Canada and the Decision on Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreem

1
Canada and the Decision on Implementation of
Paragraph 6 of the Doha Declaration on the TRIPS
Agreement and Public Health

• Frederick M. Abbott
• presented at
• The North-South Institute LInstitut Nord-Sud
• Meeting at Parliament Hill
• Ottawa
• October 21, 2003

2

• Responding to the announcement by Canadian
  Ministers of their intention to seek amendment of
  the Patent Act to authorize exports under
  compulsory license to developing countries
• It will be a negative black eye for Canada
  that will very well affect the investment
  climate.
  
• Harvey Bale, Director-General, International
  Federation of Pharmaceutical Manufacturers
  Associations
  
• Globe and Mail, September 27, 2003

3
Canada and Pharmaceuticals

• Few countries have paid closer attention to the
  role of patents in the pricing of
  pharmaceuticals, or to the systemic impact of
  such pricing on the national health care system
  than Canada.
• As a consequence of U.S. pharmaceutical industry
  pressure given effect through USTR, Canada
  substantially re-engineered its patent and
  compulsory licensing system during late 1980s and
  early 1990s. (See Reichman and Hasenzahl,
  Non-Voluntary Licensing of Patented Inventions
  The Canadian Experience, UNCTAD-ICTSD (2002)).
• Canadas Patented Medicine Prices Review Board
  (PMPRB) is granted power to make findings of
  excessive pricing and to order price reductions
  and penalties (Canada, Patent Act, section 79 et
  seq.) The PMPRB effectively performs one of
  principal functions of compulsory licensing
  legislation, which is to provide continuous
  background against which prices are set by patent
  holders, under threat of remedial action.

4
Canadas Experience with Patented and Generic
Pharmaceuticals

• November 2002 Study of the Prices of the Top
  Selling Multiple Source Medicines in Canada,
  prepared by the PMPRB
  
• Generic drugs are ordinarily introduced at a
  lower price than the brand name equivalent and
  consequently their availability may introduce
  competition in the market for that medicine which
  can play an important role in helping to contain
  increasing healthcare costs. Total sales of
  generic manufacturers are estimated at
  approximately 929 million in 2000, an increase
  of 15 from 1999. According to the Canadian
  Generic Pharmaceutical Association, generic drugs
  have represented approximately 40 of
  prescriptions filled in Canada since 1996, up
  from 26 in 1990. This increase no doubt
  reflects, at least in part, the policies of most
  public drug plans to promote and encourage the
  use of generic drugs wherever possible. (at
  pages 7-8)

5
Canadas Experience with Patented and Generic
Pharmaceuticals

• The study goes on, consistent with WHO findings,
  to indicate the importance not only of the
  presence of generic producers, but to the market
  entry of multiple generic producers in reducing
  medicines prices and public health expenditures.
  From the Highlights
• The spread between generic and equivalent brand
  name drug prices varied depending on the number
  of generic versions of the drug available. On
  average, the spread increased from about 25 when
  there were one to three generic versions
  available on the market to 45 when there were
  four or five generic sources. (at page 2)
• Canada is one of the countries that least needs
  persuading of the importance of reducing the
  impact of patents on the prices of medicines in
  developing countries. It is absolutely urgent
  that immediate steps be taken to increase the
  supply of medicines used in treating HIV/AIDS,
  but (a) treating HIV/AIDS means much more than
  providing antiretroviral treatment, and (b) the
  medicines problem in developing countries is far
  broader and deeper than HIV/AIDS. In keeping with
  the letter and spirit of the Doha Declaration and
  the Decision on Implementation of Paragraph 6,
  there should be no built-in limitation regarding
  the diseases that may be addressed. The Decision
  on Implementation was closely and intensively
  negotiated to avoid such restriction (as
  evidenced by the negotiating record further
  discussed here), with the result that Canada and
  other WTO Members are able to authorize medicines
  exports to combat all disease burdens.

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Canadas R D Experience What is Canada
Bargaining with IFPMA For?

• PMPRB Performance Report for period ended March
  31, 2002 indicates
  
• Expenditures on basic research increased
  2.5 in 2001, but its share of total RD
  continued to decline from 17.8 in 2000 to 16.1
  in 2001. This is the lowest proportion of total
  RD spending on basic research ever reported by
  patentees since the Board began reporting such
  information in 1988.
• The lions share of RD spending continued to be
  on applied research, 604.8 million, or 59 of
  the total. Applied research is directed towards
  some practical application, comprising the
  manufacturing process, preclinical trials and
  clinical trials. Clinical trials totalled 445.8
  million in 2001 and accounted for 73.7 of total
  applied research expenditures and 44.1 of total
  current RD expenditures. (emphasis added)
• Clinical trials involve submitting Canadian
  residents to testing of medicines.

