Drug Spat Strains Global Trade System

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by Elizabeth H. Williams

Originally published in Asia Times Online, May 24, 2007

The current dispute over Thailand and Brazil licensing generic versions of patented medicines severely tests global health and health-care-access policy. It also tests key US trade relations with Asia and the functionality of the global trade system itself. So far, the results aren't encouraging, and meanwhile the issue is getting larger and more complex.

A functional patent system would strike a judicious balance between the interests of drug companies, whose patents compensate them for large investments required to develop lifesaving medicines, and the imperative to make them available to the world's poor. Instead, today we have a dysfunctional battle between pharmaceutical giants and governments of developing countries, each side claiming to champion the world's health needs and accusing the other of exploitation.

The Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) allows developing World Trade Organization (WTO) member countries to issue compulsory licenses for patented drugs and other innovations so they can be manufactured generically and sold at affordable prices in the service of compelling public-health interests.

Thailand recently issued compulsory licenses for second-line HIV (human immunodeficiency virus, which causes AIDS) medications (used when resistance develops to first-line medicines), including Aluvia, made by Abbott, originally priced at US$2,200 per patient annually—expensive for most Americans, and considerably more than most Thais earn in a year.

Since Thailand's announcement, Abbott withdrew seven medicines from the Thai market and threatened not to introduce new ones. The pharmaceutical lobbying group, USA for Innovation, attacked, calling on the US Trade Representative to brand Thailand an intellectual-property "violator."

The US has sent mixed signals, putting Thailand on its so-called Priority Watch List for violating intellectual-property rights, while acknowledging that its compulsory-licensing decision was legal. Then it backtracked, denying its decision had anything to do with Thailand's decision to produce generic drugs under a compulsory-licensing arrangement. Then it said compulsory licensing was one factor among others.

But leaders of non-governmental and faith-based organizations, from former US president Bill Clinton to former Thai senator John Ungphakorn of the AIDS Access Foundation to Asian church groups, have all been clear in their strong endorsement of Thailand's and Brazil's licensing decisions, arguing that while no pharmaceutical company's life depends on drug prices in the developing world, many patients' lives do.For its part, the Thai government says it simply wants to negotiate a deal with the patent holders to sell HIV drugs at prices ordinary citizens can afford.

"We tried to negotiate with them officially for more than two years and unofficially for more than four years," but it has never been successful, said Thai Public Health Minister Mongkol Na Songkhla in a recent online interview at the Asia Society. "No company or patent holder wants to talk about lowering the price or sharing a drug with poor people."

Most recently, as the issue reverberated in the headlines and at the World Health Organization (WHO) meeting in Geneva, Abbott and Thailand did negotiate, though unsuccessfully. Thailand repeated its offer to refrain from compulsory licensing if the patent holders lower prices to generic levels. Abbott reduced Aluvia's price to $1,000 per patient annually, still above Thailand's generic price of $695 and out of range of a deal.

If fighting over that $300 difference while lives hang in the balance seems petty, it may also be a sign that the two sides are not so far apart this time. Yet the issue is much bigger than one HIV drug in one country. Cancer, heart disease, diabetes and other chronic illnesses loom large throughout the developing world, and so does the issue of access to medication to treat them.

Brazil and Thailand announced at the Geneva WHO meeting that they will cooperate on health care, a sign that as their drug needs grow, developing countries could organize and exert collective power on pricing and generic licensing.

The growing conflict particularly hurts trade relations with the United States, where most advanced drug research and development are located, and Asia, where most of the generic manufacturing is located. Investors know AIDS, severe acute respiratory syndrome, avian influenza and other diseases may threaten Asia's emerging economies, so drug-access disputes in Asia also hurt their interests. But trade issues aside, isn't equitable drug access a human right?

Neither the flawed patent system nor the disputed TRIPS agreement can adjudicate these complex issues adequately. Thailand, Brazil and others may bring the pharmaceutical companies to the table by invoking TRIPS compulsory-licensing and other provisions, but may not reach equitable compromises on pricing without more help.

It's time for Group of Eight governments to get involved. They can re-engage TRIPS, reaffirm WTO intellectual-property rules, and stop pressuring developing countries into trade agreements that destabilize them. Renewed leadership and creative thinking could strike an equitable balance between the interests of patent holders and the interests of global health and human rights. Meanwhile, they remain on a collision course.

Elizabeth H. Williams is the acting director of the Asia Society's Initiative on HIV/AIDS and Global Health.