Testimony of James Love Additional Materials Appendix A Statements by the WTO, WHO, WIPO and USTR on compulsory licensing Appendix B Timeline of Disputes over Compulsory Licensing and Parallel Importation in South Africa Appendix C USTR Reports on Thailand Pharmaceutical Policies, Appendix D USTR Reports on Israel Pharmaceutical Polices Appendix E USTR Reports on New Zealand Pharmaceutical Policies r1 Appendix A WTO, USTR, WHO, and WIPO comment on compulsory licensing 1. Adrian Otten, WTO The [TRIPS] Agreement also allows Members to authorize use by third parties (compulsory licenses) or for public non-commercial purposes (government use) without the authorization of the patent owner. Unlike what was sought by some countries in negotiations, the grounds of which this can be done are not limited by the Agreement, but the Agreement contains a number of conditions that have to be met in order to safeguard the legitimate interests of the patent owner. Adrian Otten, Director Intellectual Property Division, World Trade Organization, Presentation to the World Health Organization (WHO)'s ad hoc working group on the Revised Drug Strategy, Geneva, October 13, 1998. 2. Michael Kantor, USTR We have been balanced in our approach to the protection of pharmaceutical products. The relevant provisions of the TRIPS Agreement reflects this problem: TRIPS specifically sets out a considerable number of conditions under which compulsory licensing may be utilized for use by those countries wishing to impose limits on intellectual property protection within its own borders. TRIPS contains no transition period phasing-out the use of these compulsory licensing provisions, they may be relied upon for the indefinite future. Michael Kantor, then the United States Trade Representative, February 1, 1996 letter to Alfred B. Engelberg (member of USTR's IFAC-3). 3. World Health Organization Thus Member States are not limited in regard to the grounds on which they may decide to grant a license without the authorization of the patent holder. They are in practice only limited in regard to the procedure and conditions to be followed. . . Compulsory licenses are the easiest and the most effective way to increase the supply of products, by acting directly on marketing conditions or by deterring patent holders from taking measures that would arbitrarily reduce supply or artificially or excessively increase prices. . . According to Article 8 of the [TRIPS] Agreement, Member States may adopt the necessary measures to protect public health and nutrition (provided these measures are consistent with the provisions of the TRIPS agreement). There are many instances of regulations that envisage compulsory licenses for reasons of public health. In practice, if a new pharmaceutical product introduced into the market were to constitute an important innovation or play an essential role in health policy, such as a vaccine against AIDS or malaria, the national law may provide for the granting of a compulsory license, under the conditions of Article 31. German Velasquez and Pascale Boulet, "Globalization and access to drugs: Implications of the WTO/TRIPS Agreement." WHO/DAP/98.9 Revised 4. Richard Wilder, WIPO The right to exclude others from using a patented invention may be subject to limitations in some countries, including by the right of the government to use the invention or by the grant of compulsory licenses. . . A patent system, to function properly, should be balanced. On the one hand, the patentee must be granted effective protection for his or her invention to induce further research and encourage the disclosure of inventions to the public. On the other hand, national law may take cognizance of the constraints that may be imposed on the grant and exercise of the patent right. Richard Wilder, World Intellectual Property Organization, presentation to the World Health Organization (WHO)'s ad hoc working group on the Revised Drug Strategy, Geneva, October 13, 1998. 5. The Paris Convention for the Protection of Industrial Property of March 20, 1883. Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work. Article 5(A)(2). APPENDIX B Timeline of Disputes over Compulsory Licensing and Parallel Importation in South Africa version 1.02 July 14, 1999 1994. The US/South Africa Binational Commission (BNC) is formed, co-chaired by Vice President Al Gore and Deputy President Thabo Mbeki. March 1, 1995, BNC holds first meeting in Washington, DC. April 7, 1997. Andrew Stoller of USTR writes letter to UN Ambassador from South Africa Selebi concerning the questions of the U.S. about implementation of TRIPS. Questions touch on such topics as compulsory licensing. May 13, 1997. PhRMA's Harvey Bale writes letter to Deputy USTR Jeffrey Lang discussing objections to proposed amendments to the South African Medicines and Related Substances Control Act. May 20, 1997, Aldridge Cooper, a Vice-President of Johnson & Johnson and Chairman of the U.S.-South African Business Council, writes Secretary of Commerce William Daley about the proposed changes in the South African Medicines Act. June 2, 1997. Representatives of Bristol-Myers Squibb, Merck, Johnson & Johnson, Eli Lilly, and American Home Products meet with the South African Ambassador to the U.S. Franklin Sonn, to discuss the proposed Medicines and Related Substance Control Amendment Bill and the issue of registration of a generic version of Taxol (Paciltaxel). June 3, 1997. Aldridge B. Cooper, a Vice-President of Johnson & Johnson and Chairman of the U.S.