by Brook Baker, Senior Policy Analyst

As reported in the story below [accessible here], South Africa is at long last taking positive steps to reform its overly generous patent law that grants an excessive number of patent on medicines, thereby adversely affecting both affordability and accessibility. This very positive development, largely resulting from a national campaign to Fix the Patent Law launched by the Treatment Action Campaign and Doctors without Borders in 2011, takes place twelve years after the historic Doha Declaration on the TRIPS Agreement and Public Health.

Although the news story reports that S. Africa will adopt a patent examination system and that examination will reduce the number of secondary/evergreening patents, it is hard to assess the depth of the proposed reforms in the absence of access to draft intellectual property policy that was promised months ago. In an earlier draft, the inputs of industry and pharmaceutical-affiliated lawyers were replete, but civil society and independent experts have had not true opportunities for access and input for nearly two years.

TAC and MSF put out a comprehensive release on patent reform on the eve of an IP event hosted by South Africa, WHO, WTO, and WIPO [http://www.fixthepatentlaws.org/?p=630]. The report laid out the essence of the reforms that access-to-treatment activist feel are needed to ensure realization of the right to health. The news report does not address many of their most pressing concerns including tightening up of patentability standards, allowance of opposition procedures, and simplification of compulsory licensing mechanisms among others. Activists would be fully justified demanding immediate release of the draft policy to the public so that informed input can ensure optimal outcomes.

Regrettably Prof. Dean is acting as an apologist for a system that is completely broken and that grants a higher percentage of pharmaceutical patents than even the US and Europe. As a result, S. Africans are burdened not just with patents granting 20-year monopolies on new, break-through medicines, but stacked, successive 20-year monopolies on virtually every kind of minor modification to an existing medicines - new uses/indications, new forms/dosages/formulations, etc. In the absence of a patent examination system in S. Africa, if you file out the applications properly and pay your fees, you can get a patent on peanut butter and jelly sandwiches, then peanut butter and grape jelly, then peanut butter and apricot jelly ad infinitum.

These excessive secondary patents are not cost free - they drive up the cost of medicines and extend the period of monopoly pricing by preventing generic competition. Higher prices, in turn, result in medical apartheid, where the vast majority of patients might be denied access to life-saving, but overpriced, medicines as both medical aides and the government deny coverage because of resource constraints.

South Africa's move to amend its patent laws is not occurring in a vacuum. Brazil will soon launch patent law reforms that are also designed to heightened patent standards and reduce the evergreening of pharmaceutical patents. Zambia and Uganda too are currently considering patent reforms in line with reforms enacted in India in 2005 that have succeeded in greatly reducing the number of secondary patents.

At the same time that countries are belatedly reforming their laws to maximize use of flexibilities allowed under the WTO TRIPS Agreement, which sets forth minimum patent and data protection standards but also allows for nationally-derived flexibilities and exceptions, the US and EU are aggressively pursuing trade policies that would expand intellectual property rights and their enforcement and narrow the use of permitted flexibilities. IP maximalist, often with the support of elements of government, are also supporting a glamour campaign for intellectual property, falsely selling it as the engine of an Africa renaissance.

Contrary to this claim, most credible economic studies show that IP in the continent, and in poorer countries more generally, does not lead to increased foreign direct investment, technology transfer, indigenous innovation, or development.

So a two front battle is being waged - one to enact and then use the limited flexibilities granted under international law for accessing more affordable medicines and another being waged against Big Pharma and Big Power interests that are trying to reshackle African with IP constraints. We must also begin to explore options like those being discussed at the WHO that recognize the failures in research and development and access that are a result of innovation policies wholly reliant on privatizing monopolies on essential public goods like medicines.

Activists and progressive health forces in Brazil have succeeded in catalyzing a proposal to reform Brazilian patent law to take advantage of key TRIPS flexibilities in order to increase access to affordable medicines.  In August 2013, Brazil will issue a major report and proposed legislative reforms that will:  eliminate patent term extensions and data exclusivity, restrict patents on new forms and new uses and tighten the the inventive step requirement (following the India example), adopt government use procedures, and clarify the role that ANVISA, its drug regulatory agency, plays in the patent examination system.  We hope to gain sign-ons from hundreds of civil society/activist organizations.  Please supply the following information and return to me [email protected].

• Name of your organization
• Country
• Contact person's email 

This is a very important moment where Brazil can rectify past shortcomings in its patent law and enhance Brazil's ability to meet patients' human right to health.  The proposed patent reform demonstrates growing momentum in low- and middle-income countries to maximize use of TRIPS-compliant flexibilities to help ensure access to medicines for all. We believe that the support of global civil society organizations is useful both internally to help support adoption in Brazil and externally to counteract what is certain to be strong negative reaction from the US and EU and Big Pharma.

by Professor Brook K. Baker, Health GAP Senior Policy Advisor

On June 18, 2013, 170 Members of Congress wrote to President Obama complaining about Indian trade policy and more particularly India's intellectual property "climate."  Under the umbrella of claiming that policies of the Government of India favor domestic producers over U.S. Exporters – in other words, that India is protectionist – the Members of Congress claimed that "the intellectual property (IP) climate has become increasingly challenging in India."

