Health GAP Talking Paper
www.globaltreatmentaccess.org | www.healthgap.org

In the wake of its public relations gaff at the World Trade Organization last Friday where it blocked developing country access to affordable medicines, the U.S. has tried to rehabilitate its tattered reputation by proposing a temporary moratorium on enforcing patent rights. Whereas a flood of new cheaper medicines is needed, the U.S. has proposed a temporary trickle - a few generic medicines exported to a few developing countries after onerous and time consuming compulsory license applications. This temporary moratorium is a cruel hoax - it will not enable needed intellectual property law reform, generic entry, nor sustainability.

Although the U.S. had promised on November 14 last year to permit countries to elevate public health concerns over patent rights and to promote access to medicine for all, the U.S. reneged on that promise in month-long trade negotiations that ended on December 20. At Doha last year, the WTO members, including the U.S., unanimously agreed to find a solution under the TRIPS Agreement for countries that could not produce generic medicines efficiently when they have announced a public health need. Realistically, the vast majority of developing countries cannot produce medicines economically on their own. Accordingly, their only viable source of cheaper medicines will be generics produced at economies of scale in India, Brazil, Thailand, and a few other countries and then exported/imported to small-market and low-capacity countries. However, currently intellectual property rules dramatically limit production for export. Even now, most major generic producers manufacturing medicines under so-called compulsory licenses must predominantly supply the local market. The remainder, including India, will also be limited predominantly to their domestic markets after 2005.

The U.S., in its moratorium announcement, has promised that it will "not challenge any WTO member that breaks the WTO rules to export drugs produced under compulsory license to a country in need." That's the large print. The small print is that the "interim" solution only covers HIV/AIDS, TB, and malaria and a few other infectious diseases for which there are no patented medicines and/or no current treatment whatsoever. The interim solution also fails to reach a list of 15 "high income" developing countries, and its applicability to a broader array of middle-income developing countries is also in doubt. Finally, the interim solution requires safeguards against diversion and is of indeterminate length. More importantly, however, although the U.S. can promise not to initiate trade sanction complaints at the WTO, it can not impose a ban on the drug industry filing actions in both exporting and importing countries to enforce the industry's draconian view of its patent rights. The drug companies can only be muzzled through law reform passed in both importing and exporting countries.

The U.S. moratorium is a hoax because it creates too much uncertainty to catalyze the necessary law reform. To take advantage of all the access-to-medicines options, developing countries will have to amend their national legislation in order to permit production for export under a compulsory license and/or in order to permit compulsory licenses for import. Given the uncertain duration of the moratorium and its non-binding status, few, if any countries will assemble their legislatures for the complex task of legislative reform when the legal grounds for doing so is still undecided. (Paradoxically, many of these countries will need to depend on the U.S. for technical assistance in their IP reform, and the U.S. has been decidedly non-neutral in giving such advice, frequently asking countries to adopt TRIPS-plus protections for patent holders.)

Not only will countries be reluctant to begin necessary law reform, generic producers will continue to sit on the sidelines until the legal terrain is more certain. Generic producers are loath to get sued by their much better heeled proprietary counterparts. The decision to entry a generic market, and especially the decision is increase productive capacity and to seek multiple registrations of generic medicines, is based on cost and risk assessments, both of which are adversely affected by even the hint of a law suit. Moreover, generic entry is a time-delayed process. This is a particularly outrageous effect of the U.S.'s cynical negotiation strategy. Although it could have agreed to the necessary Doha terms in February, the U.S. has dragged the negotiation out and has now imposed impasse at the year's end. As a result, a full year of start-up time for generic producers has already been lost. In the meantime, the drug companies are laughing all the way to the bank.

Finally, the indeterminancy of the U.S. interim solution undermines sustainability. Developing countries are loath to get themselves into supply arrangements that are not sustainable over a long period of time on favorable terms. (This is a partial explanation for the dramatic failure of the industry's Accelerated Access Program.) Developing countries worry about creating social demand and about the risks of interrupted treatment when they finally begin to decide that they should provide treatment access. What would happen if a cheap source of generic medicines suddenly dried up because the U.S. imposed an even more stringent agreement at the end of its moratorium? Costs could skyrocket and generic suppliers could suddenly be out of business. The U.S.'s shameful pattern of broken promises, bad faith negotiations, and moratorium hoaxes should be exposed as a human rights violation - death by patent. Instead of expressing sympathy while it sticks a drug-industry dagger in the back of millions of people desperately needing medicines, the U.S. should simply tell PhRMA to back off and be satisfied with its already bloated profits.

Professor Brook K. Baker, Health GAP