-South Africa Business Council, again writes US Secretary of Commerce William Daley to claim that the proposed amendments to the South Africa Medicines Act will have "grave consequences for not only the US pharmaceutical industry, but all US direct investment in South Africa." Cooper notes that the US government has set up "an inter-agency task force has been established under the direction of the Department of Commerce, involving the Office of the US Trade Representative, the State Department and the Department of Health and Human Services," and that a recent Congressional delegation raised the SA Medicines Act amendments in a recent trip to Africa. He asks that this be a subject of the July 1997 BNC meetings. June 1997. The US Embassy in Pretoria, echoing testimony by US pharmaceutical companies operating in South Africa, presents US government views at a parliamentary hearing on the proposed amendments to the Medicines Act. Since mid-1997. According to the US Department of State, US Ambassador to South Africa James Joseph makes frequent public statements and multiple private demarches to high-ranking South African officials against the legalization of parallel imports. July 24, 1997. US Representatives Menendz, Royce, Payne, Chabot, Rothman, Pallone, Davis and Andrews write letters to Deputy President Mbeki and Vice President Gore expressing concern about intellectual property of pharmaceuticals in South Africa. The letter addresses the pharmaceutical industry concerns over parallel imports and proposed requirements that drugs prescribed by public health doctors be identified by generic names, which the industry claims violates trademark rights under the WTO/TRIPS accord on intellectual property. July 29, 1997. Ralph Nader, James Love and Robert Weissman write Vice President Gore, asking for a meeting with US government officials to discuss dispute with South Africa's pharmaceutical policies. The letter focuses on parallel imports, generic drug substitution and registration of generic versions of Taxol. "We see no grounds for U.S. government intervention on behalf of the international pharmaceutical companies. Indeed, the U.S. should be supportive of the South African government's thoughtful initiatives, and use the opportunity to assert that U.S. foreign economic policy with respect to pharmaceuticals will subordinate commercial concerns to broader public health interests," they wrote. Vice President Gore was also urged to expand USTR's IFAC-3 advisory committee on intellectual property to include consumer interests. July 29, 1997. During U.S.-South African Binational Commission meeting, Secretary of Commerce William Daley voiced opposition to the proposed amendments to South African Trade and Industry (DTI) Minister Alec Erwin. July 29, 1997. PhRMA meets with Minister Zuma and others from South Africa in Washington, DC to discuss intellectual property of pharmaceuticals. The US government pushed for the meeting. The South African Ministry of Health wanted to invite intellectual property and trade experts but PhRMA objected. The meeting was chaired by Franklin A. Sonn, the Ambassador of the Republic of South Africa, and attended by Alan Holmer, the President of PhRMA, Tom Bombelles (PhRMA), Cathie Bennett (Pfizer), Dr. Khalil (Merck), Mitchell Cybulski (SKB), Brian Healy (Merck), Minister Zuma (SA MOH), Dr. Olive Shisana (SA MOH), Dr. Ian Roberts (SA MOH), Gregg Burton-Durham (SA DTI), and others. Dr. Zuma tells PhRMA that parallel importing will only be done for selected drugs, when it benefits patients, and that "it is unacceptable for South Africa to pay higher prices than Australia." PhRMA attacks parallel import authority as well as South African plans to promote use of prescribing drugs by generic name. August 19, 1997. The Pharmaceutical Manufacturers Association of South Africa (PMA) distributes a document entitled "South African Pharmaceutical Prices: A Six-Country Comparison," to argue that prices for pharmaceuticals are competitive in South Africa. September 17-19, 1997. The PMA South Africa submits comments and a position paper on the Medicines and Related Substances Control Amendment Bill to Portfolio Committee on Health. October 4, 1997. Ambassador James Joseph writes letter to Dr. Abe Nkomo of the Portfolio Committee on Health describing U.S. objections to section 15(c) of the Medicines Bill. Ambassador Joseph says "my Government opposes the notion of parallel imports of patented products anywhere in the world. We argued for a prohibition of such parallel imports in the TRIPS Agreement. They are illegal in the United States, both as an infringement of patent rights and, because in the case of medicines, our Food and Drug Administration (FDA) believes it cannot adequately monitor quality." October 6, 1997. James Love, on behalf of the Consumer Project on Technology, presents comments, via fax, to the Portfolio Committee on Health Parliament, Cape Town, on the Medicines and Related Substances Control Amendment Bill and South African Reform of Pharmaceutical Policies. The CPT comments reviewed the legality of parallel imports under the WTO/TRIPS Agreement (legal under Article 6), and in recent cases in Japan and the European Union. CPT also presented evidence from the UK on parallel import savings on HIV drugs, and discussed the Taxol issue. October 10, 1997. MSD South Africa (Merck) writes a position paper expressing concern about Section 15C of the SA Medicines Act. October 14, 1997. Dr. Elizabeth Ominde-Ogaja, the Director of the National Quality Control Laboratory in Kenya, writes the Peter Foib (sp?), the Director of the South African Medicines Control Council, to express opposition to parallel importation, which Kenya has outlawed. October 24, 1997. Simon Barber, writing in the Johannesburg Business Day, reports that Senator Jesse Helms may hold up ratification of the new U.S./SA Tax Convention, in retaliation for South Africa having "abrogated" the patent rights of US drug companies by permitting parallel imports. Barber reports that Helms' is acting on behalf of Glaxo, the British drug company that sells AZT and other drugs, with offices in North Carolina. October 27, 1997. The Department of Trade and Industry (DTI) of South Africa responds to U.S.-South Africa Business Council concerns over article 15(c). Emily B. Solman, the Managing Director of the SA Business Council, contacts USTR, US Department of Commerce, US PTO, US Department of State and the US National Security Council the next day. November 19, 1997. David Miller of the Corporate Council on Africa writes to the Southern African Development Community, Secretary Shalala, USTR Barshefsky, Senators Helms and Ashscroft, Representatives Gilman and Royce, and others, to express opposition to the South African Medicines Act amendments. November 25, 1997 - Ambassador Erwan Fouere, the Head of the European Commission delegation in South Africa, writes letter to Dr. Olive Shisana, the Director General for the South African Department of Health, advising South Africa that "The European Commission has received complaints from the European Pharmaceutical Industry that the South African bill Section 15C, to amend the Medicines and Related Substance Control Act from 1965 (MRSC) appears to be in violation of the TRIPS Agreement and in particular Article 27 (non discrimination) and 28 (rights conferred by the patent)." No mention is made of the extensive use of parallel imports