In particular, the letter complained about IP issues affecting pharmaceuticals:  "For example, last year several biopharmaceutical companies inappropriately had their patents revoked or their appeals denied by the India courts to market a variety of life-saving drugs in India.  Additionally, the Indian Government issued its first compulsory license (CL) on a stage three liver and kidney cancer drug.  It has been reported that additional drugs may be subject to CLs imminently and that the decisions related to these CLs are being improperly driven by an interest in growing the pharmaceutical market in India.  These actions by the Indian Government greatly concern us because innovation and the protection of intellectual property are significant driving engines of the U.S. economy."

Under the WTO TRIPS Agreement, India has every right to define standards of patentability so long as they satisfy minimum standards of patentability set forth in TRIPS, namely novelty, inventive step, and industrial activity.  India has elected to define and apply standards of patentability rigorously.  When this rigorous standard is applied in India, it prohibits patents on secondary patents involving new uses of existing medicines or minor modifications of existing medicines/active ingredients that do not significantly enhance therapeutic efficacy.  Although Members of Congress and Big Pharma executives, including those from Novartis and Pfizer, condemn an Indian decision denying a patent on secondary form of the anti-cancer medicine Glivec, they neglect to acknowledge that both Novartis and Pfizer have received hundreds of patents on medicines in India in the past 8 years and that it is only the frivolous or unworthy patents that are being screened out.  Moreover, rather than serving domestic producers, the Novartis decision in India would allow imports of Glivec from any of the other 160 countries in the world that also do not presently have patents on Glivec.

The U.S. is notorious with respect to the ease by which pharmaceutical companies extend their patent monopolies on medicines by seeking secondary or "evergreening" patents, what is euphemistically called patent lifestyle management in polite Pharma circles.  These kinds of patents can add decades to the 20-year period of initial patent exclusivity.  Yet even in the United States, the Supreme Court, academics, and other policy makers are beginning to question the wisdom of weak U.S. standards for patents and the impact of lax patent standards both on affordability and the ecology of innovation.  Thus, the Supreme Court has recently tightened standards on inventive step, prohibited patenting of naturally occurring genes, and questioned the competitive impact of sweetheart deals that delay generic entry.  Instead of trouble-shooting for Big Pharma, Congress should turn its attention to revising standards of patentability upward in the U.S., reducing patent thickets, and restricting patent trolls.  Maybe then we could get some of our bloated healthcare costs under control and reduce the federal deficit and the pharmaceutical-tax on productivity.

Likewise, the WTO TRIPS Agreement allows India and any other country to issue compulsory licenses on any grounds they want to as long as certain procedural safeguards are followed.  Using fully lawful compulsory licensing procedures, India did issue a compulsory license on an overpriced Bayer cancer medicine, citing three justifications in a 60-plus page decision:  excessive pricing, failure to supply the market, and refusal to produce locally.  As a result of this license, the cost of the cancer medicine has now fallen more than 97%, showing the excess mark-up that Bayer imposes on patients.  Rather than acting arbitrarily, the legal system in India allows a court review of the compulsory license decision, which Bayer is now pursuing.  Moreover, instead of acting protectionist in a trade sense, India is protecting public health, public resources, and common sense in the face of monopoly pricing.

Although Members of Congress and Big Pharma companies are complaining about the issuance of compulsory licenses, the U.S. has perhaps the easiest system in the world for issuing government use licenses (by any government official or federal contractor) and has used these rights on hundreds of occasions.  Although there are not routine rights for compulsory licenses for all sectors of the economy on pharmaceuticals, there are CL provisions with respect to other technologies, and the U.S. maintains rights to march-in and grant licenses with respect to IP generated with federal resources.  

It is deeply ironic when the world's biggest wolf cries wolf.  Any objective examination of U.S. trade policy, including that represented in the current negotiations of the Trans-Pacific Partnership Agreement, would conclude that the U.S. is relentless in its pursuit of heightened standards of patentability, data protection, and enforcement in order to protect the interests of Big Pharma and other IP-intensive domestic industries.  Over 600 industry representative sit on advisory committees to the U.S. Trade Representative having privileged access to otherwise secret trade agreement proposals.  It's an affront to democracy that the first Member of Congress gained access to the text of just three sections of the proposed TPPA just this past week, while industry reps have been able to lobby U.S. trade negotiators constantly for three years to advance their monopoly interests.  It's an insult to our collective intelligence when Members of Congress misleadingly condemn alleged "protectionism" in India while tolerating monopoly encroachment globally and doing so to protect "jobs and investments" in the United States.

We could only wish that more countries, including our own, would emulated India's IP policies.  Maybe then we would have more affordable and equitable access to global public goods like medicines, maybe then Medicare would not be bankrupted, and maybe then the fruits of prosperity would not be siphoned off to IP rent-seekers who deliver so little in terms of innovation despite massive monopoly-based profits both here and abroad.

| download the Congressional letter 

LDCs stood together and won a partial victory at the World Trade Organization delaying the time within which they must become fully compliant with global minimums for protecting patents, copyrights, trademarks, and other forms of intellectual property.  Although they committed to deliberate carefully, they won back policy space to reduce existing levels of intellectual property protection if appropriate in order to develop a viable technological base and to overcome severe and lingering capacity constraints.  This same policy space will permit them to access more affordable medicines and medical technologies, educational resources, agricultural inputs, and green and climate control technologies.

