[Pharm-policy] Terbes Agreement and Compulsory licensing artice

[James Love]

This article was forwarded to the list, and is reposted as a fair use.
Forgive my ignorance, but what is the Terbes agreement?  



ECONOMIC DIALOGUE: Medicine production: a test of intellectual
property
Dr Abdullah Sadiq Dahlan

12/11/1999
Middle East Newsfile: Saudi Gazette
Copyright (C) 1999 Moneyclips Middle East Newsfile; Source: World
Reporter (TM)

  Dr William Henesi, law professor at the Franklin Pearce Law Center,
USA, has summarized the various viewpoints expressed during the
negotiations that culminated in the final formulation of the Terbes
agreement. The following is a restatement of his remarks on the
developing countries.

  At the start of the Uruguay Round, the negotiating team on the
agreement was authorized to discuss the commercial aspects of the
intellectual property rights within the context of growth and
development. This was understood to offer a wide scope of maneuvering
for countries from both the industrialized North and the underdeveloped
South. The industrialized countries focused their attention, from the
beginning, on strengthening the legal framework for the protection of
intellectual property rights.The developing nations had, however, a
different viewpoint. They believed that the main issue for them was how
to get the necessary technology rather than the protection of
intellectual property rights.

  The agreement contained tangible benefits for investors. It stipulated
patents for all products and processes in the technological field. The
only exception to this general rule were the diagnostic, curative and
surgical methods for the treatment of man, animals and plants, excluding
the microbes and biological processes used in plant and animal
production. Countries that did not have a patent protection system must
devise an appropriate and effective law for this purpose.

  The Terbes agreement stipulated that patent holders can stop others
from making products covered by a patent, or from using or selling them.
It also empowered them with stopping others from using or selling a
patent process, and also from using or selling products obtained through
the use of such a process. The agreement guaranteed the right to
transfer some patent rights, and allowed signatories to retain certain
limitations of patent rights, unless they contravened the ordinary use
of a patent by its holder, or undermined his legitimate interests. The
restrictions imposed by the agreement on forced licensing are very
important to the holder.

  For one thing, it prohibits countries from granting compulsory
licenses unless the patent holder manufactures the patented invention in
the concerned country. The agreement allows compulsory licensing only in
cases where the patent holder refuses to market his patented products in
a certain country, in such cases the license must not lead to
exploitation. The restrictions on obligatory licensing aim to encourage
voluntary licensing, ensuring that the payment for any obligatory
license is fair. The license, thus obtained, cannot be transferred to
others except in very few cases, and the licensing rules may be
appealed.

  There are some provisions relating to government use of patents, in
cases of national emergency. However, it is possible to grant a
obligatory license for a subsequent (second) invention, provided that
the second invention is more technologically advanced than the first
one, and that the patent holder for the first invention gets a license
for the second one. The obligatory license of the second invention can
only then be transferred along with the patent.

  The different viewpoints on the Terbes agreement has led to worldwide
controversy. The differing views are held mainly by multinational
companies and their subsidiaries in developing countries, on one side,
and the national pharmaceutical companies, on the other.

  The viewpoints of the multinationals were summarized in a document
published by the International Federation of Pharmaceutical Association.
It says that strengthening intellectual property rights encourages
national industries to invest in research and development, and enables a
better utilization of national resources, particularly in the innovative
development of pharmaceuticals. The bolstering of intellectual rights
also leads to a higher quality of locally produced medicines, boosting
people's confidence in them. No advance effect on prices is expected as
a result of the implementation of the agreement, for most medicines sold
in developing countries are generic--they do not have a registered
trademark, and are unprotected by a patent.

  According to this viewpoint, some countries like Egypt have to
implement the agreement immediately, without waiting for the end of the
transition period.

  The national pharmaceutical companies, on the other hand, contest the
claim that the agreement will help attract foreign investments. They say
that strengthening the international protection of intellectual property
rights benefits only the advanced countries, even though their economies
are affected by the economic activities in the developing countries. If
the protection of the intellectual property does any good to developing
nations, it is only for their development, such as cost factor, market
size, human capital (educational and cultural level), political
stability, and the overall economic situation, all of which affects
decisions on investing in developing nations.