within the European Union, or of Articles 6 or 31 of the TRIPS. December 12, 1997. President Mandela signs into law amendments to the South African Medicines Act, including Section 15C. January 8, 1998. Dr. Nathaniel Murdock of the U.S. National Medical Association (NMA) writes a number of letters expressing opposition to the SA Medicines Act. January 21, 1998 - The U.S. National Black Nurses Association writes to President Mandella expressing concern that the South African government might "inadvertently encourage the production of drugs that are not authentic," and urges changes in the South African Medicines Act. January 23, 1998 - The National Black Caucus of State Legislators sends letters, signed by Lois DeBerry, the Speaker Pro Tem of the Tennessee House of Representatives and Roscoe Dixon of the Tennessee State Senate, to Minister of Health Zuma and President Mandella. The letters ask for a new amendment to the SA Medicines Act to prohibit parallel importation of patented products. January 27, 1998. The Executive Board of the World Health Assembly recommends the adoption of EB101.r24, the Revised Drug Strategy. The resolution asks member countries to "ensure that public health rather than commercial interests have primacy in pharmaceutical and health policies and to review their options under the Agreement on Trade Related Aspects of Intellectual Property Rights to safeguard access to essential drugs." The resolution, which was introduced by Dr. Timothy Stamps, the Minister of Health for Zimbabwe, is attacked by the international pharmaceutical industry and governments in the US and the EU. February 2, 1998 - 47 members of U.S. Congress write letter to USTR Charlene Barshefsky urging her to take actions against the recently passed amendments to the SA Medicines Act. February 11, 1998. The US Department of State tells USTR that the New York Times is researching an article on the South African trade dispute. Steven Fox from USTR tells Jay Ziegler in South Africa to use the following statement "We are very concerned about the implications of these amendments. We have conveyed our concerns to the Government of South Africa in strong terms and are consulting closely with affected U.S. companies about appropriate action." The NYT story runs on March 29, 1998. February 11, 1998. Anthony Carroll from The Services Group (TSG, located in Arlington Virgina), send a fax to USTR's Rosa Whitaker, with suggestions for talking points on parallel imports. February 13, 1998. USTR's Joe Papovich attends interagency meeting chaired by Leon Fuerth of Vice President Gore's office to discuss addressing the Medicines Bill at the upcoming South African BNC meeting. February 19, 1998. Tom Bombelles of PhRMA sends USTR's Rosa Whitaker talking points and articles on parallel importation. February 23, 1998 - Pharmaceutical Research and Manufacturers of America (PhRMA) asks USTR to designate South Africa as a Priority Foreign country under the Special 301 Review. PhRMA says that "South Africa has become a `test case' for those who oppose the U.S. government's long-standing commitment to improve the terms of protection for all forms of American intellectual property, including pharmaceutical patents." February 23, 1998. Bristol-Myers Squibb (through Collier, Shannon, Rill & Scott and the Gorlin Group) presents comments to Joseph Papovich at USTR, asking that South Africa be "designated a priority foreign country" under Special 301. The compliant focuses on the decision of South Africa to permit registration of a generic from of Paclitaxel (BMS brand name Taxol). March 9, 1998. The US Supreme Court upholds the legality of parallel imports of certain copyrighted goods in Quality King Distributors, Inc. v. L'Anza Research International. March 10, 1998. Tom Bombelles of PhRMA writes USTR's Steven Fox, thanking him for "meet with our PhRMA group today, and attaching notes from the July 29, 1997 meeting between PhRMA and Minister Zuma and her staff. March 11, 1998. The U.S. South African IP Working Group holds a teleconference. One issue discussed was the March 9, 1998 US Supreme Court decision that upheld U.S. parallel imports for certain copyrighted goods. March 17, 1998. USTR Barshefsky responds to Congressman Menendez and 46 other members of congress stating that "This issue is a centerpiece of our annual `Special 301' review of countries' intellectual property practices. Our concerns about the Medicines Act were the central focus of a bilateral IPR teleconference we conducted March 11. We will raise the issue again during the President's visit to South Africa. USTR and other agencies with both trade and health policy responsibilities will continue to press the South African Government in all possible fora as long as possible." March 19, 1998 - USTR's Rosa Whitaker, Liz Artky and Stephen Fox meet with Congressman Menendez to discuss the SA Medicines Act. March 20, 1998. USTR's Stephen Fox discusses with Jim Carouso in the US embassy in Pretoria a March 23 meeting with the European Union, asking the EU to push Minister Zuma on the SA Medicines Act. March 23, 1998 - Sir Leon Brittan, VP of the European Commission, writes to VP Mbeki describing his concern with Section 15(c) of South African Medicines and Related Substances Control Act, saying the Act "would negatively affect the interests of the European pharmaceutical industry." Brittan does not knowledge that parallel imports of pharmaceuticals are common within the European Union. March 25, 1998. The Government of South Africa send a report entitled "Trade Policy Review" to the World Trade Organization, stating that "IPR protection in South Africa is consistent with the WTO Agreement on Trade Related Intellectual Property Rights (TRIPS)." March 26, 1998. President Clinton addresses South African Parliament. March 26, 1998 - Secretary of Commerce Daley met with South African Health Minister Zuma. According to the US State Department, Daley emphasized the USG resolve to ensure South Africa would not use 15(c) to undermine pharmaceutical patent rights or allow parallel imports. Minister Zuma tells Daley the South African laws do not violate any international agreements. March 27, 1998. In a radio broadcast in South Africa, Tom Bombelles of PhRMA says the dispute over the South African Medicines Act is "the single most important economic or trade issue." The report says that Bombelles "alleges that South Africa is being used by India and Argentina as a test run to see how