Europe and the US, home of powerful intellectual property industries including pharmaceuticals, publishing, movie and recording, information technology and other, tried to force LDCs, the poorest countries in the world, to open their weak economies to monopoly protections for IP-based multinational corporations.  At first the US and EU wanted to split up the LDCs coalition and speed up implementation of select IPRs, but LDCs held firm in demanding what they are fully entitled to under international law - an unconditional extension of the time period within which to become compliant with the WTO TRIPS Agreement until any particular country is no longer an LDC with no guarantee that they would maintain even existing levels of IP if it were not in their interest to do so.

At the same time that the US and EU were exerting massive backroom pressure on LDCs, often with the assistance of the TRIPS Council Chair, civil society organizations, health activists, academics, international organizations, and others rallied to support the LDCs.  They exposed the intellectual dishonesty of the big powers' position and demonstrated global solidarity in support of poor people in the world's poorest countries.

In the end, the US and EU did enforce some compromises, including a duration of this extension for only 8 years (though LDCs will be entitled to further extensions in the future) and LDCs expressed their unenforceable "determination to preserve and continue progress towards implementation of the TRIPS Agreement."  But 8 years is a victory in light of the US endgame insistence on only a 5 year extension, and the expression of "determination" is modified by a separate sentence entitling LDCs to make "full use of the flexibilities in the TRIPS Agreement to address their needs including to create a sound and viable technological base and to overcome their capacity constraints," which in this case would include the flexibility under Article 66.1 to rollback existing levels of TRIPS compliance.

Countries now have to use the policy space they have fought for and won.  Many LDCs still need to enact IP reforms that allows unrestricted access to essential public goods.  They can be selected, but they shouldn't simply maintain the colonial IP systems that they inherited, nor should the follow the siren song of WIPO and other IP fundamentalistic who claim that IP is good for you - just close your eyes and swallow.  To the contrary, virtually all the theoretical and empirical evidence on this questions finds that IP impedes rather than helps the development project in low income countries.

In addition, LDCs and their allies will have to begin early to win an even better extension of the pharmaceutical product transition period which will expire in 2016.  Here too the LDC should insist on an unconditional extension (like the one they won in 2002) and it should last as long as a WTO member is an LDC.  The fight against HIV/AIDS, tuberculosis and malaria and the simultaneous fights against neglected tropical diseases and non-communicable diseases depends on affordable access to generic medicines of assured quality.

by Prof. Brook K. Baker*, Policy Analyst Health GAP, Northeastern U. School of Law, Program on Human Rights and the Global Economy, Honorary Research Fellow, University of KwaZulu Natal

Invited Op Ed for Equilibri: A Simply New Perspective on Global Affairs

http://www.equilibri.net/nuovo/articolo/investors%E2%80%99-ip-rights-unbound-danger-investment-clauses-access-medicines (reprinted with permission of author)

April 20, 2013

Access-to-medicines activists have recently had much to celebrate.  In India, the Supreme Court upheld India’s strict standards of patentability and rejected an “evergreening” patent on Glivec, an important cancer medicines that Novartis sells for $70,000 per year [i]. Earlier last year, the Indian Comptroller of Patents issued India’s first compulsory license on a Bayer cancer medicine, Nexavar, to Natco, thereby shaving the price by 97%.  The Intellectual Property Appellate Board of India affirmed that decision which is now on appeal to the High Court [ii].  On the trade front, India health activists succeeded in convincing the Indian government to reject European demands in EU-India trade negotiations that would have imposed data monopolies and extended the length of patent monopolies [iii].  Fortunately, India is not acting alone; Indonesia also quietly issued compulsory licenses on seven hepatitis and HIV antiretroviral medicines last year [iv], and Argentina recently adopted proactive guidelines to restrain secondary patents on minor modifications to existing medicines[v].   Last summer, the over-reaching Anti-Counterfeiting Trade Agreement was rejected by the generally pro-IP European Parliament [vi] and Europe was forced to reconsider its draconian border measures that had resulted in the seizure of lawful in-transit medicines in the Netherlands and elsewhere [vii].Even the U.S. is reconsidering its willingness to patent isolated genes[viii] while Canada is accelerating its rejection of patents on medicines that fail to make required disclosures, e.g., Pfizer’s Viagra [ix]. 

We could wish that the tide was irreversibly turning against the excesses of patent and data monopolies on medicine that erect ever-higher and stronger exclusivity barriers that price poor people and poor countries from accessing life-saving public goods.  But anyone who thinks that Big Pharma is sitting still and that their allies in European and US trade offices have found a new religion is dangerously wrong.  We’ve know for a decade and a half that Big Pharma and its rich-country trade rep allies have been seeking to ratchet-up longer, stronger, and broader patent and data monopolies in a string of bilateral and plurilateral free trade agreements such as US-CAFTA and EU-Caricom [x].  Those efforts are intensifying in the TRIPS-plus demands that the US and EU are putting forth in current negotiations, e.g., the Trans-Pacific Partnership Agreement [xi] and the EU-India FTA.  In these trade negotiations, the US and EU typically seek patent term extensions, eased standards of patentability, restrictions on patent opposition procedures and patent revocations, data exclusivity [xii], and greatly enhanced enforcement powers in terms of “deterrent” damages, mandatory injunctions, enhanced border enforcement, and expanded criminal enforcement [xiii].  This IP-maximalist agenda is pursued not only in secret free trade agreement negotiations, but through diplomatic pressure, threats of sanctions found in IP/trade assessments (like the U.S. Special 301 Watch List), biased technical assistance and training to IP examiners and judges, and a thorough-going disinformation campaign that casts intellectual property rights as irreducible and irreplaceable, as the only engine for innovation and creativity, and as the prime fount of foreign direct investment, technological advancement, and development more broadly [xiv].

