U.S. Latest Conditions on Paragraph 6 - Illusory Humanitarian Sales

Brook Baker, Health GAP
August 19, 2003

As reported by Cecilia Oh of the Third World Network, the U.S. has clarified its Doha-rollback agenda on paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. In essence, the U.S. seeks to impose the following four conditions on the other WTO members, all of whom have previously acquiesced to the flawed Motta text, which already conceded far too much ground to the USTR and Big Pharma:

  1. The paragraph 6 solution should only be used for "humanitarian purposes" and should not be "abused" - a bald attempt to deincentivize a robust generic industry, which like all private enterprise industries is ultimately based on a profit motive.
  2. The paragraph 6 solution should contain an enforceable opt-out provision - a self-exclusion that would be binding on developed countries and perhaps on some high and middle income developing countries as well, which could be coerced via trade and diplomatic pressure to relinquish their citizens' rights to access to more affordable, imported generic medicines (countries pressured so far include Korea, Malaysia, Singapore and even South Africa - a potential regional source for much of Africa!).
  3. The paragraph 6 solution should entail a review mechanism to monitor implementation of the production-for-export solution - an open-ended, roving review of country utilization, diversion experiences, generic company profits and anything else the U.S. could discover to undermine the accord.
  4. The paragraph 6 solution should require distinctive trade dress (a requirement that generic manufacturers use special packaging/labeling or that they alter products' colour or shape) - an alleged anti-diversion requirement that could lead to consumer confusion and add to costs of manufacture.

All of these conditions are deeply problematic, but number one - the humanitarian-purpose requirement is the most blatantly obstructionist. The fundamental problem is that the proprietary pharmaceutical industry has never seen a penny of potential profit that it does not think that its deserves - whatever the cost in human lives. This profit-fundamentalism explains excessive pricing in Northern markets and the industry's choice during the 1990's-2001 to sell small quantities of branded medicines to local elites in developing countries at high prices (and thus high profits) instead of making medicines available in large quantities at low margins to poor consumers.

When price reductions on generic ARVs, initiated by Cipla, undercut Pharma's pricing to $.03 on the dollar, Big Pharma, its U.S. Trade Representative allies, have initiated countless diversionary and obstructionist plans to derail the development of a robust generic industry that will dramatically reduce the cost of medicines not only for ARVs for other medicines responsive to the public health needs of developing countries. These obstructionist tactics by the industry include: (1) the laughable Accelerating Access Initiative which has "succeeded" in bring ARVs to only 36,000 in 2 1/2 years of existence (end of 2002), (2) market segmentation in the AAI programs that for many manufacturers excluded discounting prices in the private sector where many poor consumers ultimately access their medicines, (3) exclusive voluntary licenses with high royalty fees and again market segmentation, e.g., GSK with Aspen in S. Africa, and (4) most notably, persistent lobbying with the USTR and Bush White House to undermine access to generics and to heighten intellectual property protections in the post-Doha negotiations and in each and every bilateral and plurilateral trade agreement, including that currently being negotiated in the heart of the AIDS pandemic with the South African Customs Union.

The USTR, in its own turn, has sought to undermine the Doha Declaration with multiple conditionalities since February of 2002, proposing: (1) disease limitations, (2) exporting country limitations, (3) importing countries limitations, (4) product limitations (excluding diagnostics and vaccines), (4) anti-diversion rules, and (5) utilization of procedurally inefficient and burdensome compulsory licenses, country-by-country and drug-by-drug, in both importing and exporting countries. At the same time, the USTR has been trying to trick multiple small developing countries, especially in Africa, to imagine that they can jump-start a generic drug industry, promising each country that it can become a regional supplier. This inefficient production, if it ever comes to fruition, will then be used against countries that wish to import even cheaper generics because they will now have some productive capacity.

In a way, there is a refreshing frankness in the nakedness of the current US/Pharma position - "we don't want generic drug companies to make money, we want them to operate on a humanitarian, nonprofit basis while we rake in tens of billions of dollars in profit each and every year." Confirming this objective, in Montreal, at a July 30 press conference, USTR Zoellick expressly said that the U.S. does not was the new post-Doha system to become a loophole for creating a commercial export industry. Zoellick and Big Pharma have consistently charged that the production-for-export system could be "abused" by the generic drug industries in Brazil, China, and most especially India. To limit that abuse, the US/Pharma team have attempted to limit markets by excluding middle income developing countries, including South Africa, and by excluding medicines for most diseases. Now they have gone even further - they will let generic producers export, but only on a hypothetical "humanitarian and non-profit" basis.

One could wish that the generic industry worldwide was altruistic enough to make HIV/AIDS medicines and other life-saving medicines for 50 years on a nonprofit basis, investing in productive capacity, fixed-dose combinations, drug registration, etc., etc. But, let's get real. In order to invest in producing medicines at efficient economies of scale, generic manufacturers need predictable markets, regulatory access, freedom from patent-infringement lawsuits, and relief from ancillary trade agreements that undermine their ability to sell standard-quality medicines cheaply. They also need not to have to jump through byzantine procedural loopholes seeking compulsory licenses for export, product-by-product and country-by-country. In other words, the generic industry and the consumers they can supply, who are dying - thousands a day - from treatable diseases, need a simple efficient procedure for producing large quantities of quality medicines with a modest rate of return that will best be guaranteed by the presence of competition in the generic industry.

The best solution for the production for export dilemma is one under Article 30 of the TRIPS Agreement which would authorize production and export to countries with no patent on file or those which have issued their own compulsory licenses. Pharma could help by sharing technical know-how and sharing registration dossiers, like Lilly has done with TB drugs, but we know that that assistance will not be forthcoming. Instead, we get industry protectionism and obstructionism, aided by their USTR cronies, who try to trade concessions on agricultural subsidies for the lives of people desperately needing access to medicines.

Brook K. Baker
August 19, 2003
Health GAP
Northeastern University School of Law
400 Huntington Ave.
Boston, MA 02115

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