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Update: The International Intellectual Property Regime

and Access to Medicines

Prof. Brook K. BakerABA AIDS Coordinating Comm. Fall Meeting

Nov. 2, 2007

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Introduction

TRIPS, Doha Declaration, and Para. 6 DecisionPharma/U.S. trade pressure and demands:

USTR Special 301 Watch List, Trade Advisory CommitteesGSP benefitsPharma lobbyingTRIPS-plus Trade Agreements

Pharma WarsThailand/AbbottIndia/Novartis

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Historically, Patent Regimes were Pluralistic

Pre-1994, enormous variability worldwide.Over 50 countries, including in Europe, did not provide patent protections for medicines and/or food products.In the 1980’s, led by drug companies, U.S. IP industries banded together to try to achieve a globalized standard set of baseline protections for patents, copyright, and trademarks.

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WTO TRIPS Agreement Increased IPRs Worldwide

Uniform floor of intellectual property protection worldwide.20-year term of patent protectionRestrictions on use of clinical trial dataRestricts discrimination against fields of technology, i.e., medicines, and against importation (outlawing rules favoring locally produced drugs).Transition periods for developing and least developed countries, but most important non-product-patent countries, e.g., India, were given until Jan. 1, 2005 to become TRIPS-compliant with respect to medicines.

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IMPORTANT IPR DATES POST-TRIPS

Pre-1995 drugs (“older drugs”)

TRIPS has no retroactivity, meaning that drugs that were not patented in a Member before 1995 need not be patented retroactively.

1995 “mailbox” drugs (“newer drugs”)

Developing countries are required to accept patent applications on post-1995 innovations and keep them in a patent-queue “mailbox.” Most developing countries started processing these mailbox applications in 2000, but some countries like India, which didn’t have product patents, can wait until 2005. (Note: least developed countries – LDCs - have until 2016). As part of the IP tradeoff, the patent applicant might be given 5-years of marketing exclusivity once it registered the “mailbox” drug. This exclusivity does not apply to LDCs.

2005 drugs(“newest drugs”)

Except for LDCs, all WTO members, including India and other major generic suppliers will have to grant patent protection for drug products as well as processes.

20062016

LDCs must become TRIPS-compliant unless they get extension.Transition period for patents on medicines automatically extended, Para. 7 of Doha Declaration, but nat’l laws still apply.

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TRIPS Has Important Flexibilities

“Parallel importation” (Article 6)Comparison shopping for originator drugsImportation of drugs lawfully produced and sold elsewhere.

“Compulsory licenses” (Article 31) Granted on any grounds whatsoever, including public health, with special expedited provisions for emergencies, public, non-commercial use, and competition-based licenses

No-hassle, “limited exceptions” to patent rights (Article 30)

Research, early working for purposes of registration.

Actual use of flexibilities was challenged by the U.S. and the drug industry, most famously in South Africa.

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Exceptions to Prior Negotiation

Article 31 ordinarily requires that “the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time.”In practice, trying to negotiate voluntary licenses can be protracted and futile.“This requirement [of prior negotiation] may be waived by a Member in the case of a national emergency or other circumstance of extreme urgency or in cases of public non-commercial use. ...”

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Domestic Production vs. Importation

Compulsory licenses and public non-commercial use licenses issued pursuant Art. 31 can be granted for local production or for importation.There may be patent, export quantity, and data restrictions on exporters that limit the effective exercise of this right.

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Restrictions on Exports

“Right” to import generics is illusory because products produced pursuant to a compulsory license must be “predominantly for domestic use” (Article 31f).

This might mean that 51% must be consumed locally.Alternatively, it might means that production has to predominantly benefit local consumption.The only exception to this rule arises when licenses are issued to remedy anti-competitive practices.

This was a major defect in the TRIPS Agreement: U.S. and Europe could use C.L. loopholes to access medicines because they have local capacity and large rich markets; poor, small countries that could not produce domestically might be barred from importing key medicines.

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Incapacity to Produce Medicines

Limited technical expertise and limited manufacturing capacity in most African and Asian countries.Small and poor markets = diseconomies of scale.Countries, with or without patents, but with limited pharmaceutical capacity needed a way to import cheaper generic medicines of assured quality.

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Who Can Produce?

Major generic producers – India, Brazil, S. Korea, and China – can produce base ingredients and finished products at a fraction of U.S. prices; Thailand and South Africa are increasingly capable of doing so as well.Finishers – a few other developing countries have capacity to formulate.Most developing countries have no capacity whatsoever, except maybe to package and label.Technology transfer and South/South cooperation may help in the long run.

