Will the August 20, 2003 decision of the WTO provide adequate protection for patent holders rights and is diversion still a threat to the pharmaceutical industry?

• Author: Pearson, Slone
• Position: World Trade Organization - Essay

On August 20, 2003 World Trade Organization (WTO) member governments broke their deadlock (1) over intellectual property protection and public health, resulting in an international agreement. (2) The new agreement, titled "Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health," allows any member country producing pharmaceuticals under compulsory licenses (3) to export to other member countries; (4) a privilege expected to be used only in good faith in order to deal with public health crises such as HIV/AIDS, tuberculosis and malaria. (5) Developed countries, however, remain fearful that the decision might be abused by developing countries and that patent protection may be undermined. (6) Many pharmaceutical companies are particularly concerned with a potential increase in diversion (7) of pharmaceuticals produced in response to public health crises. (8) Diversion not only defeats the purpose of the WTO decision, (9) but threatens research and development into new therapies for AIDS and other diseases. (10) Paragraph 2(b)(ii) of the Paragraph 6 Decision attempts to address these valid concerns by requiring exporting countries to clearly identify pharmaceuticals being produced under compulsory license through special packaging, coloring and shaping of products. (11)

This article examines the effectiveness of the requirements of importing and exporting member countries under the Paragraph 6 Decision and the "Best Practices" guidelines suggested by the WTO in order to prevent diversion of pharmaceuticals. Additionally, remedies available to patent holders that are victims of diversion under United States and International law are discussed. Finally, the article proposes other programs and mechanisms available to government entities and private pharmaceutical companies that would ensure shipments make it to the intended recipients.

1. BACKGROUND

   1. International Intellectual Property Protection

      As a result of a comprehensive debate in the 1995 Uruguay Rounds of the Negotiations on the General Agreement on Tariffs and Trade (GATT), the World Trade Organization (WTO) was created. (12) Another result of this "package deal" was the Agreement on Trade Related Aspects of Intellectual Property Rights ("TRIPS"), which is the most controversial component, subject to both praise and blame. (13) The goal of TRIPS was to harmonize world intellectual property (IP) laws. (14) TRIPS sets out minimum standards for the protection and enforcement of international IP rights, including copyrights, patents and trademarks. (15) TRIPS also established minimum standards to which each nation must adhere concerning the enforcement of domestic intellectual property rights. (16) Specific provisions cover civil and administrative procedures and remedies, provisional measures, border enforcement procedures, and criminal procedures. (17) Although some see TRIPS as accomplishing the goal of harmonization with a fair balancing among differing interests, others, mainly developing nations, refute this claim. (18) Some developing country Members of the WTO believe that implementation of their domestic public health policies are adversely affected by the limitation of access to essential medicines (19) needed during public health crises due to TRIPS provisions. (20) While it is true that other factors such as infrastructure and professional support play an important role in determining access to drugs, it is also true that the prices that result from the existence of patents ultimately determine how many people suffering from AIDS and other diseases may go untreated. (21)

      The WTO attempted to address these concerns by writing flexibilities, such as compulsory licensing, into the TRIPS Agreement. (22) Article 30 of the Agreement allows governments to issue compulsory licenses to companies to make patented products or use patented processes under license without the consent of the patent owner, but only under certain conditions aimed at safeguarding the legitimate interests of the patent holder. (23) Some governments, including the African Group, (24) sought clarification of how these flexibilities would be interpreted, and how far their right to use them would be respected. (25)

      The Doha Declaration on TRIPS and Public Health ("the Doha Declaration") addressed these divergent perspectives. (26) Members reached an agreement in principle, which acknowledged the need to assist developing countries in combating the three fatal pandemics of AIDS, malaria and tuberculosis. (27) While promoting both access to existing medicines and the creation of new medicines, ministers at the Doha Ministerial Conference focused on the importance of implementation and interpretation of the TRIPS Agreement in favor of public health. (28) The declaration provided that the TRIPS Agreement does not and should not prevent WTO members from taking measures to protect public health, and that it should be interpreted accordingly:

      We agree that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we 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. In this connection, we reaffirm the right of WTO members to use, to the full, the provisions, in the TRIPS Agreement, which provide flexibility for this purpose. (29) This declaration gave developing country Members the autonomy to make and implement domestic public health policies with respect to intellectual property protection. (30) It also clarified members' right to adopt an international principle of exhaustion of rights, including parallel importation. (31) And similarly, it confirmed the members' rights to grant compulsory licenses on the grounds determined by each member. (32) Furthermore, these countries were granted the power to determine what constitutes a national emergency. (33)

      Known as the Paragraph 6 Problem, Ministers at Doha recognized, but failed to resolve one critical issue with compulsory licensing. (34) Such authorizations benefited developing countries which were further advanced, such as India, Thailand, Brazil and South Africa, who have laboratories and the scientific capabilities to produce the pharmaceuticals. (35) The Agreement, however, overlooked the poorest developing countries which do not possess the technical production ability, although they are often the countries most affected by the diseases targeted in the declaration. (36) Specifically, the Agreement did not directly address whether countries, which were unable to produce pharmaceuticals domestically, could import patented drugs made under compulsory licensing. (37) Article 31(f) of the TRIPS Agreement in fact required that products under compulsory licensing would be "predominately for the supply of the domestic market." (38)

      Failing to define the term "predominately" in this provision left the WTO members, who lacked the requisite manufacturing infrastructure, with the unmet need of generic drugs. (39) Ironically, these countries, which were suffering the most severely due to public health crises, found it complicated to contract with a more developed country that was willing to supply them with drugs made under compulsory licensing. (40) This difficulty was due to the fact that developing countries producing pharmaceuticals under compulsory licenses were aware that the WTO accepted the manufacture of medicines for local use, but it was against the marketing of generic medicines and by extension, its export outside the domestic market mainly because of opposition from the big pharmaceutical groups. (41)

      There were, however, a few countries, such as India, that were willing to export pharmaceuticals to developing countries lacking infrastructure. Indian law does not provide patent protections for pharmaceutical products, therefore manufacturers are able to produce generic versions of US and EU patented pharmaceuticals at a fraction of the price without violating local patent law. (42) After 2005, however, when the TRIPS Agreement has become fully operative, exporting countries must fully comply with the Agreement and will no longer be able to produce and export cheap generic copies of patented medicines. (43) Consequently, the limited source of affordable drugs will be lost and developing countries suffering from emergency public health crises and unable to benefit from compulsory licensing will become entirely dependant upon expensive patented pharmaceuticals. (44)

      WTO Members entrusted the TRIPS Council with the task of finding a legal solution to this problem. (45) The council's challenge was to reach an agreement that, in theory, would grant certain countries the authority to manufacture and export to "countries which need them the most" the generic medicines used for "diseases of an epidemic proportion" on a case by case basis. (46) According to the Doha Declaration, the TRIPS council should have found a solution and reported it to the General Council before the end of 2002. (47) Unfortunately, determination of which medicines were covered by the agreement and which countries could benefit remained unresolved and the deadline was not met. (48)

      In the meantime, while a solution was still being negotiated, the licensed medicine-manufacturing countries such as the European Union, the United States, Switzerland and Canada, ended the moratorium and pledged unilaterally to refrain from taking the matter to court. (49) In light of the fact that developing countries are not bound to uphold the TRIPS Agreement until 2005, continuing to supply them developing countries with generic medicines at the present time did not constitute a violation of international law. (50)

   2. Why is the WTO deadlocked? Intellectual Property Rights...