Transcript IP and International Trade Seminar 2

IMRS CI 2008
Topics Course No.1
The TRIPS and Public Health Debate
Do Intellectual Property Rights
Facilitate Research and Development
in new Pharmaceuticals or Hinder
Access to Medication?
Issues
• The Link between International IP protection,
Free Trade and Public Health
• TRIPS Provisions Affecting Public Health Issues
– Why is the WTO Debating about HIV/AIDS,
Malaria and other Epidemics?
• The Doha Declaration on TRIPS and Public
Health – All Issues Solved?
• The ‘Paragraph 6 Solution’ – Does it Properly
Address the Problem of Insufficient Domestic
Manufacturing Capacity in the Pharmaceutical
Sector?
Linking IP, Trade and Public Health
Introduction
• Pharmaceuticals are amongst those products
which are very expensive to develop to final
product stage but to (relatively) easy copy or
imitate
• For the R&D based pharmaceutical industry, IP
is an essential tool to recoup their R&D costs,
generate profits and fund R&D for future
products
• In order to explore global markets, Pharma aims
for strong, global and harmonised IP protection
Linking IP, Trade and Public Health
Focus on 2 separate issues:
• 1) How does the IP system contribute to
the development of drugs and vaccines especially those needed by the poor?
• 2) How does the IP system affect access –
especially again of the poor – to drugs and
their availability?
IP as Incentive for new Drugs
In Industrialised Countries (IDs):
• Pharma business models often rely on selling ‘blockbuster’ drugs (sales<$1billion p.a.) to finance high
percentage of failures in R&D
• Since public health services usually cover treatment and
(a considerable proportion of) the drug price, the is
always potential buyers of effective new drugs (a
market)
• IP protection for pharmaceuticals has proven as
incentive creation mechanism to develop drugs against
the prevalent diseases as it ensures – by creating
artificial monopolies - that R&D expenditures can be
recouped and profits made
IP as Incentive for new Drugs
In Developing Countries (DCs):
• Does (high) IP protection equally provide a
sufficient incentive for the production of new
drugs?
• This can be doubted because
– In most cases, no effective state insurance
scheme for healthcare products/services exist
– Most people pay for their own health care
– Per capita spending on healthcare is around
$23 p.a. in low income DCs
IP as Incentive for new Drugs
Effects of an absence of a significant
market in DCs:
• Market based principles (which encourage
development and production of drugs wanted)
will only function if ‘customers’ can pay for the
respective product
• (strong) IP as such only prevents copying by
competitors but does not serve as incentive
mechanism if no ‘customer’ base exists which
can pay enough to recoup the investments…
IP as Incentive for new Drugs
Results for the development / production
of new drugs for DC related diseases:
• Sufficient development of drugs regarding
diseases found in both DCs and IDs
(diabetes, heart diseases – also HIV/AIDS? HIV
strains in DCs distinct to those in IDs…)
• Less than 5% of Pharma R&D spend (and only
13 out of 1933 drugs approved over 20 years)
on DC diseases (Malaria, TB, Sleeping
Sickness, etc)
IP as Incentive for new Drugs
Role of Public Sector Funding / Research
• National Institutes of Health / Medical Research
Councils in IDs concentrate on domestic
diseases
• Public Sector spending in DCs is often
comparable little
• WHO, NGOs and Public-Private Partnerships
(PPPs) aim to increase spending for DC related
diseases (neglected diseases, ND)
IP as Incentive for new Drugs
From Market-driven to Health Needsdriven Approach:
 How to create incentives for R&D in NDs?
• Funding basic research
• Prizes to reward specific innovations
• Advance purchase commitments
• Patent buyouts (welfare-based price)
• Global R&D fund for NDs, centralised IP
portfolio for ND – individual exploitation in potent
markets
IP as Incentive for new Drugs?
Conclusions:
• For diseases in both IDs and DCs, sufficient
incentives may exist but their effectiveness may
be limited due to differences in the disease
• As long as there is no sufficient market in DCs to
pay for the most relevant diseases, IP protection
alone is not sufficient for the private sector to
engage in R&D for neglected diseases
• Public sector spending and alternative
incentives thus must be significantly increased
to provide for research incentives
IP Limiting Access to Drugs?