7
Canadas Role in Doha and Paragraph 6 Negotiations

• Announcement of support for Stephen Lewis
  proposal a very welcome development, but triggers
  some apprehension regarding where internal
  discussions would lead.
• Throughout Doha process and Paragraph 6
  implementation negotiations Canada supported U.S.
  efforts to limit flexibility of developing
  countries in implementation of TRIPS Agreement
  patent rules. Canada was part of U.S.-likeminded
  Group of 5 in pre-Doha negotiations (United
  States, Australia, Canada, Japan and
  Switzerland).
• Although not joining U.S. veto of 16 December
  text, Canada formally and informally promoted
  developing country acceptance of U.S. proposals
  to limit Paragraph 6 solution.
• As with European Union, Canada appears to have
  divided view of pharmaceuticals policy.
  Aggressive internal controls designed to limit
  pricing power of patent holders, with external
  policy aimed at protecting patent rents from
  developing countries.

8
Genesis of Paragraph 6 Negotiations

• Problem of conjoined expiration of TRIPS
  Agreement transition period for pharmaceutical
  patents and Article 31(f) compulsory licensing
  limitation recognized by developing WTO Members
  well before Doha Ministerial.
• As of January 1, 2005, world supply of off-patent
  (generic medicines) will substantially contract
  as mailbox applications processed and new
  medicines under WTO-wide patent.
• For compulsory license issued under Article 31,
  TRIPS Agreement, (f) any such use shall be
  authorized predominantly for the supply of the
  domestic market of the Member authorizing such
  use
• Compulsory licenses serve dual function of (a)
  permitting production or importation of products
  under patent (b) providing leverage in price
  negotiations as background possibility, or
  explicit lever (as in U.S.-Bayer/Canada-Bayer
  cipro negotiations or Brazil-Roche ARV
  negotiations).

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Pre-Doha Developing Member Text of 12 September
2001

• 5. A compulsory license issued by a Member may
  be given effect by another Member. Such other
  Member may authorize a supplier within its
  territory to make and export the product covered
  by the license predominantly for the supply of
  the domestic market of the Member granting the
  license. Production and export under these
  conditions do not infringe the rights of the
  patent holder.
• 7. Under Article 30 of the TRIPS Agreement,
  Members may, among others, authorize the
  production and export of medicines by persons
  other than holders of patents on those medicines
  to address public health needs in importing
  Members.

10
Ministers in Doha Put Off Resolution of Problem
Set in Paragraph 6 of Ministerial Declaration (14
November 2001)

• 6. We recognize that WTO Members with
  insufficient or no manufacturing capacities in
  the pharmaceutical sector could face difficulties
  in making effective use of compulsory licensing
  under the TRIPS Agreement. We instruct the
  Council for TRIPS to find an expeditious solution
  to this problem and to report to the General
  Council before the end of 2002.

11
Adoption of the Solution

• The Decision on Implementation of Paragraph 6 was
  adopted by consensus vote of the Members of the
  WTO at a meeting of the General Council on 30
  August 2003. It was accompanied by a Statement of
  the Chairperson of the General Council setting
  out certain shared understandings of the
  Members.
• The Decision is in the form of a waiver
  applicable to Article 31(f) and (h) of the TRIPS
  Agreement regarding compulsory licensing. It is
  without prejudice to other rights, obligations
  and flexibilities under the TRIPS Agreement. It
  provides for further negotiations toward the
  adoption of an amendment to the TRIPS Agreement
  based, where appropriate, on the Decision.

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Welcomed as Milestone Achievement of WTO

• WTO Director General Supachai
• This is a historic agreement for the WTO
  allowing poorer countries to make full use of the
  flexibilities in the WTOs intellectual property
  rules ... proving once and for all that the
  organisation can handle humanitarian as well as
  trade concerns.
• European Union Commissioner for Trade Pascal
  Lamy
  
• The deal on access to medicines is vital if
  we are to show that the WTO and the multilateral
  system is not just about mindless liberalisation,
  or kow-towing to globalisation. Of course, we
  have much more work to do to ensure delivery in
  practice, on the ground. But the deal, however
  long we waited for it, shows that the WTO can and
  will put people before markets.
• Ambassador to the WTO Linnet Deily of the United
  States
  
• The decision will ensure that patent rules do
  not prevent a country that lacks capacity to
  produce medicines for itself from obtaining them
  from abroad.

