free trade

[Charu Tevari <charuX@lucent.com>]

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On the subject of free trade in the context of patented drugs
and public health, here's an update to my earlier posts.

The attached article also talks about at least in one case
that contradicts arguments that subjecting third world manufacturing
to 'free trade' enforcement regimes espoused by large corporate
transnationals benefits third world populations.

An excerpt:
__________________________________________________________________
"Before 1970, India was almost entirely dependent on imported
drugs. But since changing its laws to allow local companies to copy
patented drugs, it has built up a strong drugs industry which now
provides 70% of the country's needs and at far lower prices. Some
companies, such as Cipla, have even become large exporters of
cut-price generic drugs and are deeply hated by the Northern industry
for it.

The primary beneficiaries of these generic industries have been poor
people in the countries concerned, able to buy drugs which in other
developing countries are prohibitively expensive.

The cost of a course of fluconazole, used to treat cryptococcal
meningitis, one of the opportunistic infections associated with HIV,
costs only US$0.64 in India, but US$10.50 in Kenya and US$27 in
Guatemala, both countries where the patent laws are tight and there
are no generic competitors to the patent holders.

A course of AZT, an anti-retroviral effective in preventing AIDS
transmission from pregnant mothers to their unborn babies, costs twice
as much in patent-respecting South Africa as in Brazil, where a
government programme allows it to be produced generically.

Ciprofloxacin, an anti-infective used to treat bloody diarrhoea in
children, costs eight times as much in Pakistan, where the patent
regime is tight, as in India."
__________________________________________________________________



As I've written in the past, in understanding the current patent
scramble, a major change in patent doctrine is being promoted by
big pharma transnationals and their proxies: in the past, patents
were based on process rather than substance. For example, a particular
industrial manufacturing method to produce a substance could
be patented, but the substance itself could not. The current patent
doctrine advocates patenting the substance itself, regardless of method
of manufacture.

In theory then, whereas in the past, if someone came up
with a new method for the manufacture of sodium chloride, say, by
spraying
a fine mist of seawater onto heated plates, then they could concievably
patent this method of manufacture, but not patent the substance
sodium chloride. Under the current regime they could and charge
royalties
to anyone that manufactures sodium chloride by any other process.

For a more concrete example, the antibiotic cipro is manufactured in
India by a process different from that of it's patent holder, but
a substance patent would hold that such manufacture illegal.

It is worth considering the thought that substance patent regimes
constitute a restriction of trade- restricting the free market activity
of innovation that would promote new and more efficient ways of
manufacturing, while promoting rent collection by entrenched
market entities.

-charu



_____________________________________________________________________________



Aids Fight Boosted By Big Pharma's Defeat December 01, 2001
By Sean Healy

There's not often something to celebrate on World AIDS Day, December
1, but there might be this year: a small, much fought-over clause in a
World Trade Organisation declaration may signify a turning of the
tide, at least insofar as poor peoples' access to needed medicines is
concerned.

The clause is simple enough: it states that the set of WTO rules
covering patents on drugs, the Agreement on Trade-Related Intellectual
Property Rights (TRIPS), ``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''.

But this little paragraph was the site of a long, bitter battle
between the United States, acting for the big pharmaceutical
companies, and Brazil, India and Africa, acting for the majority of
the 36 million people with HIV/AIDS who are too poor to afford
expensive, patented anti-HIV medicines.

The Third World wanted it made clear that the TRIPS agreement could
not be used to prevent countries producing cheap, generic versions of
these drugs. It wanted a statement that ``Nothing in the TRIPS
Agreement shall prevent Members from taking measures to protect public
health''.

The drug companies were dead-set against such an outcome, which could
lead to Third World countries producing their own versions of patented
drugs and could lose them billions of dollars of revenue. Through the
US Trade Representative, they countered with a weak declaration that
WTO members can only ``use, to the full, the provisions in the TRIPS
Agreement which provide flexibility to address public health crises
such as HIV/AIDS and other pandemics''.

This was a potential deal-breaker for the Third World and they
threatened that, if the US didn't concede, they'd torpedo rich
countries' much-cherished desires for a new round of trade
liberalisation talks.

In the end, faced with a for-once united Third World, the US backed
down at the WTO's ministerial meeting in Qatar, which wound up on
November 14. While the rich countries got pretty much everything else
they wanted in Qatar, on TRIPS it was the Third World which got most
of what it sought.

The reaction from the different parties speaks volumes.

Six non-government organisations which have worked tirelessly for poor
people's access to medicines -- Medecins Sans Frontieres, Oxfam, Third
World Network, Consumer Project on Technology ,Consumers
International, Health Action International/The Network -- immediately
released a statement entitled ``Green Light to Put Public Health
First''.

``Countries can ensure access to medicines without fear of being
dragged into a legal battle,'' said Ellen 't Hoen of Medecins Sans
Frontieres. ``Now it is up to governments to use these powers to bring
down the cost of medicines and increase access to life-saving
treatments.''  ``We would have liked to see stronger wording, but the
declaration does have a clear political statement that public health
concerns must override commercial interests,'' said Oxfam's Michael
Bailey.

The NGOs attributed the success to the worldwide campaign to expose
the drug companies' efforts to prevent poor countries producing cheap,
generic drugs.

``This would have been unthinkable two years ago, and it shows how far
the world has come,'' said Jamie Love, who heads the Consumer Project
on Technology.

Growing publicity has certainly hurt the giant pharmaceutical
firms. In April, they dropped a three-year-long lawsuit against South
Africa, which had passed a law allowing its health minister to
override drug patents so as to provide medicines to the country's
estimated 4.7 million people with HIV/AIDS.

