bunn by ashrafp


									Chloe Bunn                             1               Intellectual Property Law

  Intellectual Property Law

     The Patenting system deprives
    developing countries of the South
   from valuable life-saving drugs: A
     focus on Generic drugs and the
    HIV/AIDS crisis in sub-Saharan

                             Chloe Bunn


Word Count (excluding titles subheadings and tables): 5,437
Chloe Bunn                                                   2                          Intellectual Property Law

Contents…………………………………………………………………………… ...2

Abstract……………………………………………………………………………. ...3

Part 1 – Introduction, a look at what defines a generic drug, and the motivation
for this article…………………..…………….... ….………………………………4-5

Part 2 – The reasons why this article favours generic drugs over patented
2.1 The problem with patents…………………………………………………….……6
2.2 The benefits of generic drugs…………………………………………………....6-8
2.3 A small note: The generic drug Nevirapine...…………………………………...8-9
2.4 Why have the MNCs lobbied against Generic drugs? Are there any drawbacks to
generic drugs?...........................................................................................................9-10

Part 3 – Barriers to generic drugs...……………………………………………….11
3.1 In order to understand how generic drugs are affected by the current intellectual
property regime, the different ways in which generic drugs can be legitimately
manufactured or accessed must first be established…………………………..…..11-12
3.2 The legislative barriers: The potentially disastrous effects of the provisions that
hinder access to affordable generic drugs ………………………………………..12-13
3.3 Compulsory Licensing as an „escape hatch‟ for countries to manufacture or
import generic drugs: Article 31 TRIPS – „Other Use without authorisation of the
right holder‟……………………………….……………………………...………14-15
3.4 Multinational Corporations as a barrier to generic drugs………………..…...15-16

Part 4 – Studies from India and Brazil...………………..…………………..…….17
4.1 Study 1 - India: A real time illustration of how the Generic industry is affected by
the current intellectual property regime…………………………………………..17-19
4.2 Study 2 – Brazil’s ‘radical move’: An example of how a country can put patients
over patents and reap vital rewards from the use of generic drugs….……………20-21

Part 5 – Possible solutions/reform to assist generic production and therefore
access to essential medicines for the future and conclusion…………………...…22

Part 6 – Bibliography……………………………………………………………….25
6.1 Cited Articles/Papers ……………………………………………………….........25
6.2 Cited Articles from Websites/Electronic
6.3 Other cited websites……………………………………………………………...27
6.4 Background Reading……………………………………………………………..28
Chloe Bunn                                   3                    Intellectual Property Law


    „There is nothing more valuable than life‟ - The UNAIDS country coordinator, Dr.
                                       Ruben Prado.
Generic drugs could be the difference between life and death for millions of people in
developing countries, such as South Africa, Malawi and Zimbabwe to name a few,
who are suffering from HIV/AIDS. This article argues that the current patent regime
acts as a barrier to these cheaper generic drugs resulting in a devastating impact on the
poorer people of the world. It will be illustrated that really, we are living in a world
where priority is afforded to Patents over people, “put baldly patents are killing
In support of this argument, the generic industry, and the benefits of these drugs such
as cost and generic competition will be explored. It will be submitted that the WTO
TRIPS agreement 1994 since January 2005 increases monopoly over life-saving drugs
by requiring countries to institute patents on the products; this has a potentially
disturbing affect on the generic industry particularly in India, and therefore on the
developing countries, such as sub-Saharan Africa, who greatly rely on these generic
drugs. Proposals for solutions to the problems these countries face will be addressed
and Brazil’s ‘radical’ move to defy the pharmaceutical companies and manufacture
their own generic drugs will be considered. In conclusion if these life-saving drugs
were taken out of the patenting process, or the safeguards in the TRIPS agreement
were strengthened and cheap generic versions of these drugs were made readily
available to these countries, the crisis in countries like Africa would be eased.

 Tina Rosenberg - The New York Times Magazine 28th January 2001
Chloe Bunn                                       4                    Intellectual Property Law

                                            PART 1

Introduction, a look at what defines a generic drug, and the motivation for this

1.1 Why is it that in western countries AIDS is not the ‘unstoppable killer’ that it is in
the Sub-Saharan Africa? The answer lies in the availability of anti-retroviral
medications2 (ARVs) which although have curtailed the deaths of the majority of
suffering patients in western countries, they have been largely unavailable to the
poorer countries of the world due to their high cost. Cheaper generic drugs therefore
have been of extreme importance to these countries in providing a means of accessing
essential medicines.