world wide agreements could be broken relating to the protection of intellectual property rights." Samir Khalil from Merck is also quoted. March 29, 1998. The New York times publishes "South Africa's Bitter Pill for World's Drug Makers," by Donald G. McNeil, Jr. The NY Times article reports that South Africa pays prices that are sometimes eight or nine times as high as other countries for common drugs. Spring 1998 - Assistant U.S. Trade Representative for Africa Rosa Whitaker raises U.S. government concerns with both the Minister of Health and Minister of Trade and Industry in South Africa. April 9, 1998 - Congressmen Menendez and Royce write to Secretary of State Albright asking to use Special 301 against South Africa. April 14, 1998. Peter Collins, Steve Fox and Claude Burcky send a memorandum to Ambassador Richard Fisher, with talking points about why South Africa needs to be cited in Special 301. Among them: "Our Special 301 decisions will have no credibility with our industry or with the South Africans if we do not name South Africa in this year's announcement." And, "This law is a mistake, and identifying South Africa in the Special 301 announcement is a gentle reminder." Attached is a 4 page memo, "U.S. Support for South Africa's Health Care Goals," which claimed that prices in South Africa now "represent some of the lowest prices in the world," and "parallel importation . . . does not work. . . Parallel importation often is only a way for middlemen to make more money." April 21-23, 1998. In Geneva, USTR's Rosa Whitaker submits "questions from the United States" to the WTO Trade Policy Review of South Africa, Botswana, Lesotho, Namibia, and Swaziland. The US questions on South Africa focus on South Africa's approval of generic versions of Taxol (As a possible TRIPS Article 39.3 violation), and Section 15C of the SA Medicines Act. May 1, 1998. USTR puts South Africa on the Special 301 Watch list. The USTR announcement focuses on the SA Medicines Act, including the authorization of parallel imports and empowering the Minister of Health to "abrogate paten rights," as well as the registration of a generic form of Taxol, and insufficient enforcement of copyright laws. May 7-8, 1998. Seven public health and consumer groups from around the world (including CPT, HAI and Consumers International) hold a conference in Washington, DC on the issue of health care, intellectual property rights and international trade agreements. The USTR and the US FDA refuse to participate. The Department of State, the NIH and other federal agencies do participate. May 11, 1998. The World Health Assembly (WHA) begins meetings in Geneva. An executive board resolution on the WHA "Revised Drug Strategy" draws heated opposition from the US, the EU and Japan. In negotiations on the resolution, Dr. Olive Shisana from the SA MOH is the lead negotiator for the African countries. The US government threatens diplomatic pressure remove Dr. Shisana from the negotiations. The EU DGI does not permit Finland and other Nordic EU members to support the resolution. Italy and the US move to defer action on the resolution. June 30, 1998 - White House announces that four items, for which South Africa had requested preferential tariff treatment under the Generalized System of Preferences (GSP) program will be held in abeyance pending adequate progress on intellectual property rights protection in South Africa. The South African press refers to the withheld GSP tariff reductions as "hostages." June 1998. According to the US Department of State, US Embassy official travel to Midrand, South Africa to speak at "Pharmecon SA '98" pharmaceutical industry conference about strong US negative views on Article 15(c). July 1998. French President Chirac raises France's concerns about Article 15(c) in state visit to South Africa. Swiss and German presidents also raised issue privately with Deputy President Mbeki. July 1998. Assistant USTR Rosa Whitaker met with the South African Charge d'Affaires in Washington to stress US concerns about pharmaceutical patent protection and parallel importation in South Africa. August 1998. During U.S.-South Africa Binational Commission meetings in Washington, Vice President Gore made the issue of pharmaceutical intellectual property rights protection a central focus of his discussions with Deputy President Mbeki. September 1998. Commerce Secretary Daley, in trip to South Africa, made pharmaceutical patent protection a key item in discussions with South African Trade and Industry Minister Alec Erwin. September 1998 . Discussions between Assistant USTR for Services, Investment, and Intellectual Property Joseph Papovich and the Deputy President Mbeki's legal advisor takes place. The South African government asks the US government to intervene with the US pharmaceutical industry to suspend or terminate its pending legal challenge to Article 15(c). October 1998. The US Embassy dispatches an economic officer to Cape Town to monitor committee and full chamber debates on the South African Medicines Act. He "forcefully advocates" the US position and advised parliamentarians that new law should not include provisions that jeopardize patent rights. October 12-16, 1998. In Geneva, the World Health Organization hosts a meeting of the "Ad Hoc Working Group" to discuss the WHA's Revised Drug Strategy. 59 countries participate in often bitter discussions. South Africa is the leading country in favor of a strong public health statement, and the US is the leading country representing the industry point of view. The Ad Hoc Working Group approves a resolution that asks countries to "ensure that public health interests are paramount in pharmaceutical and health policies," "to explore and review their options under relevant international agreements, including trade agreements, to safeguard access to essential drugs," and the WHO is asked to become involved in trade disputes involving pharmaceutical health policies. According to Nordic countries, the US seeks to water down the resolution, but after support for the US position collapses among the participants, the U.S. drops opposition and announces it will support the resolution. The US and PhRMA offer nearly the opposite interpretation of events. Public health groups endorse the new resolution. October 21, 1998. HR 4328 passes, and becomes PL 105-277. This omnibus appropriations law contains a provision inserted by Rep. Rodney Frelinghuysen (R-NJ) that cuts off aid to the government of