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Elements of the Solution

• Applies broadly to pharmaceutical products,
  meaning any patented product, or product
  manufactured through a patented process, of the
  pharmaceutical sector needed to address the
  public health problems as recognized in paragraph
  1 of the Declaration. It is understood that
  active ingredients necessary for its manufacture
  and diagnostic kits needed for its use would be
  included.
• Establishes procedures for importing and
  exporting Members making use of the system

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Importing Members

• One time notification to TRIPS Council of
  intention to use (may notify intent to use in
  whole or a limited way). Notification may be
  modified at any time
• When using system, notify TRIPS Council of names
  and expected quantities of product(s) needed
  
• Establish insufficient or no capacity in the
  pharmaceutical sector for the product(s) in
  question in one of the ways set out in an Annex
  
• Least developed countries automatically included
• Other countries self-determine that they have no
  capacity or, where some capacity, self-determine
  that capacity is currently insufficient to meet
  their needs
• If product under local patent, indicate intention
  to grant compulsory license (except least
  developed countries that may rely on right not to
  enforce pharmaceutical patents at least until
  2016). When compulsory license issued,
  remuneration obligation waived (paid in exporting
  Member)
• Take reasonable and proportional measures to
  prevent diversion
  

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Exporting Members

• Issue compulsory license within prescribed
  conditions
  
• Production limited to needs of importing
  Member(s) and exported to that Member(s)
  
• Products identified as produced under the system
• Post on website information identifying
  product(s) and distinguishing features
  
• Notify TRIPS Council of license and terms
• Provide for remuneration to patent holder taking
  into account the economic value to the importing
  Member of the use that has been authorized in the
  exporting Member
• Additional flexibility for certain regional
  arrangements
  
• Otherwise comply with provisions of Article 31 of
  TRIPS Agreement (not subject to waiver)
  

16
Paragraph 6 Negotiations Involve Limited Problem
Set

• Negotiations are NOT about whether WTO Members
  may issue compulsory licenses for production or
  import of medicines. Article 31, TRIPS
  Agreement, allows compulsory licensing on any
  grounds, establishing certain procedural and
  substantive requirements that vary in context.
• Paragraph 6 negotiations ONLY concern the LIMITED
  case of Members wishing to export predominant
  part of production under compulsory license (CL),
  which itself may not be a common phenomenon
  (because major suppliers, e.g., Brazil, China,
  Egypt, India, etc. may have substantial local
  requirements). If a predominant part of CL supply
  is furnished for domestic supply, the Paragraph 6
  solution would NOT APPLY. Article 31, TRIPS
  Agreement would apply without subparagraph (f)
  effect.

17
June 2002 Submissions

• In connection with June 25-27 TRIPS Council
  meeting position papers submitted by various
  constituencies
  
• African Group, Brazil et al, Egypt, EC, UAE and
  U.S.
  
• Coverage range of options
• African Group sought comprehensive solution
  across range of issues and mechanisms
  
• Brazil on behalf of Bolivia, Brazil, Cuba, China,
  Dominican Republic, Ecuador, India, Indonesia,
  Pakistan, Peru, Sri Lanka, Thailand and Venezuela
  focused on Article 30 mechanism
• Egypt identified problem set and potential
  solutions
  
• EC proposed amendment of Article 31(f) with
  multiple conditions, including preferences for
  patent holders and extensive safeguards
  
• UAE identified problem set and potential
  solutions, appearing to favor Article 30
  
• U.S. suggests moratorium or waiver with
  limitations and conditions (beneficiary
  countries, supplying countries, patent holder
  preferences, safeguards, etc.) . At this stage
  does not suggest scope of diseases limitation,
  but does reference Paragraph 1 of Doha
  Declaration.

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Norway MeetingJuly 20-23, 2002

• Sponsored by Norway Government and Quaker United
  Nations Office (Geneva)
  
• TRIPS Council Delegates (including Chair), WTO
  Secretariat, WHO, NGOs, Pharmaceutical Industry,
  Academics
  
• Constructive dialogue though within confines of
  government positions.
  
• Summary of meeting and legal options papers at
  http//www.quno.org
  

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Scope of Diseases at Norway

• EC-US promote theory that Paragraph 1 of Doha
  Declaration intended to limit scope of diseases
  covered by Paragraph 6
  
• Serious objections
• Negotiators and Ministers rejected explicit
  attempts to restrict Doha Declaration to
  pandemics, HIV/AIDS, malaria and tuberculosis.
  Broad reference to public health adopted
• Central agreement of Ministers, Paragraph 4,
  refers broadly to protection of public health and
  access to medicines for all
  
• Paragraph 5 recognizes right to grant compulsory
  licenses and the freedom to determine the
  grounds upon which such licences are granted
  
• Paragraph 6 addresses manufacturing capacity for
  products in the pharmaceutical sector. No
  reference to disease scope.

20
Chairmans Note of 17 October 2002

• Takes developing Members by surprise because of
  lack of consensus on approach in TRIPS Council
  
• Negotiations increasingly moving toward small
  group consultation, frustrating many Members not
  considered sufficiently important by
  Secretariat
• Small group process favors EC and U.S. because
  these Members do not share developing Member
  problem of intra-group coordination
  
• System is non-transparent even within hallways of
  WTO
  
• Secretariat gradually segregates importing
  beneficiaries, focusing on Africa, and potential
  exporters, focusing on Brazil and India
  
• Substantively text includes significant
  proportion of elements advocated by EC-U.S.
  including suggestions regarding limitations on
  potential importers and exporters
• Scope of diseases proposal troublesome on textual
  grounds (use of referred to in paragraph 1 of
  the Doha Declaration) and issue of diagnostics
  left open
• Legal mechanism left open
• Regional trade arrangements begin to be
  addressed
  