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Whither Public Health?

In 2001, impending crisis in access to AIDS medicines → developing countries demanding that public health receive higher priority.That fall, the U.S. threatened to override Bayer’s patent on ciproflaxin in response to the post-9/11 anthrax scare.These conditions resulted in the passage of the Doha Declaration on the TRIPS Agreement and Public Health, (Doha, Qatar Nov. 14, 2001)

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The Doha Declaration ¶ 4

“The TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. … [W]e 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. ”

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Clarification of TRIPS-compliant Flexibilities

5(b) Each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.

5(c) Each Member has the right to determine what constitutes a public emergency … (including HIV/AIDS, TB, malaria, and other epidemics).

5(d) [TRIPS leaves] each member free its own regime for exhaustion [of intellectual property rights] without challenge … (International exhaustion permitting parallel importation permitted)

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Production-For-Export – ¶ 6 Problem

“We recognize that WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an expeditious solution to this problem and to report to the General Council before the end of 2002.”

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U.S. Blocks ¶ 6 Solution

Despite agreeing to find an expeditious and efficient solution to the production-for-export issue by the end of 2002, the U.S. unilaterally blocked a tentative agreement reached by the other 143 WTO members. U.S. wanted to:

limit the number of eligible importing countries limit covered diseasesimpose strict anti-diversion rules impose multiple procedural hurdles.

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Paragraph 6 Implementation Decision

Finally passed Aug. 30, 2003 as a waiver; pending amendment to TRIPS, Art. 31bis.Problems:

Ad Hoc reviews re “insufficiency of manufacturing capacity.”45 countries opted out, thereby reducing incentives to generic producers. Impractical and costly anti-diversion measures.Onerous, ten-step procedural labyrinth - country-by-country, drug-by-drug, quantity-by-quantity.Only one license has been issued in four years, Apotex, Canada to Rwanda.

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Pharma: Special 301 Watch List

Every year the U.S. Government publishes a "Special 301" Report that details "the adequacy and effectiveness of intellectual property protection" and fair and equitable market access for US IPR users in countries throughout the world. Three classifications: watch list (bad), priority watch list (worse), priority foreign country (worst).Interested persons may submit information and recommendations to the USTR about foreign countries. PhRMA files submissions every year listing IP “offenses” and proposed classifications. PhRMA submissions reveals a steady stream of recurrent and escalating demands including demands

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Pharma: USTR Advisory Committees

The Trade Act of 2002 created a system of 27 USTR Advisory Committee, comprised of more than 750 members, the vast majority of whom are industry representatives. These committee members have insider access to US trade policy and they write reports on proposed trade agreements. ITAC 3 (Chemicals, Pharmaceuticals, Health Science Products and Services) has 7/33 pharma representatives; ITAC 15 (Intellectual Property Rights) has 3/20.

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Pharma – Lobbying

2005 study by The Center for Public Integrity found that pharmaceutical firms, their trade organizations, and their outside lobbyists lobbied the USTR on at least 289 occasions. PhRMA reported 59 official lobbying contacts, more than any other lobbying organization and more than PhRMA lobbied the FDA.

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Generalized System of Preferences

The U.S. creates trade pressure by offering and threatening to withdraw special, no-tariff trade preferences.In 1987, the U.S. actually imposed 100% tariffs (trade sanctions) against several Brazilian industries because Brazil had not “modernized” its intellectual property law.In 1992, U.S. withdrew GSP duty-free privileges on $60, then $80 million dollars of Indian export trade to the U.S. The U.S. in 1998 withheld trade preferences on four classes of products in S. Africa.

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U.S. IPR Trade Policy

Trade Act of 2002, 19 U.S.C. § 3802 announced three broad IPR trade objectives:

To promote adequate and effective protection of IPRs similar to U.S. law;To secure fair and equitable market access opportunities re IPRs; andTo respect the Doha Declaration.

The USTR interprets the first two provisions broadly and the third narrowly.

