The Role of the TRIPs Agreement on Access to Pharmaceuticals in Developing Countries Essay

The Role of the TRIPs Agreement on Access to Pharmaceuticals in Developing Countries

Trade Related Aspects of Intellectual Property Rights (TRIPs) play an important role when it comes to the aid (or lack thereof) of foreign countries with less resources. Protection of these intellectual rights has been recently garnering much attention, because it is contributing to the denial of medicine and pharmaceuticals in countries in need, due to their serious health problems. In countries ravished by HIV and AIDS, people find themselves unable to afford treatment, as medicine for the disease usually runs between four and six thousand US dollars per person for a thorough treatment. Patented drugs, protected by the TRIPs Agreement, are often not sent to countries with lower standards of living (and therefore, diseases may go untreated in these places) because the patents keep the price at or above a certain monetary note, making drugs unaffordable in most African countries.

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According to the International AIDS Conference which took place last summer in Durban, South Africa, the price of antiretroviral medications would have to be reduced by over 95% for the drugs to be considered affordable treatments in Sub-Saharan African countries. That being said, it would require major exceptions to the TRIPs Agreement before the necessary medications were made available in sub-Saharan Africa. The TRIPs policy, which concerns the patents maintained by various corporations, which in turn regulate the price of certain products, in this case pharmaceuticals, would have to be reconsidered before substantial treatment would be possible in these countries. This paper will be an investigation into which is more important: available healthcare, which goes against TRIPs, or international protection of corporations. And it seems possible that there exists some middle ground.

Price of the drugs are the main concern in these countries. “A key factor in determining the cost of a particular drug is the patent on it. Of the 50% of the patients in developing countries who lack access to essential drugs, many die because the drugs are patented and therefore too expensive,” Cecilia OH writes in her article for the Third World Network, entitled TRIPs and pharmaceuticals: A case of corporate profits over public health. “These patented drugs include treatment for tuberculosis and AIDS as well as the Hepatitis-B vaccine. Public health activists and consumer groups warn that the World Health Organization (WHO) estimates – one third of the world’s population lacks access to essential drugs Ð will further increase,” Oh continues. “They are concerned that World Trade Organization (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) (which developing countries have to implement as of 1 January  2000)  will give rise to factors that will put access to essential drugs and healthcare out of the reach of millions of people in developing countries,” (Oh, 200). But the issue Oh is bringing up is one that would certainly be an unpopular notion in major pharmaceutical corporations.

The TRIPs agreement was formulated to ensure a certain amount of profit for corporations, but when talking about pharmaceuticals and other health-related products, the issue becomes complicated. Essentially, it boils down to this: is it worth protecting the income of major corporations even if it means endangering lives? TRIPS, by securing profits for corporations, dooms third world nations ravaged by disease.

The World Trade Organization (WTO) now requires all countries to comply with what is internationally recognized as the requirements for the protection of intellectual property rights. This was because, in the 1980s, corporations in United States and Europe had a hard time competing with Asian countries, as Asian countries would see the popular products of American and European companies, and duplicate them for much cheaper, and sell them for less, which, needless to say, hurt American and European corporations. This is what gave birth to international trade requirements like TRIPs. If there is a minimum selling price for particular products, then those products cannot be duplicated by someone other than the inventor, or by somewhat the patented company gives permission to (to duplicate) because the minimum price would keep other countries from creating a monopoly on given products, because they manufacture the products for much cheaper, and put the inventing company out of business. A real life scenario that shows the intention of TRIPs (which is based on the protection of individual’s, or corporation’s intellectual property) would be something like this. Say someone who work for an automobile company invented a product that made vehicles much more fuel efficient. A car was able to conserve fuel because of this certain part which, though relatively inexpensive to add to a vehicle, allowed fuel to do more power and propel the car more for less. The inventor and his company decide to sell the part for around a thousand dollars a piece. Some time later, another organization realized that this product, which made cars more fuel efficient, only cost about one hundred dollars to produce. So the other company decided to make and sell the part for only three hundred dollars. This scenario could put the company that invented the item out of business, even though the intellectual property is the original company’s. So TRIPs seeks to set a certain minimum selling price of the product, which prevents new companies from selling the product for a very low cost, taking buyers from the inventing company. With this minimum price, the original inventing company could sell the product for the original price without having to worry about a competitor selling it for half the price.

