Transcript pharmaceutical apartheid: patents, trade, and treatment access

Update: The International
Intellectual Property Regime
and Access to Medicines
Prof. Brook K. Baker
ABA AIDS Coordinating Comm. Fall Meeting
Nov. 2, 2007
1
Introduction
TRIPS, Doha Declaration, and Para. 6
Decision
Pharma/U.S. trade pressure and demands:
USTR Special 301 Watch List, Trade Advisory
Committees
GSP benefits
Pharma lobbying
TRIPS-plus Trade Agreements
Pharma Wars
Thailand/Abbott
India/Novartis
2
Historically, Patent Regimes were Pluralistic
Pre-1994, enormous variability worldwide.
Over 50 countries, including in Europe, did
not provide patent protections for medicines
and/or food products.
In the 1980’s, led by drug companies, U.S. IP
industries banded together to try to achieve a
globalized standard set of baseline
protections for patents, copyright, and
trademarks.
3
WTO TRIPS Agreement Increased IPRs Worldwide
Uniform floor of intellectual property protection
worldwide.
20-year term of patent protection
Restrictions on use of clinical trial data
Restricts discrimination against fields of technology,
i.e., medicines, and against importation (outlawing
rules favoring locally produced drugs).
Transition periods for developing and least developed
countries, but most important non-product-patent
countries, e.g., India, were given until Jan. 1, 2005 to
become TRIPS-compliant with respect to medicines.
4
IMPORTANT IPR DATES POST-TRIPS
Pre-1995 drugs
(“older drugs”)
TRIPS has no retroactivity, meaning that drugs that were not
patented in a Member before 1995 need not be patented
retroactively.
1995 “mailbox” drugs
(“newer drugs”)
Developing countries are required to accept patent applications
on post-1995 innovations and keep them in a patent-queue
“mailbox.” Most developing countries started processing these
mailbox applications in 2000, but some countries like India,
which didn’t have product patents, can wait until 2005. (Note:
least developed countries – LDCs - have until 2016). As part of
the IP tradeoff, the patent applicant might be given 5-years of
marketing exclusivity once it registered the “mailbox” drug. This
exclusivity does not apply to LDCs.
2005 drugs
(“newest drugs”)
Except for LDCs, all WTO members, including India and other
major generic suppliers will have to grant patent protection for
drug products as well as processes.
2006
2016
LDCs must become TRIPS-compliant unless they get extension.
Transition period for patents on medicines automatically
extended, Para. 7 of Doha Declaration, but nat’l laws still apply.
5
TRIPS Has Important Flexibilities
“Parallel importation” (Article 6)
Comparison shopping for originator drugs
Importation of drugs lawfully produced and sold elsewhere.
“Compulsory licenses” (Article 31)
Granted on any grounds whatsoever, including public health,
with special expedited provisions for emergencies, public, noncommercial use, and competition-based licenses
No-hassle, “limited exceptions” to patent rights (Article
30)
Research, early working for purposes of registration.
Actual use of flexibilities was challenged by the U.S.
and the drug industry, most famously in South Africa.
6
Exceptions to Prior Negotiation
Article 31 ordinarily requires that “the proposed user
has made efforts to obtain authorization from the
right holder on reasonable commercial terms and
conditions and that such efforts have not been
successful within a reasonable period of time.”
In practice, trying to negotiate voluntary licenses can
be protracted and futile.
“This requirement [of prior negotiation] may be
waived by a Member in the case of a national
emergency or other circumstance of extreme urgency
or in cases of public non-commercial use. ...”
7
Domestic Production vs. Importation
Compulsory licenses and public noncommercial use licenses issued
pursuant Art. 31 can be granted for
local production or for importation.
There may be patent, export quantity,
and data restrictions on exporters that
limit the effective exercise of this right.
8
Restrictions on Exports
“Right” to import generics is illusory because products
produced pursuant to a compulsory license must be
“predominantly for domestic use” (Article 31f).
This might mean that 51% must be consumed locally.