1.2 A generic drug has been defined as being ‘identical, or bioequivalent to a brand
name drug in dosage form, safety, strength, route of administration, quality,
performance characteristics and intended use’3. Basically, generic drugs are a
chemically identical ‘copy’ of a brand named product4, and sold after the patent on
the originator drug has expired, at a cheaper price. According to William Haddad5, it
is estimated that when a generic drug first comes to the market the prices average at
66.6% of those of the brand name originator drug; and in the poorer nations of the
world, a drug in generic form can average 1-5% of the patented price6.

1.3 Although this article acknowledges the fact that many issues influence the
availability of essential medicines7, it will be illustrated as the main focus of the
dissertation, that the decisions made in the developed countries i.e. the current
intellectual property regime, greatly impact and restrict the access to affordable
generic medicines in the poor and developing nations. The disturbing rate at which the

  These are recommended as first line treatment for patients with AIDS by the World Health
  The US Food and Drug Administration Centre for drug evaluation and research – Office of generic
drugs - http://www.fda.gov/cder/ogd/#Introduction
  For example Paracetamol is the generic form of Panadol® or Tylenol® -
  William Haddad has had much experience in the manufacturing and political side of the generic
industry, for example, among his other ventures he has been chairman of the CEO of the US Generic
Pharmaceutical Industry Association for 10 years.
  „Generic Drugs: The Solution or the Problem?‟ William Haddad
  For example poverty, financing and lack of resources etc.
Chloe Bunn                                         5                     Intellectual Property Law

HIV/AIDS epidemic is affecting the poorer countries of the world provides a real time
example of this and is the motivation for this article.

1.4 To illustrate the scale of the problem of HIV/AIDS, UNAIDS figures reveal that
although Sub-Saharan Africa has just over 10% of the world’s population, ‘it is home
to more than 60% of all people living with HIV/AIDS8‟ and it has been estimated that
a mere 8% of people receive treatment in the form of ARVs9 due to the high costs of
patented pharmaceuticals. It is not hard to believe therefore that the disease is the
leading cause of death in these parts of the world; it has been estimated that in 2003
the total number of deaths caused by the disease was 2.2 million10, with the numbers
rising to 2.3 million in 200411. The number of people now living with HIV/AIDS in
sub-Saharan Africa is worryingly 25.4 million, and as a result of the pandemic the
average life expectancy which should be 62 years, has been alarmingly reduced to 47
years12. Based on these shocking figures it is predicted that by 2010 the populations of
many countries13 will greatly decrease because of the number of people dying of
AIDS – and frighteningly, the population growth rate in Zimbabwe and Namibia will
have slowed to almost zero14. Even where there is evidence of decline in the disease
levels in countries such as Ethiopia, Kenya and Uganda, the future is still uncertain.

1.5 This future uncertainty is no doubt partially a result of the World Trade
Organisation’s Trade-related Aspects of Intellectual Property Rights (TRIPS
Agreement) 1994 15 which is currently a cause for grave concern amongst the poorer
countries of the world, and it will be illustrated why this is so in the main thrust of the

  UNAIDS Factsheet - http://www.unaids.org/bangkok2004/factsheets.html - Based on the 2004
„Global report on the HIV/AIDS epidemic‟.
  Article: „Providing drug treatment for millions‟ - http://www.avert.org/drugtreatment.htm
   UNAIDS (2004) „Report on the Global HIV/AIDS epidemic‟, -
   At one end of the scale, the life expectancy at birth in Zimbabwe has greatly decreased from 52 years
in 1990 to 34 years in 2003 see http://www.avert.org/aidsimpact.htm - Stanecki K. A. (2002) „The
AIDS pandemic in the 21st Century’, Draft Report, July 2002, XIV International Conference on AIDS,
Barcelona, US Census Bureau.
   Including Botswana, Central African Republic, Lesotho, Malawi, Mozambique, Rwanda, Swaziland,
Zambia, and Zimbabwe.
   „The impact on life expectancy‟ - http://www.avert.org/aidsimpact.htm
   TRIPS = Agreement on Trade Related Aspects of Intellectual Property rights 1994
Chloe Bunn                                       6                    Intellectual Property Law