But such policies that serve to protect intellectual property rights, or profits for companies that hold patents can pose serious problems to third world countries when it comes to healthcare. As the set price of particular pharmaceuticals is often far too high to be considered affordable in developing countries, as the policy aims to protect profits for the pharmaceutical companies with the patents, it prevents the drugs from being even remotely accessible in some of the countries that need them most.  “‘TRIPs’ provision in Jesse Jackson, Jr.’s HOPE for Africa Act seeks to limit US trade pressures on African countries on matters concerning access to medicines. Bill would prohibit US government from using public funds to pressure African countries to adopt Intellectual Property    provisions that exceed WTO/TRIPs requirements, on matters concerning access to medical technologies,” James Love wrote in his article about the implementation of TRIPs exceptions in Africa, entitled Jesse Jackson, Jr’s HOPE for Africa Act and US policy on Intellectual Property and Medical Technologies. The first premise of this bill is as follows:

Compulsory licensing of drugs for AIDS and other essential medicines.  Under the WTO rules, all WTO members countries     will be required to have 20 year patents on medicines.  The WTO permits countries to issue “compulsory licenses” to patents to broaden access to medicines.  These compulsory licenses are subject to WTO safeguards, including payments of reasonable royalties to patent owners.  Nevertheless, the US government is putting enormous pressure on South Africa and other African countries, opposing any and all compulsory licensing of medicines.

 

This part of the bill seeks to explain the necessity of exceptions to the recent WTO requirements regarding intellectual property rights, as they directly prevent particular pharmaceuticals from reaching countries in need of them. Parallel Imports, the second part of the bill, is concerned with an action that in a way cheats the manufacturer, but supplies healthcare to people in need. “Parallel Imports sometimes called grey market goods, are cross border trade, without permission of the manufacturer,” James Love writes of the HOPE for Africa bill’s second premise. “When parallel imports are legal, hospitals or other consumers can shop around and get the best world price.  Drug companies often charge very different prices for the same drug (manufactured and sold by the same company), based upon local market conditions.  In 1997 South Africa passed legislation to permit parallel trade in pharmaceuticals, a practice that is common in several countries in the European Community.  But at the request of the US pharmaceutical industry, the US government has asked South Africa to repeal its legislation.  Without parallel imports, African countries will be hostage to often uncompetitive local markets.” The bill is trying to garner support by appealing to people’s moral standards here, and trying to demonstrate that in some cases, such as in cases when disease and health issues are involved, it is better to forego certain guidelines that the WTO has administered to protect manufacturing corporations, and aid the people ravaged by disease, who cannot themselves pay for the medication. Articles 7 and 8 of the TRIPS Agreement, deemed by the WTO to be the most important articles that justify the policy, are as follows.

Article 7-Objectives

The protection and enforcement of intellectual property rights should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.

Article 8-Principles

1.   Members may, in formulating or amending their laws and regulations, adopt measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided that such measures are consistent with the provisions of this Agreement.

2.   Appropriate measures, provided that they are consistent with the provisions of this Agreement, may be needed to prevent the abuse of intellectual property rights by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology.

(World Trade Organization, http://www.wto.org/english/tratop_E/TRIPS_e/factsheet_pharm01_e.htm)

Section one of Article 8 of the agreement touches on the issue of the TRIPs Agreement’s impact on healthcare and worldwide distribution of pharmaceutical products. But as the article also says that the measures taken to ensure availability of healthcare meet the requirements of the agreement, it seems that the World Trade Organization has not endeavored to help the people in need at all- it has only created a policy to help the major manufacturing corporations of pharmaceutical products, who would inevitably be hurt if other companies were allowed to sell similar products for cheaper to low income societies.

“The TRIPs Agreement provides flexibility for governments to fine tune the protection granted in order to meet social goals,” The WTO says of the policy. “For patents, it allows governments to make exceptions to patent holders’ rights such as in national emergencies, anti-competitive practices, or if the right-holder does not supply the invention, provided certain conditions are fulfilled. For pharmaceutical patents, the flexibility has been clarified and enhanced by the 2001 Doha Declaration on TRIPs and Public Health. The enhancement was put into practice in 2003 with a decision enabling countries that cannot make medicines themselves, to import pharmaceuticals made under compulsory license. In 2005, members agreed to make this decision a permanent amendment to the TRIPs Agreement, which will take effect when two thirds of members accept it.” This seems like it would be beneficial, not necessarily to manufacturers, but to countries in need, and it would increase worldwide approval of the given manufacturers if they aided countries in need, even if it meant, in that particular case, foregoing definite profits. But many manufacturers are not nearly as concerned with helping people in need as they are with maintaining a steady source of income, so it seems that pharmaceutically-flexible policies would be rejected by members of the World Trade Organization, because it directly leads to less profit.

