“Free” Trade Beyond The WTO – Delhi Science Forum

WELCOME to the brave new world of “Free” Trade. This is a world that extends beyond the World Trade Organisation. This may be difficult to comprehend, but the fact of the matter is that global capital, led by the US government, seeks more and more to tread where even the WTO did not. The reason, of course, is simple. Not content with what the WTO is able to deliver for it, the US is impatient with the relatively “democratic” structure of the WTO. Having written most of the rules through which the WTO operates, the US now feels constrained by attempts within the WTO to question its suzerainty.

The US has now developed a strategy that bypasses the WTO and actually goes much beyond the onerous conditions that the WTO lays down. This is particularly in evidence in the area of TRIPS, where the US is pushing for what are called Trips Plus measures, i.e. even stronger Patent protection than what the TRIPS agreement provides for. It is doing so through a series of Free Trade Agreements (FTA) that it is negotiating at a regional or bilateral level.

Clearly, in this, US interests are being driven by the interests of its pharmaceutical and agri-business companies. Developing countries are required, under these trade agreements, to include very high levels of protection in their national laws, with grave consequences for public health and other national policy objectives. The FTAs have thus become instruments through which the US pressures countries bilaterally, in some cases even threatening or imposing trade sanctions against them.

RESTRICTING ACCESS TO DRUGS IN THAILAND

Let us look at some of the Free Trade agreements that the US is negotiating. In its bilateral agreement with Thailand, for example, the US is pressuring Thailand to sign away citizens’ rights to life-saving medicines. Relief agencies like Oxfam, in a report released on the eve of the XV International AIDS conference in Bangkok, warns that US demands for the US-Thai FTA to toughen existing intellectual property protection for drugs produced by MNCs will hamper Thailand’s successful HIV/AIDS treatment programme and undermine future access to affordable medicines.

In Thailand, there are 29,000 new infections of HIV/AIDS each year, of which approximately 4,200 are children. Access to affordable medicines is a critical component of the government’s strategy to scale up the current treatment programme and prevent the spread of the epidemic. Thailand is currently implementing a treatment programme based on a generic fixed dose combination recommended by the WHO. This three-in-one tablet is around 10 times cheaper than the patented brand name drugs, and enhances patients’ compliance by decreasing the number of pills that need to be taken to two a day.

However, Thailand also urgently needs access to generic versions of other patented medicines that are vital for people who develop side effects or resistance to currently available drugs. For example, Efavirenz, a much needed antiretroviral drug made by Merck, is too expensive because it is under patent. Also essential is access to drugs to treat life-threatening opportunistic infections, such as cytomegalovirus (CMV), which can cause blindness and death. This can be treated by Glaxo Smith Kline’s ganciclovir, but because this drug is patented, it is too expensive to be included in the government’s programme.

The patent rules in the proposed US-Thai FTA, will close down the option of accessing such inexpensive generic medicines in the future by preventing Thailand from issuing compulsory licenses to generic manufacturers to manufacture these drugs or by importing such drugs from generic manufacturers from outside Thailand.

FREE TRADE AREA OF THE AMERICAS

The US is negotiating bilateral treaties with a number of other countries, like Singapore and Morocco. The largest such treaty, however, is the Free Trade Area of the Americas (FTAA) — a proposed regional trade agreement between 34 countries in North, Central and South America and the Caribbean, except Cuba. If implemented, it will be the largest “free trade zone” in the world, a US 13 trillion dollar market covering more than 800 million people. FTAA negotiations were launched officially in 1998, and are scheduled for completion by 2005.

