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TRIPS empire strikes back

By C. Rammanohar Reddy

The agreement reached yesterday at the World Trade Organisation to sew up the 2001 Declaration on Trade-related aspects of Intellectual Property Rights (TRIPS) and Public Health has been hailed as a humanitarian gesture that will provide expensive medicines under patent to the poorest countries of the world at vastly reduced prices. This is a false claim for, what has been agreed to is a watered-down agreement that will not make patented drugs available at affordable prices.

First, a bit of relevant history. In the developing countries, the provisions on patents in the 1994 TRIPS agreement was the most disliked element of the Uruguay round package that gave birth to the WTO. It was always known that the benefits from TRIPS would be appropriated entirely by the developed countries and the costs in the form of higher drug prices would be paid by the developing countries.

In the late 1990s, the worldwide anger towards the TRIPS agreement crystallised around the issue of drug prices for treatment of HIV/AIDS. A regime of drugs under patent then cost $10,000 a year in the rich countries, literally killing any chance of treatment of the millions suffering from AIDS in Africa. Indian companies made world headlines in 2000 when they offered quality generic drugs at just $350 a year. This galvanised global campaigns against the pricing policies of the multinational firms.

At the same time a larger game was being played out at the WTO. The anger against TRIPS was an important factor threatening the legitimacy of the WTO. It was also making it very difficult to mobilise support for a new round of trade negotiations. In what must be a record for the WTO, the Declaration on TRIPS and Public Health was negotiated over the space of a few months and signed in 2001 during the Doha ministerial meeting of the WTO. The timing was crucial. The new declaration was to be a symbol of the WTO's new-found sensitivity to the developing countries. With this symbol, the developing countries were brought round at Doha to agree to the launch of a new round of trade talks. A confluence of events therefore made it expedient for the U.S. and the E.U. to sacrifice — temporarily as it has since turned out — the interests of the global pharmaceutical companies.

The 2001 Declaration did not re-negotiate, modify or lessen the rigours of TRIPS. All it did was assert in plain language what was already in the TRIPS agreement. At its core, the Declaration stated that countries when faced with public health crises could issue compulsory licences to domestic firms to produce generic (and, therefore, cheaper) versions of patented drugs. The pact was yet important because it was the first time that a WTO agreement explicitly highlighted the concerns of the users of medicines. The agreement left one question unanswered. Countries could issue compulsory licences to domestic firms, but what would countries which did not have a developed domestic pharmaceutical industry do? This question was to be answered at the WTO before the end of 2002. That was enough of an opening for the multinationals to strike back on many fronts. They lobbied their governments to argue that the Declaration would hurt innovation as it would permit companies in India and Brazil to "break" patents. Then the U.S. said the Declaration would apply only to drugs meant to treat AIDS, tuberculosis and malaria. The U.S. pharmaceutical industry having successfully bankrolled a Republican triumph in the 2002 Congressional elections began to extract its pound of flesh. The U.S. refused to approve a compromise package at the WTO in December 2002, which actually had already diluted the provisions of the 2001 Declaration. The tide had well and truly turned once again.

In recent months, it once again became important to settle the TRIPS issue once and for all. It would be bad publicity for the WTO if the ministerial meeting in Cancun in 10 days time were to be held with the 2001 Declaration still non-operational. It would be worse publicity for the so-called Doha "development" round if this template of sensitivity remained non-operational. Hence, the flurry of activity which has finally resulted in an agreement. In the new compromise the U.S. has dropped its insistence that only three diseases will qualify for coverage under the pact. But that is no longer important, as two new provisions effectively destroy the usefulness of the 2001 agreement. One, poor countries (say, Mali) planning to import low-cost generic variants of patented drugs from foreign suppliers (say, Cipla in India) will have to establish to the WTO that they cannot produce the medicines locally. That means the decision can be contested at the WTO by a country (say, the U.S.) which is home to the firm holding the patents. This will cause uncertainty in the minds of both the Government of Mali and Cipla.

Second, suppliers like Cipla are expected to introduce distinct changes in shape, colour and packaging of the generic drugs. The ostensible aim is to prevent the diversion of these drugs to markets where the pact will not apply. But the true aim is to make the cost of production unviable. Producers of generics work on the principle of low margins and large volumes, so the best form of sabotage is to insert conditions that will cut into these small margins. What the WTO members have, therefore, agreed to as "a humanitarian gesture" is a package that renders the 2001 Declaration useless from the point of view of the very countries it was supposed to help. Its only value is as a cosmetic advertisement for the WTO.

Of course, the 2001 Declaration can still be used by countries with a strong pharmaceutical industry. India, for instance, can issue a compulsory licence to a local firm for producing a drug on which a patent is held by a foreign company. But after witnessing two years of a fracas at the WTO over a relatively small issue, how many countries will dare test how far they can stretch the provisions of the TRIPS agreement?

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• The spreading tentacles of terror
• On the trail
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• TRIPS empire strikes back

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