21
Pre-Sydney

• Developing Members focus on finalizing common
  substantive position African Group continues
  work on additional paper
  
• Urgency of Sydney preparations, publication in
  Inside U.S. Trade (Oct. 25) and development of
  EC proposal results in submission by South Africa
  with indications of support.
• 4. Scope of diseases Paragraph 1 of the
  Declaration does not in any manner qualify
  "public health" in paragraph 4 neither does it
  limit the scope of diseases that may be addressed
  when finding an expeditious solution to the
  problem referred to in paragraph 6. There must
  therefore be no a priori exclusions regarding
  diseases that may be addressed by importing and
  exporting Members or the products in the
  pharmaceutical sector used to address public
  health. It is neither practicable nor desirable
  to predict the pharmaceutical product needs of
  Members desiring to protect the public health by
  promoting access to medicines for all.

22
Pre-Sydney

• EC circulates proposal highly objectionable to
  developing Members across range of issues,
  including country coverage, methods of
  determining capacity and safeguards. On scope of
  diseases proposes
• The solution will apply to Cases where the
  gravity of public health problems afflict
  developing countries, especially those resulting
  from
• EC proposal was vague. Developing Members noted
  that disease burdens do not divide themselves
  into grave and non-grave. How many people
  must be at risk of death before a public health
  problem is grave 50 200 2,000 50,000
  1,000,000? Moreover, how did the EC propose to
  deal with HIV/AIDS. The HIV virus targets the
  immune system making individuals vulnerable to a
  wide range of diseases. Are only antiretrovirals
  covered because they address HIV/AIDS? If not,
  then all possibilities must be considered,
  including cancer treatments, antibiotics, and so
  forth. This whole area is not susceptible to
  advance determination.
• Secretariat circulates paper affirming absence of
  requirement for annual voting to continue waiver.

23
Chairmans Note of 10 November 2002

• Timing raises serious concern among developing
  Members because of short period to review and
  coordinate with Ministers for Sydney
  Mini-Ministerial (Nov. 14-15). Nonetheless,
  responsive positions are coordinated
• Core objections on products and disease coverage
• Patented products, or products manufactured
  through a patented process, of the pharmaceutical
  sector needed to address public health problems
  referred to in paragraph 1 of the Doha
  Declaration on the TRIPS Agreement and Public
  Health. It is understood that these products
  include the active ingredients used in their
  manufacture as well as diagnostic kits needed for
  their use.
• Because Paragraph 1 of Doha Declaration
  illustratively lists certain diseases, there was
  manifest concern that EC-U.S. would claim that
  Paragraph 6 solution was limited to diseases
  specifically referred to in Paragraph 1.
  Developing Members categorically insisted (at a
  minimum) that solution broadly address public
  health problems as recognized in Paragraph 1.

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Kenya, Coordinator of African Group

• Provides detailed grounds for rejecting
  limitations on scope of diseases
  
• Highlights Paragraphs 4 and 5 of Doha
  Declaration
  
• Member sovereignty to determine public health
  needs
  
• Objective of promoting access to medicines for
  all
  
• Paragraph 1 illustrative

25
Chairmans Text of 19 November 2002

• First concrete draft proposal
• Restates elements of 10 November note without
  adequately addressing developing Member concerns
  
• Product definition continues referred to
  language, though expanded to include test kits
  
• Developing Members want clear that vaccines
  included and prefer expansion on diagnostics
  
• Criteria for determining adequate capacity raise
  issues
  
• Problem of dual licensing not addressed, nor
  potential double compensation
  
• Restrictive suggestions on recoloring or
  reshaping of products
  
• Regional market definition raises issues on
  multiple licensing
  
• Waiver to amendment formulation leaves
  uncertainty
  
• Chairman/Secretariat continues small group
  negotiations
  

26
Chairmans Text of 20 November

• USTR intervenes in attempt to block distribution
  by Chairman
  
• Vehemently protests addition of it being
  understood that the reference to public health
  problems is not limited to the three specific
  diseases mentioned therein or to epidemics
• Japan objects to inclusion of vaccines
• Makes U.S. intent with respect to existing text
  clear
  

27
Chairmans Text of 24 November 2002

• Adopts public health problem as recognized in
  paragraph 1 formulation
  
• Multiple problems remain
• Failure to address streamlining of licensing
  (e.g., through recognition)
  
• TRIPS-plus safeguards on diversion
• Poorly designed regional market mechanism
• Transfer of technology weak
• Issues remain on determination of adequate
  capacity
  
• EC and US continue to propose options for
  limiting eligible importing and exporting Members
  (e.g., footnotes with lists)
  

28
Chairmans Text of 16 December 2002

• Retains 24 November formula recognizing public
  health problems in Paragraph 1
  
