Meeting at the U.S. Trade Representative's Office on
U.S. Trade Policy on Drugs for HIV/AIDS

Washington, D.C.
12 March 2001

On a sunny, windy Monday afternoon, after attending the ACT UP/Philadelphia demonstration at the headquarters of the Pharmaceutical Research & Manufacturers' Association in Washington, D.C., Gregg Gonsalves (now Director of Treatment Advocacy at Gay Men's Health Crisis) and I met Jamie Love (Consumer Project on Technology), Ronald Johnson (GMHC), Jane Silver (amfAR), and Yvette Delph (TAG) at the Office of the U.S. Trade Representative (USTR) Building just across the street from the ugly, ornate Old Executive Office Building. The meeting—which was called after Gonsalves sent the USTR a letter regarding the US action against Brazil at the World Trade Organization (WTO)—was to discuss US policy with regard to intellectual property rights for AIDS/HIV drugs in developing countries. We met with Joseph S. Papovich, Assistant U.S. Trade Representative, Services, Investment & Intellectual Property; Kyra Alvarez, Director, Intellectual Property; and P. Claude Burcky, Deputy Assistant USTR for Intellectual Property

Jamie Love and Joe Papovich settled into a rapid-fire exchange of views on the past, present, and future of US trade policy. They started out by discussing the 2000 Executive Order, which the new administration had recently reaffirmed, to everyone's considerable surprise. According to a USTR statement on February 21, "consistent with our overall effort to protect America's investment in intellectual property, [the USTR] will seek to contribute to administration efforts to work with countries that develop serious programs to prevent and treat this horrible disease." [Donald G. McNeil, Jr., "Bush Keeps Clinton Policy on Poor Lands' Need for AIDS Drugs", The New York Times, 22 February 2001]

The Executive Order, Papovich explained, was the culmination of a series of steps which went back to September 1999, when the USTR changed its policy with the Republic of South Africa and withdrew from the PMA [Pharmaceutical Manufacturers Association] litigation on South Africa's 1997 medicines law. The new policy would let South Africa implement any changes as long as they were consistent with the TRIPS [Agreement on Trade Related Aspects of Intellectual Property]. On 1 December 1999 the USTR extended this policy—covering access to HIV/AIDS drugs by developing countries—"to the whole developing world". If a country considered AIDS a national emergency, "or other circumstances of extreme urgency,"1 and then they could use TRIPS mechanisms such as compulsory licensing and parallel importing.

Still, by Spring 2000, the actual US policy was neither clear nor well-known. So on May 1, 2000, the USTR sent a telegram to American embassies stating that developing countries do not have to tell the US that AIDS is a national emergency. They only have to be TRIPS- compliant, not TRIPS-plus. And the Executive Order, which was released on 10 May 2000, stated the US policy more explicitly with regard to Africa.

We raised questions about the USTR's imposition of "TRIPS-plus" provisions in the US-Jordan Free Trade Agreement (FTA) —which has already been signed—and its attempts to include them in the ongoing US-Chile FTA and in the Free Trade Agreement of the Americas (FTAA). (TRIPS-plus provisions lock a country into restrictions which are greater than those provided by the TRIPS itself, for example, giving up rights they may have to utilize mechanisms such as compulsory licensing and parallel importing.)

The USTR officials stated that they were working to achieve some "TRIPS-plus improvements with Chile, Singapore, and in the FTAA," without, however, defining what those "improvements" were. An important point is that these agreements are bilateral and reciprocal—they bind the US as well as the other signatory.

Jamie raised a number of technical but important points with regard to conditions under which compulsory licenses could be issued. Under TRIPS, these conditions include

  1. use for public, non-commercial use,
  2. a national emergency or "other circumstances of extreme urgency", and
  3. anti-competitive behavior (including failure to 'work' or provide the product in a given country).
  • Problems with #1—"public, non-commercial use"—include the fact that, as health systems worldwide come under pressure (often from the World Bank, IMF, and US government) to privatize, health care is not given out on a "public, non-commercial basis". We get our prescriptions from our (HMO-paid) doctor, go to a (private, for-profit) pharmacy, and are dispensed drugs either brand-name or generic, both made by private companies. So the "public, non-commercial use" provision could be very limiting.

  • Problems with #2—national emergency or other circumstances of extreme urgency—include a) having to declare a national emergency, which could be restricted by existing national law, be time-limited, or restricted in another way, and b) the fact that it does not cover other public health needs which may not constitute an emergency per se (however defined). Indeed, President Thabo Mbeki rejected demands to declare AIDS a national emergency in South Africa earlier this month. However, he did not appear to be aware of the clause regarding "other circumstances of extreme urgency", which the HIV/AIDS epidemic certainly is in his country. So it's not strictly necessary to declare a national emergency to invoke TRIPS.

