A Long Road to Travel: trips

 sickle_s.gif (30476 bytes) People’s Democracy

(Weekly Organ of the Communist Party of
India (Marxist)


No. 48

December 02,2001

A Long Road to

Declaration On

Amit Sen Gupta

THE Doha meeting
of the WTO adopted a “Declaration on the TRIPS Agreement and Public Health”. The
declaration has been hailed as a landmark in the negotiating history of the World Trade
Organisation. In a way it is a landmark because this is the first time, since the signing
of the WTO Agreement in 1994, that a portion of that agreement has been interpreted in a
manner that is favourable to developing countries. While there is a need to recognise the
significance of this, there is also the need to examine the events which led to the
adoption of the declaration. Also, we need to understand how much has really been gained
by the adoption of the declaration.


The Trade
Related Intellectual Property Rights (TRIPS) agreement, signed as a part of the WTO
agreement, was the most bitterly fought during the GATT negotiations. Till 1989 countries
like India, Brazil, Argentina, Thailand and others had opposed even the inclusion of the
issues in TRIPS in the negotiating agenda. They did so based on the sound argument that
Intellectual Property Rights—which includes Patents over medicines—is a non
trade issue. India and others had argued that rights provided in domestic laws regarding
intellectual property should not be linked with trade. They had further argued that the
history of IPRs shows that all countries have evolved their domestic laws in consonance
with the stage of economic development and development of S&T capabilities.

Laws that
provide strong patent protection limit the ability of developing countries to enhance
their S&T capabilities and retard dissemination of knowledge. Japan, for example, was
able to enhance its domestic capabilities through the medium of weak patent protection for
decades—well into the second half of the twentieth century. Italy changed to a
stronger protection regime only in 1978 and Canada as late as in 1992. It was thus natural
that many countries like India had domestic laws that did not favour strong protection to
Patents before the WTO agreement was signed. It was illogical to thrust a single
patent structure on all countries of the globe, irrespective of their stage of

These arguments
were however systematically subverted during the GATT negotiations, leading to the signing
of the TRIPS agreement. The TRIPS agreement required countries like India to change over
to a strong patent protection regime. A regime that would no longer allow countries to
continue with domestic laws that enabled domestic companies to manufacture new drugs
invented elsewhere, at prices that were anything between one twentieth and one hundredth
of global prices. It may be recalled that it was the 1970 Patent Act which, by encouraging
Indian companies to develop new processes for patented drugs, also facilitated the
development of world class manufacturing facilities in a developing country like India.

Today the
campaign on access to drugs draws strength from Indian companies like Cipla who are
offering anti-AIDS drugs at one tenth to one fortieth of the prices being charged by large
pharmaceutical countries. It also draws strength from the ability of Brazil to
indigenously manufacture 8 out of the 12 anti-AIDS drugs and also to distribute them to
all those who require these drugs. Let us not forget that this could not have happened
if the TRIPS accord had been signed in 1975 and not in 1995! It is this that we stand to
lose as we move towards “harmonised” standards of strong patent protection.


Implications of
a product patent regime are not limited only to the area of technological self reliance.
Technological dependence on MNCs is the proverbial “thin edge” which will be
used by the MNCs to establish their suzerainty over the Indian Drug market once again (a
position they had lost after the mid seventies). They will then again start charging
exorbitant prices for drugs in the Indian market. Since the early eighties, the categories
of drugs which show the maximum rise in sales are categories which include overwhelming
majority of drugs still under Product Patent or whose Product patents have expired
recently. In other words, if we had a product patent regime today, the drugs showing
fastest growth would have been priced way beyond the capacity of the average consumer.

It must be
understood that, notwithstanding the rhetoric, the TRIPS accord was not pushed through
just to access markets of developing countries. These markets represent just a fraction of
the global market — India, for example, accounts for 0.8 per cent of the market, in
contrast to 33 per cent, 24 per cent and 20 per cent for the US, Europe and Japan
respectively. Rather the TRIPS agreement became a necessity to protect the markets of
large pharmaceutical companies in the developing world against competition from cheaper
generic drugs manufactured in countries like India and Brazil. TRIPS in other words is not
about “free” trade, but has to do with protection of markets in developed
countries. In order to safeguard this market giant pharmaceutical companies railroaded all
opposition and forced the signing of the TRIPS accord. The draft which formed the bases of
the accord was prepared by industry representatives from the US, Europe and Japan.