General Effect of IP protection:
• IP on drugs (especially patents) only grant a
limited monopoly preventing competitors from
making, using and otherwise exploiting a
protected invention
• As such, this does not prevent competitors from
offering a drug addressing the same disease as
long as it does not involve the patented invention
• However, the ability to exclude competition from
copied drugs usually allows to charge high prices
IP Limiting Access to Drugs?
• Do IPRs (especially Patents) on drugs effectively diminish competition and lead to prices
unaffordable for most people in DCs?
2 Main Counter Arguments:
• As Patents are usually not sought in smaller
DCs, they cannot represent a relevant factor for
access to drugs in these countries
• If they are sought, they are not a main price
determinant or there are other factors limiting
access to drugs
IP Limiting Access to Drugs?
Effect of Non-Patenting in (small) DCs:
• In DCs with small markets and limited
technological capacity, potential earnings and
infringements risks are low – so that patenting is
not worth the expensive patenting fees
• But significant patenting in DCs with bigger
markets and tech. capacity (SA, India, Brazil)
• Smaller DCs generally rely drug imports from
these bigger DCs – patents (and prices) there
influence also availability in smaller DCs
IP Limiting Access to Drugs?
Effect of Non-Patenting in any DCs:
• Basically no patenting regarding the main
diseases relevant in most DCs (TB, Malaria)
so that patent protection cannot negatively
impact on access to drugs?
• Probably true – but lack of patenting only results
from lack of incentive to develop drugs for
these DC diseases as there is no economically
potent customer base…
IP Limiting Access to Drugs?
Patents and high Prices (general):
• Importance of Drug Prices: Decisive for
access; and: The more (poor) people spend on
healthcare, the less remains for other essentials
• Drug prices affected by
–
–
–
–
–
purchasing power (of public health authorities, Gov‘s)
Competition and market structure
Responsiveness of demand to price
Availability of Price Controls, other regulations
Import taxes, tariffs
IP Limiting Access to Drugs?
Patents and high Prices (IDs experience):
• After patent expiry, generic competition tends
to bring down prices significantly if
– sufficient market demand for off-patent drug
– Several (best 5 or more) generic competitors exist
• Governments can encourage competition and
therefore ensure low prices by facilitating early
market entry of generics after patent expiry
• Gov‘s can try to regulate markets by price
controls if their market is potent enough
IP Limiting Access to Drugs?
Patents and high Prices (DCs experience):
• Option to bring down prices by facilitating generic
competition?  Small market size and lack of
manufacturing capacity limit ability to
encourage production of generics
• Option to adopt price controls? Only if market is
potent enough for Pharma not to withdraw from it
 In global markets and national market
economies, (drug) low prices are dependent on
effective competition and sufficient demand
IP Limiting Access to Drugs?
Patents and high Prices – any real impact?
• Patents only have an strong impact on price if
sufficient potential (generic) competitors exist
• Impact of patents is likely to be strongest in big
DCs with strong generic industries (India, etc)
• Impact in these countries will extend to all DCs
which are relying on generic imports
• Recent differential pricing policies of patent
holders amount to price reductions in some DCs –
these can be utilised by parallel importation
IP Limiting Access to Drugs?
Other Factors affecting Access:
• Absence of healthcare infrastructure, efficient
drug distribution
• Lack of public spending
• No safeguards ensuring safe medication
 While comparative relevance of patents is
disputed, surely IP policy needs to be
tailored towards the public health needs
TRIPS rules affecting Public Health
• Which TRIPS provisions are relevant for
national IP laws regulating IP protection of
pharmaceutical products?
• Which IPRs could apply to (new) drugs
and which exceptions can a national
legislator foresee without infringing
TRIPS?
