[Pharm-policy] November 6 meeting of the EU Issue Group on Health
James Love
love@cptech.org
Fri, 17 Nov 2000 11:05:32 -0500
Notes from the November 6, 2000 meeting of the
EU Issue Group on Health
v 1.2
James Love
love@cptech.org
I attended the November 6, 2000 EU "Issue Group: Health"
organized by DG Trade, on behalf of Health Action International
(HAI-Europe). There were staff from several EU Directorates
present, including those working on trade, development,
competition, industry, intellectual property and R&D. The
industry was represented by EFPIA (UNICE), Glaxo, Merck and BMS,
and I think some others. There were several NGOs present,
including MSF, HAI/CPT (represented by me), WEMOS, Paris Act-Up,
AIM (Association Internationale de la Mutualite), Deusche
Kommission Justitia et Pax (German Commission for Justice and
Peace) plus several others. The WHO was represented by Marthe
Everard. I had asked to make a presentation, and prepared a
handout, but there were no formal presentations.
The meeting addressed a number of different topics.
1. Differential pricing and parallel imports
In the morning much time was spent discussing issues relating to
differential pricing, parallel imports and methods of preventing
drugs sold on concessionary terms from entering markets in the
wealthy countries.
DG Trade described a number of things that might be done to limit
parallel imports, including the use of contracts and changes in
trade agreements that would eliminate international exhaustion of
patents. DG competition provided some comments regarding the
issue of whether or not the use of contracts to limit parallel
imports would be legal, from a competition point of view, and the
answer seemed to be, maybe yes, maybe no, depending upon the
facts.
NGOs generally supported the position that while they agreed that
Europe, the United States and other wealthy countries should
limit parallel imports from the poor countries, they did not
support a general attack on Article 6 of the TRIPS (international
exhaustion). Also, CPT/HAI asked DG Trade and the industry to
respond to the issue of cross-licensing of patents, as one
mechanisms to avoid parallel imports of drugs sold at
concessionary prices. Specifically, we asked, why can't Glaxo,
BMS, Pfsizer or other firms license a low priced product to
another company, or even the WHO/UNAIDS or an NGO, to be sold
under a different label, and would that not completely solve the
parallel import issue, if the company if fact was concerned about
parallel imports?
Black and grey markets
In the September 13, 2000 meeting, the big pharma industry had
indicated that, wholly apart from legal imports, the companies
were concerned about illegal smuggling of cheap drugs into US and
EU markets, from Africa. At this meeting, I asked if there was
*any* empirical evidence that this was a problem now, given the
big differences between prices in the EU and USA and developing
countries for many drugs. If the industry had any such data,
they were not about to provide it, then or at a later date.
However, Marthe Everard from WHO said that counterfeit drugs were
a fairly large market, including, she said, very high quality
counterfeit products, that were difficult to distinguish between
the real things. In some cases, tests had to look for impurities
in the non-active ingredients, and that these counterfeit
products were in the European market now. There was also an
extended discussion of what constituted "black market" and "grey
market" products, including such items as:
1. counterfeit products, of high quality
2. counterfeit products, of poor quality
3. products sold legally in one market, where patents did
not exist, and smuggled into a country.
4. products sold legally in one market, by a patent owner,
but sold legally or illegally (depending upon national
laws), in a different country, without the permission
of the patent owner.
To make things more confusing, in some countries, the term
"counterfeit" is used both for unauthorized copies of products
that masquerade as the real thing, *and* products that infringe
on patents.
The NGOs and industry were asked about various non-patent
barriers to parallel imports, including labeling, differential
presentations, and trademarks. It was my opinion, shared I
believe by industry, that these were often used, as were
regulatory barriers, against parallel imports, often to stop
parallel trade completely. However, from a trade perspective,
countries that wanted to permit parallel imports could authorize
ways around each of these barriers.
DG trade did not have much of a discussion of the benefits of
parallel trade, in terms of making markets more competitive, and
helping smaller markets benefit from more competitive foreign
markets, which was odd, given the fact that parallel imports are
often described by NGOs and patient groups (including ours) as a
possible mechanism to increase access to drugs, looking
particularly at the huge price differences between countries
within income groups, inefficient distribution sectors, and the
ample evidence, collected by HAI, MSF and others, that the poor
often pay more, and indeed, for some products, can save large
sums by purchasing in the US or EU markets, when products are
subject to competition.
