Philadelphia — Although the U.S. has not yet committed itself in writing with respect to its proposals for addressing the production-for-export issue left open in paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health, it has informally shopped several ideas, most of which would dramatically limit the scope and effectiveness of a post-Doha solution, sacrificing lives while securing future profits for the patent pharmaceutical industry in the U.S. These conditions, which have the potential to kill millions of people living with HIV/AIDS, include the following:

(1) limits on the types of public health products to be covered by the agreement;

(2) limits on the sectors which might be supplied by the agreement, specifically excluding the private sector (and perhaps the NGO and mission sectors);

(3) limits on the importing countries that might benefit from the agreement:

(a) no application to small market countries that theoretically have technical capacity to produce medicines but insufficient market size to achieve economies of scale,

(b) strict application of the "insufficient manufacturing capacity" standard to exclude countries where production is nontheless infeasible or impractical,

(c) income limits that would exclude many developing countries, especially middle-tier countries;

(4) a preference for Article 31(f) compulsory licensing solutions in the exporting state that create multiple barriers to implementation including:

(a) prior negotiation on commercially reasonable terms with the patent holder who might itself impose onerous conditionalities,

(b) costly, burdensome, and protracted individual determinations in administrative or judicial proceedings to grant each license on a case-by-case basis,

(c) dependence on the willingness of a third country to go through such burdensome procedures because of a public health need in a third countries,

(d) proof in these proceedings both of a triggering public health need in the affected country and of technical incapacity to produce a particular medicine,

(e) determination of the level of license compensation in the producing country rather than in the importing country and imposition of a licensing fee even with respect to imports into a no-patent country and possibly of double-license fees for CL importing countries;

(5) a probable limitation that export licenses be limited to addressing "serious" or "urgent" public health needs, such as HIV/AIDS, TB, and malaria;

(6) supply limitations or limitations on re-export, especially to developed countries, but perhaps even regionally between or to developing countries with comparable public health needs.

Each of these conditions (except the first part of #6) go against the letter and spirit of the Doha Declaration, each of them reflects erroneous assumptions and poor public policy, each of them has the potential to kill.

PHARMACEUTICALS ONLY VS. PUBLIC HEALTH PRODUCTS

Admittedly, paragraph 6 makes reference to the "pharmaceutical sector" and paragraph 4 makes reference to the imperative "to promote access to medicines for all." Likewise, there is little doubt that one of the most pressing needs with respect to infectious and pandemic diseases in developing countries is affordable medicines, especially those like anti-retrovirals which have been priced so exorbitantly in the recent past and which are still three times cheaper when supplied by generic producers.

But, treatment activists and public health specialists have clearly foreseen the need to achieve economies in other public health products, like blood tests and testing equipment. Given that paragraphs 1 and 4 make explicit reference to a broad public health exception (not just pharmaceuticals) and given that the TRIPS Agreement contains a principal of non-discrimination against a field of technology, it makes sense to broaden the category of products and processes covered beyond pharmaceutical alone to "health need products" as previously recommended by treatment NGOs in their letter to the TRIPS Council dated January 28, 2002.

SECTOR LIMITS, ESP. PRIVATE SECTOR EXCLUSIONS

The U.S. is shameless in trying to preserve the "right" of U.S. patent holders to make profits off of a narrow spectrum of rich elites in developing countries. In the era of highest pricing, only 10,000-15,000 Africans could afford medicines, even when treatment was partially subsidized by private medical aid schemes. (U.S. companies made $9000-$14,000 profit per patient per year for a total of $90,000,000-$210,000,000 a year.)

However, as important as it is to achieve universal coverage through the public sector (such as Brazil has done so successfully), at present it is important to extend access to affordable medicines in the private sector as well as the public sector for several reasons. First, there is considerable capacity in the private business sector to deliver treatment and care through workplace clinics already provided by some of the larger employers. Some of these employers, for example AngloGold, are refusing to supply anti-retroviral therapy to their non-central-office employees because of the price of ARV medicines which have not been heavily discounted in the private sector by pharmaceutical patent-holders, e.g., GlaxoSmithKline.

