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.
HISTORY OF THE TRIPS ACCORD
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 development.
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.
IMPORTANCE OF THE TRIPS ACCORD
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.
SETBACK TO PHARMACEUTICAL COMPANIES
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.
WHAT HAS BEEN ACHIEVED
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 TRIPS.
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.
A LONG ROAD TO TRAVEL
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 globe. 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.