Breathing Life into the August 30th Agreement
By Geoff Blackie
INTRODUCTION & APPROACH
I was recently giving a talk at a local area high school with two other law students on various human rights law issues. I was addressing HIV and AIDS in Africa, and thought to begin with some questions followed by statistics to shock. However, their answers regarding the number of infected in Africa, national infection rates and the number of orphans as a result of HIV/AIDS were higher than current statistics. For many, the scale of the problem is well-known (or even slightly exaggerated). Still the problem persists, infection rates are on the rise and deaths continue at an unprecedented rate with disastrous effects on the infrastructure of those societies.[1]
The battle against HIV/AIDS is fought by a number of dedicated individuals on many fronts. HIV/AIDS is an equality issue, a prevention issue, a debt relief issue, a poverty issue and an intellectual property issue. In 2003, the August 30th Agreement (the Agreement) brought changes to the World Trade Organization’s (WTO) Agreement on Trade Related Intellectual Property Rights (TRIPs). The Agreement allowed for, inter alia, importing nations to issue compulsory licenses for essential HIV/AIDS medications. Canada was the first developed country to announce that it would implement domestic legislation to allow for the issuance of compulsory licenses. Last year, on May 14th, the Jean Chrétien Pledge to Africa Act (Bill C-9) received Royal Assent.[2] Despite these important developments on the intellectual property front, all is quiet; not a single pill has reached a developing nation using the August 30th Agreement.
This paper’s central concern is how to utilize the August 30th Agreement; thus, the focus is on compulsory licenses for export. I shall first describe the concerns and actions that precipitated the Agreement. In the second section, I consider the TRIPs members that have signified intent to implement domestic legislation and are at different stages of the process. In the third section, I critically examine the Canadian legislation with reference to others models to answer the following questions: (1) How were central issues addressed and could the legislation have been better constructed to ensure success? (2) What steps are currently underway to gain a compulsory licence? (3) Can compulsory licensing systems in developed countries, specifically Canada, work?
I. CONCERNS & ACTIONS RESULTING IN THE AUGUST 30TH AGREEMENT
The African Pandemic and Access to Essential Medicines:
Unfortunately, the crisis in Africa requires little introduction but much action. In Africa only 12%, or 700,000 of those infected, are receiving required treatment. Moreover, infections are rising more quickly than number receiving treatment.[3] On World AIDS Day in 2003, the WHO released a plan to treat 3 million people in developing and transitional countries by the end of 2005 (the “3 by 5 initiative”). According to a Medicine Sans Frontier (MSF) press release, between July 2004 and January 2005 only 264,000 new patients were able to benefit from ARV treatment.[4]
The WHO recognized the importance of access to essential medicines in 1991 and was again a central concern within the WHO at the 2000 International AIDS Conference in Durban. At that time, few expected that ARVs could be made available to the poor in developing nations. Drug prices were simply too high; costs exceeded $10,000 per patient per year for first line treatments.[5] Even in 2002 no one in the developing world had received ARVs through official donor support.[6] As Kevin Outterson asserted, “precious years were lost because the drugs were too expensive for the developing world, and they were too expensive because of patent protection and fears of arbitrage.”[7]
However, in February 2001 an Indian generic company, Cipla, announced “the price heard around the world.”[8] Cipla offered a standard package of ARVs for $350/year to NGOs and $600/year to governments in Africa. As additional Indian generic producers began producing the same drugs, prices continued to fall. By 2004 fixed dose combination medicine (FDCs)[9] were available for less that $140/year and were mostly provided by four generic producers – three in India and one in South Africa.[10] MSF is able to treat 25,000 patients only because the prices are a fraction of the prices in developed countries.[11] Accordingly, the number of patients treated has risen dramatically, but remains drastically inadequate.
