Articles

Holding Patents Hostage?  The Need For HIV/AIDS Drugs In Poor Countries Threatens The Health Of International Patent Protection

Elizabeth Durham

On June 24 of this year, the Brazilian government enacted legislation that would override Abbott Laboratories’ patent on Kaletra®, an anti-retroviral drug used to treat HIV and AIDS, and would enable generic production and sale of the drug at nearly half the price that Abbott currently charges. Abbott was given ten days from that date in which to respond to this legislation and enter negotiations with Brazilian health officials to reduce the price at which Kaletra® is sold in the country. Preliminary agreements on price reductions and technology transfer programs have been proposed, but no binding agreement has been reached as of the date of this article.

On September 9, Brazilian Minister of Health Saraiva Felipe stated in a press release that he is “not talking about breaking any patents at this time because [they] are in the middle of talks. However, if there is no flexibility on the subject, [they] may reach that point.” Despite the Minister’s stated desire to reach agreement on price reductions, the Brazilian National Health Council issued a recommendation on August 11 that Brazil immediately begin producing the patented medicines locally, strengthen state laboratories, and provide more financial resources for research. It added that any commercial retaliation on the part of pharmaceutical companies against Brazil for violating the patents should be considered an illegal act.

The ongoing debates in Brazil over the availability of patented medicines such as Kaletra® are emblematic of the tension between poorer populations and governments unable to afford high-priced patented medicines, on the one hand, and the need for international patent protection as an incentive for pharmaceutical companies to invest in the development of new medicines and technologies, on the other. Although the battles over how to increase access to patented medicines for life-threatening diseases are by no means new ones, several developments over the past few years have altered the landscape on which these fights have been waged, and in some cases, have given developing countries an upper hand in determining the fate of the patent-based revenue streams that are the lifeblood of the pharmaceutical industry.

History Of The Problem

Industrialized countries with sophisticated patent systems such as that of the U.S. historically have sought to extend globally the scope of patent protection provided to pharmaceutical companies so as to similarly to protect the sale and manufacture of patented drugs in other countries. However, the only mechanism for encouraging such enforcement abroad has in the past consisted of bilateral trade agreements, such as the North American Free Trade Agreement (“NAFTA”), which proffer favorable trading terms in exchange for patent protection that more closely approximates that afforded under U.S. law.

In response to increased desires to strengthen and harmonize international patent protection, the World Trade Organization (“WTO”) adopted the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) in 1994, requiring WTO member states to provide certain minimum levels of patent protection on the national level. However, following TRIPS, poorer countries who now had to abide by the terms of TRIPS and grant monopolies on patented drugs found that the higher prices for certain drugs that could be maintained as a result of the patent monopoly were in some cases too high for individuals and public health programs needing to purchase those drugs readily. Because of large outbreaks of HIV in developing countries, cheaper access to drugs for treatment of HIV and AIDS were of especially acute concern.

Several national governments (e.g., Brazil and South Africa) responded by creating statutory compulsory licensing schemes for urgently needed drugs, which would allow the government to order generic manufacture of those drugs, creating market competition that would drive their prices down. However, compulsory licensing or price controls -- even when limited to developing countries -- posed the danger that these cheaper drugs would find their way into “gray markets” in industrialized countries, and would thereby compete with pharmaceutical companies’ sales there as well. For example, in December of 2002, the Dutch Health Inspection recalled several consignments of GlaxoSmithKline antiretroviral drugs that were being sold in the Netherlands and Germany. Officials believed that the medicines came from Senegal, where the head of the Dakar-based aid organization Africa Helps Africa said that they exchanged a surplus of the medicines for other drugs and medical equipment. The value of the drugs was estimated in the millions of Euros.

