[Pharm-policy] US Pressures Thailand on Pharmaceutical Issue

[Aileen Kwa]

Dying For ‘Free Trade’ / Dying at the Hands of ‘Free
Trade’:
The Law of the Jungle Institutionalised

Aileen Kwa
Focus on the Global South
July 2001

‘Dying for Free Trade: U.S. Or Us’, read the banner
held high by Thai NGOs and AIDS activists on the 28th
of June outside the US Embassy in Bangkok. They were
supporting the January resolution passed by the Thai
Food and Drug Administration (FDA) to allow the
production of generic drugs within a shorter time lag
after the release of the branded versions. They were
also protesting the resultant pressures Washington has
been using against Bangkok. 

Indeed, the bilateral arm-twisting has intensified in
the last few months, even as international pressures
shamed the pharmaceutical companies into dropping the
lawsuit against the South African government in April
this year, and the US into dropping the case against
Brazil at the WTO. Yet because there has not been
adequate publicity revealing the pressures US is
exerting on the Thai administration, Washington
continues to intimidate Bangkok through a variety of
trade threats. 

For 8 years, since 1993, Washington was able to limit
Thai production of generic drugs because of a
bilateral programme between the two countries, which
provided medicines not patented in Thailand, what
amounted to exclusive marketing rights for 5-6 years.
The January resolution reduces this period of
marketing exclusivity to three to four years. Furious,
Washington has been on the heels of the Thai
government.  

US STRONG-ARMS THAILAND INTO STRINGENT PATENT
PROTECTION
According to a high level Thai government official,
Washington has already sent three envoys to Bangkok
since January to exert trade pressure. Pressure has
also been put on the Thai delegation to the WTO in
Geneva.  The political leverage of the US over
Thailand is very significant. 60% of the Thai economy
depends on exports. Of this, 25% of exports go to the
US. That is, 15 per cent of the entire Thai economy
depends on Thai exports to the US. 

The history of US pressure over the Thai
Administration on giving stringent patent rights to US
pharmaceuticals goes back a long way. In 1986, USTR
pressured Bangkok to amend the Thai Patent Act, which
until then included only process patents (ie, it
allowed for the production of generic versions through
alternative processes). According to a disgruntled
Thai government official, ‘this is the trick that they
used. They applied bilateral pressure on countries to
change their patent laws so that these countries would
then support the TRIPS in the Uruguay Round
negotiations’. As a result, Bangkok amended the Thai
Patent Act to include product patents in 1992 (well
ahead of the conclusion of the TRIPS agreement). They
also extended the length of their patent protection
from 15 years to 20 years. 

However, the US was still not satisfied with the new
1992 Thai Patent Act. Products, which had been given
patents in the US prior to 1992, would not have patent
protection in Thailand upon their release as drugs.
USTR therefore continued the bilateral pressure on
Bangkok. Finally, the Thai government submitted. In
1993, the ‘Safety Monitoring Program’ (SMP) was
implemented whereby any new drug that has been
patented abroad between 1986 and 1991 and sold in
Thailand will have to be in the SMP for a minimum of
two years. While the drug is on the SMP list, no other
manufacturer is allowed to register a generic version,
or conduct bio-equivalence tests on it. The SMP
effectively gave companies an exclusive market. Often
times, this period of exclusivity was extended from 2
years, to 3-4 years. In addition, to produce a generic
version, a bio-equivalence study would take at least 1
year, and the registration of the generic product
would take up to 5-6 months. Practically, that period
of exclusivity would therefore be 5-6 years before the
generic drug could be sold on the Thai market. The
rationale for this time period is supposedly to allow
the manufacturer to monitor the drug for any adverse
effects.

THAILAND’S AIDS CRISIS: EXACERBATED BY STRONG PATENT
PROTECTION ON MEDICINES

Thailand currently has an HIV/AIDS problem of crisis
proportions. With 750,000 people living with HIV, it
is in fact one of the countries worse hit by the
epidemic. 350,000 people have already died. Less than
5 per cent of the population have access to
antiretroviral medicines due to the high costs. HIV is
in fact fast becoming the leading cause of death in
the country, particularly amongst young people. In
fact, death rates by 1999 had jumped by 16 per cent
due to AIDS. 

The government’s health budget is unable to cover the
cost of treating the large numbers infected by HIV. It
had been estimated that the cost of treatment would be
as high has US$9 billion in health expenses a year. 
The Thai government’s budget for 2001 of US$7.24
million remains only a fraction of the money required.
World Bank estimates that this will provide treatment
to only 2,100 sufferers.  

