September 2003
Pharmaceutical Products, TRIPS, and the Doha Round
Pharmaceutical patents, drug prices, and parallel imports of drugs from lower-income to higher-income nations have been at the center of some of the most contentious debates in the run-up to Cancun. At a September 2 conference at AEI, a panel of experts analyzed the positions of the various protagonists (the United States, developing countries, drug companies, and NGOs), and the proposals for resolving the conflict.
James Mendenhall
Office of the U.S. Trade Representative
The World Trade Organization (WTO) first confronted the conflict between intellectual property rights (IPR) and public health at Doha in 2001. The Doha declaration on Trade-Related Aspects of Intellectual Property Rights (TRIPS) has since stirred much controversy, as nations struggle to create an IPR regime flexible enough to ensure poor countries' access to medicines.
The Doha declaration established certain restrictions on compulsory licensing, a mechanism by which countries facing prohibitively expensive pharmaceutical imports can override patents and manufacture the drugs themselves. The medicines must be produced primarily for domestic markets and cannot be exported. This stipulation effectively strands poor countries that lack the necessary industrial capacity to manufacture the drugs at home and need them the most.
The WTO has since sought to strike a balance between upholding IPR and meeting humanitarian goals. In December 2002, the WTO considered a proposal to allow countries that are unable to produce pharmaceuticals themselves to import generics if certain safeguards, such as measures to prevent them from reentering third markets, are in place. The United States blocked the resolution because it objected to the broadness of the scope of diseases that could necessitate its use. Since then, any solutions have been unilateral, with the United States and other countries granting a moratorium on challenging needy countries that import generic drugs.
Over the last few months, four themes have emerged as central to the TRIPS debate. First, public health-not commercial interests-must be the exclusive focus. Second, states must take measures to prevent diversion into third country markets. Third, any legislation must also create a transparent mechanism for the WTO to address concerns related to the new system. Finally, the WTO must formally ensure that countries will participate in the regime and not just resort to the measures in rare or emergency situations. The current challenge is to secure the WTO's commitment to these four priorities.
Rubens Barbosa
Embassy of Brazil
The IPR issue first emerged after the 1986-1994 Uruguay Round of WTO trade talks with the declaration on TRIPS. In 2001, following two years of negotiation and unanimous approval of the Doha declaration, the United States reopened a single article of the resolution-the famed paragraph six.
The controversies at the debate's core involve reconciling drug access and patent protection, revising the compulsory licensing provisions of TRIPS (particularly for countries with no manufacturing capacity), extracting the issues from a trade context and evaluating them from the perspective of public health and ethics, and stretching limited budgets to cover growing health problems.
Brazil strongly supported the resolution the WTO adopted on August 30, 2003, despite the new issues it raises. Beyond certain tweaks, it preserves the options that the Doha declaration afforded countries facing public health emergencies. Further discussion must now secure pharmaceutical access for nations incapable of manufacturing their own drugs.
Amir Attaran
Royal Institute of International Affairs
Despite the popular rhetoric, the WTO resolution of August 30, 2003, is worthless and will most certainly not improve the lives of the poor. While the Doha declaration aimed to expand poor countries' access to drugs, its compulsory licensing provisions are of almost no value. First, it presupposes that patents are even a factor, but in needy countries without manufacturing capacity, remarkably few medicines are protected by patents at all. In sixty-two developing countries, patents cover less than 2 percent of the World Health Organization's 300 essential medicines.
Furthermore, there is no evidence of compulsory licensing's success in expanding drug use, as it has not been invoked once in the last decade. India is a perfect example. Zero antiretroviral therapies are patented, and several generic antiretroviral manufacturers compete on price. Still, of five million AIDS patients in India, only 20,000 receive treatment.
Compulsory licensing is an illusory rescue-a unicorn on which years of useless debate over its care have been wasted. Brazil and other countries were free to compulsorily license drugs before Doha, making the ensuing dialogue completely unnecessary.
The threat of using the measure has been a good bargaining chip, but the provision itself has proved useless.
The August 30 solution will never be used. The United States' objection to paragraph six of the Doha declaration was an embarrassing decision that detracted from meaningful and necessary progress. If the WTO is seriously committed to improving poor countries' access to medicines, it should instead eliminate all tariffs under the GATT and take measures to block drug diversion.