At the very end of this discussion, Mr. Vandoren mentioned that
the WTO/WIPO and WHO would be holding discussion on the parallel
trade issue. Although not discussed much in this meeting, it is
known that some persons in WIPO and WTO, and certainly in the
pharmaceutical industry, are seeking changes in the TRIPS to
eliminate or modify Article 6, concerning international
exhaustion, seeing the differential pricing of AIDS drug issue as
an opportunity to change the global trading rules.
2. R&D on neglected diseases.
The next topic concerned R&D on neglected diseases. There was
considerable talk about public private partnerships (PPPs), which
seemed to be pushed by DG Research, with what seemed to be a
proposal that the EU create to support a effort to push for
development (the D in R&D) of drugs for tropical illnesses, and
that this would be a big topic in the next G8 meeting. The NGOs
raised questions about the PPPs, and the suggestion was made that
the EU support the development of guidelines on transparency and
public accountability for PPPs, and address more explicitly
concerns regarding the sharing of IPR from publicly funded R&D.
DG Research did not seem enthusiastic about this proposal,
indicated it was not interested in soliciting comments about PPP
accountability or technology transfer issues, but did claim that
the EU would avoid making mistakes.
There was discussion of the recent controversy in Kenya over who
would be named in the patents on a possible AIDS vaccine, and
also on the South African patent that would give the South
African's access to a vaccine at cost plus 10 percent. NGOs
pushed for technology transfer policies that benefit the funders
and the poor.
During this period, the EFPIA brought up the letter from Dr.
Varmus (former US NIH Director) to Ralph Nader (actually, to
Ralph, Rob Weissman and myself), rejecting our request that the
US government give the WHO or UNAIDS the right to use US
government rights in patents on d4T, ddI, ddC, 3TC, Ziagen, Novir
and other products, in poor countries. This was one of several
meeting that I had attended where big Pharma brought up this
letter (written by Maria Freire, as was a nearly identical
version send by Secretary Shalala to Representative Jane
Schakowsky) and it is apparently one of their talking points.
I did mention that on the issue of reasonable pricing of US
government funded inventions, the Congress (the US House of
Representatives) had recently voted to overturn the
Clinton/Gore/NIH decision to eliminate reasonable pricing
provisions on US government funded R&D. Returning from Brussels,
I checked on this further, and it appears as though the bill has
yet to receive final approval, and the industry seems to have
gotten he US Senate to oppose the House language, but the issue
will continue to be before the US Congress and the new
administration, particularly as NGOs focus on the BMS price
gouging associated with the Yale d4T patent.
According to EU officials, the US style orphan drug act, soon to
be implemented in modified form in the EU, did not seem like a
useful model for funding drugs for tropical diseases. There was
a discussion of the Sachs/Kremer purchase fund proposal, and
concerns expressed about the costs and IPR issues with the
proposal. Of the record, some EU officials described the
purchase fund proposal as "a conversation between Merck and
Harvard," and expressed frustration that the proposal had out
there for a while, but still lacks basic details.
I mentioned the recent MSF meeting on Drugs for Neglected
Diseases, and the proposals for a global agreement on funding R&D
for neglected diseases, details of which were included in my
handout.
3. Quality and safety of generic products.
I don't recall much of specific utility that came out of this
discussion. It wasn't helpful that the generics industry did not
attend the meeting.
4. Incentives to exporters/donors in developed and developing
countries.
Not much was done on this topic, except that there were NGO
concerns about the cost of various industry incentive programs,
relative to benefits, and we expressed interest in (a) more
transparency, and (b) more critical cost benefit analysis, to see
if the various forms of market exclusivity, patent extensions,
tax credits, enhanced donations deductions, and other subsidies
make sense from an economic point of view. I believe some
mention was made of the MSF work on donations, for which a paper
should be available soon.
