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TRIPS: protecting intellectual property or putting profits before people?

By Louise Sylvan - posted Sunday, 15 April 2001

The major pharmaceutical manufacturers are waging a war against South Africa’s attempt to get hold of cheaper drugs for its citizens suffering from AIDS.

According to Medicins Sans Frontieres – Doctors Without Borders – about 95% of infected people in the world have no access to treatment for AIDS. These drug treatments, whose patents are held by multinational pharmaceutical companies, improve the quality of life of AIDS sufferers, prolong survival and allow people to continue contributing to their families and society. In South Africa, which is considered the epicentre of the worldwide AIDS pandemic, over 4 million people are living with HIV – that’s one in every nine people.

The main reason that people do not have access to AIDS treatment is very simple - they cannot afford to buy the drugs. The pharmaceutical manufacturers holding the patents for these treatments have been pricing the products beyond the reach of consumers in developing nations – and even beyond the reach of their governments to buy. Poorer consumers in developed countries without drug subsidisation programs are also having trouble affording these expensive treatments. While international pressure has now forced down the prices for these drugs for some developing nations, how could such a situation have occurred? Curiously, the problem comes from the free trade agreements.


TRIPS – putting profit before people

The Trade Related Intellectual Property Rights Agreement – or TRIPS - formed part of the GATT Uruguay Round. Basically, TRIPS requires all signatories, like South Africa, to put into place a legal regime for the protection of patents if the country doesn’t already have such protections.

The battle between Big Pharma and South Africa centres around two important concepts which formed part of the discussion in the TRIPS negotiations: compulsory licensing and parallel imports. Compulsory licensing is the right of governments to authorise generic production of a product while it is still on patent, with royalties paid to the patent holder. Parallel importation is the import of products retailed in one country for resale in another, so that the importing country can benefit from lower prices elsewhere in the world.

Contrary to the aggressive interpretation of some pharmaceutical companies, the TRIPS Agreement in no way prevents parallel importation; after all, why would a free trade agreement try to prevent either consumers or governments shopping around globally for the best price for a product? That’s all parallel imports mean. It’s an important right for consumers, breaking the attempts of further monopoly distribution arrangements by big companies – not just pharmaceutical firms. Australia currently has legislation in the Parliament to allow parallel imports of software – a good idea. The software developer still gets their patent rights and payment; it just means consumers get a better-priced deal wherever in the world it can be found.

Compulsory licensing is a much more contentious issue. Many developing nations have had limited patent protection regimes enabling them to manufacture or buy "copies" of products, including medicines, without the permission of the patent holder. This enabled countries to get hold of drugs at significantly lower prices. Under the TRIPS Agreement, however, these countries now have to provide legal protection for patents (drugs have a patent protection period of 20 years). Many developing countries, like Brazil, have already passed their laws – the deadline date for all signatories to comply is 2005 at the latest. The problem is that TRIPS will mean that developing countries will end up paying more, probably much more, for drugs.

To temper the potential effects of such price increases, a critically important provision was added to the TRIPS. Article 31 allows countries, under certain circumstances, to insist on compulsory licensing of patented medicines. Thus, governments can require that the patent holder must grant a license to another manufacturer of the medicine in return for "adequate remuneration". The pharmaceutical companies hate compulsory licensing and fought hard to oppose these provisions. Consumer organisations, on the other hand, supported the compulsory licensing provisions and are currently urging developing countries to use compulsory licensing to the maximum useful extent.


Despite Article 31, the pharmaceutical companies have opposed any attempt by a country to compulsory license or to parallel import – these practices would decrease their profits.

South Africa with its appalling AIDS problem passed the Medicines and Related Substances Act of 1997. The provisions of the Act would have enabled South Africa to use cheaper-priced generic drugs and medicine versions, and to conduct the parallel importation of drugs. Many analysts believe that the South African law would fit properly within the TRIPS regime – at least on a liberal interpretation rather than the restrictive interpretations used by the pharma industry. The pharmaceutical companies, 39 of them, claim that implementation of the law would contravene their patent rights. They have sued South Africa in a bid to block the implementation of the legislation.

The case is currently adjourned (until April 18th). The war continues, however, in the global media. And it isn’t only South Africa which is challenging the pharmaceutical manufacturers. Brazil has accused the multinational pharma firms of blocking cheaper "generic" drugs and of profiteering. It has threatened to invoke compulsory licensing of AIDS drugs which, after three years, are still not being made more cheaply in Brazil but are being imported from overseas. Not surprisingly, the United States has applied for a WTO judgement on Brazil’s threat, but Brazil has countered by seeking a judgment on a clause in America’s patent law allowing it to demand that products invented with the help of government funds be manufactured in America. Until the attacks on Al Gore by Act Up – an AIDS action group – during the US Presidential race, the US had assisted its multinationals by applying international pressure to governments like South Africa to abandon their attempts at parallel importing and compulsory licensing. Al Gore changed that policy and President Bush has said he will not renew the attempted pressure on developing countries on behalf of the pharmaceutical firms.

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About the Author

Louise Sylvan is Chief Executive of the Australian Consumers' Association - CHOICE.

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