TRIPS: How much flexibility?

By C. Rammanohar Reddy

The signatories to the agreement on Trade-related aspects of Intellectual Property Rights (TRIPS) have embarked on a journey which should end at the very least in clarifying how much manoeuvrability countries have to provide patented medicines at affordable prices. If the current global momentum is maintained, this journey may even end in a substantial modification of the TRIPS agreement, at least where the prices of medicines are concerned.

A meeting of the WTO earlier this week, specially convened to discuss TRIPS and access to medicines, was not meant to take any decision on the patent regime. But after an exchange of views - for the first time - among the member-countries of the WTO on this important, emotive and controversial issue, it was decided to continue the process. There is now a strong possibility that the declaration that will be issued after the fourth WTO ministerial meeting in Doha this November will include a political statement on TRIPS and access to medicines.

Such an eventuality would have been unthinkable even a couple of years ago when it seemed the last word had been said on TRIPS, patents and new medicines. The new pressure to look more closely at TRIPS has been the result of a global campaign against the high prices of patented medicines and for HIV/AIDS care in particular. In the process, the whole issue of affordable medicines has today become a major global issue.

In a sense, it is an irony that it has taken the action of international groups like Medecins Sans Frontieres, OXFAM, Consumers International and Consumer Project on Technology to give international respectability to the arguments made since the late 1980s by the Third World that the introduction of uniform patent rules was going to adversely affect access to medicines in the developing countries.

The argument of the developing countries at the WTO meeting as contained in a joint paper submitted by 46 nations (which included India, Brazil, South Africa and the Philippines) was first and foremost that public health concerns should take priority over patent rights. The developing countries' reading is that while patents need to be respected, the provisions of the TRIPS agreement cannot prevent governments from taking measures to protect public health.

This would in essence mean that governments would be free to issue compulsory licences to third parties and allow parallel imports (from other countries) of a patented drug in case the patent holder charges high prices. Compulsory licences would promote competition by allowing production of generic medicines and are seen as an important tool to control the prices of drugs under patent.

The problem with the TRIPS agreement is that while it spells out in detail the procedures for issue of compulsory licences, it does not specify the grounds for issue. The only ground that is explicitly mentioned is ``a national emergency''. This is what makes it important to clarify provisions of the TRIPS agreement which could be interpreted as providing flexibility to governments. As OXFAM in a report prepared for the WTO meeting has pointed out, no developing country has as yet issued a compulsory licence under TRIPS.

Two other important arguments made by the developing countries were, one, that countries may want to make proposals that would modify TRIPS to provide governments with more powers to meet public health policy objectives. That is, accept the possibility of having to re-negotiate this WTO agreement. Two, while differential pricing by drug companies could be considered it could not be an alternative to exploiting the flexibility in the TRIPS agreement. (Differential pricing is a system in which drug companies would charge different prices for the same medicine in different parts of the world, depending on the purchasing power in each market. Provided there are safeguards, the global pharmaceutical firms would prefer such a system to governments having considerable freedom to issue compulsory licences and allow parallel imports.)

The arguments made by the U.S. at the WTO meeting were predictably in defence of TRIPS except for reiterating a flexible position on patented medicines for HIV/AIDS treatment. The European Commission too expressed much the same view except in one important respect. Compulsory licences issued under TRIPS are to be used ``predominantly'' for the domestic market.

This means, for example, that while Indian drug firms could produce patented medicines with these licences, they cannot export a larger share of this production even if their prices are competitive. And the smaller underdeveloped countries in Africa and Asia, which may need these inexpensive medicines but do not have production facilities, will then have no use for compulsory licences.

The EC called for ``a permissive reading'' of the relevant provision - Article 31(f) - of TRIPS so that export of a predominantly larger share of production is allowed with a compulsory licence. This is only one of many issues of the presumed flexibility in TRIPS that need to be clarified.

Until now the debate has been only about how malleable TRIPS is on the patents and the prices of medicines. There are others - governments, economists and non-governmental organisations - which ask for removing TRIPS altogether from the WTO or at the very least for a substantial modification of the present agreement.

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