5. Intellectual property Rights.
Much of the afternoon session was devoted to discussions of
intellectual property rights, and in particular, Articles 30, 31
and 39 of the TRIPS, as well as articles 41 and 44. The
presentation from DG Trade was made by Jean Charles
Van-Eeckhaute, and he addressed in some detail the issues raised
in the September 26, 2000 NGO letter (signed by EPHA, HAI, CPT,
Oxfam, WEMOS and Paris Act-Up), regarding issues of production
for export and the problems regarding data exclusivity and
compulsory licensing. The inital presentation by Mr. Van-
Eeckhaute on Article 31 of the TRIPS regarding product for export
appeared to be a rather onesided and misleading argument that
there was little room Article 31 for exports, relying mostly upon
the Article 31.f restrictions:
31 (f) any such use shall be authorized predominantly for
the supply of the domestic market of the Member authorizing
such use;
The NGO letter and the discussions in the meeting emphasized in
some detail the importance of exports for compulsory licensing,
particularly for the future, when India and other generic
producers would be subject to product patents other TRIPS
conditions. It was widely discussed how important were economies
of scale, how few countries had an technologically advanced
domestic industry (particularly in terms to manufacturing raw
materials) and how unrealistic it was for every country to make
every drug it needed, even with compulsory licenses, and that
unless poor countries could import products under a compulsory
license, many countries would never be able to make effective use
of Article 31.
Van-Eeckhaute explored the export issue in much greater detail,
focusing next on the issue of the use of Article 31.k, the
provision that waives provisions in 31.b (regarding prior
negotiations) and 31.f (restriction on exports), under certain
circumstances. Article 31.k reads:
31(k) Members are not obliged to apply the conditions set
forth in subparagraphs (b) and (f) where such use is
permitted to remedy a practice determined after judicial or
administrative process to be anti-competitive. The need to
correct anti-competitive practices may be taken into account
in determining the amount of remuneration in such cases.
Competent authorities shall have the authority to refuse
termination of authorization if and when the conditions
which led to such authorization are likely to recur;
Mr. Van-Eeckhaute began by stating Article 31.k would be quite
restrictive in practice, and could only be used by competition
authorities in each country. This was immediately challenged by
the NGOs, and Mr. Van-Eeckhaute was asked to identify the actual
language in Article 31.k that would restrict its use to
competition authorities. I pointed out that in the USA, many
agencies had responsibility for addressing competition issues.
For example, mergers are reviewed by the US Department of
Justice, but also by the US Federal Trade Commission, and in area
of competence by other authorities, by other federal agencies,
such as, for example, the US Federal Communications Commission
(FCC), or even banking authorities, airline regulators, or other
federal agencies. Why couldn't a public health agency make such
a determination? There was also an extensive discussion about
what type of procedure would be required. Article 31.k referred
to "a practice determined after judicial or administrative
process to be anti-competitive," plainly giving countries the
options of using purely administrative process. Mr. Van-
Eeckhaute first suggested the TRIPS language was was quite
restrictive, and that the term "administrative process" meant a
very higher barrier. But after this was discussed at length, he
seemed to agree that many different approaches would satisfy the
TRIPS, so long as the provided basic standards of fairness, and
gave a patent owner the opportunity to present evidence and be
adequately represented. Indeed, Mr. Eeckhaute conceeded
specifically that such a determination could be made by public
health authorities. This was an important concession, because
the EU seem to acknowledge that public health authorities could
make a determination that the existence of market power could
justify not only domestic consumption, but also production for
export.