Secondly, most medical aid schemes extended to private and public sector employees have benefit limits that make it impossible to pay for anti-retroviral medicines and associated testing unless they are heavily discounted. Third, the private sector technically includes NGOs and mission hospital systems which are also well poised to deliver high quality treatment and care but only if medicines are made available at a more affordable price. What is particularly cynical about the U.S. position is that it coincides with U.S.

backed imperatives in the World Bank requiring borrowers to privatize health systems and as it presses further for health care privatization in the General Agreement on Trade in Services. There is no reason in the world to exclude untreated private and public sector employees and their families from the benefit of more affordable medicines and medical products.

IMPORTING COUNTRY LIMITS

The U.S. is trying to dramatically limit that countries that might benefit from the production-for-export exception in three ways. First, the U.S.

refuses to consider application of the new rule to countries with a small market for a particular medical product through fear of benefiting customers in small but rich markets.

Many African countries are "small market" both in terms of absolute population and number of citizens suffering a particular disease and in terms of consumers who can afford medicines. Even though these countries might theoretically have, or in the future develop, some limited technological capacity, production for domestic use only will remain impractical because it will be impossible to achieve meaningful economies of scale by domestic production. Certainly it is important in the long run to promote technological transfer and to develop pharmaceutical capacity in Africa and in other developing nations.

But in terms of AIDS and many other diseases of poverty, it is important to achieve both economies of scale and some degree of competition so that high quality medicines can be made available on a low-cost basis as soon as possible. Thus, any post-Doha agreement must address the importing needs of small-market countries as well as limited capacity countries.

Parenthetically, there are many instances where U.S. and E.U. consumers can and should benefit from this same principle. There are many so-called orphan diseases which have a small incidence, but where orphan drugs are available but only at truly exorbitant prices. Likewise, in times of threats of bio-terrorism (remember anthrax and Cipro?) or epidemic outbreaks of certain infectious diseases, developed countries should have the flexibility in their national legislation to address public health needs as well through import of critically important medicines. Although the NGO letter clearly addresses this public health need, the U.S. position staunchly ignores health market needs in both developed and developing countries in order to preserve profits.

Second, the U.S. is trying to narrowly interpret the meaning of "no and insufficient manufacturing capacity countries" to impose an onerous pharmaceutical capacity test which will exclude several countries with theoretical or marginal capacity or even capacity in some sectors but not in others. Many developing countries have some residual capacity to finish medicines (press them into pills) from raw ingredients manufactured abroad.

However, few of these countries have current capacity to make ingredients from scratch (nor would it be economically sensible to do so). Even fewer of them have the current productive capacity to manufacture the newest generation of sophisticated drugs, especially anti-retrovirals where production and quality control standards are extraordinarily important because of the risk of drug resistance and/or toxicity where the bio-availability of medicine is not maintained in a very narrow range.

The NGO letter has opted to drop any "capacity" requirement whatsoever in favor of addressing a public health mandate that might affect all countries, even those with theoretical capacity. Even if countries eventually negotiate something narrower with respect to capacity, the definition should err on the side of over- rather than under-inclusion and it should be easy to administer to avoid complex determinations in the country of production.

Third, the U.S. is trying to preserve pharmaceutical monopolies in low-middle and middle-income countries by refusing to automatically include all "developing countries" in its coverage provisions. As previously stated, the NGO letter has urged a broader inclusion of all WTO members who face a public health need - the interests of consumers in developing countries could be addressed in this new agreement and there is no sound reason not to do so. Moreover, if the U.S. or the E.U. or Japan decided that their consumers somehow did not need the benefit of public health imports in times of dire need, they could simply keep their current generic/import exclusion rules in place.