TRIPS rules affecting Public Health
• In general, (elements of) pharmaceutical
products can receive protection as
– Inventions under patent provisions (Art.27-34)
– brand names under trademark rules (Art.1521)
– Data submitted to obtain regulatory approval
from health authorities against unfair use (by
second comers), Art.39 sec.3
TRIPS rules affecting Public Health
General distinction between patents – trademarks:
• patents actually protect inventive drugs and
processes used in the development of drugs
• trademarks can merely prevent others from
using the (same or a similar) brand name, logo,
etc. with regard to the (same or similar) drug
 Therefore they have a different impact on
access and competition: Only patents directly
affect the production, trade and conditions of
availability to the public and competitors of
protected drugs…
TRIPS rules affecting Public Health
Patent protection for pharmaceuticals
• Scope: Patents protect inventions (↔ discoveries) in all fields of technology, Art.27 sec.1
TRIPS allows to exclude from patentability:
• Plants and Animals (except micro-organisms)
• Essential biological processes (other than nonbiological & micro-biological processes)
• Diagnostic, surgical and therapeutic methods of
(medical) treatment for humans and animals
TRIPS rules affecting Public Health
• Tendency in IDs (with strong bio-tech/pharma
industry):  patents granted to purified,
isolated or crystallized products obtained
from a natural source
• Some DCs tend to use all TRIPS flexibilities to
limit patents related living, pre-existing material
• Free Trade Agreements (FTAs) with EU, EFTA,
US, Japan often force DCs to grant „TRIPSplus“ patents on bio-material
TRIPS rules affecting Public Health
Tendency for a ‘liberal’ application of Art.27
• Patents apply to inventions which are new (not
known anywhere world-wide), involve an
inventive step (not obvious for persons skilled
in the technology) & are industrial applicable
(or show utility)
• In IDs, pharmaceutical patents are often granted
to a natural substance (often found in DCs) in
respect to its new (not known) therapeutic use
• Some IDs also allow pharmaceutical patents on
second indications / second „new“ uses of a
medication (evergreening)
Doha Declaration & Para.6 Solution
Consider the following questions:
• In your opinion, what (if any) importance did the
Doha Declaration on TRIPS and Public Health
have for easy access to medication in DCs?
• Explain the interrelation of compulsory licensing
under Art.31 TRIPS, exports of drugs produced
under such a license and countries lacking
domestic facilities to produce pharmaceuticals!
How is this problem solved under the so called
‘paragraph 6 solution’ (Decision of 30th August
2003)?
Doha Declaration & Para.6 Solution
Doha Declaration on TRIPS and public
health, 11/2001
• Background: LDCs in Africa require fast and
easy access to cheap medication to address
Pandemics such as HIV/AIDS, Malaria or
Tuberculosis. Strong patent protection without
flexibilities prevents such access to medication.
• The Doha Declaration was agreed at the
Ministerial Conference in Doha addressing the
problem of easy access to medication
Doha Declaration & Para.6 Solution
The Doha Declaration addresses
• The right to interpret TRIPS supportive to protect
public health and in light of its objective/principles
• TRIPS flexibilities (compulsory licenses,
determination of national emergency, freedom to
allow parallel imports (see Art.6 & fn.6 to Art.28)
• A mandate to find a solution for countries with
insufficient domestic production facilities
cannot effectively utilise compulsory licenses (due
to Art.31 f TRIPS)
• Extension of product patent moratorium for LDCs
Doha Declaration & Para.6 Solution
• Background: DCs policy option of allowing
parallel imports from low price countries due to
– Differential pricing structures of patent
holders/licensees
– Price controls for medication
– No recognition of patent term extensions
– Compulsory licenses? (-), Art.31 f) TRIPS ensures
that main production remains in the domestic market
• Patent holders’ response by tackling parallel
imports through FTAs, different product
packaging and varying brand names
Doha Declaration & Para.6 Solution
Background: Compulsory licensing (CL) under
Art.31 TRIPS and manufacturing capacity
• The grounds on which compulsory licenses are granted
are freely to be determined by national laws – TRIPs
does not impose any limitations and allows also the use
of CL to tackle public health crisis’
• Art.31 rather regulates a long list on the procedure to be
followed and terms to be included in CL
• In particular, Art.31 f) requires a production under a CL
to be predominantly for the supply the domestic market
 DCs which lack domestic production facilities cannot
produce ‘at home’ and cannot rely on imports from
countries where the drug is under patent protection
Doha Declaration & Para.6 Solution
The Doha “paragraph six solution” (08/2003)
• Art.31 f) is waived for the exporting country
• coverage: esp. HIV/AIDS, Malaria, TB and the
patented inventions (products, processes)
needed to address public health problems
• Generally, all LDCs, DCs and Countries in
transition can use the system as importers
• All WTO Members can be exporters
• Safeguards against Trade Diversion (specific
labelling, packaging; complete exportation, etc)
Art.31 bis TRIPS & TRIPS Annex
Consider the following question:
• Would you agree that the permanent version of
the ‘paragraph 6 solution’, the new Art.31 bis
TRIPS and the related Annex to TRIPS solves
the problem of insufficient drug manufacturing
capacity in most developing countries?
• In your opinion, what else should be done
regarding (international) IP law to facilitate
access to drugs?