Far more complex was Mr. Eeckhaute's discussion of a possible use
of Article 30 of the TRIPS to authorize production for export
markets. In the September 26, 2000 NGO letter, we had pushed
hard for EU support for this, which would be subject to challenge
under WTO dispute resolution procedures. Mr. Eeckhaute focused
mostly on one specific scenario, where a country would authorize
a patent exception under Article 30 for production to a different
market, where a compulsory license had been issued. He expressed
concern that this might run afoul of the TRIPS for a the reason
that Articles 30 and 31 are mutually exclusive, and that a
dispute resolution panel might see a policy of tying the Article
30 exception (an exception to the patent rights in Article 28) to
the export having an Article 31 license in the country of
destination, as breaking this mutually exclusive requirement. He
also often referred to the issue of whether or not a country
could issue a compulsory license to a patent in a different
country, an issue that I didn't understand that well. Mr
Eeckhaute's presentation seemed at best to be one possible
interpretation of the TRIPS. Another that is that each country,
acting on its own, would only use Article 30 or Article 31,
depending upon whether or not it was importing or exporting. We
asked the EU to raise this issue in the TRIPS council, in the
context of this being a very important issue for insuring that
countries could obtain low cost medicines, from efficient
producers. The EU was unwilling to make such a commitment, and
indeed, had opposed this proposal in its September communication
to TACD. This is an area where the NGOs will continue to press.
We make it clear that we consider it morally repugnant to oppose
this use of Article 30, since it would have the practical effect
of severely limiting the usefulness of compulsory licensing in
any but a handful of countries that could justify or realistic
expect local production. Also, by limiting exports, the EU was
taking a position that would severely limit benefits from
economies of scale, and issue that could later hurt EU consumers,
since these restrictions would also restrict cross border trade
in the EU, because the WTO does not creation distinctions for
trade unions.
Interestingly, Mr. Eeckhaute raised an issue concerning transport
of a product from one market to another. He suggested that even
if two countries agree to produce, export and import a product,
there might be a problem in transport, with the good being seized
when going through customs in a third country. Moreover, MSF
mentioned after the meeting that the EU had recently changed its
own customs rules, making it more difficult to store
pharmaceuticals in Europe, for example, that are being purchased
for the African market, where the products would be off patent.
Also, it appears as though the big pharma companies are working
on this issue in various trade agreements, in discussions that we
have been unable to follow.
We were pushing very hard for fast track, administrative
simplified procedures for compulsory licensing, in developing
countries. At one point Ms Hvid, now officially representing the
EFPIA, having recently left DG Trade, brought up Article 41 of
the TRIPS, which provides a general obligation to provide for
judicial review of administrative decisions. However, we pointed
out that Article 44, regarding injunctions, permits governments
to limit remedies to payment of compensation, in cases involving
government use or compulsory licensing. The relevant provision
in Article 44 of the TRIPS reads:
44.2. Notwithstanding the other provisions of this Part and
provided that the provisions of Part II specifically
addressing use by governments, or by third parties
authorized by a government, without the authorization of the
right holder are complied with, Members may limit the
remedies available against such use to payment of
remuneration in accordance with subparagraph (h) of Article
31. In other cases, the remedies under this Part shall apply
or, where these remedies are inconsistent with a Member's
law, declaratory judgments and adequate compensation shall
be available.
We told DG Trade that it was astonishing that no African country
had issued any compulsory licenses for any pharmaceutical
patents, despite the horriffic crisis in terms of access to
medicines, and that we believed that these countries did not have
the capacity to engage in endless litigation with the drug
companies, and that what was needed are fast track simplified
administrative procedures for compulsory licensing. The US model
for government use (no requirement for negotiation, no need even
for a license, no injunctive relief for patent owners, and a
limit of remedies to payment of compensation) was considered a
good model for Africa, at least for public-non commercial use.
Article 39
The discussion of Article 39 of the TRIPS was extensive, highly
technical and serious. DG Trade and DG Industry had clearly
prepared for the meeting, and presented a often tortured argument
for data exclusivity requirements. In the previous meeting as
well as the September 26, 2000 NGO letter, we had made it clear
that we consider this issue very important, because regulatory
barriers could frustrate efforts for compulsory licensing, unless
there are provisions for cost sharing (a form of compulsory
licensing) or exceptions. Often Mr. Eeckhaute and his colleague
from DG industry seemed to be arguing that Article 39 should be
implemented more broadly than the actual language of the
agreement would suggest. However, on the critical issue of
whether or not a country could rely upon a foreign government's
marketing approval as evidence that a drug is safe and effective,
without providing any data exclusivity to data collected by the
foreign government, the EU staff could not find anything in
Article 39 that would specifically prohibit this approach.