• Developing Members retain substantial objections
• Perception ultimately that sides have exhausted
  room for concession and express willingness to
  accept proposal
  
• U.S. insists on limiting application of system to
  HIV/AIDS, malaria, tuberculosis or other
  infectious epidemics of comparable gravity and
  scale, including those that may arise in the
  future, appending list of infectious diseases
• USTR asserts asthma, diabetes, cancer should be
  excluded, surprising public health experts
  
• USTR/Pharma later focuses on Viagra and
  obesity
  
• USTR argues to delegates that if U.S. proposal
  constitutes rewriting of Doha Declaration, so be
  it
  
• USTR begins aggressive campaign to suggest
  developing Members, particularly export-capable
  (Brazil, China, India) acting in bad faith
  

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Flaws in U.S. Approach

• Establishes world public health system that
  discriminates against the developing world
  
• The U.S., EC, Switzerland and Japan can meet
  their public health needs by compulsory
  licensing, but developing Members health needs
  are pre-selected by USTR
• For developing Members the U.S. proposal is a
  step backward from Doha, rewriting the
  Ministerial Declaration
  
• The premise of the perceived risk to the WTO
  system and U.S. is that people in developing
  countries will have too great access to low price
  medicines. This is not a real risk
• U.S. focus on Viagra is an insult to developing
  Members and the millions suffering without
  treatment for disease
  
• The U.S. proposal on limiting scope of diseases
  makes no sense from a public health standpoint
  
• HIV/AIDS, for example, is an immune deficiency
  disorder resulting in a myriad of opportunistic
  infections, cancer and other medical conditions.
  It is not by any means only about
  antiretrovirals
• For what reason would we want to preclude
  application of system to asthma, cancer or
  diabetes? These diseases are enormous problems in
  developing Members (See Annex Table 3 of the
  World Health Organization World Health Report
  2002).

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Flaws in U.S. Approach

• The U.S. and EC will remain the worlds largest
  import markets for the indefinite future. The
  United States has enormous leverage at the WTO.
  If developing Members abuse the system they know
  the U.S. will limit market access and capital
  flow. The risks of abuse of the system by
  developing countries are dramatically
  overstated.
• The OECD Pharma companies are NOT dependent on
  patent-based profits from developing Members for
  their research budgets. The Pharma companies are
  worried that low price medicines will work their
  way into OECD markets. This is not a realistic
  concern since U.S. and EC law each prohibit
  patented pharmaceuticals from entering the
  market, and since the system of the December 16
  text includes substantial safeguards against
  diversion.
• Failure to carry out the Doha Declaration mandate
  in good faith is having very serious
  repercussions among the developing countries, and
  will influence all other areas of the
  negotiations.

31
Unilateral Moratoriums

• USTR is prepared for adverse press, and on
  December 20 announces unilateral moratorium based
  on its perceived interests
  
• Swiss follow on December 22
• EC floats and later formalizes proposal for WHO
  involvement. Adopts moratorium based on December
  16 text.

32
EU Compromise Proposal

• The European Communities have proposed the
  addition of a footnote to draft paragraph 1(a) of
  the Chairmans text of 16 December 2002. The text
  as amended would state
• 1. For the purposes of this Decision
• (a) "pharmaceutical product" means any patented
  product, or product manufactured through a
  patented process, of the pharmaceutical sector
  needed to address the public health problems as
  recognized in paragraph 1 of the Declaration.1
  It is understood that active ingredients
  necessary for its manufacture and diagnostic kits
  needed for its use would be included1
• 1 This covers at least HIV/AIDS, malaria,
  tuberculosis, yellow fever, plague, cholera,
  meningococcal disease, African trypanosomiasis,
  dengue, influenza, leishmaniasis, hepatitis,
  leptospirosis, pertussis, poliomyelitis,
  schistosomiasis, typhoid fever, typhus, measles,
  shigellosis, maemorrhagic fevers and arboviruses.
  When requested by a Member, the World Health
  Organization shall give its advice as to the
  occurrence in an importing Member, or the
  likelihood thereof, of any public health
  problem.
• 1. This subparagraph is without prejudice to
  subparagraph 1(b). underlining identifies
  proposed amendment

33
Flaws in EC Proposal

• List of diseases implies presumption of
  limitation on scope of diseases at least
  suggests that additional subject matter is
  subject to justification
• Takes determination whether Member has public
  health problem out of hands of national
  government and into hands of WHO. This is
  contrary to Doha Declaration recognition of
  sovereignty, to the customary practice of the
  WTO, and places developing Members in lesser
  position than Member (e.g., the EC and U.S.) with
  manufacturing capacity.
• System would be more complex and burdensome than
  at present, which already will substantially
  inhibit action.
  
• The WTO has not before allocated principal
  decision-making authority to another
  international organization. WIPO, for example,
  does not have authority to provide an
  authoritative interpretation in TRIPS dispute
  settlement.
• There is no mechanism in WHO for dealing with
  the EC proposal
  
• The Director General could render an
  interpretation, but under what authority and
  conditions?
  
