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The FTAA, Intellectual Property and Access to AIDS and Other Essential Medicines
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What is the Free Trade Agreement of the Americas (FTAA)?
The FTAA
is a proposed free trade agreement between the economies of 34
countries in the Western Hemisphere, stretching from Canada to Chile. It
is effectively an effort to expand NAFTA, the North American Free Trade
Agreement, to include all of North, Central and South America and the
Caribbean (except for Cuba).
Negotiations over the FTAA are now
underway, with a scheduled completion date of 2003. The negotiating text
remains secret, so it is not possible to know exactly what is included
in the agreement. But it is clear the agreement will be modeled on
NAFTA; and the United States has released a summary of its negotiating
objectives for the agreement, which gives a good idea of what it is
seeking to achieve in the negotiations.
What is Intellectual Property?
Intellectual
property is the right to use certain ideas, expressions of ideas,
images or names. Governments grant exclusive intellectual property
rights (monopolies) through such familiar concepts as patents, copyright
and trademarks. Those who hold patents are given the exclusive right to
manufacture or sell a patented product for a set period of time,
subject to certain limitations.
Who Sets Intellectual Property Rules?
Each nation is free to set its own rules for intellectual property.
Members
of the World Trade Organization (WTO) are obligated to abide by the
minimum standards included in the WTO's Trade-Related Aspects of
Intellectual Property Agreement (known as TRIPS). TRIPS requires, for
example, that all WTO countries provide 20-year patents on inventions.
This is a significant change for many developing countries, which did
not provide for patents, or had much more lax patent rules, prior to
joining the WTO. In particular, many developing countries did not grant
patents for pharmaceuticals. (Many European countries also recently
refused to provide for pharmaceutical patents, even up through the
1970s.)
Other international agreements, such as NAFTA, may require additional intellectual property protections.
The negotiators of the FTAA are planning to adopt still more intellectual property requirements.
How do Intellectual Property Rules Affect Access to Medicines?
Patents
give drug companies a monopoly on medicines for a 20-year period (less
time when delays in the patent and drug approval processes are taken
into account), and the ability to set prices without direct competition.
Competition is the most important factor in limiting pricing, and
intellectual property rules largely determine how much competition drug
companies will face, and when.
What is Compulsory Licensing?
Compulsory
licensing enables any government to instruct a patent holder to license
the right to use its patent to a company, government agency, or other
party. Costa Rica, for example, could issue a license to a local company
for an HIV/AIDS drug manufactured by Bristol-Myers Squibb. The Costa
Rican firm would then manufacture the drug for sale in Costa Rica under a
generic name, and it would pay a reasonable royalty to Bristol-Myers
Squibb on each sale.
Compulsory licensing lowers prices to
consumers by creating competition in the market for the patented good.
Its impact is similar to the introduction of generic competition at the
end of a drug's patent term-prices come tumbling down. Compulsory
licensing can lower the price of medicines by as much as 95 percent or
more.
Is Compulsory Licensing Legal?
Whether compulsory
licensing is permitted in any particular country depends, of course, on
that country's laws. But compulsory licensing is permitted under the WTO
TRIPS rules. Compulsory licenses are regularly granted in the United
States, primarily in connection with antitrust disputes.
How Serious is the HIV/AIDS Crisis in Latin America and the Caribbean?
Although
the HIV/AIDS epidemic in Latin America and the Caribbean is nowhere
near as serious as it is in Africa, infection rates are still high.
UNAIDS estimates that 1.4 million people have HIV/AIDS in Latin America,
with 150,000 people newly infected with HIV in 2000. 390,000 people
have HIV/AIDS in the Caribbean, with another 60,000 infected in 2000.
(920,000 have HIV/AIDS in North America, with 45,000 newly infected last
year.) Deaths due to HIV/AIDS totaled 32,000 in the Caribbean and
50,000 in Latin America in 2000 (while 20,000 died from HIV/AIDS in
North America last year).
How Can Compulsory Licensing Help Latin American Countries Treat HIV/AIDS?
Triple-drug
therapies ("drug cocktails") are now enabling many people with HIV/AIDS
in the United States and other rich countries to survive. But the
patent-protected drug treatments are very expensive -- $10,000 to
$15,000 a year, or more.
Providing access to combination
therapies at $10,000 or more a year would severely strain or overwhelm
the budgets of the developing countries in the Caribbean and Latin
America.