The strong patent protection as well as the SMP
programme, has led to an escalation of medical
expenditure, and also to the decline of the local
pharmaceutical industry. 

According to an ASEAN workshop on TRIPS and
pharmaceuticals held in May 2000, between 1979 and
1992, when only process patents were granted in
Thailand, a generic version would be on the market 1
or 2 years after the product was released on the
market. Currently, it takes about 5 to 15 years after
the introduction of a patented product before a
generic version is available, and 5-6 years for
products (without a Thai patent) under the SMP. As a
result of the lack of competition, prices of original
drugs are high. This has reduced access, and also
increased government expenditure. 

Experts at this workshop estimated that after five
years of SMP-market exclusivity in Thailand, medical
expenditure increased by 2,000 million Baht (US$50
million) for the top 25 products under the programme.
They projected that this figure would increase 10-fold
once the full impact of product patents are felt (by
2000).  

This level of stringent patent protection has also
negatively affected the local generic drug industry.
When before, imported drugs made up only 30 per cent
of the Thai pharmaceutical market, with 70 per cent of
the market met by local production, today, 50 per cent
of drugs are imported. The local industry has
therefore significantly contracted. 

THAI GOVERNMENT ADDRESSES AIDS CRISIS: CHANGES TO THE
SMP

In response to the AIDS crisis on their hands, and the
high costs of treatment, an official from the Ministry
of Health, in a private interview, said that the
Ministry would like to see as many drugs produced
generically as possible. This includes
anti-retrovirals as well as other medicines needed for
diseases, which often accompany AIDS and the loss of
immunity, eg. meningitis, pneumonia, fungal
infections. The Thai experience with generic products
has been that once they are out on the market, prices
of the branded versions fall drastically, sometimes
even to levels comparable to the generic ones. 

Many of the new anti-retrovirals that are currently
appearing on the market, would fall under the SMP
category. That is, they would have obtained patents
from abroad between 1986-1991, but not in Thailand, as
this was before the Thai Patent Act came into effect. 

In the interest of providing more people with access
to medicines, the Thai FDA amended the SMP in January.
The resolution included the following elements:

1) Bangkok requested that pharmaceutical companies
provide the Thai FDA, within 180 days, with names of
products still in the pipeline, but which they intend
to register under the SMP in order to enjoy market
exclusivity. Only those products which have been
notified, will be provided market exclusivity. 

2) Thai companies will be able to start
bio-equivalence studies (development and tests) before
the expiry of the Safety Monitoring Programme for that
product. This is so that the generic version can be
released the moment the SMP expires. 

In practical terms, it means reducing market
exclusivity from 5-6 years to 3-4 years.

3) The FDA also took a decision to exclude medicines
under the SMP from being listed on the National List
of Essential Medicines (NLED). 

(All hospitals and clinics administered by the
Ministry of Health are supposed to use no less than 80
per cent of their budget for medicines to buy drugs on
the National List, though in practice, the percentage
is 30-40 per cent. )

MINOR CHANGES FROM THAILAND DRAW MAJOR OPPOSITION FROM
US

Minor Changes from Thailand
The January resolution in fact only changes the SMP in
minor ways. The programme, as promised in the 1993
bilateral agreement, is still being maintained. In
fact, in comparison to the intensity of the health
crisis, these changes can even be viewed to be rather
timid. 

Information on Pipeline Products
According to Thai government officials, they have only
requested notification of the names of products still
in the pipeline, and the country where a patent was
first registered. They have not asked for confidential
information that would in any way compromise
pharmaceutical companies’ trade secrets. 

Conducting Bio-equivalence Studies During SMP
Allowing for the development and testing of generic
products by non-patent holders, and without the
permission of the patent holder, before the expiry of
the patent, would in fact be in accordance to the
TRIPS agreement. This is usually known as the Bolar
Provision. Such a law was first incorporated in the US
in 1984 and has since been more widely used in other
countries. According to the WTO Secretariat, it is
allowed in Article 8 of TRIPS.  In a case which
concluded in April 2000, filed by the EU against
Canada’s Bolar Provisions, (case title: Canada –
Patent Protection for Pharmaceutical Products), the
WTO’s Dispute Settlement Body ruled that Canada was
TRIPS-compliant. 