There were other
compelling reasons why developed capitalist countries, led by the US, exerted such
enormous pressure during the GATT negotiations to ensure that the TRIPS agreement was
pushed through. In the mid-80s the United States was faced with waning industrial
competitiveness, which hurt US companies and US trade internationally. As a consequence it
began searching for new areas of commerce which would maintain US dominance in the world
market. Around this time several intellectual property dependent industries, namely
information technology, entertainment (records, films, and books) and pharmaceutical who
were becoming extremely important contributors to the US economy. All these sectors were
heavily IPR dependant as they dealt in products where the development costs were high but
the replication costs were small. These were sectors where, in order to maintain high
levels of returns, monopoly “rent” incomes had to be protected thought the
mechanism of strong Intellectual Property Protection.

The importance
of the knowledge based sectors to the US (and global) economy can be gauged from the
performance of large companies today. Among the top fifteen companies with the highest
returns (profits) on Revenues (turnover), six are pharmaceutical companies —
Microsoft, Cable and Wireless, EI du Pont de Nemours, Eli Lilly, Glaxo Wellcome, Roche
Group, Bristol-Myers Squibb, Novartis and Pfizer. Five are from the information technology
sector — Microsoft, Cable and Wireless, Telefonos de Mexico, Intel and Textron. Yet,
none of these figure anywhere among the top 100 in terms of turnover. Microsoft is 216th
in the list in terms of turnover, but has the highest return on revenues (39.4 per cent).
Clearly rent incomes, today, are one of the major driving forces of the economies of the
developed countries.


In 1995 the
pharmaceutical MNCs seemed to be sitting on top of the world. Unanticipated by them a
major development in the field of health care set in motion a chain of events. The AIDS
epidemic was fast gripping the imagination of the global community. In the nineties almost
the whole continent of Africa was under the grip of this epidemic. In some countries an
estimated third of the adult population were infected by AIDS! The tragedy was compounded
when drugs to contain AIDS started being developed. These drugs allowed AIDS patients the
opportunity to live normal lives even if they were infected. But there was a catch.
Because of Patent protection these drugs were priced beyond the reach of patients in
developing countries. The ridiculous effect of Patent protection was evident when one
found that the cost of treating AIDS patients in some African countries was many times
their total GNP! Even more ridiculous, and tragic, when we know that these drugs can be
produced at one fortieth of prices being charged by MNCs.

AIDS became a
rallying point for activists from all parts of the world and developing country
governments alike. In a few years one saw the forging of an unparalleled global coalition.
Countries like Brazil and Thailand defied the TRIPS agreement and allowed domestic
companies to produce cheap anti-AIDS drugs. South Africa changed its laws to allow imports
of cheap anti-AIDS drugs. The MNCs and the developed countries struck back. 39
pharmaceutical companies challenged the South African law in the country’s court of
law. Brazil was dragged by the US to the WTO appellate body for infringement of TRIPS. But
the tide was clearly turning. In the face of mounting criticism and hostile reactions
towards the pharmaceutical industry, the industry and its sponsors were forced to step
back. The companies were forced to withdraw their case in South Africa and the US did not
proceed with its dispute with Brazil in the WTO.

The coalition
that was built around the AIDS issue then pressed for clarifications from the WTO that the
TRIPS accord did not prevent country governments from legislating in favour of protection
of public health. In this they were supported by almost the entire community of developing
nations. The industry fought to the last to prevent this. In the draft declaration
circulated in September the US and other developed countries tried to limit any
clarification to just measures related to AIDS. But the momentum of the global movement
was able to increase the scope of the declaration to include public health crises not
limited only to AIDS.