                                            PART 2

The reason why this article favours generic drugs over patented

2.1 The problem with patents

The currently over-protective patent laws allow large Multinational Corporations
(MNCs) such as Glaxo-Smith Kline, Merck & Co, and Bristol-Myers Squibb, which
are some of the leading producers of US pharmaceuticals, to place „profits over
people‟16. The system permits a select few pharmaceutical companies to have the
advantage of a twenty year monopoly over life-saving anti-HIV/AIDS drugs; this
power then enables the MNCs to gain high profit margins because they are able to
control the price of their drug, for example, it is estimated that Glaxo-Smith Kline
makes a profit of £6 billion per annum17. This has been made equally possible to
achieve by western governments who are able to meet the high price demands from
these corporations. Unfortunately while this profit is enjoyed by the few granted
patent protection, this market exclusivity makes these drugs unaffordable to
developing countries resulting in a devastating effect on the poorer people of the

2.2 The benefits of generic drugs

An obvious advantage to generic drugs therefore, is that because they can make use of
expired patent products, the generic manufacturers do not have to spend large
amounts of their budget on research and development costs that the MNCs do. For
example, although the approximate expenditure of R & D greatly varies, in a recent
report it was estimated that Glaxo-Smith Kline spends $500 million, over a period of
about thirteen years, to develop a major drug18. This also means that there is not the
pressure on generic manufacturers that MNCs have in recouping the initial
expenditure. Therefore the generic industry can afford to lower the price barrier that
restricts developing countries from accessing essential anti-HIV/AIDS treatment.

   Article – „Profits over People‟ AIDS India’s National Magazine -
   The Guardian Friday February 4th 2005 – „Raking it in – How much is too much?‟
   The Guardian Friday February 4th 2005 – „Raking it in – How much is too much?‟
Chloe Bunn                                     7                   Intellectual Property Law

Table 1
             ARV Combinations                               + Nevirapine (200mg)
              1. Combivir (brand)                    Brand Drug             Generic Drug
          (AZT 300mg + 3TC 150mg)                       $116                    $96
              Duovir (generic)
       (AZT 300mg + 3TC 150mg)                           $80                     $60
        2. D4T 40mg + 3TC 150mg (brand)                  $72                     $52
            D4T 40mg + 3TC 150mg
                                                         $52                     $47
      3.  D4T 40mg + ddI 100mg                           $65                     $45
     D47 40mg (generic) + ddI 100mg (brand)              $64                     $44
         4. Triomune (generic) (D4T 40mg                              40
                   + 3TC 150mg                             *Lowest price in Uganda*
                + Nevirapine 200mg

The table above indicates the difference in price between brand named and generic
ARV combinations (at lowest retail price) in Uganda for one month’s treatment

There is no clearer example of current price barriers when it is considered that the
average monthly salary for a Ugandan Farmer is between $55 and $138, yet to receive
one month’s supply of the brand-named ARV combination ‘Combivir + Nevirapine’
it would cost $11620. This can be compared to the most common, least expensive
generic ARV drug on the market ‘Triomune’, which is produced by the Indian generic
manufacturers Cipla and costs just $40 a month. It is therefore plain that generic
medicines offer an „affordable difference between life and death‟21.

Because generic drugs cost less than brand name or innovator counterparts another
benefit is that they play an important role in drug ‘competition’. This competition can
drive down the prices of patented pharmaceuticals; for example, in 2001 following the
significant price reductions from two Indian generic drug makers, Bristol-Myers
Squibb agreed not to use its patent in South Africa on the AIDS drug Zerit to block
the country from legally buying generic copies of Zerit, but in doing so they offered to

   Access to Antiretroviral therapy in Uganda – Kampala June 2002
   See „Access to Antiretroviral Therapy in Uganda‟ page 15 www.oxfam.org.uk/what_we_do/
   Generic Medicines – The Solution or the problem by William (Bill) Haddad page 5
Chloe Bunn                                        8                     Intellectual Property Law

sell Zerit for $54 a year to Africa as opposed to $270 from the previous year22. This is
an obvious advantage because it encourages the MNCs to become more willing to
supply their drugs at a cheaper rate to poorer countries which results in an increase in
the availability of the ARV drugs. Many argue that the benefit of generic competition
is conditional upon whether the brand name companies respond to this competition or
not, and claim that often they do not. However even if this were the case, generic
competition is still advantageous as there may be competition between generic drugs
themselves; i.e. the increasing number of manufacturers producing the same generic
drug means that the average price of a generic drug will inevitably decrease. It was
found that when 1-10 generic corporations manufacture and distribute generic forms
of a particular drug, the price of that drug averages about 60% of the brand named
price; when more than 10 generic manufactures enter the market, the average price
declines to less than half of the brand name price.23