South Africa, pending a Department of State report outlining its efforts to "negotiate the repeal, suspension, or termination of section 15(c) of South Africa's Medicines and Related Substances Control Amendment Act No. 90 of 1997." November 1998. A new medicines bill is passed in South Africa with provisions identical to Article 15(c). November 1998. The U.S. State Department's Economic Minister Counselor in Pretoria meets with South African Department of Foreign Affairs officials to discuss resolution of the pharmaceutical patent controversy. December 4, 1998. Joe Papovich, the Assistant USTR for Services, Investment, and Intellectual Property, sends a letter to Deputy President Mbeki's legal advisor Mojanku Gambi noting the USG's interest in Health Minister Zuma's discussions with pharmaceutical industry executives. December 1998 - Secretary Daley meets with Mbeki and Erwin. The Department of State says that pharmaceutical patent protection was the most important topic discussed. January 26, 1999. The WHA Executive Board meets in Geneva, and approves the Revised Drug Strategy resolution that was proposed by the Ad Hoc Working Group in October, 1998. Dr. Desmond Johns from South Africa presents comments to WHA Executive Board that specifically mention parallel importing and compulsory licensing. January 1999. The State Department's Economics Minister Counselor in Pretoria raises pharmaceutical patent protection issue with Deputy President Mbeki's economic advisor. February 5, 1999. The US Department of State sends a report to the US Congress, entitled, "US Government efforts to negotiate the repeal, termination or withdrawal of Article 15(c) of the South African Medicines and Related Substances Act of 1965." According to the report: All relevant agencies of the U.S. Government the Department of State together with the Department of Commerce, its U.S. Patent and Trademark Office (USPTO), the Office of the United States Trade Representative (USTR), the National Security Council (NSC) and the Office of the Vice President (OVP) - have been engaged in an assiduous, concerted campaign to persuade the Government of South Africa (SAG) to withdraw or modify the provisions of Article 15(c) that we believe are inconsistent with South Africa s obligations and commitments under the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) . . . Since the passage of the offending amendments in December 1997, U.S. Government agencies have been engaged in a full court press with South African officials from the Departments of Trade and Industry, Foreign Affairs, and Health, to convince the South African Government to withdraw or amend the offending provisions of the law, or at the very least, to ensure that the law is implemented in a manner fully consistent with South Africa s TRIPS obligations. February 16, 1999. PhRMA's 301 submission to US government asks that South Africa be listed as a Priority Foreign Country under Special 301. PhRMA's complaint focuses on parallel imports, compulsory licensing and "data exclusivity" (the Taxol issue). A new element in the 1999 submission is PhRMA's attacks on South African government's public statements at the World Health Assembly, including a bitter attack on the South African governments statements during the negotiations on the Revised Drug Strategy. PhRMA added: "From the recent remarks and actions, the apparent intent of the Government of South Africa is to not only defend its diminishment of the effectiveness of patent protection in South Africa, but to urge other countries to similarly weaken patent protection for pharmaceutical products. Such a posture is plainly antagonistic to the concept of effective patent protection for pharmaceuticals,and is likely to give rise to a substantial diminishment of the effectiveness in protection not only in South Africa but elsewhere." February 17, 1999. The US Department of State briefs the pharmaceutical industry on international HIV/AIDS policy, and on international efforts to promote compulsory licensing of HIV/AIDS drugs. February 18, 1999. The US Department of State briefs non- government public health groups on international HIV/AIDS policy, but refuses to permit discussion of trade disputes involving compulsory licensing, parallel imports or other intellectual property issues. Ralph Nader and James Love write Secretary Madeleine Albright, "strongly objecting" to the decision to forbid discussion on IP issues, and asking for a second NGO briefing focusing on the IP/trade issues. February 23, 1999. Representative Jess Jackson, Jr. introduces HR 772, the HOPE for Africa bill, which includes Section 601, which would cut off funding to any department or agency that sought "through negotiation or otherwise, the revocation or revisions of any sub-Saharan African intellectual property or competition law or policy that is designed to promote access to pharmaceuticals or other medical technologies," as long as the laws comply with TRIPS. February 1999. USTR officials and Mbeki's advisors meet. February 1999. Vice President Gore meets with Mbeki, and again raises US concerns regarding South Africa Medicines Act. Leon Fuerth, the Vice President's National Security Advisor is among those attending the meeting. The Vice President's staff later gives different versions of the discussions. Following the Vice President's talks with Mbeki, the US PTO speaks out against the use of compulsory licensing in a meeting in Geneva,South Africa is placed on the USTR watch list for intellectual property violations, scheduled for an out-of-cycle review focusing on the Medicines Act, and criticized by the US government for its intention to use compulsory licensing and parallel imports, for speaking out at the World Health Assembly and for approval of generic versions of Taxol, an unpatented drug that was invented by the US government. March 25-27, 1999. CPT, MSF and HAI sponsor meetings in Geneva on compulsory licensing of essential medical technologies. Lois Boland, representing the US Patent and Trademark Office (US PTO), acknowledges that the USG position on compulsory licensing is not reflected in the TRIPS. The fact that [the USG] view is not reflected in the TRIPs agreement, in the multilateral context, is fully acknowledged. In our bilateral discussions, we continue to regard the TRIPs agreement as an agreement that establishes minimum standards for protection and, in certain situations, we may, and often do, ask for commitments that go beyond