Why 39 Pharmaceutical Companies Sued the South African Government AIDS Act

Why 39 Pharmaceutical Companies Sued the South African Government AIDS Act

The South Africa AIDS Case

In 1997, South Africa, faced with an HIV/AIDS crisis of epidemic proportions, drafted a new Medicines Act. It gives the Health Minister the powers to override patent laws in a health emergency.

Over 39 pharmaceutical companies filed action against the government of South Africa on the basis that the law violated its obligations under TRIPS. However, after three years, due to “an extremely high amount of international pressure” the case was eventually withdrawn. This incident served to remind the membership that a workable solution had to be found as soon as possible.

The Doha round and the pharmaceuticals debate

“TRIPS does not and should not prevent members from taking measures to protect public health, we affirm that TRIPS can and should be interpreted and implemented in a manner supportive of WTO members’ rights to protect public health and, in particular, to promote access to medicines for all.” It authorized members to use the provisions in TRIPS that provide flexibility for this purpose. Some of them as including the rights to grant compulsory licenses and to determine what constitutes a “national emergency or other circumstances of extreme urgency”. HIV/AIDS TB and malaria or other epidemics are considered to be “a national emergency or other circumstances of extreme urgency”. A separate declaration on TRIPS and public health was one of four issues on the Doha agenda. This separate Declaration affirmed what had already been said in the main agreement, namely, that the TRIPS agreement should be interpreted in a manner that does not prevent members from taking steps to protect public health. It recognized “the gravity of the public health problems affecting many developing and least developed countries, especially those resulting from HIV/AIDS, TB, malaria and other epidemics”. Veering away from the view that TRIPS was an instrument for the protection of private rights, it went on to say that “we stress the need for the WTO agreement on TRIPS to be part of the wider national and international action to address these problems.”

Two specific tasks were also set out. The TRIPS council had to find a solution to the problems that developing countries may face in making use of compulsory licenses if they have little or no pharmaceutical manufacturing capacity. They were required to report to the General Council on this by the end of 2002. In addition, Least-Developed Countries (LDCs) were given time till 1 January 2016 for the implementation of the rights related to pharmaceuticals, with the option of postponing them further. LDCs were also exempt at least until 1 January 2016.

Responses to Doha

On 30 August 2003, the General Council adopted the Decision on the Implementa­tion of the Doha Declaration. It acknowledges that “exceptional circumstances exist justifying waivers from the obligations set out in paragraphs domestic market use and remuneration to right-holder of the TRIPS agreement with respect to pharmaceutical products.” It defines “pharmaceutical product” as including a component required to address public health problems.

The Decision also sets out the procedure to be followed when importing such products into the country where it is needed. First, the importing member should notify the TRIPS Council that it intends to import a specific quantity of a named drug, and that it lacks the manufacturing capacity in the pharmaceutical sector. It should also confirm that it has granted or intends to grant a compulsory licence, where the pharmaceutical product is patented in its territory. Further, the exporting member should issue a compulsory licence containing certain conditions as to the amount to be produced, as well as the undertaking that the final destination of the products shall be only those markets of the members who notified the Council of their needs.

The Decision makes provision for adequate remuneration for the products, taking into consideration their economic value in the importing country. Members are also encouraged to prevent re-exportation of these products.

These provisions will be replaced by the subsequent amendments to the TRIPS agreement, due to begin in December 2003. However, these amendments have not yet been agreed upon.

When analyzing this decision, and the effect it has upon TRIPS, one realizes that little has changed. The interpretation sought to be given takes a middle path between allowing members to issue compulsory licences, and prohibit them from accessing medicines altogether. However, much remains in the hands of individual nations and the manner in which they seek to interpret these provisions. The EC, in their Communication on this decision, issued on 17 November 2003, welcomed the decision and pledged to help to implement it. They stated that “to make the system really work, members will have to refrain from overly restrictive interpretations of the decision which could affect its efficiency.” The US issued a statement on para­graph 6 of the Doha Declaration and TRIPS. Although it commences with the words “we are committed to helping countries that are experiencing public health crises”, it goes on to take a hard stand on the issue, conceding only the minimal divergence from TRIPS. For example, it says “Compulsory Licenses are appropriate, but it must be borne in mind that these are the exceptions, rather than the norm”. It says that measures should be taken to see that the rights granted under this measure are not exploited.