2.3 As a small note to illustrate the real time effects of generic drug availability,
looking at things on a larger scale, because the patenting system facilitates market
monopoly, pregnant women in sub-Saharan Africa cannot afford the necessary drugs
which prevent mother to child transmission of the HIV/AIDS disease and it is
estimated that approximately 200 babies are born HIV positive each day in South
Africa. The availability of the cheap generic drug Nevirapine can greatly ease the
crisis in developing countries in the future as the use of Nevirapine can reduce Mother
to child transmissions by half24.

To summarise, generic drugs are obviously favoured above patented pharmaceuticals
because a) the price of patented pharmaceuticals is too high to be accessible to places
like sub-Saharan Africa b) patenting pharmaceuticals means that monopolies are
created in favour of MNCs c) generic drugs benefit the economy by ‘holding down’
national spending on prescription drugs d) generic drugs provide a ‘benchmark’ for

   The Wall Street Journal March 15th 2001 - „Bristol Myers Squibb offers to sell AIDS drugs in Africa
at below cost‟ -http://www.aegis.com/news/wsj/2001/WJ010312.html
   See article „How increased competition from generic drugs has affected prices and returns in the
pharmaceutical industry‟ http://www.cbo.gov/showdoc.cfm?index=655&sequence=0&from=1
   See „Effort to make the Government Provide Nevirapine to pregnant HIV+ women to prevent mother
to child transmission of HIV‟. http://www.cptech.org/ip/health/sa/mtct.html
Chloe Bunn                                         9                     Intellectual Property Law

low prices through competition25 and e) most importantly „using generic
antiretrovirals offers the possibility of treating twice the number of people with the
same amount of money.26‟

2.4 Why have the MNCs lobbied against Generic drugs? Are there any drawbacks to
generic drugs?

The most obvious concern is that generic drugs are not the same standard of quality as
the patented pharmaceuticals and this is what used to be predominantly argued by the
large pharmaceutical companies27, often in an attempt to continue to hold market
share and protect their profits. Despite the stigma which may have been attached to
generic drugs in the past i.e. that they are a „second class‟ medicines28, their quality
has been defended by the US FDA which regulates both generic and brand named
pharmaceuticals29. Another argument which the MNCs have used to discourage the
use of generic drugs is that generic drugs look different to patented pharmaceticals
and the incorrect useage of the drugs could lead to a more resistant strain of the
disease causing more harm than good; a common argument was that ‘uneducated
people cannot stick to their medicine on time as patients in the United States can’.
This is based on fallacious grounds; however if this were true it would surely mean
that people in the poorer countries would not be able to use patented pharmaceuticals

It can be said quite confidently that generic drug manufacturers are generally seen as a
threat to the MNCs profits; this belief is not unfounded as the CBO30 examined 21
brand name prescription drugs in its’ retail pharmacy data set and noted that at the end
of the year in which the patent on the originator drugs had expired those drugs lost an
average of 44% of their market to generic drugs.31 While this article acknowledges the

   For example, according to an Oxfam briefing paper „Generic competition, price and access to
medicines‟ it was found that due to the importation of generic drugs and price cuts induced by generic
firms, the number of patients that were able to be treated in Uganda was increased from 962 – 3000
(2002 report), see http://www.oxfam.org.uk/what_we_do/issues/health/bp26_generic.htm
   See article „Importation of generics cuts price in half‟ www.oxfam.org.uk/press/releases/tac.htm
   Such as Warner-Lambert and its subsidiary, Parke-Davis.
   „Generic Medicines: The Solution or the Problem?‟ By William Haddad page 9
   It was a common belief in developing countries that generic drugs were ‘sub-standard’, see quote:
„just because we are poor does not mean we should be treated with second class medicines.‟ Article:
‘Generic Medicines: The Solution or the Problem?‟ – William Haddad page 9
   CBO = Congressional Budget Office USA
   See article „How increased competition from generic drugs has affected prices and returns in the
pharmaceutical industry‟ at http://www.cbo.gov/showdoc.cfm?index=655&sequence=0&from=1
Chloe Bunn                                        10                     Intellectual Property Law

fact that the MNCs should be able to reap the rewards for their innovative drugs, Bill
Haddad’s argument that ‘if the same drugs are life saving and the public is dying on
account of non-affordability of the drug, then the MNCs should be ready for the
option of bringing the price to the level of the dying person’s affordability,32’ is
heavily supported.