  • There are likely problems with #3 as well—anti-competitive behavior—but we didn't discuss them. Could pricing of a drug out of reach of most of a country's people, when a cheaper, TRIPS-legal, generic drug would be more broadly available, be considered anti-competitive? I would think so.

The USTR staff emphasized the need for trade agreements to preserve the flexibility developing countries need to respond to AIDS, other national health emergencies, and other circumstances of extreme urgency.

Jamie: "The government in South Africa is paralyzed. They can't afford universal public access. There is an opportunity to move products into the private sector, but that's by definition not public and non-commercial. Brazil and South Africa are reluctant to invoke a 'national health emergency' to justify what they consider to be their basic right to a compulsory license [for public health reasons] even without a national health emergency, which they're concerned is too limiting and could be revoked. At the Cipla offer, $600/month, some private companies in South Africa would be willing to provide it."

Gregg brought up the US-Brazil case now pending for arbitration at the WTO. Of note, this case was brought by the Clinton administration. It focuses on article 68 of Brazil's industrial property law (Law No. 9,279 of 14 May 1996), which represented Brazil's initial effort to come into compliance with the General Agreement on Tariffs & Trade (GATT)/World Trade Organization (WTO) treaty. The US claims that "Article 68 of Brazil's 1996 industrial property law discriminates against US owners of Brazilian patents whose products are imported into, but not locally produced in, Brazil. Article 68 also curtails the exclusive rights conferred on these owners by their patents. As such, Brazil's local working requirement appears inconsistent with its obligations under Article 27.1 and 28.1 of the TRIPS agreement." [WTO WT/DS199/3, 9 January 2001—BRAZIL - MEASURES AFFECTING PATENT PROTECTION, www.wto.org.]

We then had another very technical, but very important, discussion of the differences between Article 68 ('local working') and Article 71 ('national emergency') in Brazil's 1996 law. The US maintains that Brazil's AIDS drug program—including the local manufacturing of local generic- equivalents under contract from the Brazilian government—would still be allowed under Article 71, and that Article 68 is a protectionist, mercantilist attempt to force companies to make all products in Brazil if they wish to sell them in Brazil. As noted above, Brazil is apparently reluctant to invoke Article 71 if it doesn't have to (which it doesn't). [See 6 Feb 2001 CPT statement attached.]

The US case cites TRIPS article 27(1) prohibiting discrimination between locally-made and imported products.2 He explained that under article 68 of the Brazilian legislation, the article in dispute, foreign companies have three years to manufacture a patented product in Brazil. If they don't, Brazil can issue a compulsory license, or the patent owner can argue it's not economically feasible—the Brazilian Patent Office would adjudicate the matter. If it agrees with the company, no compulsory license is issued, but Brazil is enabled to start parallel importing the product to drive down the price. There was no definition of 'economically feasible'. The US case maintains that Brazil is saying that products sold in Brazil must be made there, and that's contrary to TRIPS.

Jane Silver said, "Wouldn't it have the same effect, if the US protested article 68 or article 71?" Papovich replied that this was not the case. Brazil is now negotiating with Roche (on nelfinavir) and Merck (on efavirenz), both of which are patented in Brazil (unlike the previously manufactured knock-off drugs). If they don't reduce the price sufficiently, then Brazil can simply start making those two drugs under article 71—regardless of how the WTO panel adjudicates the case on article 68.

USTR staff were upset that "Brazil has wrapped the AIDS flag around this, claiming 'the US is attacking our effective AIDS strategy'."

Jamie Love responded, "In many respects, I agree ... but not completely. Local working is a legitimate trade dispute. This is the one area where there's an argument that you can't do a compulsory license. On the other hand, lots of countries have the local working provision. Why pick on Brazil? This suit enables drug company executives to tell African leaders, 'Don't do what Brazil did or you'll end up at the WTO!'" Local working provisions were incorporated into the Paris convention in 1883 in order to enable countries to develop their own industrial infrastructure. The question is, are such provisions still needed in 2001?

Litigation over article 68 won't preclude utilization of article 71 by Brazil. If the US wins, it can sanction Brazil, but the problem is that the sanctions affect others in the target country whose livelihood depends on trade with the US, so they're not really that fair.

*

Executive order 13155 of May 10, 2000: [Federal Register 65(93), Friday, May 12, 2000, 30521-3.]