>From the perspective of Thailand, this small change in
the SMP should not be problematic since the SMP is
already a TRIPS-plus concession which Thailand is
offering the US (since it gives ‘protection’ to
products patented before the Thai Patent Act and
before TRIPS came about). Furthermore, it is also
unreasonable for the US to demand that Thailand
relinquishes the right to conduct bio-equivalence
tests when US legislation itself allows for this. 

Exclude Drugs Under SMP from the National List of
Essential Drugs
As the name, Safety Monitoring Program (SMP) suggests,
drugs under the scheme are being tested for their
safety. In all fairness to Thailand, it is reasonable
that until there is clear information on safety, these
drugs should not be on the essential drug list. 

Fiery Opposition from US 
Washington was quick to make its opposition known to
the Thai government. In the few months following the
resolution, US envoys sent to meet Thai officials
included Barbara Weisel, Deputy Assistant USTR for
Bilateral Asian Affairs, high ranking officials from
the US Embassy in Bangkok, as well as from the US
Department of Health and Human Services. 

Pressure on Thailand has not only been limited to the
SMP, which the US finds ‘unacceptable’, but also on
other issues – such as Thailand’s draft Trade Secrets
Law, and even Thai FDA’s plans to label genetically
modified foods. 

Thailand’s Achilles’ heel is their US$8.7 billion
worth of exports to the States. USTR is threatening to
put Thailand on the Priority Watch List. Once on the
list, unilateral trade sanctions against Thai exports
could be taken under Section 301 of US’ Trade Act as
long as USTR determines that an act, policy or
practice of Thailand ‘violates or is inconsistent with
any trade agreement, denying the rights or benefits
derived thereof to the United States, or is,
unjustifiable and burdens or restricts United States
commerce’. When developing countries agreed to accept
TRIPS in the multilateral trading system, they
expected that such unilateral action by the US would
be removed. However, this has not been the case.
According to a Thai official, should they be put on
the Priority Watch List, the negative impact would be
immediate. Export volumes would immediately fall
because importers would already be anticipating that
US could at any time slap on a high levy on products
from the country. 

A formal letter dated May 11 was sent by USTR to Dr
Vichai Chokavivat, the Secretary General of the Food
and Drug Administration. The points made in the letter
included: 

1) Washington’s Disapproval of the draft Thai Trade
Secrets Law
The draft Thai Trade Secrets Law has already been
through a first reading by the Senate. Section 7(2) of
this Law permits the disclosure of test data by a
government agency to protect any ‘public interest’ not
having commercial objectives. According to
Washington’s letter, ‘Such an exception to the
protection against disclosure of test data is both
overly broad and does not conform to the exception
found in TRIPS Article 39.3… we respectfully request
to see the most recent version of the draft law, and,
as we offered to your delegation in Geneva, stand
ready to assist you by suggesting adequate language to
ensure a Trips-consistent law’.

Washington also asserts that ‘While it is our hope
that the new Trade Secrets Act will provide a
significant improvement over the 1993 SMP, should the
new law provide less protection than that afforded by
the 1993 SMP, the US government would have serious
concerns’. 

This interpretation by Washington seems unreasonable.
TRIPS Article 39, entitled ‘Protection of Undisclosed
Information’ in fact supports ‘public interest’
objectives. Article 39.3 explicitly states that
‘Members shall protect such data against disclosure
except where necessary to protect the public…’.  

2) Washington Denounces Changes in SMP
In response to the change in the SMP as announced by
the Thai FDA, Washington responded as follows:

‘The Thai FDA requested that the US unilaterally
abandon benefits affording data protection for
pharmaceuticals as established in the 1993 Bilateral
Agreement. The US declines to relinquish such
benefits.’

In retaliation to Thailand’s request for the names of
pipeline products, and the country where a patent was
first granted, Washington stated in their letter that

‘We have reviewed as well the TFDA’s new requirement
that US pharmaceutical manufacturers submit lists of
products qualifying for the SMP under the 1993
Agreement, or sacrifice the protection of the test
data or such products should they be introduced to the
Thai market in the future. The 1993 Agreement provides
no such stipulation whereupon SMP protection is
qualified based on a prior written submission listing
the products that were granted foreign patents between
1986 and 1991. This requirement would effectively
limit the extent of protection afforded under the 1993
Agreement. 

Furthermore, the release of such information discloses
valuable indications of a company’s potential
marketing strategy, and threatens to compromise
industry trade secrets. The US government requests the
Royal Thai government withdraw this modification to
its SMP policy’. 

On the exclusion of SMP products from Thailand’s
National List of Essential Drugs, Washington had this
to say: 

‘The exclusion of SMP drugs from the NLED would
effectively negate the original intent of the SMP and
pose potentially harmful risk to public health…
innovative products qualifying for the SMP will not be
listed or stocked in most hospitals. 