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TRIPS-plus Bilateral and Regional Trade Agreements

Expand scope of patentability (new forms of existing entities, new uses, new formulations, combinations, etc.)Ban parallel importation (nat’l exhaustion/contract-rule only)Limit compulsory licenses to public non-commercial use, emergencies, and competition cases onlyLink drug registration and patent statusData exclusivity - exclude use of registration data for five years for new chemical entities and three years for new uses/formulationsExtend patent term for regulatory delaysCriminal enforcement mechanismsInvestor rights to sue countries directly

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Recent Trade Agreements

Free Trade Area of the Americas (dead 2005)CAFTA-DR (post-ratification pressures)Southern African Customs Union (suspended 2006)

Botswana, Lesotho, Namibia, South Africa and Swaziland

U.S. bilateral Free Trade Agreements Jordan, Chile, Morocco, Singapore, Oman, BahrainThailand and Malaysia (suspended)S. Korea, Peru, Columbia, Panama (pending)

Trade Promotion Authority (Fast-Track) expired June 30, 2007

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New Pharma Wars: Thailand, Abbott, USTR

Thailand negotiated with Abbott for two years winning some concessions ($6000 ↓ $2200), but prices for Kaletra remained high.2006 – World Bank predicted that Thailand’s use of compulsory licenses would reduce the cost of second-line ARVs by 90%, saving the country $3.2 billion over 20 years.Aug. 2006, Abbott dropped its price for Kaletra to $2200.Thailand issued three TRIPS-compliant “public, non-commercial use” compulsory licenses, including for efavirenz and Kaletra, in Nov. 2006 and Jan. 207.

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Grounds for the Licenses

Thailand estimated significant cost savings and therapeutic advantages from its licenses:

Efavirenz – generic price 42% of Merck price; less toxicity than nevirapine Kaletra (lopinar/ritonavir = LPN/r) – generic price 42% of Abbott price; need for second-line therapies = 20% of patientsPlavix – generic price 10% of brand price; only drug that can be used with coronary artery stent.

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Licenses will be limited

Thailand’s government use licenses will be limited to five circumstances:

Listed on Nat’l Essential Drug ListNecessary to solve important public health problemsNecessary in emergency or extreme urgencyNecessary to prevent or control outbreaks/epidemics/pandemicsNecessary for life-saving

Estimated to apply to only 5-15% of drugs (four more cancer drugs currently targeted)

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U.S. and Thai Law on Gov. Use Licenses

Section 51 of the Thai Patent Act permits any ministry, bureau or department of the Government to issue a license for “public consumption” of generic medicines without prior negotiations with the patent holder, subject only to an obligation to a set a royalty rate which is thereafter reviewable by the patent owner. Section 51 does not require prior negotiation.Two provisions of U.S. law also clearly allow for government use of patents without prior negotiations:

28 U.S.C. § 1498(a) and U.S. Executive Order 12899 (1993) (NAFTA).

Under U.S. law, there is an after-the-fact obligation to pay “reasonable and entire” compensation.

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March 14, Abbott bombshell

Abbott withdrew heat-stable lopinavir/ritonavir (Kaletra) and six other medicines from the Thai drug registration process.April 10, Abbott dropped its price for Kaletra from $2200 to $1000 for 45 low- and lower-middle income countries, but still refuses to introduce Aluvia in Thailand.

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April 30, Thailand on 301 Priority Watch List.

Grounds:“Overall deterioration in the protection and enforcement of IPR in Thailand.”“Weakening respect for patents (decision to issues several compulsory licenses).”“Lack of transparency and due process ... represents a serious concern.”“[Ongoing] concerns such as delay in the granting of patents and weak protection against unfair commercial use for data generated to obtain marketing approval.”

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PhRMA’s Work in Congress

Prescription Drug User Fee Amendments Act of 2007 (S. 1082, the Food and Drug Administration Revitalization Act) Sec. 516. Sense of the Senate regarding certain patent infringements.

(a)(6) “There are concerns that certain countries have engaged in ... abuse of compulsory licensing.”(b)(2) “[The USTR] should develop and submit to Congress a strategic plan to address the problem of countries that infringe upon American pharmaceutical intellectual property rights.”

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Back and ForthMay 4 – Brazil issued a compulsory license on EfavirenzMay 8 – Clinton Foundation announced generic, heat-stable Kaletra at $695/year.June 20 – Sen. Res. 241 (pro-Doha Declaration)June 28 – USTR announces loss of $1 billion duty-free privileges for Thailand for three product classes under GSP.July 20 – US Ambassador to Thailand writes protesting deliberations on issuing additional compulsory licensesOctober 17 –Thai Food and Drug Administration announced registration of generic LPN/r produced by Matrix (India); GPO announced that it was ordering a six-month supply for 8000 patients at a cost of $695/pppy.

