is essentially an IPR issue.

"There is an attempt to enlarge the definition of counterfeits beyond its
definition in the TRIPS Agreement, to set maximalist enforcement norms, and
to include TRIPS plus provisions in RTAs," said India.

It added that these are "subtle and concerted ways of circumscribing the
flexibilities of the TRIPS Agreement", and that they not only "run counter
to the spirit of the TRIPS Agreement which is a minimum standards agreement
but is counter to the understanding given to developing countries when the
TRIPS Agreement was being negotiated".

India cautioned that "Efforts to enshrine new, maximalist TRIPS plus
provisions in other forums will seriously undermine the delicate balance in
the TRIPS Agreement and raise systemic issues".

It called on the EC to "urgently review the relevant regulations and the
actions of the national authorities based on such regulations, and bring
them in conformity with the letter and spirit of the TRIPS Agreement and the
rules based WTO system".

Many other developing countries spoke at the General Council in support of
Brazil and India.

Nigeria registered its "expectation that the balance between public health
concerns and enforcement of IP rights should be respected" and that the
"importance of generic drugs for countries that have no capacity to
manufacture pharmaceutical products cannot be over-emphasized".

It urged countries "to ensure that the enforcement of IP rights is not used
to impede legitimate trade" and specifically "to avoid taking measures that
would adversely affect the freedom of transit by the most convenient and
economical routes". It also encouraged the Netherlands and/or the EC to
clarify the circumstances and legal basis of this case.

Pakistan stressed that recent "IP maximalist" attempts and "forum shopping"
have triggered a dangerous trend that could undo most of what WTO members
have gained so far. It called particular attention to the application of
extraterritoriality of IPRs, which it said was alarming for developing
countries which are producing mostly the generic drugs.

It added that the action was against the spirit of the Doha Declaration on
TRIPS and public health and called on members to respect TRIPS provisions
and maintain a fair system devised through multilateral negotiations rather
than defining their own standards and applying them at the cost of other
members.

According IP Watch (3 February 2009), the EU Ambassador Eckart Guth
responded that the Dutch seizure is allowed by the TRIPS agreement and is
based on provisions in EU customs law that allow the customs authorities to
temporarily detain any goods if they suspect that these goods infringe an
intellectual property right. As soon as the goods were eventually determined
not to be headed for the EU market, they were returned to the owner.

Guth said it would have been preferable for Brazil and India first to raise
the issue bilaterally in order to clarify facts "before triggering a highly
emotional debate." Guth also referred to TRIPS Article 51, which allows
customs authorities to suspend the release of goods, and he said that under
EU law, companies whose goods are wrongly detained are eligible for
reimbursement.

"Let me make it very clear that the EU has absolutely no intention to hamper
any legitimate trade in generic medicines or to create legal barriers to
prevent movement of drugs to developing countries, nor have our measures had
this effect," Guth said. "We are absolutely committed to all the efforts
that are being made to facilitate access to medicines."

In addition to Brazil and India, those voicing their concerns about how the
customs authorities' actions could hamper access to medicines were
Argentina, Bolivia, Burkina Faso, China, Costa Rica, Cuba, Ecuador, Egypt,
Indonesia, Israel, Nigeria, Pakistan, Paraguay, Peru, South Africa, Thailand
and Venezuela.

Some sources say that there is another unsavoury twist to the story. They
say that there was a possibility that the IP holders in the Netherlands
forced the Indian company to agree to return the goods to India (rather than
to send them on to Brazil) on the ground that they would otherwise be
destroyed in the Netherlands. +