February 24, 2000*

Senate Committee on Foreign Relations
Subcommittee on African Affairs
Washington, DC

Dear Senators Frist and Feingold,

Please include this statement as part of the record of the hearing on AIDS and Africa. Our comments will focus on the following topics:

• What is US trade policy as it relates to access to medicines?
• What are the concerns of public health groups with regard to US trade policy?

I. US Trade policy and access to medicines.

For decades, the US government has advanced the interests of large pharmaceutical companies in its trade policy. The pharmaceutical sector is considered a major export industry, and US government trade policy has been focused almost entirely upon the commercial interests of companies like Merck, Bristol-Myers Squibb, Pfizer and other members of trade associations like the Pharmaceutical Research and Manufacturers Association (PhRMA) and the International Federation of Pharmaceutical Manufacturers Associations (IFPMA).

Among the features of US policy, as expressed in countless bilateral negotiations and multilateral fora, are the following:

1. The US government has pushed to end the exemptions for medicines in national patent laws.
2. The US government has pushed for a minimum term of 20 years in patent laws.
3. The US government has put pressure on governments to create patent extensions for pharmaceuticals.
4. The US has pushed for a broader scope of patenting, on issues such as patenting of doses and treatment regimes for medicines, formulations of medicines, patents on second uses of medicines, and patents on biotechnology.
5. The US government has been an aggressive opponent of the use of compulsory licensing of patents on medicines by developing countries.
6. The US government has objected when other countries have proposed US "Bolar" style patent exceptions for testing of bioequivalence of generic products.
7. The US government has opposed efforts by developing countries to require the use of the generic name of a product on pharmaceutical packaging, claiming this violates company trademark rights.
8. The US government has opposed the efforts by developing countries to require generic prescribing, or generic substitution laws, as a violation of company trademark rights.
9. The US government has opposed efforts by many countries to impose price controls on pharmaceuticals.
10. The US government has objected to efforts by countries to use US style "managed care" formularies to obtain better prices on drugs.
11. The US government is seeking extensive non-patent regulatory barriers to entry for generic drugs, such as regulatory exclusive marketing rights for products not protected by patent.
12. The US government is asking countries to provide 10 years of commercial exclusivity for data used in regulatory reviews of the safety and efficacy of pharmaceuticals as a barrier to entry for generic versions -- even though the US laws only provide five years of data exclusivity.
13. US trade officials oppose laws that would permit parallel imports of pharmaceutical drugs, thereby denying countries the ability to get the best world price on branded pharmaceutical products.
14. The US government has rejected proposals by public health groups to permit the World Health Organization to use US government rights in taxpayer funded health care patents, to expand access to medicines in developing countries.
15. The US government has opposed proposals that the World Health Organization advise developing countries on intellectual property policies, as they relate to access to HIV/AIDS drugs.

I could add to the list or simply refer persons to the National Trade Estimates (NTE) reports of the United States Trade Representative (USTR), other US government trade publications and CPT's extensive reports on trade disputes involving pharmaceutical drugs. These can all be found on the web here: http://www.cptech.org/ip/health.

While US trade officials sometimes claim they are merely protecting the legitimate interests of investors in intellectual property, the US positions are often perceived outside the US as extreme, hypocritical, unfair or protectionist, and increasingly are criticized by the public health community for the negative impact on access to medicines.

II. Public Health concerns regarding US trade policy.

The rising concern over the global AIDS crisis has highlighted the need to change US trade policy. With more than 22 million persons currently infected with HIV/AIDS in Africa, and millions more in developing countries outside of Africa, it is clear that the costs of treatment would be astronomical, if there ever was a serious effort to do so. A typical HIV/AIDS cocktail in the US costs more than $10,000 per year, for the drugs alone. At just $10,000 per year, it would cost more than $222 billion per year to provide drugs to the current population of African persons living with HIV/AIDS, and for significant portions of the population, this would not be effective without other investments in health care infrastructure. But even if one has far more modest treatment goals -- the prices of drugs are important -- as illustrated, for example, by the lack of access to fluconazole, an important, high priced, but cheap to produce, antifungal medicine.

This committee will hear from many informed persons who can describe the nature of the HIV/AIDS crisis in Africa and other developing countries. We will simply note the obvious, which is that this is an overwhelming tragedy that challenges all of humanity to fashion a response equal to the human suffering.

Certainly the Subcommittee will hear how complex are the problems in dealing with HIV/AIDS in Africa. There are many aspects of the problem -- poor medical infrastructure, limited budgets, lack of education, ineffective prevention efforts, discrimination and bias, employment practices, the need to change sexual behavior, the failure of African countries to allocate greater funding to health care, the crushing burden of debt on African countries, the paucity of foreign aid, the high prices of drugs, the rules for the protection of intellectual property and bilateral trade pressures to protect the pharmaceutical industry.