  Interview William (Bill) Haddad a strong advocate of generics across the globe - „India should strive
for postponement of WTO deadline to 2016‟. Interview with William Haddad Thursday 25th December
2003 by Prabodh Chandrasekhar
Chloe Bunn                                       11                    Intellectual Property Law

                                             PART 3
Barriers to Generic Drugs

3.1 In order to understand how generic drugs are affected by the current intellectual
property regime, some of the different ways in which generic drugs can be
legitimately manufactured or accessed must first be established.

A. ‘Voluntary licenses’

Voluntary licenses can be granted by the Multinational Corporations (MNC) to
governments or generic companies which means that they would then be able to
legally produce generic versions of certain patented drugs. For example, recently33 the
world’s largest pharmaceutical manufacturer of AIDS drugs, GlaxoSmithKline,
granted a voluntary licence to Cipla-Medpro34 a generic company in South Africa, for
the importation and sale of generic versions of antiretroviral medicines including its
patented drugs lamivudine, zidovudine and a combination of the two35. This would
appear to be a model solution to the developing countries’ needs in accessing
affordable medicines; however it is unsurprising to discover that generally the MNCs
refuse to grant voluntary licenses. The reason for this is that as well as seeing generic
drugs as a threat to their profits when they are sold in the poorer countries, the
pharmaceutical industry fears also that the drugs will „find their way back into the
richer markets.36‟

B. Donations

For some products the MNCs generously donate their medicines to developing
countries37 especially in times of crisis; however although this no doubt makes access
to drugs easier, the donations are too infrequent and the drugs to be donated are often
selectively chosen enabling countries to treat a small number of „opportunistic fungal
infections in HIV/AIDS patients38‟; this alone cannot curtail the majority of deaths in

   14th December 2004
   Cipla-Medpro is a subsidiary of the major Indian manufacturing company Cipla which will be
mentioned later on this dissertation.
   See „Glaxo grants Cipla AIDS-Drug Licence‟ http://allafrica.com/stories/200412150122.html
   „Brazil to break AIDS drug patents‟ 1st December 2004 – http://news.bbc.co.uk/2/hi/health/4059147
   For example Pfizer and the South African Government initiated a program in 2000 ‘The Diflucan
Partnership Program‟ which made their patented AIDS drug ‘Diflucan’ available for free in South
Africa with no time or dollar limit. This program has extended to other countries since then.
   See Pfizer „Seeds of hope‟
Chloe Bunn                                  12                   Intellectual Property Law

these countries and the patent regime still allows for control over the many other life
saving drugs unavailable to the poorer nations.

C. Process patents rather than product patents: before 2005

As noted above, anti-HIV/AIDS drugs cannot be afforded in poorer parts of the world
such as sub-Saharan Africa, unless they can be cloned in the form of a generic drug.
The generic drug industries have been able to legally copy the originator drugs
because it was the process of making the drug that was protected by patent laws and
not the product itself; this means that 3rd parties, i.e. generic drug industries, could
produce the same drug by manufacturing the product through another process than
that already protected under patent law. This method is of extreme importance and
countries such as India which have the means to manufacture these drugs have been
permitted to export them to countries which do not have a thriving generic
pharmaceutical industry. Sub-Saharan Africa is a prime example; the people are
therefore dependant on these generic imports. The problems that the generic industry
and this method face in relation to the TRIPS agreement will now be illustrated

3.2 The legislative barriers: The potentially disastrous effects of the provisions that
hinder access to affordable generic drugs.

