Contact: Asia Russell (267) 475-2645 or Brook Baker (617) 373-3217

At the first meeting of 2002 of the WTO Council on TRIPS (the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights), the U.S. Trade Representative proposed a highly contentious, and tightly limited, moratorium on WTO complaint procedures arising from disputes over compulsory licenses. This is the suggested "solution" of the U.S. to the problem of countries with little-or-no domestic capacity being unable to utilize compulsory licensing in order to obtain needed low-cost medications.

Activists claim the controversial proposal shows the U.S. is quickly reneging on its promise to help make medicines more easily accessible to countries with public health needs that have limited capacity to produce low-cost medicines on their own.

At the WTO negotiations in Doha in November 2001, the U.S. and all WTO Member States recognized "the gravity of the public health problems afflicting many developing and least developed countries" and agreed "that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health." The U.S. also affirmed that TRIPS "can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all."

One of the mechanisms clarified at Doha was the right of countries to grant a compulsory license - permission to break a patent monopoly on a product in exchange for a reasonable royalty paid the patent holder - and the freedom to determine the grounds upon which such licenses are granted.

A major limitation in compulsory licensing rules, however, is the requirement that a product made under a compulsory license must be consumed primarily in the licensee's domestic market - unless the license were issued to remedy anti-competitive practices. Rich, big-market countries like the U.S. could readily make use of compulsory licenses to manufacture generic versions of patented medicines to meet public health needs, including those arising from the threat of bio-terrorism. Poor and small-market companies - where the AIDS crisis has hit hardest - lack any real capacity to manufacture medicines on their own, especially given the failure of rich countries to transfer pharmaceutical capacity to developing countries.

To correct this problem, developing countries, led by the Africa Group, have insisted that countries should be permitted to produce and export medicines to needy countries that lack the means to manufacture medicines efficiently, on their own. There was no final agreement at Doha on how to accomplish this, the Member States did agree that the TRIPS Council should find an "expeditious solution" to this problem by the end of 2002.

The Africa Group and the European Commission have proposed pro-public health clarifications of production for export mechanisms, but the U.S. is refusing to budge. The U.S. is especially vehement in its opposition to an application of the provision for "limited exceptions" under Article 30 of TRIPS as a remedy for lack of access to medicines caused poor domestic manufacturing capability.

The U.S. proposal instead is a time-limited "moratorium" whereby WTO Members would agree not to bring a WTO complaint against countries that export some medicines to countries in need, so long as certain other conditions are met. Activists and developing countries resist moratoriums because they delay systemic solutions and are not straightforward enough either to induce producer countries to change their legislation to permit production for export or to induce generic manufacturers to invest in increasing export capacity.

"Does the U.S. seriously think that the crisis in access to medicines in developing countries is going to disappear in a few years?" asked Asia Russell of Health GAP. "Moratoriums are a face-saving measure that mean that the U.S. will stop beating you over the head with trade threats, like it has done with South Africa, Thailand, and Brazil, but not that it will let you get up off the mat and actually access medicines. Accepting a U.S.-imposed moratorium will mean more lives lost, as many as 8,000 a day to AIDS alone," said Russell. "Broken promises can kill."

Brook Baker, a law professor at Northeastern University and a Health GAP member, noted that "Moratoriums don't give legal assurances risk-averse countries need to pass complicated legislation authorizing administratively burdensome compulsory licensing regimes that also permit production for export. Why should countries go through the trouble, when the U.S. will yank the rug from under them a few years down the road?

"The problem is even worse in terms of motivating generic producers to act," continued Baker. "Generic manufacturers want assurances that they won't be sued by major pharmaceutical companies who have a army of lawyers, like the battalion that took on South Africa for three years. Investing in new capacity for production to meet the need for Africans living with AIDS, TB, and malaria is a risky undertaking. Instead of encouraging the development of this vital generic industry, the U.S. is intent on protecting the interests of the patent pharmaceutical industry, which has two lobbyists for each U.S. Congressperson and is the most profitable U.S. business in Fortune 500 analyses."

According to James Love, director of the Consumer Project on Technology, "The U.S. government in particular is showing bad faith after striking a deal in Doha. The U.S. got the developing countries to agree to a new round, but they are refusing to implement the entire Doha Declaration in a way that was clearly expected. By double-crossing developing countries on this issue, the U.S. trade negotiators are making it harder for other countries to believe what we say in the future, and other U.S. policy objectives will suffer. The public health groups and developing countries have indicated a willingness to pay a royalty to patent owners in every country where patents are valid."

"The U.S. is disgracing itself in the world community by insisting on rules that prevent the poorest countries on earth from obtaining medicines from the most efficient suppliers, and they are also endangering our own consumers, when we face health problems that require imports, such as the Cipro-anthrax case."

Activists pointed out that the U.S. already uses compulsory licenses for the export of high-technology goods, which it can do under WTO rules when the licenses are issued as a remedy to anti-competitive practices. Few developing countries have the type of competition laws and agencies to take advantage of this authority, set out under Article 31.k of TRIPS.

"If the U.S. government leaves this as the only practical option, developing countries like India will learn how to use Article 31.k of the TRIPS to authorize exports," continued Love. "The entire point of the Doha declaration was to make a political statement in favor of access to medicines, and to reduce the specter of bilateral pressures from the US and the European governments on these issues. The aggressive US position at the TRIPS Council this week is a big step backwards."