• The Executive Council and World Health Assembly
  are political bodies. Their involvement would
  politicize individual questions of public health
  
• The Essential Drugs and Medicines Division could
  provide view, but acts under ultimate authority
  of Director General
  
• The WTO Dispute Settlement Understanding already
  provides for solicitation of advice on scientific
  and technical aspects of a problem, and for
  establishment of an expert review group. The
  latter must be independent of a government or
  international organization.

34
Prospects for Multilateral Solution

• U.S. has put enormous pressure on capitals
  throughout the world to change their positions.
  
• The U.S. has attempted to divide Africa and the
  potential exporting countries (Brazil, China,
  India, et al). USTR Zoellick was very clear on
  this in his remarks in Africa (see transcript of
  Media Roundtable, Pretoria, Jan. 13, 2003).
• The ECs position as honest broker is
  discounted. They have been and remain a primary
  demandeur.
  
• It is extremely unlikely that developing Members
  will compromise on scope of diseases. They have
  made very significant concessions in acceptance
  of December 16 text, and regard the U.S. proposal
  as a rewriting of the Doha Declaration.
• All sides are apparently prepared to accept that
  a multilateral solution will not be achieved.
  

35
Consequences of Failure

• Developing Members in position to rely on Article
  30 limited exception to patent rights because
  action necessitated by refusal of one WTO Member
  to accept multilaterally agreed solution.
  Paragraph 4 of Doha Declaration (the TRIPS
  Agreement does not and should not prevent Members
  from taking measures to protect public health)
  and necessity to address problem of Members
  without adequate capacity (as recognized by
  Paragraph 6) creates situation where action
  presumed not unreasonable.
• Developing Members have already articulated
  adverse results for continuing multilateral
  negotiations. If decisions of Ministers cannot be
  relied upon as basis for further negotiations
  e.g., claim that Paragraph 1 of Doha Declaration
  intended to limit scope of diseases then
  negotiations will need to be conducted in a
  different way.
• Real losers are people living in developing
  countries whose governments are placed in
  position of legal insecurity and for that reason
  are less likely to have access to lowpriced
  medicines.
• Pharma considers that blocking consensus secures
  its position in developing Members, but Pharma
  has put itself in position of having unilaterally
  blocked reform of TRIPS health mechanism and this
  affects relations with governments and health
  ministries around the world. Query whether the
  short run gains are likely to exceed the long run
  costs of stimulating a developing country
  response.
• USTR has generated a substantial reservoir of
  ill-will among WTO delegations. The implications
  of this are unpredictable.

36
Draft Chairmans Statement of 5 February 2003

• Chairmans Proposal Untitled
• 5 February 2003
• Before proposing the adoption of the text of 16
  December 2002,1 would like to put on record a
  number of understandings which have emerged from
  the discussions leading up to the formulation of
  this text.
• Secondly, delegations have made it clear that
  they see the system that we are establishing
  under paragraph 6 of that Declaration as being
  essentially designed to address national
  emergencies or other circumstances of extreme
  urgency.

37
Why the Limitation to Emergencies Was Rejected in
February 2003

• Function of compulsory licensing is substantially
  broader than entering production phase provides
  continuous background for patent holder pricing
  that is undermined when potential use is highly
  restricted, e.g., only in emergency. Recall that
  Paragraph 6 negotiations were directed to
  permitting effective use of compulsory
  licensing by countries without capacity. In
  Canada, pharmaceutical pricing by patent holders
  takes place against background of authority
  granted to Patented Medicine Prices Review Board
  to mandate price reduction and impose penalties.
• Compulsory licenses are sought by governments and
  private entities. Prospective private generic
  producers have limited options for seeking
  government declaration or recognition of
  emergency as predicate to licensing. Introduces
  major additional hurdle. (cond)

38
Why the Limitation to Emergencies Was Rejected in
February 2003

• Determining which part of government has power to
  declare or acknowledge emergency introduces
  constitutional complication that may not be easy
  to resolve. Recall that Health Canada was forced
  to repudiate its contract for Cipro during public
  health emergency despite acknowledgement by
  Health Canada.
• These are extraordinary and unusual times.
  Canadians expect and demand that their
  government will take all steps necessary to
  protect their health and safety. (Health Canada
  Spokesperson, NY Times, Oct. 19, 2001)
• Questions of authority to determine emergency
  may be even more complex in developing country
  context. (cond)
  

39
Why the Limitation to Emergencies Was Rejected in
February 2003

• Governments are resistant to declaring public
  emergency. Implies governmental failure.
  Potential adverse effects on travel and tourism
  (see, e.g., Toronto and Hong Kong experience with
  SARS).
• Declarations of national emergency may raise
  troubling constitutional/human rights issues.
  Such declarations ordinarily used for temporary
  suspension of individual rights. Encouraging such
  actions is problematic from a good governance
  standpoint. (cond)