Although access to medicines activists have been wise to focus our attention intently on convincing low- and middle-income countries to adopt and use all possible TRIPS-compliant flexibilities and to oppose the TRIPS-plus IP chapters in free trade agreements, we have neglected to interrogate another chapter in free trade agreements and bilateral investment treaties that perhaps pose an even greater threat to our collective access to medicines – investment chapters.

Under investment chapters, foreign IP investors, like Novartis and Bayer, are recognized as “investors” who have made “investments” involving expenditures and expectations of profit [xv].  Suddenly intellectual property rights, already hugely protected, are given another mantle of protection, namely protections as investments.  In addition, investors are given rights to bring claims for private arbitration directly against governments whenever their expectations of IP-based profits are frustrated by government decisions and policies.   Decisions of these private arbitral tribunals consisting of three international trade lawyers are not subject to judicial review, but are reducible into court judgments that can be levied against government property. 

Using loose and imprecise standards addressing “minimum standards of treatment,” “indirect expropriation,” and “national treatment,” multinational pharmaceuticals might claim that denying patents, granting oppositions, revoking patents, issuing compulsory licenses, and registering generics while referencing clinical data or doing so before patent expiration all violate their legitimate expectations for profit.  Although the “minimum standards of treatment” clause was originally designed to prevent grossly abusive and discriminatory courtroom adjudications totally outside the bounds of normative due process, it has morphed to decisions with a much more lenient standard that rewards investors even when they have been given a full panoply of due process safeguards.  The expropriation standard, originally adopted to deter nationalization of businesses and seizures of real property has similarly morphed to prevent indirect expropriations, what we call regulatory takings in the U.S., where changes in government regulations – many designed to protect public health, environment, and other legitimate public interests – are challenged as having diluted the investor’s expectations of profit.  Finally, the national treatment standard, though originally adopted to ensure that foreign investors are treated equivalently to domestic investors, is also morphing in new directions.

Threats like these with respect to pharmaceutical IPRs used to be theoretical, but the theoretical has now become real.  In November of 2012, Eli Lilly sued the government of Canada for $100 million under NAFTA's investment chapter because Canada invalidated a Bayer patent on a medicine used to treatment attention deficit disorders [xvi].  Courts in Canada, including its Court of Appeals, reviewed the patent in depth as part of an invalidation case initiated by Teva.  The patent was declared invalid pursuant to requirements in Canadian patent law that an applicant must satisfy its “promise of utility” (more commonly called industrial applicability) by disclosing evidence pointing to a claimed benefit as an inventive medicine.  Eli Lilly objected because the promise doctrine had been developed judicially and that it had been clarified only after Bayer had filed its common patent application in the format authorized by the Patent Cooperation Treaty, of which Canada was a member.

Eli Lilly didn't like this ruling, so it is seeking to greatly expand the accepted meanings of minimum standards of treatment, indirect expropriation, and national treatment to argue that Canada should not be able to modify any of its patent standards or even to have a patent standard on utility and disclosure of utility that is any higher than that currently practiced in the US and EU.  It argues further that it should not have to disclose information needed to satisfy patent requirements in Canada that is above and beyond what is required in patent applications filed pursuant to the Patent Cooperation Treaty, even thought the PCT clearly covers procedures for filing patent applications, not substantive requirements of patentability enforced as a sovereign rights by each country.  It is important to note that Eli Lilly is pursuing a patent invalidation claim despite an express provision in the NAFTA investment chapter that purports to exclude NAFTA-compliant patent granting, revocation, and compulsory license decisions from investor dispute resolution [xvii].

If Eli Lilly can file this kind of expansive, topsy-turvy claim in Canada with respect to its decision to revoke a patent, what would prevent Novartis and Bayer from filing comparable claims against India because it too has adopted strong protections against evergreening in section 3(d) of its Patents Act and has allowed compulsory licensing in section 84?  India has international investment agreements with 82 countries and has been subjected to 17 known investor-state claims [xviii].  Although no claims to date have been brought based on pharmaceutical IPRs, these are exactly the kinds of claims that a major international corporate law firm, Jones Day, is urging companies to file under existing investment clauses that India has ill-advisedly entered into [xix].

Novartis and Bayer, and the rest of Big Pharma, are relentless in their search for monopoly rights and monopoly profits.  The right to sue governments directly when their unquenchable thirst for profits is thwarted is a dangerous escalation of corporate power.   These kinds of investor cases are expensive to defend (average cost to governments over $8 million/case) and have cost taxpayers globally nearly $3 billion and counting.  Five hundred and eighteen known investor-state cases have been filed, of which only 244 have been concluded [xx].  The pace of new cases is escalating (62 new cases filed in 2012 alone), as is the rate of investor wins (70% of investors claims decided on the merits in 2012 were favorable to claimants).  When investors win, they can win a lot, like the $1.77 billion, plus compounded interest, costs, and attorney’s fees, awarded to Occidental in its claim against Ecuador.  But even when they don’t win, investors can coerce settlements on favorable terms (approximately 27% of case are settled).  Once the pharmaceutical floodgate is unlocked, the number of claims and taxpayer exposure will expand as well.