  According to estimates from the International Monetary Fund, 40
percent of direct foreign investments in 1993, which amounted to $170
billion, was poured into developing countries. The investment rate is
steadily growing. A large portion of the amount was invested in markets
where there is no sufficient intellectual property protection. For
instance, $20 billion was invested in Mexico in 1993, another $20
billion in southeast Asia, and $27 billion in China. So, attracting
investment must have more enticing factors than the protection of
intellectual property rights.

  According to the outcome of a joint questionnaire carried out by the
World Bank and US executive directors in 1994, the transfer of advanced
technology, such as that used in the pharmaceutical industry, can easily
be imitated.

  The directors expressed their strong belief that the weakness of the
protection on intellectual property rights represents a substantial
factor in taking decisions pertaining to investments, especially the
ones linked to the transfer of advanced technology or setting up
developed research centers.

  However, another study conducted by the UN on the issue yielded a
different result. This study, which was not based on a sound scientific
experiment, re-affirmed that American companies conduct research and
development only in the developing countries in which they invest.

  They mainly invest in southeast Asia, where they don't give much
consideration to the protection of intellectual property.

  The study stressed that strictness and the application of the
protection of intellectual property represents one of the many factors
that companies take into account when they decide to invest in a certain
developing country.

  Thus, it is expected that the enforcement of the Terbes agreement will
lead to a huge price increase. The expansion in the scope of the
protection of the patterns to cover operations and products for a period
of no less than 20 years will definitely lead to a price hike and the
production of costlier products.

  Advocates of this trend see that the agreement will make it difficult
for developing countries to apply the system of compulsory licensing.

  In turn, this will add a burden on the health system, which, in turn,
will deprive developing countries of benefits from new developments in
the health sector.

  The report pointed out that the abrogation of the compulsory licensing
system by Canada will cost it between $4 to $7 billions in the next 15
to 20 years. To be added to this is the rise in the cost of the locally
produced medicines which will make them cost-ineffective compared to the
international pharmaceutical industries.

  The viewpoints of those who represented the public, which was not
given due attention, can be summarized by the following:

  The multinational companies exaggerate the research and development
cost for two reasons:

  1. to erase from the minds of developing countries the idea of
investing in this field.

  2. to justify the high prices of medicines they produce, they claim
that the processing of a new medicine costs at least $400 millions.

  By any measure, the so-called new developments in the field of
medicine do not constitute any major breakthrough in treating many
chronic diseases. In the meantime, some studies show that only one-third
of the new machines are effective. This makes one support the assumption
that patients bear the cost of useless pharmaceutical experiments aimed
at manufacturing new drugs.

  However, it is imperative to carefully examine the claims of the
patents' applicants because the scientific achievements are nothing but
an accumulation of knowledge and efforts of thousands of scientists in
various parts of the world.

  Nevertheless, this accumulated knowledge can also be derived from the
old civilization, in other words, breakthroughs in the field may be
based on old knowledge.

  Consequently, the claims of the patent seekers vis-a-vis their
inventions are pure allegations because they must have based their
inventions on the knowledge and discoveries of old generations. We can
add to this the so-called brain drain or the migration of innovative
scientists from the Third World to the advanced countries. However, one
can hardly accept the idea of giving a patent to whoever applies, for
under these criteria the misuse of this right by the multinational
companies will deprive developing countries and poor patients of
benefits from some of the scientific achievements which they badly
need.

  It is an indisputable fact that the health sector is a human one, as
it transcends borders or sectarian divisions.

  The harsh rules of the intellectual property rights and the unethical
pressures will increase the suffering of the poor elsewhere in the
world; this will constitute a burden on the primary healthcare systems
in the developing countries. Needless to say, this will lead to a host
of socio-economic problems.

  This confirms the need for transparency in the field of patent rights,
especially the one relating to the real cost.