WTO MEMBERS RE-OPEN FIGHT OVER SUBSTANCE OF TRIPS-HEALTH AGREEMENT

Inside U.S. Trade
Date: March 12, 2004


The U.S. and several developing countries appear to be re-opening a fight
over whether some of the most controversial issues negotiated in last yearıs
agreement to give developing countries increased access to generic
pharmaceuticals will be included in a final amendment to World Trade
Organization rules. These countries are split on whether a written
statement, which was read by the chairman of the WTO Council on Trade
Related Aspects of Intellectual Property Rights (TRIPS) and ultimately
allowed the U.S. to agree to this modification to TRIPS, should be reflected
in a final amendment to the TRIPS agreement.

Reflecting that statement in an amendment to WTO rules is seen as critical
by the U.S., as it contains pledges that developing countries will only take
advantage of the new rules to deal with health crises, and that several of
the more advanced developing countries would not use the agreement except in
the most dire emergencies to import generic drugs manufactured under a
compulsory license.

But developing countries are resisting this U.S. demand, and argue that the
statement is not part of the formal agreement.

As a result, meeting the June deadline for agreeing to an amendment
incorporating the decision into the TRIPS is no longer seen as possible,
sources said. At the March 8 TRIPS Council meeting, the new chairman, Hong
Kong Ambassador to the WTO Joshua Law, suggested this deadline could be
extended by nine months.

At issue is a written statement from Singapore Ambassador to the WTO and
former TRIPS Council Chairman Vanu Gopala Menom, which was read by the
General Council chairman in an August 31, 2003 General Council meeting. That
same meeting accepted a December 2002 agreement to give developing countries
that lack the capacity to manufacture generic drugs a waiver from WTO rules
that would allow them to import generic copies of patented drugs
manufactured in third countries under a compulsory license. The U.S. only
accepted that agreement after other countries agreed to Menomıs statement.

Specifically, the Menom statement was meant to provide safeguards for the
December 2002 agreement, such as by stating that the flexibility being
granted to developing countries was to protect public health and not to
pursue industrial and commercial policy objectives through compulsory
licensing. It also refers to 11 countries that are voluntarily opting out
using the agreement allowing the use of compulsory licenses to export
generic copies of patented drugs with the exception of emergencies; Hong
Kong China, Israel, Korea, Kuwait, Macao China, Mexico, Qatar, Singapore,
Chinese Taipei, Turkey and the United Arab Emirates (Inside U.S. Trade,
Sept. 5, p. 1).

One developing country source argued that developing countries believe the
chairmanıs statement was never intended to be legally binding, and was
instead intended to allay the fears of brand-name pharmaceutical companies
that the TRIPS agreement would by misused, such as through the diversion of
drugs to rich countries. This source said it was not intended to have the
same legal effect as the TRIPS decision.

U.S. industry sources strongly dispute this suggestion, as they argue the
December 2002 agreement prepared by then-TRIPS Council Chair Eduardo Perez
Motta was only agreed to by the U.S. in connection with the Menom statement.
³Itıs got to be Motta as defined by Menom or read together with Menom,² one
industry source said, referring to any future amendment to TRIPS. Not
referring to Menom in the amendment would effectively disregard it, which
would be unacceptable, another source said.

Developing countries advanced their argument prior to the March 8 formal
TRIPS meeting in consultations with Menom, who was not succeeded as chair
until after the March 8 meeting. In particular, the 11 developing countries
identified as opting out of using the compulsory licensing rules in the
Menom statement argued they wanted to avoid turning what they see as a
voluntary statement into something more legally binding.

European sources said the European Commission also does not see it as
necessary for there to be a written reference to the Menom statement in the
TRIPS amendment. The Commissionıs view is that there is no reference to the
Menom statement in the December 2002 decision, which was formally agreed in
August 2003. As a result, the EU view is that it is not appropriate for
there to be a written reference to Menom in an amendment to the TRIPS
agreement, sources said.

However, Germany disagrees with this line. Germany, like the U.S., sees the
TRIPS decision as effectively having two parts -- the Motta text from
December and the Menom statement.

Despite this split, the U.S. and EU agree that translating the decision into
a TRIPS provision should be a technical exercise in order to avoid reopening
debates over the issue. These countries argue this would also allow for the
amendment to be completed by the June deadline, a Geneva source said.

Some developing countries, in contrast, are not in a rush to complete work
on the amendment because they are interested in further refining it, which
could also be a potential hurdle to finalizing an amendment. For example,
one developing country source said the decisionıs rules on notification
before using the system impose heavy restrictions on developing countries
and could be changed.

Industry sources said the Motta decision and Menom statement currently have
legal effect, and will continue to until they are replaced by an amendment
to the TRIPS. As a result, they downplayed the importance of actually
completing work on such an amendment.

At the end of the day, the Menom statement and the Motta decision have the
same legal certainty as an amendment to the TRIPS, one industry source said.
³We are not going to sacrifice substance just to get this amendment done
quickly,² the source said.

The U.S. and developing countries also disagree over what legal form an
amendment to the TRIPS should take, with the U.S. suggesting a footnote to
the TRIPS. However, industry sources said the U.S. brand name drug industry
is not insisting on a specific legal form for the amendment.

Developing countries want the decision reflected in a new paragraph that
would be included in TRIPS Article 31. Developing countries are
uncomfortable with a footnote, one delegation source said, because they do
not believe it would be as strong as text within the TRIPS. A footnote is
something ³that adds clarity to the main body² of a text, but if there is a
conflict between the text and a footnote, the main text ³wins the day,² one
developing country delegation source said.