ACCESS TO HIV/AIDS PHARMACEUTICALS AND MEDICAL TECHNOLOGIES
By the authority vested in me as President by the Constitution and the laws of the United States of America, including sections 141 and chapter 1 of title III of the Trade Act of 1974, as amended (19 U.S.C. 2171, 2411-2420), section 307 of the Public Health Service Act (42 U.S.C. 2421), and section 104 of the Foreign Assistance Act of 1961, as amended (22 U.S.C. 2151b), and in accordance with executive branch policy on health-related intellectual property matters to promote access to essential medicines, it is hereby ordered as follows:

Section 1. Policy. (a) In administering sections 301-310 of the Trade Act of 1974, the United States shall not seek, through negotiation or otherwise, the revocation or revision of any intellectual property law or policy of a beneficiary sub-Saharan African country, as determined by the President, that regulates HIV/AIDS pharmaceuticals or medical technologies if the law or policy of the country:

(1) promotes access to HIV/AIDS pharmaceuticals or medical technologies for affected populations in that country; and

(2) provides adequate and effective intellectual property protection consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) referred to in section 101(d)(15) of the Uruguay Round Agreements Act (19 U.S.C. 3511(d)(15)).

(b) The United States shall encourage all beneficiary sub-Saharan African countries to implement policies designed to address the underlying causes of the HIV/AIDS crisis by, among other things, making efforts to encourage practices that will prevent further transmission and infection and to stimulate development of the infrastructure necessary to deliver adequate health services, and by encouraging policies that provide an incentive for public and private research on, and development of, vaccines and other medical innovations that will combat the HIV/AIDS epidemic in Africa.

Sec. 2. Rationale: (a) This order finds that:
(1) since the onset of the worldwide HIV/AIDS epidemic, approximately 34 million people living in sub- Saharan Africa have been infected with the disease;

(2) of those infected, approximately 11.5 million have died;

(3) the deaths represent 83 percent of the total HIV/AIDS-related deaths worldwide; and

(4) access to effective therapeutics for HIV/AIDS is determined by issues of price, health system infrastructure for delivery, and sustainable financing.

(b) In light of these findings, this order recognizes that:

(1) it is in the interest of the United States to take all reasonable steps to prevent further spread of infectious disease, particularly HIV/AIDS;

(2) there is critical need for effective incentives to develop new pharmaceuticals, vaccines, and therapies to combat the HIV/AIDS crisis, including effective global intellectual property standards designed to foster pharmaceutical and medical innovation;

(3) the overriding priority for responding to the crisis of HIV/AIDS in sub-Saharan Africa should be to improve public education and to encourage practices that will prevent further transmission and infection, and to stimulate development of the infrastructure necessary to deliver adequate health care services;

(4) the United States should work with individual countries in sub-Saharan Africa to assist them in development of effective public education campaigns aimed at the prevention of HIV/AIDS transmission and infection, and to improve their health care infrastructure to promote improved access to quality health care for their citizens in general, and particularly with respect to the HIV/AIDS epidemic;

(5) an effective United States response to the crisis in sub-Saharan Africa must focus in the short term on preventive programs designed to reduce the frequency of new infections and remove the stigma of the disease, and should place a priority on basic health services that can be used to treat opportunistic infections, sexually transmitted infections, and complications associated with HIV/AIDS so as to prolong the duration and improve the quality of life of those with the disease;

(6) an effective United States response to the crisis must also focus on the development of HIV/AIDS vaccines to prevent the spread of the disease;

(7) the innovative capacity of the United States in the commercial and public pharmaceutical research sectors is unmatched in the world, and the participation of both these sectors will be a critical element in any successful program to respond to the HIV/AIDS crisis in sub-Saharan Africa;

(8) the TRIPS Agreement recognizes the importance of promoting effective and adequate protection of intellectual property rights and the right of countries to adopt measures necessary to protect public health;

(9) individual countries should have the ability to take measures to address the HIV/AIDS epidemic, provided that such measures are consistent with their international obligations; and

(10) successful initiatives will require effective partnerships and cooperation among governments, inter- national organizations, nongovernmental organizations, and the private sector, and greater consideration should be given to financial, legal, and other incentives that will promote improved prevention and treatment actions.

Sec. 3. Scope. (a) This order prohibits the United States Government from taking action pursuant to section 301(b) of the Trade Act of 1974 with respect to any law or policy in beneficiary sub-Saharan African countries that promotes access to HIV/AIDS pharmaceuticals or medical technologies and that provides adequate and effective intellectual property protection consistent with the TRIPS Agreement. However, this order does not prohibit United States Government officials from evaluating, determining, or expressing concern about whether such a law or policy promotes access to HIV/AIDS pharmaceuticals or medical technologies or provides adequate and effective intellectual property protection consistent with the TRIPS Agreement. In addition, this order does not prohibit United States Government officials from consulting with or otherwise discussing with sub-Saharan African governments whether such law or policy meets the conditions set forth in section 1(a) of this order. Moreover, this order does not prohibit the United States Government from invoking the dispute settlement procedures of the World Trade Organization to examine whether any such law or policy is consistent with the Uruguay Round Agreements, referred to in section 101(d) of the Uruguay Round Agreements Act.