The WTO TRIPS Agreement

When the member countries joined the WTO they signed several agreements and
agreed to amend their domestic laws in order to conform with the international trade
rules. The implementation of one of these agreements, the TRIPS agreement, poses a
huge threat to accessing essential generic medicines in poorer countries. One reason
for this can be found under article 27 which states:

27 (1) „Subject to the provisions of paragraphs 2 and 3, patents shall be available for
any inventions, whether products or processes, in all fields of technology, provided
that they are new, involve an inventive step and are capable of industrial

Following this article, article 28 (1) (a) states that a product patent confers on its
owner the exclusive right to prevent third parties from making, using, offering for
sale, selling or importing for these purposes the product. This means that as well as
imposing twenty year patents on all new products, TRIPS effectively abolishes the
Chloe Bunn                                          13                      Intellectual Property Law

right to manufacture generic medicines using the non-infringing patent process

2005 marks the year of arguably the greatest impact of these provisions in the TRIPS
agreement as middle-income countries were granted until the 1st January this year to
start granting patents for processes and products. This is therefore an area of current
concern as countries such as India, have had to adjust their patent law to comply with
TRIPS. The negative consequences that flow from this change are obvious, „Basically
the TRIPS agreement that becomes virtual world law in 2005…will terminate the
lifeline of essential medicines traditionally exported to poor nations by India39‟ this
will mean that there will also be a reduction of the important generic competition
which drives down the prices of brand name drugs, and the provisions pose a huge
threat to the future of the generic industry40.

It has been remarked that the rules in TRIPS „have little to do with free trade and
more to do with the lobbying power of the American and European pharmaceutical
industries41‟. It would appear to be true that because MNCs see generic drugs as a
threat they use their patents as a weapon, along with their money and powerful
western governments, to lobby against greater access to them in an attempt to protect
their profits; as a point to note, this would appear to contradict the fundamental
element of what TRIPS aims to achieve i.e. „that the measures and procedures to
enforce intellectual property rights do not themselves become barriers to legitimate

The implementation of the TRIPS agreement has also opened the doors for ‘TRIPS-
Plus’ agreements which contain unnecessarily rigid provisions which further hinder
generic production42; „ the name of the game is to extend patents and block

   ‘Generic Medicines – The Solution or the problem‟ by William (Bill) Haddad page 1
   India will be focused on later as an illustration of how the Generic industry is affected by the current
intellectual property regime and how this in turn affects the regions of sub-Saharan Africa.
   „India‟s Choice‟ The New York Times Editorial January 18th 2005
   An illustration and the effects of a TRIPS-Plus agreement will be given in Part 4 Study 1: India.
Chloe Bunn                                     14                    Intellectual Property Law

competition43‟ . Therefore any safeguards within TRIPS which might assist generic
production must now be explored.

3.3 Compulsory Licensing as an „escape hatch‟ for countries to manufacture or
import generic drugs: Article 31 TRIPS – „Other Use without authorisation of the
right holder‟

It would appear that the ‘safeguard’ of compulsory licensing serves to restrict the
monopoly rights given to patent holders and therefore would assist in the availability
of generic drugs. In basic terms a compulsory licence means that the government of a
WTO Member country can grant licences to a government agency or company for the
production or importation of a patented drug without the permission of the patent
holder in situations of national emergency, or for exporting medicine to countries
facing public health emergencies. The legal basis for compulsory licensing is found
under Article 31 TRIPS which allows for WTO member states to:

„use the subject matter of a patent without the authorisation of the right holder,
including use by the government or third parties authorised by the government‟

In effect, by allowing production of the drug without the patent holder’s consent,
Article 31 of the TRIPS agreement would appear to overcome the problem of TRIPS
as a legislative barrier to generic drugs as it acts as an „escape hatch44‟ to the product
patent regime under article 27. However this provision is not without many artificial
barriers also which block its use, including apparent contradictions and confusion
over the terms, resulting in most governments not making use of the provision which
in turn results in an adverse affect on the availability of generic drugs. One of the
most prominent reasons for its lack of implementation has been due to the fact that the
majority of developing countries do not have the sufficient means both in terms of
economic efficiency and manufacturing capability etc, to produce ARVs. For example
in places like India it would be relatively simple to grant a compulsory licence for the
production of patented drugs as the pharmaceutical market is very large; however in

