PARA 6 OF WTO DOHA DECLARATION
Non-Solution of TRIPS Problem
The WTO has formally adopted a solution to the defects of Article 31 of the TRIPS agreement, which stipulates that compulsory licences are predominantly for domestic use and therefore creates a peculiar situation for countries with insufficient pharmaceutical manufacturing capacity. However, the solution seems intended more to ensure that not even a single tablet of drugs produced under this system escapes into the market and less to make medicines available to countries with limited manufacturing ability.
C NIRANJAN RAO
T
In Section I we examine the August 2003 decision. In Section II we examine the situation of countries with no or insufficient manufacturing capacities in pharmaceuticals. Section III offers some concluding remarks.
To facilitate the use of compulsory licences for the production of pharmaceuticals for export to countries with no or insufficient manufacturing capacities in the pharmaceutical sector, Article 31 (f) which stipulates that compulsory licences could be used predominantly for domestic market, is waived. The second step was to formulate the procedural requirements for the export of pharmaceuticals produced under compulsory licensing to countries with no or insufficient manufacturing capacities in the pharmaceutical sector (hereafter referred to as the system). The August 2003 decision (which is the same as the amendment to TRIPS agreed to at the Hong Kong ministerial) comes up with an ingenious and cumbersome procedure. The aim of this decision seems more to ensure that not even a single tablet produced under this system escapes into the market rather than to make pharmaceuticals available to countries with no or insufficient manufacturing capacities in the sector. The eligible importing members are of two types: (i) least developed countries (LDCs), and (ii) other members who have to make a notification to the council for TRIPS.
Least Developed Countries
LDCs are automatically regarded as eligible importing members. In 2002, the transition period for LDCs for protection of pharmaceutical products consistent with the TRIPS Agreement was extended up to 2016. For LDCs the procedure to follow for importing pharmaceuticals while using compulsory licensing is as follows:
Once such pharmaceutical products have been imported they have to make sure that no trade diversion of such products takes place.
Other Eligible ImportingMembers1
Many countries do not have sufficient manufacturing capacities in the pharmaceutical sector. If such a country has to use compulsory licensing to import pharmaceutical products, then it has to follow the procedure as detailed below.
Once such pharmaceutical products have been imported they have to make sure that no trade diversion takes place of such products.
Exporting Members
With this done, the exporting members have to go through an elaborate procedure to meet the requirements of the importing members. The system requires such detailed obligations that it is doubtful whether anybody will use it at all.
Apart from all this, all the members have to prevent re-export of such products and have effective legal systems to prevent
Economic and Political Weekly January 28, 2006 their importation and sale in their respective territories.
Now let us see how this system is going to work in countries with no or insufficient manufacturing capacities in the pharmaceutical sector. We will use “a typology of the world’s pharmaceutical industries” given in Ballance et al (1992) for this purpose. Ballance et al (1992) classify the countries into three categories, viz,
For our present purposes we will take countries, which produce only finished products as countries with insufficient pharma manufacturing capacity, and countries without a pharmaceutical industry as having no manufacturing capacity in the sector. This is only for simplification and we recognise that countries identified, as C1 above may not have insufficient manufacturing capacity for specific pharmaceuticals.
There are 89 countries/areas, which can produce only finished products and 60 countries/areas without a pharmaceutical industry. Out of this total of 149, we have removed countries, which are classified as high income economies, and upper middle income economies by the World Bank, and countries/areas whose population is below one million. That leaves us with 77 countries, 64 with insufficient manufacturing capacity in pharmaceuticals and 13 are with no manufacturing capacity in pharmaceuticals at all.
Least Developed Countries
There are 36 LDCs in our database. Out of these nine were not members of GATT and five of them joined GATT between 1990 and 1994. Seven of them are not members of WTO as of December 2005 and hence the system is not applicable to them. Of these 39 LDCs six are not members of the Paris Convention. Of the countries that are members of the Paris Convention, memberships date back to earlier than 1990 for all except seven. At present there are four countries, which are not members of both WTO and the Paris Convention. Of the 13 countries with no manufacturing capacity in pharmaceuticals, 11 are LDCs.
LDCs have too few resources to spend on either meaningful R&D or efficient patent systems. These countries therefore have very few domestic patent applications, most of the time there are no domestic patent applications. On the other hand the number of foreign patent applications in LDCs is very low. The foreign patent applicant seems to be least interested in LDCs. If the patentee is looking to make profits out of his invention, the LDCs do not seem to matter. If the problem of developing countries is a large number of foreign patents, the problem with LDCs seem to be too few foreign patents. The decision to patent abroad is basically a defensive mechanism and the patentee will choose those countries, which have the technological capability to copy the technology. In such a case, LDCs with low technological capability will not figure in the list of countries in which a foreign patentee will seek patents [Dhar and Rao 2002].