The Debates: Life, Property and Innovation:
Professor Bryan Mercurio asserts that the debate between access to essential medicines and patent rights received global attention in 2000 when several pharmaceutical companies challenged the legality of South African legislation designed to allow for compulsory licenses of patented medicines. Simultaneously the US initiated WTO procedures challenging the legality of Brazil’s compulsory license system. Both the patent holders and the US, who supported the pharmaceutical companies, where bombarded with negative publicity. Largely as a result, the claims were dropped.[12]
Generally, increasing access to essential medicines is dependant on their prices. With finite funding, more ARVs can be bought and more money spent on developing the infrastructures to distribute the drugs. A number of methods have been used to reduce costs including: voluntary licensing, compulsory licensing, differential pricing, and bulk procurement.[13]
Domestic legislation that allows generic production of pharmaceuticals has played a central role in reducing costs. First, once generic companies are able to produce the drugs, the patent holder no longer holds a monopoly and prices necessarily drop closer to the manufacturing costs (see table 1 below). Second, a legitimate threat by a government to issue a compulsory license and allow generic production often provides the patent holder with an incentive to significantly reduce prices or allow a voluntary license on more favourable terms. While this happened in Brazil and South Africa, it is not unique to the developing world. When fears of an anthrax attack mounted in the United States government, it used the threat of a compulsory license to entice Bayer to provide Cipro at a greatly reduced cost.[14]
TABLE 1: Effects of Generic Competition on ARV Prices[15]
Third, generic producers are able to provide essential medicines in forms that allow improved compliance with the required treatment regiment (e.g. FDCs). This is not an option in developed countries when different parties hold the patents to the drugs in the FDCs and empirically have demonstrated a lack of sufficient interest to cross-patent.
The TRIPS Agreement is the international standard for protecting intellectual property rights and has drawn scorn from many developing countries.[16] It became a central issue at the Doha during the Fourth WTO Ministerial Conference in 2001. To this extent, paragraph 4 of the Doha Declaration (the Declaration) asserted:
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.[17]
Paragraph 5(b) of the Declaration asserts the right of members to issue compulsory licenses for medicines to protect public health, “and the freedom to determine the grounds upon which such licences are granted.”[18] Paragraph 6 then recognizes the inadequacy of this solution for members who do not possess a manufacturing capacity in the pharmaceutical sector. It also instructed the Council on TRIPS to report a solution to the General Council by the end of 2002.[19]
The August 30th Agreement – The floor for compulsory licenses
A solution to the paragraph 6 dilemma was not reached until August 30th, 2003. The responses have been mixed. Baker asserts that the current international regime should be “a floor and a ceiling.”[20] He argues that developing countries should abandon the August 30th Agreement and return to a simplified process under Article 30 of the TRIPS Agreement. While an important consideration, this paper will focus on the potential within the legal framework created by the August 30th Agreement.
The August 30th Agreement[21] generated a list of eleven possible steps that an importing country must initiate for the issuance of a compulsory licence, this includes[22]:
(1) The importing country must seek a voluntary license on commercially reasonable terms for a reasonable period of time.
(2) If the importing country is not successful in obtaining a voluntary license, it must to apply to the WTO for a compulsory license.
(3) If the compulsory license is for import, the importing country must assess its generic industry's capacity to produce the medicine locally.
(4) If capacity insufficient, it must notify and explain to the TRIPS Council its decision to import.
(5) The importing country must notify a potential exporter.
(6) The exporter must also attempt to obtain a voluntary license on commercially reasonable terms for a reasonable period of time.
(7) The exporter must then seek a compulsory license from its own government on a single-supply basis.
(8) The exporter will need to achieve product registration and prove bio-equivalence (as required by domestic law). This requires studies regarding toxicity and efficacy (unless access to the initial data from the original studies is granted with the compulsory license)
(9) The exporter must determine the adequate royalty based on standards of reasonableness in the importing country.
(10) The exporter must investigate pill size, shape, colour, labelling, and packaging of the patent-holder's product in the importing country and differentiate its new product in all respects, provided the measures taken are not too costly
(11) Before shipment a website must be created, posting information about the quantities supplied and the distinguishing features of the product.