those found in the TRIPs agreement. The South African government attends the meetings, but in deference to pressures from the US, does not participate on panel discussions. April 8, 1999. Ralph Nader and James Love write Vice President Gore asking for a reversal of US policy on South African Medicines Act and parallel import and compulsory licensing. April 11, 1999. Lisa Richwine from Rueters writes the first major U.S. wire story about the South Africa/Thailand trade dispute over access to HIV/AIDS drugs. April 21, 1999. Several hundred demonstrators march in downtown Washington, DC in support of Jessie Jackson's H.O.P.E for Africa legislation, in support on compulsory licensing for HIV/AIDS and other essential medicines. April 28, 1999. Merrill Goozner writes a page one story in the Chicago Tribune, "Third World Battles for AIDS Drugs." This is the first major US newspaper story on this issue. The President reads the story on Air Force One. April 30, 1999. USTR announces that South Africa is placed on the "watch list" in its Special 301 Review, and schedules an "out-of-cycle" review for South Africa to conclude in September 1999. According to USTR, South Africa's "barriers to trade" are parallel imports, compulsory licensing, registration of generic forms of Taxol, and speaking out at the World Health Assembly. "During the past year, South African representatives have led a faction of nations in the World Health Organization (WHO) in calling for a reduction in the level of protection provided for pharmaceuticals in TRIPS. " May 12, 1999. CPT and Act Up meet with the Department of Health and Human Services (DHHS) to discuss trade disputes involving intellectual property rights and health care, to ask DHHS to moderate US trade polices in order to improve access to drugs. DHHS is also asked to give the World Health Organization and foreign governments to right to use US government use rights in patents obtained with federally funding. May 24, 1999. In Geneva, the World Health Assembly approves the Revised Drug Strategy. June 7, 1999. The International Issues subcommittee of the Presidential Advisory Council on HIV/AIDS (PACHA) holds a public debate on compulsory licensing and parallel imports. The Clinton/Gore Administration declines a request to explain US policy. CPT asks that PACHA recommend that the US end trade pressures on compulsory licensing and parallel imports, and that the US government enter into an agreement with the WHO giving the WHO the right to use federal "public use" rights for pharmaceutical patents based upon government funded research. June 16, 1999. HIV/AIDS activists begin campaign to disrupt Vice President Gore's campaign to draw attention to US trade sanctions against South Africa and Thailand. June 22, 1999. CPT, Public Citizen and HIV/AIDS activists meet with Sandra Thurman, Director of White House Office of National AIDS Policy, Thomas Rosshirt, Vice President Gore's foreign policy spokesman and others to discuss compulsory licensing and parallel imports. June 24, 1999. The US Supreme Court rules that State governments cannot be sued for patent infringement. (Florida Prepaid Postsecondary Education Expense Board V. College Savings Bank et al.) June 24, 1999. Rep. James Clyburn of Congressional Black Caucus writes a letter to VP Gore with concerns over trade sanctions against South Africa June 25, 1999. Vice President Gore writes James Clyburn of the Congressional Black Caucus, saying "I want you to know from the start that I support South Africa's efforts to enhance health care for its people including efforts to engage in compulsory licensing and parallel importing of pharmaceuticals -- so long as they are done in a way consistent with international agreements." June 26, 1999. CPT writes James Clyburn asking the Black Caucus to seek clarification from the Vice President on his interpretation of international law concerning parallel imports and compulsory licensing Appendix C USTR NTE Reports on Thailand Pharmaceutical Policies The following are portions of USTR's 1995, 1996, 1997, 1998 and 1999 commentary on Thailand policies toward pharmaceuticals, as reported in USTR's annual National Trade Estimate (NTE) reports. Each year's entry is somewhat repetitive from the previous year, but illustrates the nature and progress of USTR efforts to reshape national legislation in Thailand on pharmaceuticals. For example, in 1997 USTR reported: The Thai legislature is expected in 1997 to consider a bill abolishing the Pharmaceutical Review Board. This measure would advance objectives of American manufacturers. And in 1999, USTR reported: Thailand's Patent Law was amended by the Thai Parliament in October 1998 and the amended provisions will enter into effect in 1999. Pursuant to the U.S.-Thai IPR Action Plan, the amended law abolished the Pharmaceutical Review Board. According to initial observations, businesses in Thailand are generally pleased with the amendments. However, they foresee problems rising from new provisions regarding compulsory licensing authorizing the Director General of the Department of Intellectual Property to override a patent and issue a compulsory license if the patent is deemed as not being locally "worked" or if the price is deemed unreasonably high. It is interesting that USTR's report goes far beyond patent protection to express opposition to policies such as price controls or even the collection of economic data (permitted under the WTO/TRIPS), as well as the US insistence on high regulatory barriers to the introduction of generic drugs. For example, on numerous occasions, USTR complains that in Thailand, "the market exclusivity period is only 5-6 years." What USTR doesn't say is that regulatory exclusivity (the period before generic drugs can use bioequivalency to register drugs) is 5 years under the US Hatch/Waxman Act, and that USTR is asking Thailand to adopt the longer market exclusivity period now used by the European Union (6 to 10 years). Jamie Love May 16, 1999 Here is the text from the past five years of USTR NTE annual reports on Thailand: 1995 In January 1991, the Pharmaceutical Manufacturers Association filed a petition under Section 301 for relief from Thailand's failure to provide patent protection for pharmaceuticals. In March 1992, the USTR determined that Thailand's acts, policies and practices related to patent protection were unreasonable and burden or restrict U.S. Commerce. These acts, policies and practices were the subject