Art.31 bis TRIPS & TRIPS Annex
Amendment to TRIPS (12/2005)
• Amendment as permanent version of the
(temporary) paragraph 6 solution - almost
identical in substance
• (remaining) Problems:
– Merely one use so far of the para.6 solution… A sign
of its failure to address public health concerns?
– legal status of chair’s statement (containing further
limitations on using the para.6 solution)
– How to facilitate research in and products for
‘neglected diseases?
– So far, only a handful of countries have ratified the
amendment…
Case Studies
Consider the 2 case studies:
• Compulsory Licensing in Thailand
• Bird Flu Outbreak in UK
Compulsory Licensing in Thailand
• Assume the right holders AL and BMS object the issuance of a
compulsory license and consider to lobby their respective
governments to take the case to the WTO dispute resolution. They
think that key provisions of TRIPS have been violated by the
procedure adopted by the Thai Government. In particular they
argue
• that the Thai government cannot issue a compulsory license for
‘non-epidemic’ diseases as they are not covered by the Doha
Declaration on TRIPS and Public Health
• that the government had not sufficiently negotiated a license with
them before moving to issue a compulsory license and
• that any imports of generic drugs (consisting of the patented
medication) from India violate their patent rights under Art.28 TRIPS
and further the newly established mechanism of Art.31 bis and the
Annex to TRIPS
• Advise the Thai Government on their chances of winning a potential
dispute in the WTO!
Compulsory Licensing in Thailand
Compliance of the Thai CL with WTO Law
• Option to issue a compulsory license for ‘nonepidemic’ diseases?
• Not covered by the Doha Declaration on TRIPS
and Public Health?
• Para. 1 focussing on epidemics, but para.4 and
esp. para.5 (b): right to grant CL and freedom to
determine the grounds on which CL is granted
Compulsory Licensing in Thailand
• Insufficient negotiations for a license with right
holder before moving to issue a compulsory
license?
• Art.31 (b) generally requires such ‘efforts to
obtain authorisation’. But this requirement is
waived, among other cases, in those of ‘public
non-commercial use.
• Art.31 (b) does require prompt notification of the
right holder
Compulsory Licensing in Thailand
• imports of generic drugs (consisting of the
patented medication) from India violating patent
rights under Art.28 TRIPS?
• Thailand could legalise parallel importation (first
sale in India as exhausting the importation right),
see Art.fn.6 to Art.28 and Art.6 – but
controversial whether first sale must be one with
the consent of right holder…
• Thailand could also extend CL to cover
distribution of Indian drugs in Thailand
Compulsory Licensing in Thailand
• imports of generic drugs (consisting of the
patented medication) from India violating
the newly established mechanism of Art.31
bis and the Annex to TRIPS?
• Art.31 bis TRIPS does not apply as drugs
are not under patent in India!
Bird Flu Outbreak in UK
The British Health Authorities plan
• to issue a compulsory license to domestic producers in the UK to
produce more vaccination as soon as possible
• to request other EU member countries, the US and India (all
countries where the vaccination is under patent) to authorise a
compulsory license to produce large quantities to be exported to the
UK
The holder of the patent for the vaccination does not object to a
compulsory license in principle but thinks that the procedure under
Art.31 TRIPS has been violated. The company further considers any
imports into the UK as violations of WTO law and points to the fact
that the UK has opted out to use the ‘paragraph 6 solution’ as an
importer (as it is stated in the chairman’s statement related to the
recent Art.31 TRIPS amendment).
• Examine the legality of the actions of the UK government under
TRIPS, including the recent amendment to TRIPS!
Bird Flu Outbreak in UK
• Violation of procedure of Art.31 because no
negotiations with the right holder took place
before issuance of CL?
• Art.31 (b) allows CL issuance without prior
negotiations in cases of ‘national emergency
and other extreme urgency’ this arguably covers
bird flu outbreak (see para.1 Doha Decl); further,
each WTO Member has the ‘right to determine
what constitutes a national emergency…’
(para.5 c) Doha Decl)
Bird Flu Outbreak in UK
Legality of Imports produced under CL
abroad:
• As Art.31 f) prohibits the exportation of the
predominant part of drugs prepared under CL,
such actions are legal only under the rules of
Art.31 bis, Annex to TRIPS
• Since UK opted out to use the system, can it opt
back in? See Annex para.1 b), the related chair’s
statement…
Thank you for your attention!
Questions to [email protected]