The WTO also intends to moderate trade and enforce the TRIPs Agreement. For violators, heavy fines or tariffs may be in store. “The second main set of provisions deals with domestic procedures and remedies for the enforcement of intellectual property rights,” the World Trade Organization writes of the policy. “ The Agreement lays down certain general principles applicable to all IPR enforcement procedures. In addition, it contains provisions on civil and administrative procedures and remedies, provisional measures, special requirements related to border measures and criminal procedures, which specify, in a certain amount of detail, the procedures and remedies that must be available so that right holders can effectively enforce their rights.” But this means that it will undoubtedly be difficult for necessary pharmaceuticals to enter countries ravaged by disease. Renegade companies who seek to supply developing countries with the necessary pharmaceuticals, or even non profit organizations that attempt to purchase the drugs for cheaper costs may be subjected to fines, or the people importing the pharmaceuticals may find heavy tariffs in place as they try to buy the drugs at more affordable prices.

But it certainly seems that, at times, exceptions to the TRIPs agreement would be quite necessary. Patent holders are generally free to charge high prices for their products under the agreement, and this means that if pharmaceutical companies wished to do so, they could exclude lower income societies from buying their drugs, because the drugs would only be affordable if they were much less expensive. “While the patent system was seen as a way to generate incentives for innovation,” Eva Ombaka writes in her article, entitled Trade-Related Aspects of Intellectual Property Rights (TRIPs)and Pharmaceuticals, “member states were given a certain amount of freedom in modifying their regulation in order to adopt measures necessary to protect public health and prevent abuse by the patent holder. Thus member states may, in their laws, provide limited exceptions to the patent holder’s exclusive rights e.g. through issuing of compulsory licensing, advanced generic registration and parallel importation of protected products as provided for in the agreement,” (Ombaka, 2001). These limited exceptions, and the parallel importing policy, would help to grant access of important pharmaceuticals to third world countries in need. Ombaka hopes that limited exceptions to the TRIPs agreement will be allowed for countries that would otherwise be deprived of imperative medical supplies. “These developments raise a major question,” she writes. “Is the TRIPs agreement going to be used by the powerful to protect corporate profit regardless of the cost in human life? How the TRIPS agreement can be used to ensure access to innovation and affordability of pharmaceuticals is the challenge that WHO, governments, NGOs, consumers and all people interested in justice face.”

If exceptions to the TRIPs agreement are not granted, it seems that, because current pharmaceuticals are patented, new medicines that treat the same illnesses would have to be developed, and sold at lower prices, for third world countries to have access to the latest medical treatments. “The level of patent protection granted on pharmaceuticals under TRIPS was controversial. Arguments in favor of the policy emphasized the benefits for new-drug innovation and institution building in developing and least-developed countries,” Margaret Kyle and Anita McGahan write in their article,  Investments in Pharmaceuticals Before and After TRIPs. “Supporters claimed that patent protection would promote the distribution of drugs in poorer countries, and could create incentives for new drug development on diseases that disproportionately affect the poor, called “neglected” diseases. They argued that the dynamic benefits of increased innovation would offset the static costs of the temporary, legal monopolies created by patent protection,” they continue. “Proponents of TRIPs also noted that intellectual property protection could have other benefits through by cultivating research communities in developing countries. Patent protection might facilitate technology transfer from firms in developed countries to partners or subsidiaries in developing countries, or induce invention by individuals or firms in developing countries,” (Kyle, McGahan, 2008).

“Many others, mostly from developing countries but also a few academics from industrialized countries, raise concerns about the unfairness of harmonization of patent protection and its attendant negative impacts: high drug prices and further decline in access of the people to medicines, weakening of local pharmaceutical companies, increased dependence on Trans- national Companies (TNCs), and decreased transfer of technology and foreign direct investment,” Zafar Mirza wrote in an article entitled WTO/TRIPs, Pharmaceuticals and Health: Impact and Strategies. Mirza is stating the main concern of the TRIPs Agreement, which is that it makes healthcare less accessible in countries that are in dire need of medical attention. But what can be done to counter this concern? Major pharmaceutical manufacturers are hesitant to allow exceptions to the agreement because they inevitably feel that such exceptions will directly disadvantage their companies. Even if that is absolutely true, and a definite side effect of exceptions to the TRIPs Agreement, so be it. The WTO should recognize that affordable healthcare in countries in need of it is more important than the corporate profits their 1994 policy is aimed at protecting.