India and other trade negotiators should heed the entreaties of trade, IP, and health activists who are warning against the inclusion of an Investment Clause in the EU-India FTA [xxi], the Trans-Pacific Partnership Agreement, and in the many other trade agreements that are underway or soon-to-be initiated.  Preferably, investment chapters will be rejected in their entirety, as they are becoming a corporate sword of Damocles that hangs over the head of rich and poor governments alike.  At the very least, IP should be totally defined out of “investments” and no investor claims whatsoever should be available for alleged frustration of IP-based expectations.  IP right holders already have multiple forms of enforcement including private lawsuits, border seizures, criminal prosecution, and state-state dispute resolution.  Enough is enough.  Expanded and unbound investment rights for Big Pharma under the cover of underscrutinized investment chapters is a grave threat – a threat with deadly consequences to millions of patients who rely on governments’ rights to regulate IPRs and to use any and all TRIPS-compliant flexibilities to ensure affordable access to medicines for all.

[i] Novartis cancer drug patent bid rejected by Indian court in landmark ruling, The Guardian (April 1, 2013). 

[ii] Patent board rules in favour of Natco in cancer drug case; Bayer to challenge decision, CNN-IBN Live (March 5, 2013).  

[iii] India-EU FTA won't hit generic drugs industry: EU envoy, Business Standard (April 13, 2013). 

[iv] Indonesia to override patents for life-saving medicines, IRIN News (March 25, 2013).

[v] Argentina adopts new guidelines to examine patent applications for pharmaceuticals, Don’t trade our lives away (May 31, 2012). 

[vi] European Parliament rejects ACTA piracy treaty, The Telegram (July 4, 2012).

[vii] India Ministry of Commerce and Industry, India EU Reach an Understanding on the Issue of Seizure of Indian Generic Medicines in Transit (July 28, 2011); see Brook K. Baker, Settlement of India/EU WTO Dispute re Seizures of In-Transit Medicines: Why the Proposed EU Border Regulation Isn't Good Enough, PIPIF Research Paper Series (2012). 

[viii] Justices Consider Whether Patents on Genes are Valid, New York Times (April 14, 2013).

[ix] Canada’s Supreme Court strips Viagra Patent from Pfizer, Reuters (Nov. 8, 2012).

[x] Baker, B. and Avafia, T., (2011), The Evolution of IPRs from Humble Beginnings to the Modern Day TRIPS-plus Era: Implications for Treatment Access.  Working Paper prepared for the Third Meeting of the Technical Advisory Group of the Global Commission on HIV and the Law, 7-9 July 2011. 

[xi] Sean M. Flynn, Brook Baker, Margot Kaminski & Jimmy Koo, The U.S. Proposal for an Intellectual Property Chapter in the Trans-Pacific Partnership Agreement, 28 Am. U. Int’l L. Rev. 105, 149-184 (2012).

[xii] Id.

[xiii] Id. at 183-200.

[xiv] Brook K. Baker, Debunking IP for Development:  Africa Needs IP Space, Not IP Shackles (draft 2013).

[xv] Trans-Pacific Partnership, Intellectual Property Rights Chapter September 2011 Draft (Selected Provisions), available at http://www.citizenstrade.org/ctc/wp-content/uploads/2011/10/TransPacificIP1.pdf.  See Brook K. Baker, Corporate Power Unbound:  Investor-State Arbitration of IP Monopolies – Eli Lilly and the TPP (draft 2013).

[xvi] The investor-state claim is Eli Lilly and Company v. The Government of Canada, Notice of Intent to Submit a Claim to Arbitration under NAFTA (Nov. 7, 2012), available athttp://italaw.com/sites/default/files/case-documents/italaw1172.pdf.  See Public Citizen, U.S. Pharmaceutical Corporation Uses NAFTA Foreign Investor Privileges Regime to Attack Canada’s Patent Policy, Demand $100 Million for Invalidation of a Patent (2013). 

[xvii] NAFTA, Article 1110(7).

[xviii] Biswajit Dhar, Reji Joseph & T.C. James, India’s Bilateral Investment Agreements:  Time to Review, 52 Economic & Political Weekly 113-122 (2012).

[xix] Jones Day Commentary, “Treaty Protection for Global Patents:  A Response to a Growing Problem for Multinational Pharmaceutical Companies,” 3 (October 2012).

[xx] UNCTAD, Recent Developments in Investor-State Dispute Resolution (2013).

[xxi] Does the EU/India free trade agreement spell the end of cheap drugs for poor countries?, The Guardian (February 10, 2013).

*Brook K. Baker is a law professor at Northeastern University School of Law (US) and an affiliate of its Program on Human Rights and the Global Economy. He is also an honorary research fellow at the University of KwaZulu Natal, Faculty of Law, South Africa. He is a policy analyst for Health GAP (Global Access Project) and writes frequently on IP, trade, and access to medicines issues.

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By Brook Baker, Senior Policy Analyst

The stunning reaffirmation of India's commitment to prevent evergreening of patent monopolies on medicines has been widely celebrated following the India Supreme Court's decision upholding the rejection of a secondary patent on Novartis' cancer medicine, Glivec.  It is widely hoped that the willingness of Indian courts to fairly review and limit patent monopolies on medicines, as they are expressly allowed to do under the WTO TRIPS Agreement, will be repeated in the pending court review of India's first compulsory license to Natco on a Bayer cancer medicine, Nexavar.  