There are many issues that must be addressed to save lives and limit suffering in Africa. There are no silver bullets, no single solutions -- simply a large list of things that must be done. There should be no controversy that this list will include changes in US trade policy, and addressing intellectual property rules. And, while compulsory licensing and other measures will change private R&D incentives, it is worth noting that Africa only accounts for about 1.3 percent of the worldwide pharmaceutical market, and that much R&D on HIV/AIDS related medicines is funded by the US government.

Defenders of current US trade policy sometimes say that the price of drugs isn't the "the issue," pointing the many other problems. But as is often said, when someone says it isn't about the money, it is often about the money, and only a fool would suggest the price of drugs is not important to people in Africa who are infected with HIV/AIDS.

Responding to increasing international and domestic criticism of US trade policies on pharmaceutical drugs, President Clinton announced on December 1, 1999, that he was removing South Africa from the USTR Watch list on intellectual property, and that US trade policy would be changed to facilitate access to medicines. That review is just beginning, and has produced very few results so far.

The WTO TRIPS agreement as a norm for Africa

The World Trade Organization Agreement on Trade Related Aspects on Intellectual Property, known as the TRIPS agreement, is the most important international agreement on intellectual property rights. The TRIPS accord is extensive and comprehensive, covering patents, trademarks, copyright, trade secrets, undisclosed health registration data and other items. Under the TRIPS, all WTO member countries will have to extend 20 years of patent protection to pharmaceuticals. The TRIPS accord places restrictions on government use or compulsory licensing of patents, and provides countless other protections for the owners of intellectual property.

However, the US government does not accept the WTO rules as appropriate for African countries. It seeks much higher levels of protection --- so called "TRIPS plus" levels of protection. US policy on this is itself a seeming violation of the WTO rules. Article 1 of the TRIPS says:

Members . . . shall not be obliged to, implement in their law more extensive protection than is required by this Agreement. . . . Members shall be free to determine the appropriate method of implementing the provisions of this Agreement within their own legal system and practice.

The public health community is split on the degree to which the WTO TRIPS agreement should be modified to address public health concerns. There is, for example, much controversy over whether or not poor countries should be required to have 20 year patents on pharmaceutical drugs. However, there is much less disagreement on the issue of TRIPS plus obligations. Given the huge suffering in Africa today, a policy of requiring TRIPS plus -- more than the WTO rules for medicines -- is morally repugnant.

A February 10-12, 2000 meeting of the Trans Atlantic Consumer Dialogue (TACD) produced a set of recommendations on health care and intellectual property that provide a useful overview of public health community views on these disputes. I have attached the TACD resolutions to this letter. We ask the members of this Subcommittee to formally ask the US government to provide a written response to the TACD recommendations.

From these recommendations, I would highlight several issues that are a priority to public health groups.

1. The US and EU governments should not require TRIPS plus levels of intellectual property protection on medicines. This is an issue addressed in the Senate version of the African Trade Bill.
2. The US government should support the call to create a working group on access to medicines within the WTO. This would provide an important and needed forum to discuss a number of important trade related aspects of the access to medicines problem.
3. The US government should permit the World Health Organization, UNAIDS or other international bodies to use US government funded patents in developing countries. It is shocking and ethically indefensible to withhold use of US government funded medical inventions in developing countries.
4. The US government should provide the WTO with a communication supporting an interpretation of Article 30 of the TRIPS that would permit patent exceptions for production of medicines for export.

I will elaborate briefly on item 4, concerning patent exceptions and exports of medicines. Under the WTO rules, governments can issue a compulsory license to a patent, but in most cases, the use must be limited to domestic consumption. The practical effect of this is that only a handful of developing countries will have a large enough domestic industry to manufacture their own products. Moreover, it is inefficient if not absurd to think of more than 100 different manufacturing facilities for each essential medicine that might be a subject of compulsory licensing.

If one was serious about providing treatments for HIV/AIDS medicines in developing countries, one would focus attention on those issues that would lead to the cheapest and highest quality production of medicines. This would involve:

a. Fast-track compulsory licensing (as has been proposed in South Africa and the Dominican Republic).

b. Coordinated global procurement, to take advantage of economies of scale, joint bargaining power and the best international production facilities, and

c. An agreement by the WTO that patent exceptions for production of medicine for export would be a reasonable use of TRIPS Article 30.

Finally, thanks to Senators Frist and Feingold for addressing this important issue.

Sincerely,

James Love
Director
Consumer Project on Technology
202.387.8030, fax 202.234.5176
love@cptech.org, http://www.cptech.org