The letter goes on to state that ‘continuation of the
original SMP is necessary to offer some form of data
protection until a satisfactorily TRIPS-consistent
Trade Secrets Law is passed, enacted, and successfully
implemented. A gap in data protection coverage for US
products would be unacceptable’. 

Finally, the statement concludes with a diplomatically
veiled threat, that 
‘We were encouraged by our talks with your delegate in
Geneva, and believe the successful implementation of a
Trade Secrets Act in compliance with the TRIPS
Agreement would greatly improve Thailand’s attraction
as a destination for foreign investment – not only for
the research pharmaceutical industry – but for all
manner of industries providing access to innovative
products’. 

3) Washington Pressures FDA Not to Label Genetically
Modified (GM) Products
This final point was not included in the 11 May letter
by USTR, but has been communicated by Dr Vichai
Chokavivat, Secretary General of the FDA. He revealed
that Washington’s pressures have not been limited to
the SMP. In fact, they have used the occasion of this
dispute to raise other issues, such as Thailand’s
intentions to label GM products. On 13 February 2001,
in addition to expressing their disapproval of the
SMP, US envoy to the FDA also threatened that trade
sanctions under Section 301 would be imposed on
Thailand should they go ahead with labelling. The Thai
FDA had already resolved, in 1999, to have food
products with GM concentration higher than 3 per cent
carry a GM label.  

WTO USED BY POWERFUL TO INSTITUTIONALISE THE LAW OF
THE JUNGLE
According to WTO’s Director General Mike Moore, the
WTO benefits the poor because it is rules-based. The
alternative, he warns repeatedly, would be the law of
the jungle. 

The situation between US and Thailand, the treatment
developing countries receive at the WTO, and the
treatment of members of civil society who dare to
disagree, offers another view:
1)	That the law of the jungle still rules despite
having a WTO 
2)	That in fact, the WTO is USED to justify bilateral
pressures (e.g. that Thailand’s draft Trade Secrets
Act – which is already TRIPS consistent – should,
according to US, be brought in line with TRIPS Article
39.3); and worse
3)	That bilateral pressures are ‘multilateralised’ in
the WTO.

This may not be surprising after all. India’s
Ambassador Narayanan in Geneva, when addressing a
group of NGOs in March this year, commented that the
WTO is a rules-based organisation. However, those
rules have been written on the basis of power. 

Corporations lobbying and funding the US government,
push Washington to make bilateral deals with
developing countries, which are then reinforced and
made permanent in WTO rules. (This is how Thailand
came to accept the TRIPS in the Uruguay Round). 

The same governments and corporations are now
ferociously lobbying the WTO to widen and deepen its
coverage by taking on yet another round of trade
negotiations at the November Ministerial. Despite many
developing countries’ vehement protests, the pressures
for new multilateral investment and government
procurement agreements continue. We see developing
countries’ concerns in implementation issues being
systematically marginalized. Instead, the powerful
countries and the WTO Secretariat take on an ‘I know
what’s best for you’ attitude. And to top it all, as
time marches on and the powerful countries become more
desperate to ensure that their new round is launched
at Qatar, we witness arm-twisting and underhand
pressure tactics taking place between the big players
and trade ministers of developing countries in order
to win them over. All this to me, reeks of bilateral
pressures, multilateralised. 

Furthermore, when Washington’s interests happen to
fall outside the WTO ambit, Washington uses its
infamous Section 301 (the ‘bilateral’ law of the
jungle). And to make the relationship between
Washington and the WTO even more incestuous, the WTO’s
Dispute Settlement Body, in 2000, ruled in favour of
retaining Section 301. The then USTR, Barshefsky
noted, ‘Today’s action by the WTO closes the door
on…unfounded claims regarding the legitimacy of
Section 301. Section 301 has been and will remain
essential to our efforts to enforce our international
trade rights’. 

And, as if the corporate agenda is not already
blatantly coercive, police are now shooting at
demonstrators protesting against this
corporate-led-globalisation ‘logic’. Three were shot
in Gotenburg at the EU/US summit, and one shot dead
with life ammunition, and run over in Genoa, when the
G7 met to launch a new round of negotiations. Other
demonstrators were treated with brutality by the
Italian police. 

If all of this is not the law of the jungle,
institutionalised, systematised, multilateralised,
globalised, and at its ugliest, what is the law of the
jungle? 




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