In other words, the developed countries can always protect their own domestic markets from generic competition but means of their national legislation. However, the U.S. is also trying to figure out how to exclude some of the bigger developing and middle income markets because that is an area of future growth for the patent pharmaceutical industry. Once again, pharmaceutical profits and intellectual properties rights are being put ahead of the health rights of people in South Africa, Brazil, and other middle income countries.

PREFERENCE FOR COSTLY, INEFFICIENT, AND NULLIFYING COMPULSORY LICENSE SOLUTIONS

Both the E.U. and the U.S. have stated a preference for an Article 31(f) solution liberalizing the "predominantly for the supply of the domestic market" rule so as to permit production for export. Although an Article 31(f) solution without onerous conditions would certainly be better than no solution, it is inferior to an Article 30 solution because of the numerous procedural and practical hoops that will inevitably delay implementation of production for export.

First, a production for export license (except one granted under 31(k)) would ordinarily required protracted negotiations with the license holder seeking commercially reasonable terms for a commercially reasonable period of time. During these negotiations, there is little doubt that patent holders would attempt to impose the same limitations and conditions on voluntary licenses that the U.S. seeks to impose in its post-Doha proposals, e.g., product limits, country limits, sector limits, etc.

Moreover, at a minimum, these negotiations are likely to drag out for months if not years and might result in time-limited rather than life-of-patent agreements. Second, compulsory license procedures are costly, burdensome and protracted, imposing substantial procedural and substantive barriers that many countries seek to avoid. Compulsory licenses, even under administratively streamlined procedures, take lawyers, bureaucratic decision-makers, and other official resources, are subject to pharmaceutical company opposition and subversion, and can give rise to covert bilateral trade pressure from the U.S. which wants CLs to remain "exceptional" rather than "ordinary."

Paradoxically, however, the U.S. is attempting to impose a system that requires dozens of separate applications - one for each and every required medicine and perhaps one for each and every importing country. Third, these kinds of burdens may well make many countries loath to permit compulsory licenses on humanitarian grounds merely to serve public health needs in distant countries. As previously stated, many countries have been reluctant to even consider imposing licenses for their own needy populations. (Remember, no developing country has yet issued a compulsory license for AIDS medicines, though Brazil has threatened to do so and although a current CIPLA application is pending in South Africa.)

What makes the U.S. think that countries will readily go through this grief even to benefit a fledgling generics industry? Fourth, the license-granting, export-producing country will have to undertake a determination both of the public health need and the level of technical capacity in distant countries, at least under the U.S. proposal. Once again, this is an unreasonable and impractical burden. Finally, under this scenario, it is the producing/exporting country that will determine and impose a license royalty fee to be paid to the patent holder and tacked onto the product price. It makes a lot more sense for the licensing fee to be determined in the importing country where local realities and markets are affected. (It makes no sense that an importing country that has issued its own compulsory license might have to pay double compensation!)

Moreover, there is no justification for any fee whatsoever to be imposed on products destined for no-patent countries. If the pharmaceutical company has not bothered to secure a patent in a particular country, why should it get a royalty on sales there? The extension of the transitional time periods in the Doha Declaration expressly permits least developed countries to remain non-patent or to revert to non-patent status. Why should these poorest countries pay a premium just because they can't manufacture medical products on their own?

LIMITATION TO SERIOUS OR URGENT PUBLIC HEALTH NEEDS

At Doha, the U.S. famously negotiated for an AIDS, TB, and malaria platform only. The E.U. has partially resurrected the U.S. position in its proposal that talks about "serious" public health needs rather than any legitimate public health need whatsoever. The Doha Declaration makes not such distinction except in the paragraph 1 preamble and with respect to paragraph 5(c) dealing with the emergency rules of Article 31. Indeed, the Doha Declaration is significant for having adopted a much broader public health perspective, particularly in paragraph 4: "We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health.

Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all." Although the U.S. and E.U. language would undoubtedly permit production and export of medicines for AIDS, TB, and malaria, it would not give member countries the option of accessing most or all of their pharmaceutical and other medical products at more affordable price should public policy so mandate. Thus, scarce resources, otherwise available for public and private health care and poverty alleviation, would be "wasted" on high cost antibiotics, or diabetes medicines, or the like. Since the TRIPS Agreement places no limits on the public health issues that Member Countries might address, there is no sound reason for limiting the scope of paragraph 6 solutions to "serious" or "urgent" needs only.

SUPPLY LIMITS AND RESTRICTIONS ON RE-EXPORT

The U.S. and E.U. are understandably concerned about preventing the leakage of TRIPS sanctioned medicines back into developed countries markets where pharmaceutical companies make the vast majority of their profits. As previously discussed, however, the U.S. and E.U. are in the driver's seat with respect to this alleged problem because they will certainly maintain or expand their existing legislation to prohibit importation of "production-for-export" medicines into their national markets. However, even with these legislative barriers and with their capable customs systems, the E.U. and U.S. still want some protections against grey market or black market re-export.

As a practical matter, this grey market danger has never materialized, but if the U.S. and E.U. can fashion some reasonable language on this issue, it might not be so bad. Unfortunately, in an effort to protect their own markets from generic competition, the U.S. and E.U. are attempting to impose barriers that impede regional procurement and distribution of medical products among developing countries, whether mediated by international agencies or not. This is unconscionable.

MORATORIUMS AVOID SOLUTIONS

The U.S. has floated the idea of a moratorium, which in the view of treatment activists delays a solution rather than implements one.

Unfortunately, the problem of public health needs and access to medical products in the developing world is not going to go away quickly, especially for the pandemic diseases of AIDS, TB, and malaria. When a moratorium ends, the same conundrum about how to structure a workable solution will still exist. Even worse, a moratorium, especially a short moratorium, does not give producing countries and generic manufacturers the legal security they need to pass enabling legislation or to invest in production for export.

In particular, it is clear that generic manufactures seek to avoid all risk of litigation with patent holders, whose army of lawyers terrifies both companies and nations. (Note, it took South Africa three years and 400,000 lives to beat off the litigation by the pharmaceutical industry over its legislation permitting generic substitution of off-patent medicines and parallel importation.) Accordingly, clear rules are preferable to vanishing moratoriums.

ARTICLE 30

The E.U. has at least considered the possibility of an Article 30 limited exception to supply a compulsory license issued in the importing country (ignoring the right of no-patent countries to access medicines.) The NGO paper has stated many of the advantages of an Article 30 limited-exception solution and has proposed implementing language broader than the E.U.

proposal. Similarly, the Africa Group and other countries proposed Article 30 language that would "authorize the production and export of medicines by persons other than holders of patents on those medicines to address public health needs in importing Members."

These solutions are streamlined, easily negotiated, and even easier to implement once authorizing legislation is enacted in producing and importing countries. The U.S. has argued that negotiating an Article 30 limited exception is more time consuming than negotiating an amendment to Article 31(f) or a highly conditional moratorium on its enforcement. This is sophistry. Surely, amending the text of TRIPS is more time consuming and procedurally burdensome than a binding interpretation of the TRIPS Council on an Article 30 limited exception.

LIVES HANG IN THE BALANCE

Once again, the U.S. seems to have forgotten that lives - millions of lives, 13,000 lives everyday with respect to AIDS, TB, and malaria - hang in the balance. The U.S., the E.U., and the rest of the world made a promise at Doha, that the WTO would find an expeditious solution to the production-for-export issue left open on November 14, 2001. Now the U.S.

and the E.U., but particularly the U.S., are threatening to renege on that promise - to break their word - and to conditionalize the Doha Declaration to death.

Although the U.S. might decide to callously ignore the current and future public health needs of its own citizens in times of bio-terrorism or with respect to orphan medicines, it should not be permitted to kill countless others in its drive to preserve pharmaceutical profits. Developing countries and treatment activists worldwide must protest the U.S.'s narrow, Doha-strangling conditions at the upcoming TRIPS Council negotiations.