Then in June, the US Trade Representative announced that he had
dropped an official WTO complaint against Brazil, whose pharmaceutical
industry produces generic versions of patented drugs.

Big Pharma's representatives are no happier after Qatar. Harvey Bale,
the director-general of the International Federation of Pharmaceutical
Manufacturers Associations, argued that the language would have an
adverse impact on research into life-saving medicine and warned
darkly, ``So if I'm [a research and development] director with $500
million that I'm thinking of investing on developing an AIDS drug or a
cancer drug, I'm going to be careful.''  The TRIPS agreement is
possibly the most controversial of all the WTO's agreement. While the
trade organisation is officially about ``free trade'', for good or
ill, TRIPS is blatant protectionism and for a super-rich industry
whose operating profit rate, at 20-23% per annum, dwarfs most others.

Drug companies, and especially the powerful PhRMA, the Pharmaceutical
Researchers and Manufacturers of America, were closely involved in
drafting the agreement in the first place, which was signed in 1994,
and it shows.

TRIPS creates a harmonised, global patent regime, replacing the
pre-existing patchwork of many different sets of national rules.

Developing countries have until 2005, and least-developed countries
now have until 2016, to enforce the uniform system, which includes 20
year protection for new patents with no exceptions. Failure to enforce
can lead to the levying of trade sanctions against a country.

The gains for pharmaceutical companies in this are obvious: Northern
transnationals hold 90% of all patents on pharmaceuticals and patented
drugs enjoy monopoly rents, as companies can charge pretty much what
they like.  Patented anti-retrovirals, used to keep HIV in check, for
example, typically cost between three and 15 times their generic
equivalents.

The gains of the TRIPS agreement for everybody else are harder to
discern.

Big Pharma claims that tight patent laws encourage innovation, by
giving inventors a just (20 year long) reward for their efforts.

But Western pharmaceutical companies pay little attention to the
diseases of the poor, who in any case rarely have the cash to buy
their products.

Less than 10% of the US$60 billion spent each year on pharmaceutical
research and development goes into medicines to treat the diseases of
the poorest 90% of the world's population. Derisory levels of research
are put into tuberculosis, malaria, sleeping sickness or the
sub-varieties of the HIV virus prevalent in the underdeveloped world.

Rather, the new global patent regime is clearly directed against those
Third World countries, like India, Brazil and Egypt, which have
managed to build up pharmaceutical industries of their own, using
patent regimes which don't favour Western companies.

Before 1970, India was almost entirely dependent on imported
drugs. But since changing its laws to allow local companies to copy
patented drugs, it has built up a strong drugs industry which now
provides 70% of the country's needs and at far lower prices. Some
companies, such as Cipla, have even become large exporters of
cut-price generic drugs and are deeply hated by the Northern industry
for it.

The primary beneficiaries of these generic industries have been poor
people in the countries concerned, able to buy drugs which in other
developing countries are prohibitively expensive.

The cost of a course of fluconazole, used to treat cryptococcal
meningitis, one of the opportunistic infections associated with HIV,
costs only US$0.64 in India, but US$10.50 in Kenya and US$27 in
Guatemala, both countries where the patent laws are tight and there
are no generic competitors to the patent holders.

A course of AZT, an anti-retroviral effective in preventing AIDS
transmission from pregnant mothers to their unborn babies, costs twice
as much in patent-respecting South Africa as in Brazil, where a
government programme allows it to be produced generically.

Ciprofloxacin, an anti-infective used to treat bloody diarrhoea in
children, costs eight times as much in Pakistan, where the patent
regime is tight, as in India.

Faced with the choice between the ``rights'' of patent-holders to
monopoly rents and the rights of the citizens to life and health, poor
countries have two main ways around the TRIPS regime.

First, they can use ``parallel importing'', whereby they take
advantage of the price differentials between patented drugs in various
countries: buying, say, from continental Europe where prices are
low(ish) rather than Britain, where prices are high.

But this requires good market information that many poor countries
don't have and even so drugs can still be dear. In any case, PhRMA and
the US Trade Representative are pressuring governments to outlaw
parallel importing and have even opposed moves by the World Health
Organisation to set up a database of prices in different markets.

Second, poor countries can engage in ``compulsory licensing'': they
can declare that public health needs are such that a patent needs to
be suppressed and give a licence to local manufacturers to produce
generic versions of that drug.

This has been the crux of the battle: the US and the pharmaceutical
industry have sought to limit and even eliminate this right, by highly
restrictive language in the WTO agreement and by threats of legal
action (as in companies' suit against South Africa) or trade sanction
(as in the US case against Brazil in the WTO).

As a result of this stern pressure, not a single compulsory licence
has been issued south of the equator, not even to fight the AIDS
pandemic.

It is in this crucial battle that the big companies have been beaten
in Qatar.

The WTO ministerial statement by no means ends the war, that's for
certain. It is simply a statement, a ``clarification'', and is not a
change to the actual TRIPS agreement itself, giving it
far-from-ironclad legal standing. Poor countries still have to
implement TRIPS, if they haven't already.

It also doesn't deal with a crucial, presently ambiguous issue:
whether poor countries without pharmaceutical industries of their own
can issue compulsory licences to manufacturers in another
country. Without this right, a nation like Uganda has little prospect
of gaining access to cheap generics.

Yet the explicit recognition that TRIPS ``does not and should not
prevent Members from taking measures to protect public health'' should
give poor countries a way to fight off US demands and the courage to
start issuing compulsory licences.

And it deals the drug companies themselves another public relations
blow, of which they cannot suffer too many.

This is not a victory over the HIV virus itself, but it is a victory
over the virus' human allies, hopefully the first of many -- and
that's worth celebrating.





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