Alternatively, it might means that production has to predominantly
benefit local consumption.
The only exception to this rule arises when licenses are issued to
remedy anti-competitive practices.
This was a major defect in the TRIPS Agreement:
U.S. and Europe could use C.L. loopholes to access medicines
because they have local capacity and large rich markets;
poor, small countries that could not produce domestically might
be barred from importing key medicines.
9
Incapacity to Produce Medicines
Limited technical expertise and limited
manufacturing capacity in most African and
Asian countries.
Small and poor markets = diseconomies of
scale.
Countries, with or without patents, but with
limited pharmaceutical capacity needed a way
to import cheaper generic medicines of
assured quality.
10
Who Can Produce?
Major generic producers – India, Brazil, S. Korea,
and China – can produce base ingredients and
finished products at a fraction of U.S. prices;
Thailand and South Africa are increasingly
capable of doing so as well.
Finishers – a few other developing countries have
capacity to formulate.
Most developing countries have no capacity
whatsoever, except maybe to package and label.
Technology transfer and South/South cooperation
may help in the long run.
11
Whither Public Health?
In 2001, impending crisis in access to AIDS
medicines → developing countries demanding
that public health receive higher priority.
That fall, the U.S. threatened to override Bayer’s
patent on ciproflaxin in response to the post9/11 anthrax scare.
These conditions resulted in the passage of the
Doha Declaration on the TRIPS Agreement and
Public Health, (Doha, Qatar Nov. 14, 2001)
12
The Doha Declaration ¶ 4
“The TRIPS Agreement does not and should
not prevent Members from taking measures
to protect public health. … [W]e affirm that
the Agreement can and should be
interpreted and implemented in a manner
supportive of WTO Members' right to
protect public health and, in particular, to
promote access to medicines for all. ”
13
Clarification of TRIPS-compliant Flexibilities
5(b) Each Member has the right to grant compulsory
licences and the freedom to determine the
grounds upon which such licences are granted.
5(c) Each Member has the right to determine what
constitutes a public emergency … (including
HIV/AIDS, TB, malaria, and other epidemics).
5(d) [TRIPS leaves] each member free its own
regime for exhaustion [of intellectual property
rights] without challenge … (International
exhaustion permitting parallel importation
permitted)
14
Production-For-Export – ¶ 6 Problem
“We recognize that WTO Members with
insufficient or no manufacturing capacities in
the pharmaceutical sector could face
difficulties in making effective use of
compulsory licensing under the TRIPS
Agreement. We instruct the Council for
TRIPS to find an expeditious solution to this
problem and to report to the General Council
before the end of 2002.”
15
U.S. Blocks ¶ 6 Solution
Despite agreeing to find an expeditious and
efficient solution to the production-for-export
issue by the end of 2002, the U.S. unilaterally
blocked a tentative agreement reached by the
other 143 WTO members. U.S. wanted to:
limit the number of eligible importing countries
limit covered diseases
impose strict anti-diversion rules
impose multiple procedural hurdles.
16
Paragraph 6 Implementation Decision
Finally passed Aug. 30, 2003 as a waiver; pending
amendment to TRIPS, Art. 31bis.
Problems:
Ad Hoc reviews re “insufficiency of manufacturing capacity.”
45 countries opted out, thereby reducing incentives to
generic producers.
Impractical and costly anti-diversion measures.
Onerous, ten-step procedural labyrinth - country-by-country,
drug-by-drug, quantity-by-quantity.
Only one license has been issued in four years, Apotex,
Canada to Rwanda.
17
Pharma: Special 301 Watch List
Every year the U.S. Government publishes a "Special
301" Report that details "the adequacy and effectiveness
of intellectual property protection" and fair and equitable
market access for US IPR users in countries throughout
the world.
Three classifications: watch list (bad), priority watch list
(worse), priority foreign country (worst).
Interested persons may submit information and
recommendations to the USTR about foreign countries.