However, India's efforts to preserve policy space so as to ensure access to medicines for all, both in India and in developing countries more broadly, is under threat because of an obscure provision that the EU is seeking in its pending trade negotiations with India.  Under the so-called investment clause, foreign IP investors, like Novartis and Bayer, will be given rights to sue the Indian government directly whenever their expectations of profit are frustrated by government decisions and policies.  Using loose standards like minimum standards of treatment, indirect expropriation, and national treatment, transnational corporations will be able claim that denying patents, granting oppositions, revoking patents, issuing compulsory licenses, and registering generics before patent expiration all violate their expectations for profit.

Threats like this used to be theoretical, but the theoretical has now become real.  In November of 2012, Eli Lilly sued the government of Canada for $100 million under NAFTA's investment chapter because Canada had invalidated a patent on a medicine used to treatment attention deficit disorders.  The patent was invalidated pursuant to requirements in Canadian patent law that an applicant must satisfy the promise of utility (in India called industrial applicability) by disclosing evidence pointing to a claimed benefit of the medical innovation.  

Eli Lilly didn't like this ruling, so it is seeking to greatly expand the accepted meanings of minimum standards of treatment, indirect expropriation, and national treatment to argue that Canada should not be able to have a patent standard on utility and disclosure of utility that is any higher than that currently practiced in the US and EU.  It argues further that it should not have to disclose information needed to satisfy patent requirements in Canada that is above and beyond what is required in clearinghouse, patent application forms filed pursuant to the Patent Cooperation Treaty.

If Eli Lilly can file this kind of expansive, topsy-turvy claim in Canada with respect to its decision to revoke a patent, what would prevent Novartis and Bayer to file claims against India because it has adopted strong protections against evergreening in section 3(d) of its Patents Act and allowed compulsory licensing in section 84?  In fact, these are exactly the kinds of claims that a major international corporate law firm, Jones Day, is urging companies to file under existing investment clauses that India has ill-advisedly entered into.

Novartis and Bayer, and the rest of Big Pharma, are relentless in their search for monopoly rights and monopoly profits.  The right to sue governments directly when their unquenchable thirst for profits is thwarted is a dangerous escalation of corporate power.  These kinds of cases are expansive to defend (average cost to governments over $8 million/case) and have cost taxpayers globally nearly $3 billion and counting.  Four hundred investor-state cases are currently pending, and pharmaceutical claims, once the floodgates are unlocked, will expand that number.

Indian trade negotiators should heed the demands of trade activists who are warning against the inclusion of an Investment Clause in the EU-India FTA, and particularly the right to bring such cases with respect to alleged IP infringements where the risk of expanded monopolies and reduced access has deadly consequences. 

Promoting health, development, education, and environmental consideration 

Download the Fact Sheet

Read the Letter from 375 Civil Society Groups (or here for French)

Haiti recently submitted, on behalf of the Least Developed Country (LDC) members of the World Trade Organization (WTO), a request to extend the transition period for LDCs to implement the Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement.The TRIPS Agreement sets out minimum standards for intellectual property (IP) protection and enforcement that all WTO Members must implement in their national laws. When it was signed TRIPS granted transition periods for both developing and Least Developed Countries.  LDCs initial transition period was to have expired in 2005, but an extension was granted in 2005 until June 30, 2013.  The Haiti proposal would simply extend this transition period until countries “graduate” from LDC status—a proposal the TRIPS Council is obliged to pass according to WTO rules.

The “Least Developed Country” Category

 LDCs are the most impoverished and economically vulnerable countries—officially classified by the United Nations based on three factors: lowest income (GNI $ 1,190 per capita); poor human development indicators of nutrition, health, and literacy; and economic vulnerability.  LDCs include countries such as Haiti, Bangladesh, and Zambia. While they comprise 880 million people, one eighth of the world’s population, they subsist on 0.9% of the world total GDP.  The transition period in the TRIPS Agreement was to protect LDCs in need of increased assistance, investment, and technology transfer from the burdens of granting and enforcing IP monopolies in order to enable them to “graduate” (as Botswana and Cape Verde have); the global goal is for at least half of LDCs to graduate in the next 10 years.

TRIPS & LDCs

The adoption of Intellectual Property Rules (IPRs) by developing countries means that they are no longer free to make use of technologies developed in wealthy countries without the permission of right holders. Nevertheless, developing countries were convinced to join the WTO because they were promised “special and differential treatment” that included increased investment and technology transfer from rich countries to LDCs under TRIPS. Article 66.1 of TRIPS provided for an initial ten-year extendable timeframe for them to implement TRIPS. It further provided that LDCs would be accorded extensions to this original transition period upon a “duly motivated request.” Article 66.2 requires rich countries to support LDCs in obtaining technologies they need for development and economic growth—an obligation that most observers say has not been met.

In 2002, the LDCs were granted an extended waiver based on the “Doha Declaration on TRIPS and Public Health” saying they were not obliged to implement or to enforce patents and test data for pharmaceutical products until January 2016. Recognizing that LDCs were still likely to be negatively impacted by the full scope of TRIPS, a waiver for the full TRIPS agreement was granted in 2005 that extends throughJune 2013.  If it is not extended, LDCs will be under an immediate obligation to implement TRIPS (pharmaceuticals in a few years). The short term and long-term impacts of such an obligation would be harmful to development.