“The TRIPS Agreement is not a uniform law, but a framework that sets (minimum) standards and conditions for the protection of intellectual property,” an executive summary of the policy relates for the World Health Organization. “These are made operational via the national intellectual property rights (IPR) legislation. Within the TRIPs framework, there is some room for man oeuvre, which can be used to design legislation which is in the best interest of the country. Measures to protect the public interest ought to be included in the national legislation, and should encompass public health aspects.” Indeed, the World Trade Organization should have been concerned with the dangerous side effects of the TRIPs Agreement before it proposed its policy to protect intellectual property rights. Third world countries should have had an opinion, and should not have been completely left out of the WTO’s decision to enact the agreement. If more third world countries played a major role in the WTO’s policy making assemblies, certain aspects, which would now have to be made exceptions to the agreement, would have been in place since the TRIPs Agreement’s proposal.

But exceptions are only permissible when the patent holding corporation is unable to manufacture certain products, at which point another company may do so, and sell the products at any given price. “Safeguards such as provisions for compulsory licensing are an essential element of IPR legislation, since they signal to the patent holder that, in the case of abuse of rights and/or non-availability of the product, a third party could be allowed to use the invention,” the World Health Organization documents. “As such, they reduce the risk of misuse of the monopoly rights conferred by a patent. However, to ensure that such safeguards can be used effectively, it is important to carefully state the grounds and conditions for their use in the national legislation.” Compulsory licenses, which essentially allow corporations other than patent holding companies to manufacture and sell the same type of product as the patent holding company, are one way that important pharmaceuticals would be able to enter third world countries, because these other corporations would be allowed to sell the drugs for cheaper. These licenses, however, are only issued when the patent holding company abuses its rights, or when it is unable to manufacture the products itself. But why not issue these licenses more often, even if the patent holding corporations do not abuse their rights, and they are still able to manufacture as usual? Do they fear that even a small number of exceptions, which would benefit developing countries, would take that much business away from the major manufacturing corporations?

It seems as though exceptions of the TRIPs Agreement would not do too much damage to companies that hold the patents to, and manufacture pharmaceutical products. After, the corporations that the exceptions would “disadvantage” do not do business with the third world countries that the exceptions would benefit. But if they were to trade with developing countries, as much of the sale of these corporations is profit anyways, selling the drugs for less in these countries might make small income for the companies, and certainly boost global approval of pharmaceutical corporations. As it currently stands, the World Trade Organization is taking measures to ensure that intellectual property rights are protected, but by doing so, they directly deprive countries in need of aid. Perhaps one solution, if manufacturing companies do not choose to sell pharmaceuticals for less to third world countries, would be to allow competitors of the patent-holding companies to manufacture the drugs for less, and sell them for a price similar in value to what they would sell them for globally if the TRIPs Agreement was not in place, to developing countries. This way the patent-holding corporations would not be disadvantaged by losing some of their business, as third world countries are not buyers of their products anyways.

 

Works Cited

 

 

Correa, Carlos, (2000) “Implementing national public health policies in the framework of the WTO Agreements” (2000), Journal of World Trade, vol. 34, No. 5, September.

 

Gambardella, Alfonso, (1995), Science and innovation. The Us pharmaceutical industry during the 1980s, Cambridge University Press. Cambridge.

 

Gervais, Daniel (1998), The TRIPS Agreement. Drafting history and analysis, Sweet & Maxwell, London.

 

International Intellectual Property Institute (IIPI) (2000), Patent protection and access to HIV/AIDS pharmaceuticals in Sub-Saharan Africa, Washington D.C.

 

Oh, Cecelia. (2000), A Case of Corporate Profits over Public Health, Third World Network.

 

Ombaka, Eva. (2001), Trade-Related Aspects of Intellecutal Property Rights (TRIPS)
and Pharmaceuticals, http://www.wcc-coe.org/wcc/what/jpc/trade.html

 

Raggett, Tom, (1996), GATT and patent reform. The global strengthening of patent protection and the implications for the pharmaceutical industry, Financial Times Management Reports, London.

 

UNCTAD, (1996), The TRIPS Agreement and developing Countries, UNCTAD/ITE/1, New York and Geneva.

 

WHO, (2000), The TRIPS Agreement and Pharmaceuticals. Report of an ASEAN Workshop on the TRIPS Agreement and its Impact on Pharmaceuticals, Jakarta, 2-4 May 2000.

 

World Trade Organization, Agreement on Trade-Related Aspects of Intellectual Property Rights. 1994

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