PhRMA files submissions every year listing IP “offenses”
and proposed classifications. PhRMA submissions reveals
a steady stream of recurrent and escalating demands
including demands
18
Pharma: USTR Advisory Committees
The Trade Act of 2002 created a system of 27
USTR Advisory Committee, comprised of
more than 750 members, the vast majority of
whom are industry representatives.
These committee members have insider
access to US trade policy and they write
reports on proposed trade agreements.
ITAC 3 (Chemicals, Pharmaceuticals, Health
Science Products and Services) has 7/33
pharma representatives; ITAC 15 (Intellectual
Property Rights) has 3/20.
19
Pharma – Lobbying
2005 study by The Center for Public Integrity
found that pharmaceutical firms, their trade
organizations, and their outside lobbyists
lobbied the USTR on at least 289 occasions.
PhRMA reported 59 official lobbying contacts,
more than any other lobbying organization
and more than PhRMA lobbied the FDA.
20
Generalized System of Preferences
The U.S. creates trade pressure by offering and
threatening to withdraw special, no-tariff trade
preferences.
In 1987, the U.S. actually imposed 100% tariffs
(trade sanctions) against several Brazilian industries
because Brazil had not “modernized” its intellectual
property law.
In 1992, U.S. withdrew GSP duty-free privileges on
$60, then $80 million dollars of Indian export trade to
the U.S.
The U.S. in 1998 withheld trade preferences on four
classes of products in S. Africa.
21
U.S. IPR Trade Policy
Trade Act of 2002, 19 U.S.C. § 3802
announced three broad IPR trade objectives:
To promote adequate and effective protection of
IPRs similar to U.S. law;
To secure fair and equitable market access
opportunities re IPRs; and
To respect the Doha Declaration.
The USTR interprets the first two provisions
broadly and the third narrowly.
22
TRIPS-plus Bilateral and Regional Trade
Agreements
Expand scope of patentability (new forms of existing
entities, new uses, new formulations, combinations,
etc.)
Ban parallel importation (nat’l exhaustion/contractrule only)
Limit compulsory licenses to public non-commercial
use, emergencies, and competition cases only
Link drug registration and patent status
Data exclusivity - exclude use of registration data for
five years for new chemical entities and three years
for new uses/formulations
Extend patent term for regulatory delays
Criminal enforcement mechanisms
Investor rights to sue countries directly
23
Recent Trade Agreements
Free Trade Area of the Americas (dead 2005)
CAFTA-DR (post-ratification pressures)
Southern African Customs Union (suspended 2006)
Botswana, Lesotho, Namibia, South Africa and Swaziland
U.S. bilateral Free Trade Agreements
Jordan, Chile, Morocco, Singapore, Oman, Bahrain
Thailand and Malaysia (suspended)
S. Korea, Peru, Columbia, Panama (pending)
Trade Promotion Authority (Fast-Track) expired June
30, 2007
24
New Pharma Wars: Thailand, Abbott, USTR
Thailand negotiated with Abbott for two years
winning some concessions ($6000 ↓ $2200), but
prices for Kaletra remained high.
2006 – World Bank predicted that Thailand’s use of
compulsory licenses would reduce the cost of secondline ARVs by 90%, saving the country $3.2 billion
over 20 years.
Aug. 2006, Abbott dropped its price for Kaletra to
$2200.
Thailand issued three TRIPS-compliant “public, noncommercial use” compulsory licenses, including for
efavirenz and Kaletra, in Nov. 2006 and Jan. 207.
25
Grounds for the Licenses
Thailand estimated significant cost savings
and therapeutic advantages from its licenses:
Efavirenz – generic price 42% of Merck price; less
toxicity than nevirapine
Kaletra (lopinar/ritonavir = LPN/r) – generic price
42% of Abbott price; need for second-line
therapies = 20% of patients
Plavix – generic price 10% of brand price; only
drug that can be used with coronary artery stent.