The New LDC Request

LDCs submitted a proposal at the November 2012 TRIPS Council meeting, requesting that all LDCs be provided with a full waiver on TRIPS implementation until they graduate from the LDC status. This would include giving LDCs the right to eliminate any IP provisions that had already been implemented, which is important for countries that find that old IP rules—some dating from the colonial era—are inhibiting development. If agreed, the proposal would also extend the waiver issued to LDCs with regard to pharmaceutical-related provisions.

Wealthy countries have not taken a public position on the LDC request, though there are signs that certain developed countries will refuse to agree with the LDC request or may require onerous conditions, limited timeframe, etc.. In March 2013, the TRIPS Council will meet to take up the LDC group proposal. Civil society groups from across the world including Oxfam, Health GAP, Doctors Without Borders, Knowledge Ecology Intl., Public Citizen, and Third World Network have called on WTO Members to approve the LDC request in its current form.

KEY ISSUES AT STAKE

Access to affordable medicines.  LDCs, by definition, face substantial health problems—often high rates of HIV and malaria, weak health systems, and massively insufficient health budgets. Implementation of TRIPS IP rules, as well as of rules that exceed TRIPS (“TRIPS-plus”) drives up the price of medicines by allowing key medicines to be patented—putting life-saving technology out of the reach of patients and national health programs. IP rules could also undermine nascent industries in LDCs. Some LDCs are working with foreign partners to upgrade their domestic pharmaceutical capacities; in Bangladesh and Uganda, for example, the Indian generics firm Cipla has set up manufacturing facilities for quality, low-cost medicines that could be used domestically, or exported to other developing countries. Such activities could be interrupted if patents can be filed in those countries.

Access to educational resources.  Although the need for affordable medicines is well known globally, LDCs also need access to other important public goods and technologies that are frequently blocked by IP.  For example, students in LDCs need access to affordable educational resources and such access is routinely blocked by copyrights owned by textbook publishers.  Similarly, LDC researchers need access to the latest scientific information to adapt new technologies and to pioneer innovations meeting unmet local needs. Software, textbooks, and academic journals are key items where copyright is a determining factor in pricing and access. For instance, a reasonable selection of academic journals is far beyond the purchasing budgets of university libraries in most LDCs.

Access to agricultural goods. The rights of small-scale farmers that dominate LDCs agriculture system can also be hampered as IP can hinder their traditional farming practices by preventing free exchange and use of protected seeds and varieties. IP systems for plant variety protection can also hinder access to affordable agricultural inputs, increase erosion of agro-biodiversity, which in turn affects food security.   

Access to Green Technology. Many of the break-through green technologies that are energy-saving and that control or mitigate climate change are unavailable in LDCs. Further, many of them are not adapted for use in low-resource and tropical settings and patents will stand in the way of local companies and non-profits adapting them where they’re needed most.  For LDCs to be able to deal with the climate challenges effectively, they will need prompt access to affordable technologies, which requires policy space to overcome IP barriers.

TRIPS hinders development in the case of LDCs. Many economists have documented how pushing LDCs to adopt TRIPS is unlikely to support development—indeed today’s wealthy countries largely built their technological capacity by copying and experimenting with proprietary technologies dev

eloped elsewhere without the barrier of overly broad IPRs. In order for IP regimes to have any role in stimulating investment and R&D, a technological and knowledge base must first be built and there must be a functioning market. Such conditions do not yet exist in most LDCs. LDCs should have policy space to access to the same path to development that was previously used by rich countries including the U.S.

Don’t LDCs already have IP systems? Many LDCs have implemented parts of the TRIPS agreement voluntarily—some as a simple legacy of colonial-era laws and others through conscious choice. Under the exception LDCs remain free to adopt whatever IP provisions they find them appropriate. But LDCs should not be forced to adopt the whole TRIPS system immediately—they need the space to prioritize development. LDCs should also not be forced to keep in place any existing laws that prove to be a barrier to development—which wealthy countries have demanded in the past in exchange for the 2006-2013 extension.

Instituting TRIPS-compliant IP systems would be very expensive for LDCs. TRIPS implementation costs countries an initial outlay of anywhere between USD 250K and USD 1m, plus annual expenditures of as much as USD 1m.[1] LDCs should be directing their scarce economic resources towards more pressing regulatory and other essential needs. For example, LDCs could achieve a greater return on their spending by directing resources towards improvement of the regulatory systems that ensure medicine quality and safety, or the education system.

by Professor Brook K. Baker, Senior Policy Analyst

Janssen Pharmaceutical Company, an affiliate of Johnson & Johnson, has just announced its intent "not to enforce its patent for quality, medically acceptable generic versions" of its protease inhibitor, darunavir (brandname Prezista) for sales in sub-Saharan Africa and in UN-defined Least Developed Countries.  That restriction gives this so-called "non-assert" commitment a geographical scope of just 64 countries. 