40
Why the Limitation to Emergencies Was Rejected in
February 2003

• U.S. sought to limit compulsory licensing to
  emergencies and competition throughout Uruguay
  Round TRIPS negotiations (1986-1993). A
  Suggestion by the United States for Achieving the
  Negotiating Objective was transmitted to the TNG
  on 13 October 1988 (MTN.GNG/NG11/W/14/Rev.1)
• A compulsory license may be given solely to
  address, only during its existence, a declared
  national emergency or to remedy an adjudicated
  violation of antitrust laws. Patents may also be
  used non-exclusively by a government for
  governmental purposes.
• This limitation consistently rejected by
  developing countries. Introduction here not only
  steps backward from Doha Declaration, but steps
  backward from TRIPS negotiations.
• Imposing emergency limitation on developing
  countries that is not imposed on OECD
  discriminates against the poor, and is
  inconsistent with allowing effective use of
  compulsory licensing.

41
Scope of Diseases at the End-Game

• U.S. efforts to limit scope of diseases covered
  by waiver were rejected throughout Paragraph 6
  negotiations, including informal discussions
  following December 2002 veto. The record of U.S.
  proposals for limitation and rejection is
  public.
• In August 2003 final effort made to reach
  agreement based on concept of Chairmans
  Statement to accompany adoption of 16 December
  text. This was not a sole United States
  initiative, but informal suggestions also put
  forward by developing Members.
• Developing Members make clear to Chair of TRIPS
  Council (Ambassador Vanu Menon of Singapore) that
  solution could not include limitation on scope of
  diseases, and U.S. outline for proposed solution
  tendered by Ambassador Deily does not contain any
  such reference (text of US outline of content for
  the Chairmans statement, undated).

42
Scope of Diseases at the End-Game

• Draft text of 21 August 2003 submitted to group
  of five key delegations (Brazil, India, Kenya,
  South Africa, United States) included language
  reminiscent of referred to language objected to
  by developing countries throughout negotiations
  leading to 16 December 2002 text. Offered as
  final (take it or leave it) proposal acceptable
  to United States provided in first paragraph
• This Decision is part of the wider national
  and international action to address problems
  identified in paragraph 1 of the Declaration.
  (emphasis added)
• Developing delegations were strongly concerned
  that the United States was attempting to
  reintroduce a limitation on scope of diseases
  by narrowing application of the solution to
  conditions expressly identified in Paragraph 1
  of the Doha Declaration (that is, HIV/AIDS,
  Malaria and Tuberculosis and other epidemics).
  Only two changes were demanded as a condition to
  accepting the proposed Chairmans statement. One
  of them addressed this concern.

43
Scope of Diseases at the End-Game

• The final text of the first paragraph of the
  Chairpersons Statement states
  
• This Decision is part of the wider national and
  international action to address problems as
  recognized in paragraph 1 of the Declaration.
  (emphasis added)
• Paragraph 1 of the Declaration recognizes the
  gravity of the public health problems afflicting
  many developing and least-developed countries
  (emphasis added).
• Press reports suggest that Canadian authorities
  consider that there is disagreement among WTO
  Members as to whether the Decision is limited to
  diseases specifically identified in the 30 August
  waiver. The text and negotiating history make
  clear that the solution is NOT limited to a
  prescribed list of conditions.
• What may be more accurate to say is that United
  States and IFPMA are pressuring Canada and other
  WTO Members to accept a limitation that could not
  be negotiated in Doha or Geneva.

44
Eligible Importing Countries

• Least developed Members automatically eligible
• Annex 1
• For other eligible importing Members
  insufficient or no manufacturing capacities for
  the product(s) in question may be established in
  either of the following ways
• (i) the Member in question has established that
  it has no manufacturing capacity in the
  pharmaceutical sector
  
• OR
• (ii) where the Member has some manufacturing
  capacity in this sector, it has examined this
  capacity and found that, excluding any capacity
  owned or controlled by the patent owner, it is
  currently insufficient for the purposes of
  meeting its needs. When it is established that
  such capacity has become sufficient to meet the
  Member's needs, the system shall no longer
  apply. (emphasis added)

45
Eligible Importing Countries

• During course of negotiations, various proposals
  from U.S. and EC to establish lists of eligible
  importing countries based on data concerning
  manufacturing capacity and/or level of income
  were rejected.
• The text of Annex 1 is unambiguous
  determination of eligibility is made by importing
  Member.
  
• Chairpersons Statement adds that notification to
  TRIPS Council of specific use of system will
  include information on how the Member in
  question had established, in accordance with the
  Annex, that it has insufficient or no
  manufacturing capacities in the pharmaceutical
  sector.
• Developing Members understand the how to mean a
  concise statement of the methodology used in
  making the determination.
  
• There is no provision for TRIPS Council approval
  of Member determinations regarding insufficient
  manufacturing capacity.
  