Let us now turn
to what has been achieved by the declaration. Contrary to popular perception, the
declaration in no way changes the TRIPS accord. It does not even say that the accord needs
to be renegotiated. In that sense it is really in the nature of a clarification, stating
what can be done by countries to safeguard public health while not at the same time
infringing the TRIPS accord. Thus the declaration says: “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”.

Clearly the
intent is still to maintain that the TRIPS accord is inviolable and at the same time say
that the accord allows certain measures to safeguard public health. Specifically, the
declaration clarifies that countries can issue compulsory licenses when faced with a
health crisis or emergency. It further states that: “Each Member has the right to
grant compulsory licences and the freedom to determine the grounds upon which such
licences are granted”. It must be understood that such clarifications do constitute
an advance because, in the past, the US has tried to prevent countries like Brazil and
Thailand from doing exactly what the clarifications now say are perfectly compatible with

In concrete
terms it means that countries can provide a license to produce life saving drugs to
domestic companies, even if patents for these drugs are held by foreign patent holders.
But this is still far short of what the 1970 Patents Act of India allowed. Our Patents
Act did not allow patents to be held for any product, irrespective of whether they were
required to address any health crisis or not. It is this provision that allowed the
development of a domestic drug industry and also the development of an R&D base in the
pharmaceutical sector. It needs to be realised that what may be construed to be drugs
“that are required to address emergencies” will always constitute a small
fraction of the total number of drugs manufactured. Hence MNCs will be able to control the
production and distribution of a majority of drugs.
This would mean that Indian
companies will not have the unhindered freedom that the 1970 Patents Act provided. In the
long run this will have an impact on the balance in the pharmaceutical sector, allowing
the MNCs to once again assume a dominant position. Moreover R&D and manufacturing
capabilities are built over a period, and cannot be suddenly switched on when
“emergencies” arise. Restricting the space in which domestic companies can
operate to produce newer drugs will have an adverse impact on their manufacturing and
R&D capabilities as well as R&D capabilities built up in the public sector.

The declaration
falls short of requirements in another key area. It says that: “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”. Most
developing countries, unlike India, have no manufacturing capability. So the declaration
does not enable them to access cheaper drugs because they cannot get these drugs produced
cheaply in their country. The declaration does not explicitly allow them to import cheaper
drugs from countries like India.


In other words,
there is a long road to travel before it can be claimed that the TRIPS accord has been
successfully undermined. What we see today is a small retreat in the face of hostile
global reaction. The issue of access to AIDS drugs is, arguably, the weakest link in the
TRIPS accord and the emerging global patenting system. The tremendous evocative appeal of
the “Access Campaign to AIDS Drugs” lends it the potential to delegitimise the
TRIPS agreement.

However, to
effectively strike at the “weakest link” the campaign for access to cheap
medicines has to look beyond AIDS or even beyond “health emergencies” and beyond
the TRIPS framework. The “access campaign” must eventually extend itself to
cover access to all essential medication and draw in interest groups from across the
The campaign needs also to look beyond the TRIPS framework. While arguing for a
more “liberal” interpretation of the TRIPS language to ensure better access, it
is also necessary to understand that the TRIPS agreement was arrived at on the basis of
submissions of the pharmaceutical industry. It is an agreement designed to promote
monopolies and hinder competition. The campaign needs to look beyond TRIPS, and use the
present momentum to force that the TRIPS agreement be interpreted in a manner that
promotes competition and technology dissemination. The minimum that such an interpretation
must recognise is the automatic invocation of provisions that promote competition in all
markets, and curb the monopoly over knowledge that the present TRIPS regime is interpreted
to allow.

Finally, we need
to note that India is a late entrant in this recent fight against TRIPS. After abandoning
the ship in 1989 we seem to have just got on board again. In the last few years
India’s voice was not heard clearly with those of Brazil, Thailand and the large
group of African countries. This was evident even in Seattle in 1999. The Access Campaign
will be hoping that the Indian negotiating team’s perseverence in Doha was not merely
an attempt to play to the gallery.

gohome.gif (364 bytes)