Claude E. Barfield
AEI
A few points have been overlooked in the general discussion of IPR and public health. First, we do not need to be fans of the pharmaceutical industry to recognize that the drug delivery system by and large works. It is also worthwhile to note the true value of the global patent system-often just an uneasy compromise and not a source of advantage to firms in many industries. Finally, price discrimination, or charging different prices based on demand, can be instrumental both to expanding access and to recouping funds to reinvest in research and development (R&D).
Recent trade talks have raised new concerns. The WTO appears to take on faith that countries will not abuse the new system by employing it outside of health emergencies. On the other hand, the limits on which diseases are candidates for compulsory licensing are unclear. Additionally, barriers to parallel imports, such as distinct packaging, seem insufficient.
The impassioned debate over pricing, patents, and access to existing treatments, has obscured attention to the need for vaccines and more effective drugs for HIV, TB, malaria, and other illnesses that disproportionately affect the poorest nations. A second panel at the September 2 conference addressed the link between economic incentives and new drug research.
Patricia Atkinson Roberts
Malaria Vaccine Initiative
The Malaria Vaccine Initiative (MVI) was founded in 1999, through a grant from the Bill and Melinda Gates Foundation, in response to the fragmented and stalled efforts of the pharmaceutical industry to create an effective malaria intervention. MVI is committed to accelerating the development of a malaria vaccine and to ensuring its availability across the globe. The organization invests in and oversees the progress of several vaccine projects and runs advocacy campaigns to promote drug access.
Malaria is unique in that it devastates the health of developing countries exclusively. There are 300 to 500 million cases and one million deaths from the disease each year. It affects children disproportionately and is currently the number one killer of African children.
Because malaria treatments have no market in the developed world, the pharmaceutical industry is less committed to developing working interventions for this disease than it is to others. Two major factors frustrate the development of a malaria vaccine: there is no paying market for a potential vaccine, and the science it would require seems unfeasible. The prospects of high risk and low returns land a malaria vaccine in the orphan zone of drug research.
MVI has partnered with biotech firms, multinational vaccine manufacturers, government agencies, academia, and contract manufacturers to launch a range of projects aimed at developing a vaccine. It currently has projects in various stages of development across the globe.
Michael Kremer
Harvard University
Market incentives are critical to encourage R&D on neglected diseases that ravage the health of developing countries. Vaccines hold particular promise, not only in saving millions of lives each year, but also in saving money. Still, because the potential purchasers are poor and vaccine developers can expect to recoup only a fraction of their investment, current research efforts are grossly insufficient. The conception of research as a global public good exerts downward pressure on the price of new technologies and makes the returns to vaccine development discouragingly low.
Strategies to spur greater R&D include elements of push (payments for research inputs) and pull (price guarantees for usable vaccines). Push tactics are compatible with research in general and with existing initiatives. Pull approaches boast other advantages, such as removing the uncertainty of scientific feasibility and minimizing budgetary conflict with current priorities.
A pull program holds great promise for the development of vaccines for malaria and other infectious diseases. To be effective, it must ensure a credible commitment on the part of potential vaccine purchasers and stipulate criteria for eligible vaccines. The malaria prize could be on the order of $250 to $500 million annually for ten years, which, while expensive, is tremendously cost-effective when weighed against the lives saved.
In practice, a scheme that combines both push and pull incentives has the greatest potential for the development of life-saving technologies in needy countries.
John E. Calfee
AEI
Vaccines have the capacity to vastly improve public health, but guaranteed purchase funds are a problematic way to encourage their development. There are concerns about who appropriates the money, how they are to do so, and what products would qualify. Committing to a particular vaccine is risky as well. After one vaccine wins the price guarantee, a better technology could be developed, but the fund would be obligated to purchase the outdated, inferior vaccine. Another difficulty would be to set an appropriate reward sum, partly because of the prospect of constant scientific improvements. Compulsory licensing would further undermine this scheme because developing countries would have incentives to import generics below the guaranteed price.
An alternative would be for the WTO to secure inviolate IPR for a single disease. Any product developed could be purchased only from the manufacturer or a licensee at whatever price the producer set. Given the high cost-effectiveness of vaccines, there would almost certainly be a market. This plan could coexist with other initiatives but would bolster the prospects of vaccine development.
AEI research assistant Ximena Pinell prepared this summary.