• A Member considering that another Member has
  inappropriately established eligibility has the
  right to initiate a dispute settlement proceeding
  under the rules ordinarily applicable to disputes
  under the TRIPS Agreement. Prospective exporting
  countries are not responsible for making
  determination regarding insufficient capacity.

46
Not for Profit Rejected

• At End-Game, USTR proposed limiting solution to
  not for commercial gain.
  
• US outline of content for the Chairmans
  statement (Ambassador Deily)
  
• 2. Purpose
• That the solution is for humanitarian purposes,
  to be undertaken in good faith by governments,
  not as a part of industrial or commercial policy
  and hence not for commercial gain. (emphasis
  added)
• Developing Members immediately rejected this
  proposal on grounds that no private
  pharmaceutical producer would reverse engineer,
  produce and supply product without the prospect
  of commercial gain. The system would effectively
  be limited to government/public producers on
  charitable grounds, and this was perceived as a
  limited prospect. Also, since the U.S. as
  principal demandeur is adverse to non-market
  (i.e., public) solutions to public health
  problems, this did not seem consistent with its
  general philosophy.

47
Not for Profit Rejected

• Final Chairpersons Statement provides
• First, Members recognize that the system that
  will be established by the Decision should be
  used in good faith to protect public health and,
  without prejudice to paragraph 6 of the Decision,
  not be an instrument to pursue industrial or
  commercial policy objectives.
• There seems little risk that Canada is responding
  to the needs of developing countries in order to
  achieve its own industrial policy objectives.
  Harvey Bale from IFPMA has advised that Canadas
  action will not achieve anything and will harm
  its capacity to attract investment. This could
  not conceivably be a Canadian industrial policy
  objective.

48
The NAFTA

• Canadian officials expressed concern industry
  action to allow exports under the 30 August WTO
  solution would violate U.S. patent rights under
  Chapters 17 and/or 11 of NAFTA
• The legal relationship between NAFTA and WTO is
  complex (see, e.g., Frederick M. Abbott, The
  North American Integration Regime and its
  Implications for the World Trading System (Oxford
  University Press 2000)). The TRIPS Agreement
  NAFTA Chapter 17 relationship is not expressly
  defined. However
• 1. The TRIPS Agreement is later in time than the
  NAFTA. As a general principle a later in time
  treaty on same subject matter prevails (VCLT,
  Art. 30(3))
• 2. The subject matter of the TRIPS Agreement was
  not covered as part of GATT 1947, therefore very
  difficult to bring within the theoretical scope
  of NAFTA Article 103(1) and
• 3. The waiver adopted at the WTO pertains to an
  identical rule in the NAFTA (predominantly for
  the supply of the domestic market) (Article
  31(f), TRIPS Agreement, Article 1709(10)(f),
  NAFTA). Canada and the U.S. are both party to
  waiving the identical subject matter at WTO.
• Absent an express reservation of rights in NAFTA
  context, it should be very difficult for U.S. to
  succeed on claim of NAFTA priority. Both parties
  actively participated in WTO negotiations, and
  neither appears to have suggested that it was
  attempting to preserve a NAFTA priority.
• Chapter 11 exempts private proceedings based on
  compulsory license issued consistently with
  Chapter 17 (Article 1110(7)). In any event,
  establishing an unlawful taking in Canada based
  on exports under WTO waiver to developing
  countries appears a rather unlikely intrusion
  into Canadian regulatory sovereignty.

49
Canadas Policy Choices

• Canadas decision to implement Paragraph 6
  Decision and to provide generic supplies of
  medicines to developing countries is potentially
  a pathbreaking step in addressing HIV/AIDS, a
  public health crisis of unprecedented dimension.
  
• Canadas method of implementing Paragraph 6 will
  be looked at as a model for other nations, both
  in the developed and developing world. The public
  health problems facing developing countries go
  far beyond HIV/AIDS, and include cancer,
  diabetes, heart disease and respiratory
  infection. There is no public health rationale
  for limiting the method of implementation to a
  few of the most widespread disease burdens.
• Canadas decision to implement Paragraph 6 in a
  manner that effectively addresses public health
  problems in developing countries is in Canadas
  national interest because deterioration of social
  and political conditions is not conducive to
  public security or economic conditions in Canada
  or other developed countries. The global costs of
  failing to treat disease are growing.

50
Canadas Policy Choices

• The only plausible basis for Canada to limit its
  implementation is the threat of trade sanctions
  (or offering of trade incentives) by the United
  States, and the threat of reduced investment flow
  by IFPMA.
• Pharma is predominantly using Canada as a
  location to conduct clinical trials. The
  rationale for encouraging investment in this
  activity is questionable.
• It is difficult to speak to how Canadas
  international development policy in the field of
  public health should be influenced by concerns
  regarding trade relations with the United States.
  This is a matter of balancing national political
  priorities in a complex international
  environment. The decision should not, however, be
  made under the illusion that Canada is required
  by international trade or intellectual property
  rules to adopt a restrictive approach.