of consultations between the United States and Thailand. In September 1992, Thai legislation became effective that extended patent protection to pharmaceuticals and agricultural machinery and increased the patent protection term to 20 years. However, the law did not provide protection for existing products patented in other countries that had not yet been marketed in Thailand ("pipeline protection") and it contained extremely broad authority to issue compulsory licenses in cases where patented goods are not yet produced in Thailand. Additionally, this legislation created a pharmaceutical patent review board with unique and extraordinarily broad authority to require sensitive cost and pricing information. These provisions are a significant disincentive to obtain product patent protection for pharmaceuticals in Thailand and seriously reduce the benefits of the patent protection provided in the 1992 law. In 1993 the Thai government established administrative measures to provide a degree of market exclusivity for pharmaceutical products not eligible for protection under the 1992 law, to narrow the scope of compulsory licensing provisions and to restrict the authority of the pharmaceutical patent board. These administrative measures, however, are not fully consistent with the growing international consensus on protecting pharmaceutical products. For example, the market exclusivity period is only 5-6 years. [CPT Note: market exclusivity is 5 years under US Hatch/Waxman act, but as much as 10 years in the Europe Union. USTR seeks the EU rather than the US period]. Thailand is still in the process of developing a a new, fully-TRIPs consistent patent law, which is crucial to resolving important issues in the patent area. 1996 Following a complaint by the Pharmaceutical Manufacturers Association, the Administration determined in March 1992 that Thailand's acts, policies and practices relating to patent protection were unreasonable and restricted U.S. commerce. In September 1992, Thai legislation extended protection to pharmaceuticals and agricultural machinery and increased the patent protection term to 20 years. However, the law did not provide protection for products patented in other countries that had not yet been marketed in Thailand ("pipeline protection"), and it contained extremely broad authority to issue compulsory licenses in cases where patented goods are not yet produced in Thailand. The legislation also created a pharmaceutical patent review board with unique and extraordinary powers to require sensitive cost and pricing information. These provisions are a significant disincentive to obtain product patent protection for pharmaceuticals in Thailand and seriously reduce the benefits of the patent protection provided in the 1992 law. In 1993, the RTG established administrative measures to provide a degree of market exclusivity for pharmaceutical products not eligible for protection under the 1992 law, narrow the scope of compulsory licensing provisions, and restrict the authority of the pharmaceutical patent board. These measures, however, are not fully consistent with the growing international consensus on protecting pharmaceutical products. For example, the market exclusivity period is only five to six years [CPT Note: market exclusivity is 5 years under US Hatch/Waxman act, but as much as 10 years in the Europe Union. USTR seeks the EU rather than the US period]. Thailand is still in the process of developing a new patent law that is meant to comply with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs); parliament will consider such legislation in 1996. The Pharmaceutical Research and Manufacturers of America estimates that in 1994 its members lost $70 million in sales due to deficiencies in patent protection in Thailand. 1997 In September 1992, Thai legislation extended protection to pharmaceuticals and agricultural chemicals and increased patent protection to 20 years. In 1993, following complaints from private industry about inadequacies in the law, the Thai Government established administrative measures to provide a degree of market exclusivity for pharmaceutical products not eligible for protection under the 1992 law ("pipeline protection"), narrowed the scope of compulsory licensing provisions, and restricted the authority of the Patent Review Board. These measures, however, are not fully consistent with the growing international consensus on protecting pharmaceutical products. Thailand is still in the process of amending its patent law to comply with the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). The Thai legislature is expected in 1997 to consider a bill abolishing the Pharmaceutical Review Board. This measure would advance objectives of American manufacturers. Industry representatives report that in 1994, approximately $70 million in sales was lost due to deficiencies in patent protection in Thailand. Estimates of losses during 1995 and 1996 due to inadequate patent protection in Thailand are not available. 1998 In September 1992, Thai legislation extended protection to pharmaceuticals and agricultural machinery and increased patent protection to 20 years. In 1993, following complaints from private industry about inadequacies in the law, Thailand established administrative measures to provide a degree of market exclusivity for pharmaceutical products not eligible for protection under the 1992 law ("pipeline protection"), narrowed the scope of compulsory licensing provisions, and restricted the authority of the pharmaceutical patent review board. These measures, however, are not fully consistent with the growing international consensus on protecting pharmaceutical products. For example, the market exclusivity period is only five to six years. [CPT Note: market exclusivity is 5 years under US Hatch/Waxman act, but as much as 10 years in the Europe Union. USTR seeks the EU rather than the US period] Although the Thai Government recognizes importation as "working the patent," this policy position is not uniformly understood by Thai officials. The Thai Government has long promised to amend its patent law to comply with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), including the abolition of the Pharmaceutical Review Board. Due to domestic opposition and frequent changes of government, it has failed to do so. The Thai Government also refuses to exercise discretionary power to amend pending patent applications under the 1979 law. Such action would provide enhanced protection under the 1992 patent law and would permit coverage of the pharmaceutical product, as well as the production process. 