³Itıs important to have this in the main body,² the source said.

The EU at the March 8 meeting said it could accept a footnote but would
prefer that the amendment take a different form, according to a Geneva
source. If a footnote is used, the EUıs view is that it should be made clear
that this would be an exceptional case, the source said.

Separately, Doctors Without Borders late last week charged, in a letter to
EU Trade Commissioner Pascal Lamy, that the U.S. free trade agreement with
five Central American countries undermines the Doha Declaration on TRIPS
authorizing compulsory licensing. The group asked Lamy to raise this issue
with the U.S., and to urge the U.S. to abandon its pursuit of ³TRIPS plus²
provisions in bilateral and regional FTAs.

The letter, reprinted below, was issued to alert other countries to what
they are being asked to give up in the context of FTAs with the U.S., a
health activist source said. It was also intended to push Lamy to take an
active stance against the inclusion of such provisions in FTAs.

The greatest problem with the CAFTA, the source said, is a provision in the
agreement that would prohibit drug regulatory authorities from granting
marketing approval for drugs produced by generic manufacturers under a
compulsory licensing system unless the patent owner of that drug gives its
consent. The letter states that Article 15.10(3)(a) of the agreement states
that a generic producer may not obtain marketing approval of a product
covered by a patent ³during the term of that patent, unless by consent or
acquiescence of the patent holder.²

The letter states that this would effectively nullify the effects of the
August TRIPS decision for the parties to the agreement.

An NGO source acknowledged the five Central American countries parties to
the agreement -- Costa Rica, Guatemala, Nicaragua, El Salvador and Honduras
-- agreed to the commitment and will have to comply with these rules. But
the source said such provisions should not be included in the Free Trade
Area of the Americas being negotiated by the U.S., or in bilateral deals
under way with countries such as Thailand. -- By Ian Swanson

Text: Doctors Without Borders Letter On TRIPS

_______________________________________________

Date: March 12, 2004

March 5, 2003

Dear Mr Lamy,

In view of the forthcoming WTO TRIPS Council meeting next week, we would
like to bring some critical issues to your attention.

The adequate protection of public health demands that WTO Members be
permitted to give full effect to the letter and spirit of the Doha
Declaration on TRIPS and Public Health (³Doha Declaration²) in their
domestic and/or regional legislation.

MSF was therefore very pleased to see the Communication of the EC to the
last TRIPS Council, dated 21st November 2003 in which the EC states ³...the
EC reiterated its commitment to fully take the Doha Declaration into account
into their trade policy, in particular in the context of technical
assistance for the implementation of the TRIPS Agreement ... [and calls
upon] all technical assistance providers, and in particular multilateral
organisations, to join them in making this commitment, and to fully
integrate the Doha Declaration in their policies and practices.²

However there are several bilateral and regional agreements that include
provisions that threaten the implementation of the Doha Declaration
including the effective use of the August 30th decision.

For example the Central American Free Trade Agreement (CAFTA) recently
agreed between the United States and Costa Rica, El Salvador, Guatemala,
Honduras, and Nicaragua includes clear examples of ³TRIPS plus² provisions.
Under CAFTA, parties will be obliged to extend pharmaceutical patent terms
beyond the 20 years required in WTO rules; prevent the marketing approval of
generic medicines if there is a patent; and grant additional exclusive
marketing rights by prohibiting drug regulatory agencies to use original
pharmaceutical test data for the registration of generic medicines, a
restriction referred to as ³data exclusivity.²

Our deepest concern is with one provision (Article 15.10(3)(a)) that states
that a generic producer may not obtain marketing approval of a product
covered by a patent ³during the term of that patent, unless by consent or
acquiescence of the patent owner². Even if a license on the patent is
granted to a generic producer/importer, the patent owner appears to be able
to prevent marketing approval of its equivalent medicine. This means that
even with a compulsory license the relevant generic medicine cannot be
marketed because the drug regulatory authorities are prohibited from
granting it a marketing approval. This provision would appear to prevent the
effective use of compulsory licensing including the August 30th mechanism.

If this were the case and if CAFTA comes into force, then, the Doha
Declaration and the August 30th Decision could be nullified for the parties
to the Agreement at a single stroke.

Similar provisions, all of which exceed WTO requirements, are also found in
the draft FTAA agreement. CAFTA is only one of a number of Free Trade
Agreements that the United States has pursued or is pursuing. MSF is
concerned that further proliferation of TRIPS plus provisions in such
agreements may jeopardise the progress that has been made on access to
medicines. This may have enormous consequences for the health and life of
millions of people. This is particularly so given the deadline of 1st
January 2005 after which pharmaceutical product patent protection has to be
provided by all non-Least Developing Country Members.

Therefore, we request that you follow up on your commitment by raising the
concerns about the threats of TRIPS plus provisions in bilateral and
regional trade agreements to the full implementation of the Doha Declaration
and the August 30th decision in the TRIPS Council.

We also ask you to raise these concerns with your US counterparts and to
urge the US to abandon their pursuit of TRIPS plus provisions that
negatively affect access to medicine in developing countries.

We would be most willing to meet with you to discuss how further progress
can be made in this area and to update you on developments on access to
medicines in the countries where we work.

Sincerely yours,

Ellen Œt Hoen

Director Médecins Sans Frontières

Campaign for Access to Essential Medicines

cc:

TRIPS Council members

WHO

UNAIDS