26
Licenses will be limited
Thailand’s government use licenses will be
limited to five circumstances:
Listed on Nat’l Essential Drug List
Necessary to solve important public health
problems
Necessary in emergency or extreme urgency
Necessary to prevent or control
outbreaks/epidemics/pandemics
Necessary for life-saving
Estimated to apply to only 5-15% of drugs
(four more cancer drugs currently targeted)
27
U.S. and Thai Law on Gov. Use Licenses
Section 51 of the Thai Patent Act permits any ministry,
bureau or department of the Government to issue a
license for “public consumption” of generic medicines
without prior negotiations with the patent holder,
subject only to an obligation to a set a royalty rate
which is thereafter reviewable by the patent owner.
Section 51 does not require prior negotiation.
Two provisions of U.S. law also clearly allow for
government use of patents without prior negotiations:
28 U.S.C. § 1498(a) and
U.S. Executive Order 12899 (1993) (NAFTA).
Under U.S. law, there is an after-the-fact obligation to
pay “reasonable and entire” compensation.
28
March 14, Abbott bombshell
Abbott withdrew heat-stable
lopinavir/ritonavir (Kaletra) and six other
medicines from the Thai drug registration
process.
April 10, Abbott dropped its price for Kaletra
from $2200 to $1000 for 45 low- and lowermiddle income countries, but still refuses to
introduce Aluvia in Thailand.
29
April 30, Thailand on 301 Priority
Watch List.
Grounds:
“Overall deterioration in the protection and
enforcement of IPR in Thailand.”
“Weakening respect for patents (decision to issues
several compulsory licenses).”
“Lack of transparency and due process ...
represents a serious concern.”
“[Ongoing] concerns such as delay in the granting
of patents and weak protection against unfair
commercial use for data generated to obtain
marketing approval.”
30
PhRMA’s Work in Congress
Prescription Drug User Fee Amendments Act
of 2007 (S. 1082, the Food and Drug
Administration Revitalization Act)
Sec. 516. Sense of the Senate regarding
certain patent infringements.
(a)(6) “There are concerns that certain countries
have engaged in ... abuse of compulsory
licensing.”
(b)(2) “[The USTR] should develop and submit to
Congress a strategic plan to address the problem
of countries that infringe upon American
pharmaceutical intellectual property rights.”
31
Back and Forth
May 4 – Brazil issued a compulsory license on
Efavirenz
May 8 – Clinton Foundation announced generic, heatstable Kaletra at $695/year.
June 20 – Sen. Res. 241 (pro-Doha Declaration)
June 28 – USTR announces loss of $1 billion dutyfree privileges for Thailand for three product classes
under GSP.
July 20 – US Ambassador to Thailand writes
protesting deliberations on issuing additional
compulsory licenses
October 17 –Thai Food and Drug Administration
announced registration of generic LPN/r produced by
Matrix (India); GPO announced that it was ordering a
six-month supply for 8000 patients at a cost of
$695/pppy.
32
Novartis/USTR v. India
Novartis sued the Indian Patent Office and
government of India 2006-2007 challenging
the denial of a patent on its cancer
medicines, Glivec, specifically claiming that it
violated the TRIPS Agreement.
The USTR placed India on its 2007 Special
301 Watch List (priority watch list status)
based in part on its strict standards for
patentability.
33
India Has Adopted Multiple TRIPS Flexibilities
In its amended Patent Act of 2005, India
adopted virtually all permissible flexibilities:
Compulsory licenses, including for export
Licenses of right for generic producers already
producing “mailbox” generics, even if 19952005 patent applications were granted
Strict definitions of patentability
Pre-grant opposition procedures with broad
standing
34
TRIPS Flexibilities in Defining Patentability
Article 27.1 of the TRIPS Agreement requires
Members to grant patents for innovations that
are “new,” involve an “inventive step,” and have
“industrial applicability.”
However, there is great flexibility in how these
standards are interpreted and applied globally.