1999 Thailand's Patent Law was amended by the Thai Parliament in October 1998 and the amended provisions will enter into effect in 1999. Pursuant to the U.S.-Thai IPR Action Plan, the amended law abolished the Pharmaceutical Review Board. According to initial observations, businesses in Thailand are generally pleased with the amendments. However, they foresee problems rising from new provisions regarding compulsory licensing authorizing the Director General of the Department of Intellectual Property to override a patent and issue a compulsory license if the patent is deemed as not being locally "worked" or if the price is deemed unreasonably high. In September 1992, Thai legislation extended protection to pharmaceuticals and agricultural machinery, and increased patent protection to 20 years. In 1993, following complaints from private industry about inadequacies in the law, the Thai Government established administrative measures to provide a degree of market exclusivity for pharmaceutical products not eligible for protection under the 1992 law ("pipeline protection"), narrowed the scope of compulsory licensing provisions, and restricted the authority of the Pharmaceutical Review Board. These measures, however, are not fully consistent with the growing international consensus on protecting pharmaceutical products. The market exclusivity period, for example, is a maximum of just six years [CPT Note: market exclusivity is 5 years under US Hatch/Waxman act, but as much as 10 years in the Europe Union. USTR seeks the EU rather than the US period]. The Thai Government has refused to exercise discretionary authority to amend pending patent applications under the 1979 law. Such action would provide enhanced protection under the 1992 patent law amendments and would protect not only pharmaceutical products, but also the production process. Sources: National Trade Estimate Reports http://www.ustr.gov/reports/nte/1999/contents.html http://www.ustr.gov/reports/nte/1998/contents.html http://www.ustr.gov/reports/nte/1997/contents.html http://www.ustr.gov/reports/nte/1996/contents.html http://www.ustr.gov/reports/nte/1995/contents.html Appendix D USTR Reports about Israel Pharmaceutical Polices 1999 NTE Report Current Israeli patent law contains overly broad licensing provisions concerning compulsory issuance for dependent and non-working patents. A draft revision of Israel's patent law, now under review, is expected to upgrade patent protection and eliminate compulsory licensing. . . . Despite U.S. objections, the Government of Israel enacted in 1998 an amendment to the patent law which allows non-patent holders to manufacture patented pharmaceutical products prior to the expiration of patent rights in order to submit data to foreign and Israeli health authorities to gain marketing approval. In addition, in 1998, the Israeli Government introduced legislation to permit the unauthorized parallel importation of pharmaceutical, patented or otherwise, into Israel and to sanction unfair use of test data. In February 1999, despite strenuous U.S. objections, the Knesset approved the legislation. 1998 NTE Report Current Israeli patent law contains overly broad licensing provisions concerning compulsory issuance for dependent and non-working patents. A draft revision of Israel's patent law, now under review, would upgrade patent protection and eliminate compulsory licensing. In addition, revised laws are under consideration for the protection of industrial designs, trademarks, and integrated circuits. In February 1998, the Israeli Knesset passed a separate amendment to the patent law which will allow non-patent holders to manufacture limited quantities of patented pharmaceutical products prior to the expiration of patent rights in order to submit data to foreign and Israeli health authorities to gain marketing approval. The amendment will also extend patent terms for pharmaceutical products. The U.S. unsuccessfully objected to the amendment and urged that Israel model its law on the comparable provisions of U.S. law. Appendix E USTR Reports about New Zealand and Pharmaceutical Drug Policies USTR's 1999 NTE Report Access for Pharmaceuticals -Pharmaceutical Management Agency (PHARMAC) PHARMAC was established in 1993 as a limited liability company to manage the purchasing or funding of pharmaceuticals for the Health Funding Authority (HFA). The HFA is responsible for purchasing health services and supplies for all New Zealanders. PHARMAC administers the National Pharmaceutical Schedule on HFA's behalf. The Schedule lists medicines subsidized by the government and the reimbursement paid for each pharmaceutical. The schedule also specifies conditions for prescription of a product listed for reimbursement. At its creation, PHARMAC was exempted from New Zealand's normal competition laws, an exemption upheld in a 1997 High Court ruling in an umbrella court case brought against PHARMAC by New Zealand's Researched Medicines Industry (RMI) association. While New Zealand does not per se restrict the sale of non-subsidized pharmaceuticals in NewZealand, private medical insurance companies will not cover unsubsidized medicines. Thus, PHARMAC effectively controls what prescription medicines will be sold in New Zealand and, to alarge extent, at what price they will be sold. Pharmaceutical suppliers complain that it is difficult to list new chemical entities and line extensions on PHARMAC's schedule. In general, PHARMAC will not apply a subsidy to a new medicine unless it is offered at a price lower than currently available subsidized medicines in the same therapeutic class or unless the producer is willing to lower its price on another medicine already subsidized in another class. Pharmaceuticals can also be delisted if a competing product is selected to serve the market as the result of a tender or if a cheaper alternative becomes available and the manufacturer of the original product refuses to discount its price to that of the lower-priced alternative. PHARMAC's use of reference pricing, the practice of doing trade- off deals between classes of drugs, and tendering practices can negatively affect a company's revenue return on its intellectual property. The United States and New Zealand governments have begun a dialogue with the aim of alleviating impediments to market access from PHARMAC's practices.