If compulsory licensing brought prices down to even $500
a year -- more than the Cipla price -- most Caribbean and Latin
American countries could provide pharmaceutical treatments to their
HIV/AIDS populations. Although poor, these countries are considerably
than African nations; and their HIV/AIDS populations are considerably
smaller. Universal access to treatment is certainly within reach in
Latin America and the Caribbean.
How has Brazil Provided Treatment to People With HIV/AIDS?
The
experience of Brazil shows how generic production and compulsory
licensing can drive down prices and enable developing countries to make
drug treatments universally available. Brazil manufactures generic
HIV/AIDS drugs (which are not patent protected because Brazil has only
recently adopted a WTO-style patent system for pharmaceuticals). It
guarantees pharmaceutical treatment to every person with HIV/AIDS.
Brazil
has shown that developing countries can administer an effective
HIV/AIDS treatment program. It has effectively delivered drugs to those
with HIV/AIDS and maintained high rates of compliance with treatment
regimes. It has proven that generic production drives down prices -- its
cost for drug cocktails is far below that of the multinational
pharmaceutical firms, and the price continues to decline. And the Brazil
experience -- where infection rates are considerably lower than
projected -- strongly suggests that treatment is an important component
of prevention; healthier people are less likely to spread HIV, and
people are more likely to be tested for HIV and then adopt safer
practices if they know that those with HIV/AIDS have hope of being
treated.
Could the FTAA Limit Countries' Rights to Undertake Compulsory Licensing?
Yes.
Because the FTAA negotiating texts remain secret and in any case are
not finalized, it is not possible to know exactly what intellectual
property rules the FTAA may contain.
But if a recent trade
agreement completed between Jordan and the United States foreshadows the
FTAA future, there is cause to worry.
In the trade agreement
recently concluded with Jordan, the United States restricted the basis
for compulsory licensing. Under WTO rules, compulsory licensing is part
of the basic schema of the intellectual property system, not a limited
"exception." TRIPS permits compulsory licensing generally, so long as
certain procedural conditions are met. The U.S.-Jordan Free Trade
Agreement severely limits the ability of the United States and Jordan to
use compulsory licensing for non-public use.
Might Other Provisions Limit Countries' Rights to Undertake Compulsory Licensing?
Yes.
In the summary of its negotiating position, the United States has made
clear that it is seeking "TRIPS-plus" provisions -- that is, rules that
require countries to provide stronger intellectual property protections
than required by the WTO TRIPS.
For example, the U.S. negotiating
position includes a goal of providing new mandatory protections for the
safety and efficacy ("registration") data that drug companies submit to
gain approval to market a drug.
To gain marketing approval --
which they would need to put a compulsory licensed product on the market
-- generic companies typically show their product is "bioequivalent" to
a patented product, and then rely on the patented product's safety data
to earn approval. In many instances, if a generic company cannot use
the already-generated registration data, it will not introduce a
generic version of the patented product; the price of generating the
data may be too high, or, just as important, take several years to
replicate.
Adoption of new protections for registration data are
likely to significantly impede efforts at compulsory licensing of
pharmaceuticals.
Are There Other Potential FTAA Provisions that Could Interfere with Efforts to Enhance Access to Essential Medicines?
Yes.
For example, the U.S. negotiating position calls for an effective
extension of the patent term for pharmaceuticals (including patent
extensions to offset delays in marketing approval for pharmaceuticals).
The result would be to give drug companies longer-term monopolies,
enabling them to price gouge over longer periods.
For a more
detailed discussion of this and other problems with the U.S. negotiating
position, see a letter written by Robert Weissman and James Love, at:
http://lists.essential.org/pipermail/pharm-policy/2001-January/000620.html.
Should Intellectual Property Provisions Be Included in the FTAA?
No.
The FTAA negotiating countries are all members of the World Trade
Organization and have committed themselves to the TRIPS. TRIPS
establishes a comprehensive international standard for intellectual
property protection, with a heavy tilt towards the interests of
intellectual property holders. The only reason to include intellectual
property provisions in the FTAA is to force countries to adopt
TRIPS-plus obligations -- many of which are dangerous and injurious to
public health.
Even inclusion in the FTAA of rules identical to
the WTO would be harmful. That would mean that if positive changes were
achieved in the WTO intellectual property rules, the FTAA countries
would still be required to adhere to the old, more restrictive rules. By
contrast, if harsher rules were adopted at the WTO, the FTAA countries
would be required to adhere to them.
This is a lose-lose arrangement. Intellectual property should be kept out of the FTAA.
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