In addition to the above specifics, the motivation behind the whole process must be non-commercial in nature. The General Council Chairperson’s Statement released with the decision asserted that the “system that will be established by the Decision should be used in good faith to protect public health and, without prejudice to paragraph 6 of the Decision, not be an instrument to pursue industrial or commercial policy objectives”.[23] Questions remain about how this restriction impinges upon the ability of generic producers to make profits. Originally, the US had tried to limit the motivations to “humanitarian” only. However, preceding public outcries, the Chairperson’s statement was left more ambiguous.
Some of the above processes do not create substantial burdens; others do.[24] Fellmeth sees the central problem being that “developers must undertake the laborious and time-consuming task of obtaining marketing approval from the government agencies charged with protecting public health.”[25] Essentially, the largest hurdle will not be imposed by the international system, but by the rigorous hurdles in domestic exporter legislation. As such, the domestic government has a crucial role to ensure that a legislative scheme allowing for the issuance of compulsory licenses for export works.
II. LEGAL INITIATIVES TO IMPLEMENT THE AUGUST 30TH AGREEMENT
Since August 30th, 2003 a number of developed countries have taken steps to implement the Agreement. Presently, only Canada, Norway, the Netherlands and, just recently, India have passed legislation. Others are currently pursuing and evaluating potential legislation. This section of the paper will provide an analysis of what legislation does exist and what other frameworks are being proposed.
Canada:
Canada was one of the first to initiate legislation to take advantage of the August 30th agreement. Proposed legislation was introduced as Bill-56 in early November 2003, and was well received by many NGOs and generic pharmaceutical producers in Canada.[26] Following extensive debate and consultation with various parties, the Jean Chrétien Pledge to Africa Act (Bill C-9) received Royal Assent on May 14, 2004.[27] The legislation will take effect once all the companion legislation is passed. It was rumoured this would occur in January 2005; this was not the case. As of yet, there is little word as to when the regulations will be in place and the legislation will be in effect.
The Canadian legislation is a product of compromise between the various stakeholders. Bill C-9, unfortunately, uses the August 30th Agreement as a floor and builds upwards. Its purpose is clear; section 21.01 lays out the goal of the legislation: “to facilitate access to pharmaceutical products to address public health problems afflicting many developing, and least developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria and other epidemics.”[28]
The legislation has a series of schedules. Schedule 1 is a list of patented drugs that can be produced under compulsory licenses. For the most part, the list is the WHO’s list of essential medicines that are patented in Canada. Schedules 2-4, respectively, lists the least developed countries, the developing countries that have chosen not to notify the WTO that they do not intend to import drugs under compulsory licenses, and the member countries that have stated they will issue compulsory licenses only in situations of emergency.[29] The drugs do not have to be sold directly to government of the importing state. However, the applicant must provide the name of the governmental entity or “the person or entity permitted by the government of the importing country”.[30] As such, an NGO[31] could act as the purchaser but would have to be permitted by the importing state to do so. In addition, the NGO would have to inform the Canadian regulators what country wants which particular products and in what amount. It also appears that separate approval must be obtained for each state that the drugs will be imported to.
When a party wishes to apply for a compulsory license they must file a notice of intent to apply to the Commissioner of Patents and attach a series of additional documents.[32] They must provide notice of intent to identify the product, prescribing information, the quantity to be manufactured, information about the patentee, the importing country, and the terms of the contract that establishes how the product will be sold.[33] Additionally, documentation must be provided: a copy of the WTO notification of intent to import (if they are a member state), the importers notification to the Canadian government and the patent status of the product in the importing country.[34] The applicant must also provide the Commissioner with a solemn and statutory declaration stating that at least 30 days prior to filling the application the applicant sought form the patentee(s) a license to manufacture and sell the product to the importing country on reasonable terms and conditions and provided the patentee(s) with the information provided to the Commissioner with the application.[35]