The draft FTAA agreement is a set of proposals that includes provisions on Patents, services, investments, agriculture, and market access, among others. There are nine FTAA Negotiating Groups, including one on patents, which are negotiating text for the chapters in the agreement. Throughout the negotiations on Patents, the United States has been pushing to increase the intellectual property protection provided to pharmaceutical products held by MNCs and to reduce the rights of countries in the region to take measures necessary to protect public health. In other words, the US is trying to impose standards on pharmaceuticals that go much further than what is required in the WTO TRIPS Agreement. Such standards that are being sought to be imposed through the FTAA include:

Sharp limitations on the grounds under which compulsory licenses on pharmaceuticals may be issued. This is in spite of the fact that the TRIPS Agreement mentions no such limitations and the Doha Declaration, which was adopted by all WTO member states, confirmed that countries have “the freedom to determine the grounds upon which such licenses are granted.” The FTAA draft would, for example, limit compulsory licensing to declared “national emergencies” or other situations of extreme urgency and to the public sector only. Thus countries would no longer have the right to issue a compulsory license to remedy high prices that restrict access to medicines, or to foster competition in the private sector to increase access to patented essential medicines.

The extension of patent terms beyond the 20 years required in TRIPS. This would prolong the monopoly enjoyed by patent holders and further delay introduction of generic products.

Exclusive rights on pharmaceutical test data that have been provided to Drug Regulatory agencies. Since generic companies rely on these data to demonstrate that their product is safe and effective, this exclusivity will significantly delay the introduction of generics even when there are no patent barriers.

The agreement may restrict parallel importation to within the FTAA region only, contrary to the Doha Declaration. As a result, FTAA countries will not be able to access cheaper drugs through imports from the international market.

The draft text also includes a proposal to prohibit the export of drugs produced under compulsory license, which is currently permissible under the TRIPS Agreement to a certain extent.

TARGETING THE PB SCHEME IN AUSTRALIA

The US is being very even handed in hammering out the Free Trade agreements and is targeting developed countries like Australia too. In Australia the prime target of the FTA in the pharmaceutical sector is the country’s “Pharmaceutical Benefit Scheme” (PBS). This scheme, hailed by many, as a model arrangement that keeps drug prices low for essential drugs has long been a target of US based pharmaceutical companies.

Under the 55-year-old scheme, low drug prices are negotiated by the combination of stringent cost-benefit (or ‘pharmacoeconomic’) analyses and the market power of a centralised buying system that the government oversees. That the Australian system works is obvious from the fact that drug prices in the United States are around 160 per cent higher than in Australia; drugs in Canada and Sweden cost about 50 per cent more.

Now, the Free Trade Agreement being signed allows US pharmaceutical manufacturers to ask for an independent review if the Pharmaceutical Benefits Advisory Committee (PBAC) decides not to list their drug. The end result will be drugs listed at higher prices than the PBAC originally thought justified by the pharmacoeconomic evidence. The agreement also proposes changes to Australian patent laws, which could delay the introduction of cost-effective generic drugs.

The US Trade representative Robert Zoellick said after the fiasco of the Cancun WTO meeting: “The U S trade strategy, however, includes advances on multiple fronts. We have free trade agreements with six countries right now. And we’re negotiating free trade agreements with 14 more. All our free trade agreement partners, some quietly, some more actively, tried to help over the course of the past couple of days. The results are very revealing to me, that over the past few days, a number of other developing countries, that are committed to opening markets and economic reforms, expressed their interest in negotiating free trade agreements with the United States”. Clearly, the US is advancing this agenda with a vengeance.

BOX

PhRMA, which represents the largest Pharmaceutical companies in the US, spent an equivalent of Rs 1,000 crore (about equivalent to the total turnover of the largest Indian pharma company) just on lobbying to change Patent laws across the globe

Spending money to change policy:
PhRMA’s budget initiatives
(July 2003–2004)

PhRMA Initiatives

Budget
(US$m)

Pharmaceutical lobbying at the federal level, (there are 625 pharmaceutical lobbyists on Capitol Hill; more than the number of Congressmen)

72.7

Lobbying at state level

48.7

Fighting price controls and protecting patent rights in foreign countries and in trade negotiations

17.5

Fighting ‘a union-driven initiative in Ohio’ which would lower drug prices for people who have no insurance to cover such costs

15.8

Lobbying the US Food and Drug Administration

4.9

Payments to research and policy organisations, ‘to build intellectual capital and generate a higher volume of messages from credible sources’ sympathetic to the industry

2.0

Funding a standing network of economists to speak against US drug price controls

1.0

Changing the Canadian health care system

1.0

TOTAL

163.6

1st August 2004