The WTO acknowledged this problem at their conference in Doha, Qatar in 2001 with a declaration calling for the creation of procedures for developing countries to implement compulsory licensing only when the need for drugs that the government could no longer afford at market prices rose to a state of “emergency.” In 2003, the WTO issued further procedural guidelines for determining when countries designated as “least-developed countries” could engage in compulsory licensing for the generic production of patented drugs in cases of sufficient “national emergency.” These guidelines include several safeguards to maintain protection of what the WTO recognized as the patentee’s general right to maintain his monopoly:

• Limited amounts of compulsorily-licensed production so as to meet necessary demand only.
• Measures to keep drugs manufactured under compulsory licensing from being exported to “gray markets” in non-developing countries (for example, using special labelling to ensure that the drugs are not put into commerce in other countries).
• Adequate notice provisions whereby the patent owner and the WTO will be assured an opportunity to negotiate a voluntary (likely reduced-cost) license or make donations of medicines.
• Adequate compensation to the patent owner under the compulsory license.

These procedures set forth by the WTO also specifically articulate mechanisms for industrialized countries to manufacture and export patented drugs pursuant to a compulsory license whereby the developing country needing the drugs does not have the manufacturing capacity to meet their demands internally, subject to the safeguards listed above.

Negotiations Over Access Problems

Since the implementation of the Doha Declaration, the governments of Malaysia, Indonesia, Zambia, Zimbabwe, and Mozambique have ordered compulsory licensing for various patented HIV drugs. The negotiations in Brazil this year represent the most recent and most urgent of a long line of battles between forces seeking to maintain pharmaceutical patent protection and those arguing for cheap public access to patented medicines in particular countries. Over the past four years, the Brazilian government has engaged in similar negotiations with international pharmaceutical companies and has succeeded in obtaining price reductions for several other HIV drugs, including Viracept®, patented by Roche, Indinavir®, patented by Merck, and Efavirenz®, patented by Merck. A listing of compulsory licensing proposals and disputes in various countries is maintained online by the Consumer Project on Technology at http://www.cptech.org/ip/health/cl/recent-examples.html.

In contrast, some national governments have been willing to fortify the levels of patent protection they make available despite high demand for patented medicines and high costs to governments purchasing those medicines for public health programs. For example, India passed new legislation in March of this year aimed at strengthening its national patent system to bring Indian patent law into compliance with its obligations under the TRIPS Agreement as a member state in the WTO. Prior to that legislation, India was home to one of the largest number of generic manufacturers of patented drugs in the world. As a result of the new legislation, however, the Indian patent office received over 1,300 applications for drug patents this year -- a number second only to the United States in that category.

The problem of access to patented medicines has not been an issue for governments of developing countries exclusively. U.S. patent law also contains measures aimed to strike a long-term balance between patent protection and access to patented medicines, such as the Hatch-Waxman Act of 1984 (codified at 35 U.S.C. § 355). This statute allows generic drug manufacturers to apply for FDA approval to market a particular drug before any patents covering the drugs have expired, allowing such manufacturers to launch generic production of those drugs more quickly once the patent or patents expire.

But in some instances, the need for access to patented medicines, even in industrialized countries, is much more acute. For example, during the anthrax scare of 2001, the demand for Cipro®, a powerful antibiotic-of-last-resort patented by Bayer AG, sharply increased. In the wake of the crisis, several Canadian pharmaceutical companies offered to manufacture a generic form of Cipro® if given permission by their government. Bayer AG, under such political pressure, donated supplies of Cipro® in Canada to avoid compulsory licensing for generic production.

Also at the time of the anthrax panic, the U.S. House of Representatives proposed the Public Health Emergency Medicines Act, giving the Secretary of Health and Human Services the ability to mandate compulsory licensing of patented drugs needed for certain public health emergencies, specifically to facilitate building up a stock of Cipro®.

Given the number of controversies over this issue in Brazil alone, let alone in other poorer countries, it seems likely that the pattern of threatened compulsory licensing for patented medicines, followed by negotiations with pharmaceutical companies to maintain their patent protection, while perhaps extending further price concessions to Third World governments and citizens, will continue for the foreseeable future. Although this pattern of “holding hostage” of pharmaceutical patents may not have been the optimal solution to the problem of access to patented medicines intended by the WTO, the implementation of the WTO’s mandate in the Doha Declaration clearly has strengthened the position of developing countries in bargaining for the release of patented medicines into the public domain. Pharmaceutical manufacturers -- and indeed, patent owners generally -- should be aware of this shift in power, and mindful of the fact that their patent protection may only be as strong as the political influence necessary to back it up in negotiations such as those underway in Brazil.

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