Janssen's publicity release is intended to give it a reputational boost on the eve of World AIDS Day, but there are multiple deficiencies and ambiguities in its announcement.  Although any increased access to generic darunavir of assured quality is desirable, Janssen has given far less than what is required:

1. The geographical scope is woefully inadequate because it excludes treatment-experienced patients in all non-African middle-income countries who are much more likely to need second- and third-line medicines – like darunavir – because they've developed treatment resistance to other regimens over time.  The vast majority of patients in developing countries who are treatment experienced and who need second- and third-line regimens live in middle-income countries in Latin America and Southeast Asia where patients first had government supported access to treatment, e.g., Brazil and Thailand.  Excluding these middle-income countries not only leaves poor patients in middle-income countries subject to the pricing whims of Janssen, but it also shrinks the market of darunavir-eligible patients.  Accordingly, the resulting consumer demand will be too small to incentivize robust generic competition and economies-of-scale will be much slower to develop – resulting in higher prices and fewer sources even in the covered territories.
   
   
2. The "generosity" of the geographical scope is misleading, because it appears that Janssen has no patent claims whatsoever in the vast majority of countries covered by the non-assert commitment.  A search of the Medicines Patent Pool patent database reveals a patent for a darunavir pseudopolymorph in ARIPO (Botswana, Gambia, Ghana, Kenya, Lesotho, Malawi, Mozambique, Sierra Leone, Sudan, Swaziland, Uganda, United Republic of Tanzania, Zambia and Zimbabwe) and in South Africa only.  Of course, there may be additional patents that have been filed, but to date Janssen, like virtually every other Big Pharma company has been unwilling to publicly disclose their existing patent landscape in developing countries, making it very hard to generic competitors, governments, or other interested parties to ascertain patent status.
   
   
3. The prices currently charged in excluded, non-African middle-income countries can be quite outrageous.  According to MSF and Global Fund data available at http://www.theglobalfund.org/en/procurement/pqr/,  prices being paid by some excluded countries are as follows:
   Brazil:  USD 6,037 ppy
   Georgia: USD 8468 ppy
   Moldova: USD 9187 ppy
   Jamaica: USD 6570 ppy
   West Bank and Gaza: USD 5900 ppy
   Thailand: USD 4854 ppy 
   Of course, these prices are for one component of triple-therapy only, so the aggregate cost of a full second- or third-line regimen in these countries could be many times higher.
   
   
4. Janssen has not clarified whether the non-assert commitment is absolute and for the duration of any relevant patent claim or whether the commitment could be revoked.  In press coverage on the commitment, Janssen has already indicated that there are circumstances where it would assert its patent rights if - in its unilateral judgment - darunavir was being produced in sub-optimal formulations or dosages.  This would leave little incentive for generic companies to try to optimize chemical form, formulations or dosages since the rug could be pulled out from under it both with respect to the original investments needed to produce darunavir at all and with respect to the additional expenses incurred to "optimize" the medicine.
   
   
5. Janssen has not clarified whether it will permit co-formulation with other medicines, though as a protease inhibitor darunavir needs to be combined with a protease booster such as ritonavir.  In addition, darunavir should, if possible, be co-formulated with the other medicines to produce a fully potent fixed-dose combination.
   
   
6. Janssen has not clarified where the darunavir for covered countries can be lawfully produced.  There is a weak and opposed divisional claim for a combination with ritonavir in India and Janssen is pursuing an appeal of a denial of its patent for darunavir as a stand alone product.  Thus it is not completely clear in the long run that India companies could produce a darunavir standalone or a ritonavir/darunavir combo for export to SSA and LDCs.  Since the major generics of assured quality ARVs are India-based, it would be highly desirable if all generics producers of assured quality, including Indian, were permitted to produce for export.
   
   
7. Janssen has not taken adequate steps to ensure registration of darunavir in the covered territories despite ample time to do so.  The absence of such pre-existing registration negatively impact the cost, timeliness, and ease of registering a generic equivalent.  Many of the covered territories will allow fast-track registration of generic equivalents, but only if the originator's dossier has already been approved.  In the same vein, Janssen has failed to clarify whether it will assist in the generic registration process, and whether it will waive any data rights or patent-registration linkage rights in may have in any of the covered territories.
   
   
8. Janssen has not clarified what if any restrictions it might place on "qualified" generics, e.g., with respect to their right to oppose patent applications or challenge granted patents or to be licensees of compulsory licenses granted in non-territories.  There may well be other non-disclosed terms that are problematic.

The ideal voluntary license is one that is open to all qualified generic producers and has a territorial reach of all developing countries.  The closest to that ideal at present is the Medicines Patent Pool, which has the added advantage of transparency about licenses and efficiency in acting as a clearinghouse for multiple licenses on diverse products.  However, for the second time, Johnson & Johnson has tried to cover its tracks in boycotting the MPP by saying "we feel better doing it alone."  Indeed, J&J has stepped back from its earlier 2011 voluntary license because the geographical scope on this second commitment is smaller than what it promised a year ago for rilpirivine.   

In sum, the limitations on the Johnson & Johnson/Janssen non-assert commitment make it a gift box without the gift on the even of World AIDS Day.  Yes, over the long haul, as demand in the covered territories builds, a viable generic market may slowly develop and generic companies may get through the arduous registration process unassisted.  But, many other patients in middle-income countries and in underserved SSA and LD countries will go without the life-enhancing and life-saving benefits of darunavir in the meantime.  Scarce resources will be wasted on overpriced brandname Prezista or patients will go without.  This frankly is not good enough.