(b) This order is intended only to improve the internal management of the executive branch and is not intended to, and does not create, any right or benefit, substantive or procedural, enforceable at law or equity by a party against the United States, its agencies or instrumentalities, its officers or employees, or any other person.

WILLIAM J. CLINTON
THE WHITE HOUSE, May 10, 2000

*

Consumer Project on Technology Statement on the Trade Dispute Between the United States and Brazil
February 6, 2001

There are several reasons why the United States should not have filed a WTO action against Brazil.

  1. Brazil is the prime example of a country that is doing things right with respect to providing treatment for AIDS. The US action undermines the often expressed view that the US is primarily concerned with infrastructure or other care related issues.
  2. The ability of Brazil to provide care is linked to its ability to manufacture cheaper copies of drugs. This should inform policy makers about the benefits of policies that support a domestic industry.
  3. The big Pharma companies will use the US trade action to disparage and undermine the Brazil program, throughout the world, and it will be used domestically in Brazil to undermine the governments AIDS policies.

That said, it should also be acknowledged that the US action was narrow, focusing on the validity of the local working requirements, and surprisingly, on the Brazil provisions on parallel imports, a matter that appears to be out of the WTO authority, given Article 6 of the TRIPS. The US government did NOT ask the WTO to review Article 71 of the Brazil law, which states:

Art. 71. In cases of national emergency or of public interest, declared in a decision of the Federal Executive Power, and where the patent owner or his licensee do not satisfy such need, a temporary non- exclusive compulsory license to exploit the patent may be granted ex officio, without prejudice to the rights of the owner of the patent.
Sole paragraph. The instrument granting the license shall set out its term of validity and any possibility of extension.

We are pleased that the USTR did not target Article 71. One doubts the US could have achieved much by contesting Article 71 before the WTO, given Article 31.b in the TRIPS. However, it should also be noted that the US has pressed Brazil on Article 71, via bilateral pressures, including, for example, a trip to Brazil by Commerce Secretary Daley, last year, traveling executives from Merck and Pfizer.

This article in on the CPT Brazil page here: www.cptech.org/ip/health/c/brazil/.

*

INTELLECTUAL PROPERTY LAW No. 9,279 [of Brazil]
Effective as of May 15, 1996

SECTION III - COMPULSORY LICENSES

Article 68: A patentee will be subject to having its patent compulsorily licensed if he exercises rights resulting therefrom in an abusive manner or by means of abuse of economic power proven under the terms of the law by an administrative or court decision.

§1 The following may also result in a compulsory license:

Non-exploitation of the subject matter or the patent in the territory of Brazil, by lack of manufacture or incomplete manufacture of the product or, furthermore, by lack of complete use of a patented process, except in the case of non-exploitation due to economic unfeasibility, when importation will be permitted; or

Commercialization that does not meet the market needs.
§2 The license can only be requested by a party with legitimate interest and that has the technical and economic capacity to carry out the efficient exploitation of the subject matter of the patent, which should be predominantly destined for the internal market, save for exception provided for in item I of the previous paragraph.

§3 In the case that a compulsory license is granted due to abuse of economic power, a period of time, limited to that provided for in article 74, will be guaranteed to a licensee proposing to manufacture locally, to proceed with importation of the subject matter of the license, provided it has been placed on the market directly by the patentee or with his consent.

§4 In the case of importation for exploitation of a patent and in the case of importation provided for in the preceding paragraph, the importation by third parties of a product manufactured according to a process or product patent will equally be allowed, provided it has been placed on the market directly by the patentee or with his consent.

§5 A compulsory license, to which §1 refers, may only be requested after 3 (three) years form grant date.

. . .

Article 71: In cases of national emergency or public interest, declared in an act of the Federal Executive Authorities, insofar as the patentee or his licensee does not meet such demand, a temporary ex-officio non-exclusive compulsory license for the exploitation of the patent may be granted, without prejudice to the rights of the respective patentee.

Sole Paragraph: The act of grant of the license will establish its te[r]m of validity and the possibility of extension.

http://www.araripe.com.br/law9279eng.htm#patente

*

1 TRIPS Article 31: Other Use Without Authorization of the Right Holder
    Where the law of a Member allows for other use of the subject matter of a patent without the authorization of the right holder, including use by the government or third parties authorized by the government, the following provisions shall be respected:
  1. authorization of such use shall be considered on its individual merits;
  2. such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This requirement may b waived by a Member in the case of a national emergency or other circumstances of extreme urgency or in cases of public non-commercial use [emphasis added]... [TRIPS agreement, article 31, [http://www.wto.org/english/docs_e/legal_e/27-trips.wpf.] 2. Article 27: Patentable Subject Matter
    1. Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application.. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this Article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced. [Emphasis added.]

      Oddly, I haven't heard mention during any of the debates of the interesting subsequent clauses:

    2. Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health [emphasis added] or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.
    3. Members may also exclude from patentability:

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