Vol. 22, No. 24
June 17, 2002

The European Union (EU) is stepping back from a bold proposal it made in March to revise the World Trade Organization’s (WTO) Trade-Related Intellectual Property Rights (TRIPs) agreement to allow the export of drugs subject to compulsory licensing to countries that need the patented drugs to fight major epidemics such as HIV/AIDS. Faced with a sharp split among its own members and the complexity of implementing its proposal, the EU is drafting a new offer that it will present to the WTO’s TRIPS Council June 25-26 (see WTTL, March 11, page 4).

A June 11 draft of the EU’s communication, obtained by WTTL, would significantly narrow the exception it proposed for developing and least developed countries that invoke the compulsory licensing provisions of TRIPs.

At the WTO’s Doha Ministerial Meeting in November, members adopted a policy statement liberalizing the application of TRIPs rules on compulsory licensing for countries dealing with a major health crisis and needing access to drugs that might not be available because of patents and prices. Ministers directed the TRIPs Council to work out the details of implementing that policy.

A key problem with the new policy involved developing countries that might invoke the compulsory license rules but don’t have a pharmaceutical industry with the capacity to manufacture the drug. Under current TRIPs rules, compulsory licenses only allow domestic production and consumption and block the export of drugs to other countries. The EU’s proposal would allowed one country to produce the drug for export to another country that issued the compulsory license.

The EU proposal drew complaints that it might undermine TRIPs protection for patented drugs and that it promoted the worldwide distribution of generic drugs. These objections forced the EU’s European Commission (EC) to issue a statement disavowing such interpretations and backing the need for research-based pharmaceutical companies to make profits to support their research. “Medicines do not invent themselves,” the EC declared. It also said conditions needed to be established to make sure the licensed drugs were used by the people that need them and are not diverted for profit to others.

In the latest draft of the communication the EU will present to the TRIPs Council, the EC’s 113 Committee, which is drafting the document, includes language that would require compulsory licensing countries to take “all reasonable and necessary regulatory and/or administrative measures to ensure that condition (ii) (i.e., no further reexportation) is effectively respected.” It also adds a provision calling on all WTO members to prevent diversion of these drugs.

The draft also contains language supported by the pharmaceutical industry, providing the patent holder the opportunity to supply the needed drugs “at strongly reduced prices.” If these firms can provide the drugs “in terms of price, safety and sustainability, this should be a reason not to resort to a compulsory license,” the EU draft states.

One issue still being debated in the 113 Committee is whether the exception for manufacturing and exporting a drug under patent should be limited only to developing and least developed countries. Some European generic drug manufacturers reportedly want the opportunity to supply drugs under compulsory licenses. But patent-based firms in Europe want this exception limited. They want to prevent generic firms in countries such as Canada, Brazil and Argentina from using the exception to circumvent patent rights.

A paragraph in an earlier draft, which would have limited the export rule to producers in “developing and least developed countries,” was taken out. Sources, however, say they expect the paragraph to be put back in before the EU makes its presentation to the TRIPs Council.

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