Members were also permitted to implement
TRIPS in a method appropriate to their own
legal system and practice (Article 1.1)
35
India’s Strict Patent Standard for Drugs
Section 3(d): The following are not inventions
within the meaning of the Act –
The mere discovery of a new form of a known substance
which does not result in the enhancement of the known
efficacy of that substance or the mere discovery of any new
property or new use for a know substance ...
Explanation. – For the purposes of this clause, salts, esters,
ethers, polymorphs, metabolites, pure form, particle size,
isomers, mixtures of isomers, complexes, combinations and
other derivatives of [a] known substance shall be
considered to be the same substance, unless they differ
significantly in properties with regard to efficacy; ...
36
Patent Office Denied Glivec Patent
When Novartis asked that its Glivec patent
application be processed, India cancer
patient groups and several generic drug
manufacturers filed a pre-grant opposition
claiming that Glivec was a new form of an
old (1993, pre-TRIPS) drug.
Novartis submitted evidence that Glivec
had 30% greater bioavailability.
The India Patent Office disagreed that
Novartis had shown significantly increased
efficacy and on Jan. 25, 2006 refused to
grant a patent on Glivec.
37
Novartis appealed to High Court
Claims:
First, that the denial of the Glivec
application was erroneous;
Second, that Section 3(d) of the Patent
Act is not compliant with TRIPS; and
Third, because of non-TRIPScompliance, Section 3(d) is
unconstitutional.
38
Novartis’s Defense of its Lawsuit
“We are entitled to sell to middle class consumers”
(Note: 90% of Indians are not middle-class)
“We support India’s rights to issue compulsory
licenses to solve its access problems” (Note: opposite
position in Thailand)
“We have solved the access problem through our
Glivec donation program” (Note: the access program
is inaccessible for many)
High mark-up sales in India are crucial to finance
future research and development (Note: India is
1.3% of the global pharmaceutical market)
39
Merits of the Case Were Quite Weak
India’s treaties are not self-executing,
according to Article 57 of its Constitution.
It is permissible to differentiate between
field of technology under TRIPS Art. 27.
India has implementing flexibility under
TRIPS Article 1.1 and under the broadly
interpretable meanings of newness and
inventive step to limit pharmaceutical
product patents as it has.
Aug. 6, 2007, High court denied the appeal
40
Important Implications
India supplies generic medicines broadly in
developing countries.
No patients have benefited more than people living
with HIV, 70% of whom receive treatment with lowcost generic drugs of assured quality from India.
Due to market competition from Indian companies,
first-line AIDS treatment regimes now cost
approximately $90-130/patient/year, a quarter the
price of the R&D industry’s “discount” prices, and a
penny on the dollar of what R&D companies charge
in U.S. and European markets.
41
New Trade Agenda?
Congressional Democrats have recently
attempted to ease IPR barriers to more
affordable generic medicines
Clarification of public health exceptions and
limits on data exclusivity (concurrency)
Elimination of patent/registration linkage
No mandatory extensions of patent terms
for regulatory delay
42
GAO Report: IPRs and Trade
Sept. 2007, GAO issued a report concluding
that trade policy guidance on protecting
public health needed clarification.
The Report further found that the USTR had
not significantly changed its trade policy after
passage of the Doha Declaration.
GAO Recommendation: If Congress disagrees
with USTR’s interpretation and
implementation of Doha, it should specify its
mandate.
43
Conclusion - New phase in Pharma War
Six years after a humiliating defeat in South Africa where 39
drug companies sued the Mandela government to prevent
parallel importation, the drug companies and the U.S.
government are re-launching a new global assault on
developing countries’ use of TRIPS-compliant flexibilities.
US continues to use 301 listing and other trade pressures to
coerce compliance with IPR demands.
At the same time, Pharma/USTR continue to pursue heightened
IPRs in pending trade agreements.
Although the effects of the new Pharma War are bad for AIDS
policy, including cost of PEPFAR, they impact the human right to
access to essential medicines more broadly.
Activists are beginning not only the fight back in the this
battlefront, but to launch a new one challenging the patent
regime’s stranglehold on medicines more broadly.
It is unclear what role a new Congress will play.
44