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Novartis/USTR v. India

Novartis sued the Indian Patent Office and government of India 2006-2007 challenging the denial of a patent on its cancer medicines, Glivec, specifically claiming that it violated the TRIPS Agreement.The USTR placed India on its 2007 Special 301 Watch List (priority watch list status) based in part on its strict standards for patentability.

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India Has Adopted Multiple TRIPS Flexibilities

In its amended Patent Act of 2005, India adopted virtually all permissible flexibilities:

Compulsory licenses, including for exportLicenses of right for generic producers already producing “mailbox” generics, even if 1995-2005 patent applications were grantedStrict definitions of patentabilityPre-grant opposition procedures with broad standing

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TRIPS Flexibilities in Defining Patentability

Article 27.1 of the TRIPS Agreement requires Members to grant patents for innovations that are “new,” involve an “inventive step,” and have “industrial applicability.”However, there is great flexibility in how these standards are interpreted and applied globally.Members were also permitted to implement TRIPS in a method appropriate to their own legal system and practice (Article 1.1)

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India’s Strict Patent Standard for Drugs

Section 3(d): The following are not inventions within the meaning of the Act –

The mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a know substance ...Explanation. – For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of [a] known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy; ...

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Patent Office Denied Glivec Patent

When Novartis asked that its Glivec patent application be processed, India cancer patient groups and several generic drug manufacturers filed a pre-grant opposition claiming that Glivec was a new form of an old (1993, pre-TRIPS) drug.Novartis submitted evidence that Glivec had 30% greater bioavailability.The India Patent Office disagreed that Novartis had shown significantly increased efficacy and on Jan. 25, 2006 refused to grant a patent on Glivec.

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Novartis appealed to High Court

Claims:First, that the denial of the Glivec application was erroneous;Second, that Section 3(d) of the Patent Act is not compliant with TRIPS; and Third, because of non-TRIPS-compliance, Section 3(d) is unconstitutional.

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Novartis’s Defense of its Lawsuit

“We are entitled to sell to middle class consumers” (Note: 90% of Indians are not middle-class)“We support India’s rights to issue compulsory licenses to solve its access problems” (Note: opposite position in Thailand)“We have solved the access problem through our Glivec donation program” (Note: the access program is inaccessible for many)High mark-up sales in India are crucial to finance future research and development (Note: India is 1.3% of the global pharmaceutical market)

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Merits of the Case Were Quite Weak

India’s treaties are not self-executing, according to Article 57 of its Constitution. It is permissible to differentiate between field of technology under TRIPS Art. 27.India has implementing flexibility under TRIPS Article 1.1 and under the broadly interpretable meanings of newness and inventive step to limit pharmaceutical product patents as it has. Aug. 6, 2007, High court denied the appeal

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Important Implications

India supplies generic medicines broadly in developing countries. No patients have benefited more than people living with HIV, 70% of whom receive treatment with low-cost generic drugs of assured quality from India. Due to market competition from Indian companies, first-line AIDS treatment regimes now cost approximately $90-130/patient/year, a quarter the price of the R&D industry’s “discount” prices, and a penny on the dollar of what R&D companies charge in U.S. and European markets.

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New Trade Agenda?

Congressional Democrats have recently attempted to ease IPR barriers to more affordable generic medicines

Clarification of public health exceptions and limits on data exclusivity (concurrency)Elimination of patent/registration linkageNo mandatory extensions of patent terms for regulatory delay

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GAO Report: IPRs and Trade

Sept. 2007, GAO issued a report concluding that trade policy guidance on protecting public health needed clarification.The Report further found that the USTR had not significantly changed its trade policy after passage of the Doha Declaration.GAO Recommendation: If Congress disagrees with USTR’s interpretation and implementation of Doha, it should specify its mandate.

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Conclusion - New phase in Pharma War

Six years after a humiliating defeat in South Africa where 39 drug companies sued the Mandela government to prevent parallel importation, the drug companies and the U.S. government are re-launching a new global assault on developing countries’ use of TRIPS-compliant flexibilities.US continues to use 301 listing and other trade pressures to coerce compliance with IPR demands.At the same time, Pharma/USTR continue to pursue heightened IPRs in pending trade agreements.Although the effects of the new Pharma War are bad for AIDS policy, including cost of PEPFAR, they impact the human right to access to essential medicines more broadly.Activists are beginning not only the fight back in the this battlefront, but to launch a new one challenging the patent regime’s stranglehold on medicines more broadly.It is unclear what role a new Congress will play.