The US cannot afford to deviate far from this position, considering that a hard-line approach was taken when the implementation of the Bill for the Uruguay Round Trade Agreements was debated before Congress. The SAA contends that TRIPS mandates that “WTO countries must make patent protection available for essentially all fields of technology, including pharmaceuticals,”. Further, the SAA interprets the conditions under which members may make unauthorized use of a patented invention as “stringent”. The US took this very attitude in many of the discussions following Doha, maintaining that the exceptions to TRIPS should be limited to diseases such as HIV/AIDS, TB, malaria, and other serious, infectious epidemics. It alone opposed the draft of 16 December 2002 proposed by the Council chairman, arguing that the scope of disease coverage went beyond what was originally agreed to in Doha. This caused considerable delay, as the members realized that US support was needed if the proposal was to work; they could not proceed without it. The US was also not amenable to an EU proposal that attempted to list a specific number of diseases, and provide for a mechanism whereby developing and least­ developed countries could appeal to have further diseases added to the list.

One of the dangers of having the pharmaceutical industry exert such great influence over the ultimate outcome is the fact that many of these companies are based in the Western world. Today, diseases are also polarized in terms of geography, and the serious, infectious epidemics mentioned exist largely in the developing world. Having conquered these diseases, the pharmaceutical companies have turned to finding cures for the more cosmetic problems of those in the developed world. Noting this, the World Health Organization agreed on 28 May 2003 to establish a body to be responsible for examining the impact of IP rights protection on the development of new drugs. The resolution calls for the collection of data and an analysis of IP rights, innovation, and public health issues. It will also look into identifying funding and other incentives for the development of new medicines to fight diseases that mainly affect developing countries.

This action plan confirms the fact that the WHO has realized that pharmaceutical companies no longer have the entire world’s health interests at heart. For example, the resolution noted that, out of a total of about 1,400 new products developed by the pharmaceutical industry between 1975 and 1999, only 13 were for tropical diseases and just three were for TB, both endemic in the developing world. The WHO resolution also calls for the newly established body to analyze the “pharma­ceutical and public health implications of relevant international agreements” such as TRIPS, so that governments “are able to maximize the positive and mitigate the negative impacts of those agreements.”

Concluding remarks

The course of events leading up to Doha, and the subsequent negotiations and documents that have followed, have displayed only a grudging willingness by all parties to submit to certain concessions they perceive as being unfavourable to them. While bargaining and haggling are inevitable parts of any trade negotiation, they are not a productive means of negotiation on issues of public health, given that these can have long-term implications. Hence, a hard-nosed attitude will not work optimally in this area. Further, even though the pharmaceutical sector wields considerable influence in the deals that are ultimately agreed, the legitimacy of the sector’s concern is at question, given the data showing that they are really no longer interested in the diseases that afflict the developing world, where the larger (although poorer) part of the world’s population lives. Also, the traditional herbs and medicinal plants owned by communities as a whole are at risk of being patented and used by these companies as well. The pharmaceutical sector has established for itself an unenviable reputation, thus the conclusion may easily be reached that it will not strive to use community- owned herbs and plants in a manner benefiting society as a whole, but will, rather, attempt to exclude these communities from using them altogether.

It is also interesting to evaluate the approach taken in interpreting obligations under the TRIPS agreement in the light of the standards advocated by public inter­national law. According to Article 31 of the Vienna Convention on the Law of Treaties, treaties Shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose.

When the Doha Declaration, and the events that followed it, are examined, it would seem as if the member states to the WTO have forgotten this basic premise of public international law. The haggling over the interpretation of words indicates that certain countries are unwilling both to interpret these terms in good faith and to give to them their ordinary meaning, because it does not serve their own selfish interests to do so. The example of the pharmaceutical sector has shown us that, instead of “reducing tension by reaching strengthened commitments to resolve disputes” there has in fact been greater tension and less commitment. The pattern of behaviour, as evidenced by the pharmaceutical industry, does not augur well for the newer areas in which conflicts still exist, and where the major issues have as yet not been resolved.

About The Author
Nguyen Thi Mai is a writer and lawyer based in Vietnam. You can contact him here.
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