With respect to the unfair competition issue for test data, the
EU staff asked what where the alternatives to a fixed term of
data exclusivity. We said, a cost sharing approach, where the
company would (a) disclose what its costs actually were, and (b)
receive some pro-rata share of those costs (even adjusted for
risk) from its competitors. We will be sending a proposal to the
EU on this.
The title of Article 39 is "Protection of Undisclosed
Information" and appears to be written to protect data that is
collected by the government from the company. Quite a bit of
time was spent on paragraph 3, which reads:
3. Members, when requiring, as a condition of approving
the marketing of pharmaceutical or of agricultural chemical
products which utilize new chemical entities, the submission
of undisclosed test or other data, the origination of which
involves a considerable effort, shall protect such data
against unfair commercial use. In addition, Members shall
protect such data against disclosure, except where necessary
to protect the public, or unless steps are taken to ensure
that the data are protected against unfair commercial use.
It is interesting to note that the US and EU provisions on test
data are not across the board, and apply only in limited
situations, for example for new chemical entities, and 2nd uses
in some countries are covered, in some countries not, and in
others, covered in a different way, and the EU seemed to be
conceding that the were interested in TRIPS plus protection of
test data, because the TRIPS provisions did seem mostly above
undisclosed data. There was some discussion of what is
"disclosed" by a reliance upon foreign regulatory actions, or
academic papers, which have been published. The fact that we got
into the details was useful, in my opinion.
One very interesting discussion was the back and forth between
Mr. Eeckhaute and Mr. Khalil Elouardighi from Paris Act Up.
Khalil kept asking the EU official, "what about public non-
commercial use? Is that different?" Mr. Eeckhaute began saying
that it was the same, but Khalil kept pressing, and asking, "is
'commercial use' the same as 'use', or does it mean something
different?" Khalil seemed to have the better of the argument.
BMS and Paclitaxel
In the discussion of technology transfer, there was mention of
problems with the US government transfer of rights in its Taxol
trials (and treatment regime patents). (Note: the generic name
for this product is now paclitaxel, after BMS obtained a
trademark on taxol, the old generic name). At one point, a BMS
official made the claim that the NIH had done only basic research
on Taxol, but that BMS had sponsored the clinical trials and
figured out how to manufacture the product. This was either
highly misleading or flatly untrue, depending upon how much slack
one gives BMS in terms of describing its role. The US government
had Taxol in Phase III trials before BMS even signed a contract
to market Taxol. BMS signed the US government CRADA in January
1991, and the product was approved for marketing in December
1992, less than two years later. At the time of FDA approval,
BMS did not even know how to manufacture Taxol, and was using
Hauser chemicals, the former NIH contractor, to produce the bulk
taxol. All of the clinical trials used for the US FDA approval
of Taxol were sponsored by the NIH. After the product was on the
market, BMS of course has become more knowledgeable about the
manufacturing of Taxol, and sponsored additional clinical trials,
mostly to advance its marketing efforts, moving the product on to
formularies, but this while Taxol was on the market, generating
several million dollars per day in revenue (more than $4 million
per day today). For more info on the Taxol situation, see:
http://www.cptech.org/ip/health/taxol/
NEXT STEPS
The EU wants specific suggestions regarding R&D, action
items for the G8 meeting, and should be pressed on bringing
specific issues before the TRIPS council, and asked to reconsider
its opposition to the WTO Working Group on Access to Medicines.
DG Trade promises us a written response soon to the September 26,
2000 NGO letter. While DG trade/industry is clearly moderating
is positions on IPR issues, they are still highly concerned about
offending industry. Industry is very unhappy with this process,
perceiving this as an NGO forum. I think it is very productive
to have NGOs and industry together in these meetings, to force
many issues out into the open, and to give each side a chance to
question the other talking points and arguments. I personally am
impressed with the high level participation by the Commission
staff. Clearly more has to be done in the EU Parliament and with
member countries, particularly Sweden, Germany, UK, Italy, the
Netherlands and France.
--
James Love mailto:love@cptech.org http://www.cptech.org
Consumer Project on Technology, P.O. Box 19367, Washington, DC 20036
voice 1.202.387.8030 fax 1.202.234.5176