It is very likely that LDCs are attracting very few foreign pharmaceutical patents. Hence the need to grant compulsory licences to use the system may not arise. These countries have to keep track of the inventions and patenting taking place all over the world and recognise the importance of particular patents, which may be useful in solving their public health concerns. The other issue is whether inventions relevant to their public health problems are occurring in the pharmaceutical sector. Unless inventions, which are relevant for public heath concerns in LDCs occur, the use for the system will be almost negligible.
Countries without Pharmaceutical Production Capacity
There are 41 countries in our database with no or insufficient manufacturing capacities in the pharmaceutical sector. Of these, 11 countries were never members of GATT, nine countries joined GATT between 1990 and 1994, and six countries are not members of WTO as of December 2005. Only one country is not a member of the Paris Convention.
Except two countries all the others have been categorised by Ballance et al [1992] as “those producing only finished products”. This means that they have a pharmaceutical industry, which can produce formulations. Even here these countries may be having different levels of technological capabilities. At least some of these countries could be expected to keep track of developments in the pharmaceutical sector and identify those products, which could solve any of their public health concerns. Being middle income economies these countries could be expected to have a market under which production of drugs through compulsory licensing becomes feasible. Some but not all of these countries could be expected to attract foreign patents in the pharmaceutical sector. If patents are taken in a particular country, it may be necessary to grant compulsory licences in cases related to public health concerns.
Exporting Countries
The experience around the world during the pre-TRIPS era of the use of compulsory licences has not been very encouraging. But it has been argued that non-use is not an indicator of its irrelevance, as it might have discouraged misuse of patent monopoly. But the fact that the use of compulsory licences to ensure patented drugs are available (including lower prices) in the domestic market was not very successful in the past, poses questions on the usefulness of the very elaborate system developed to implement paragraph 6.
Given the nature of public health concerns this system is supposed to react to, the provisions and mechanisms may take a long time. This defeats the very purpose of the system. The drug manufacturers from exporting countries will have to face the uncertainties of manufacturing only for a particular order and the short-term nature of the order. If the product for which compulsory licensing for export is granted is within their existing manufacturing capacity this system may work, but if it requires new investment in new processes this may not be feasible. The amount of pharmaceutical products required for a particular country may be small and such necessities may arise at different points of time, making manufacturing for a standing order that much more uneconomical.
The other issue is whether exporting countries,2 which have built up technological capability in the pre-TRIPS era, continue to have this capability in the post-TRIPS era. The technological capability of these countries may be eroded in the long run. Then these countries will no longer be able to act as exporting countries under this system.
Economic and Political Weekly January 28, 2006
Concluding Remarks
The world is saddled with the TRIPS agreement; it has to live with it. But the TRIPS agreement seems to have created such insurmountable problems that solutions such as the system for the implementation of paragraph 6 do not seem to be workable.
How did the LDCs or countries with no or insufficient manufacturing capacities in the pharmaceutical sector cope with public health concerns in the past? Because not all the other countries in the world had patents at very high level of protection (product patents, and 20-year patent term), there were sources for these countries to import pharmaceuticals at low prices. But in the post-TRIPS world this is not possible. All the countries provide a high level of patent protection and prices may be high.
If the experience with compulsory licensing in the past is anything to go by, the system developed here will not be able to make access to medicines easier for those countries with no or insufficient manufacturing capacities in the pharmaceutical sector. It is interesting to note that none of the developed countries have yet made their patent laws consistent with paragraph 6 of the Doha declaration. The patent law has to allow for the use of compulsory licences for exports. Only Canada is taking some steps in this direction. In the past five years no compulsory licence under this system was issued, it will be surprising if more than 10 compulsory licences are issued under this system in the next two decades.
EPWEmail: calindi@gmail.com
Notes
1 In an unnecessary gesture, countries, most ofwhom are classified by Ballance et al (1992)having a research-based pharmaceuticalindustry or innovation capacities, have declaredthat they will not use the system.
2 These are categorised as countries withinnovative capabilities and countries/areas withreproductive capabilities; those producing boththerapeutic ingredients and finished productsby Ballance et al (1992).
References
Ballance, R, J Pogany and H Forstner (1992): The World’s Pharmaceutical Industries: An International Comparative Study, Edward Elgar, Aldershot.
Dhar, B and C N Rao (2002): The International Patent System: An Empirical Analysis, Research and Information System for the Nonaligned and Other Developing Countries (RIS),New Delhi (mimeo).
Economic and Political Weekly January 28, 2006