   Testimony of William Haddad before the Committee on International Trade, European Parliament on
TRIPS and Access to medicines – see http://lists.essential.org/pipermail/ip-health/2005-January
   ‘Generic Medicines the Solution or the Problem?‟ - William (Bill) Haddad page 1
Chloe Bunn                                      15                    Intellectual Property Law

sub-Saharan Africa where unfortunately the AIDS disease is most severe, the smaller
market means that it might be difficult to establish economically viable production45.
The next question that arises is whether the member states can issue compulsory
licensing for importation, as this would greatly assist developing countries in
accessing cheap generic drugs from other countries with adequate pharmaceutical
sectors. The restrictions under article 31 (f) which states that “…any such use shall be
authorised predominantly for the supply of the domestic market of the market of the
Member authorising such use;” meant that this too presented a problem in that it
limited the amount of generic drugs which a country could export to poorer countries
unable to manufacture their own drugs; developing countries would only be able to
import generic drugs from countries where the patents have expired or the
pharmaceuticals are just not patented. Paragraph 6 of the DOHA declaration
addressed the problem46 and on the 30th August 2003 there was decision to lift the
TRIPS restrictions on compulsory licensing for export of generic medicines to
countries that „lack the capacity to manufacture the drugs themselves‟47. The generic
ARVs currently imported by the developing countries are not the major concern here
as they make use of expired patents; therefore the concern is focused on that of future
developments in AIDS treatments. The newer life saving drugs on the market are
bound to become more advanced in future years due to the ever increasing innovation
within the pharmaceutical industry, however these will inevitably not be easily
accessible to countries such as sub-Saharan Africa. The patent restrictions are not the
only problems that developing countries face in their struggle for generic medicines;
in practice compulsory licensing is often „controlled by a political process where the
vote of one WTO member can prevent implementation48‟ and also by using the threat
of trade sanctions, the richer countries tend to bully poorer countries into disregarding
their rights49. For example, the US often uses bilateral pressure to stop poorer

    See „Implications of the DOHA Declaration on the TRIPS agreement and Public Health‟ Page 19 -
www.who.int/medicines/library/ par/who-edm-par-2002-3/doha-implications.doc
    The DOHA Declaration aimed to „promote access to medicines for all‟ and under paragraph 6
recognised that “WTO members with insufficient or no manufacturing capacities in the pharmaceutical
sector could face difficulties in making effective use of compulsory licensing under the TRIPS
   „Undermining Access to medicines‟ Oxfam Briefing note June 2004
    „Generic Medicines: The Solution or the Problem?‟ William Haddad page 1
    See ‘US bullying On Drug Patents: One Year After DOHA, Oxfam Briefing Paper no. 33‟
www.oxfam.org.uk/policy/papers/24global fund.html
Chloe Bunn                                       16                     Intellectual Property Law

countries from using compulsory licensing for pharmaceuticals50. The results of this
dilemma would appear ultimately to mean that developing countries have no choice
but to eventually become completely reliant upon the expensive patented
pharmaceuticals, a fate which the generic drug industry has for years desperately tried
to avoid.

3.4 Multinational Corporations

It has already been mentioned why MNCs see generic drugs as a threat and that often
they will spend a great deal of time and money lobbying to block other means to
accessing essential medicines. The following case study provides an example of an
aggressive attempt by the MNCs to protect their patent rights above public health in
South Africa.

Case study
The 'Medicines Act' 1997, was introduced by the South African government with its
intended purpose being to bring down the price of essential medicines and promote
national health above patent rights. The backlash was that the Pharmaceutical
Manufacturers' Association and forty brand name companies then took the South
African government to court to block the Act, naming Nelson Mandela as the main
defendant and relying on the argument that the Act „broke their patent rights and
would harm their profits51‟. They withdrew the case in 2001 after a huge public
outcry, but „this aggressive action revealed to the world the strength of the
pharmaceuticals' grip on the availability of essential medicines, and their desire to
protect their patents at all costs‟52.

   For example, „the US is actively pressuring South Africa and Thailand against the use of compulsory
licenses of pharmaceuticals to treat AIDS‟ See http://www.cptech.org/ip/health/cl/faq.html
   http://www.peopleandplanet.org/stopaids/briefing.access.php - „Treat AIDS now – Blocking Access‟.
    See Treat AIDS now – Blocking Access‟.
http://www.peopleandplanet.org/stopaids/briefing.access.php - „Treat AIDS now – Blocking Access‟.
Chloe Bunn                                       17                     Intellectual Property Law

                                              PART 4

4.1 Study 1 - India: A real time illustration of how the Generic industry is affected by
the current intellectual property regime and how this in turn affects the regions of sub-
Saharan Africa.

India has been named the „world‟s supplier of cheap generic AIDS drugs53‟ as it treats
patients in over 200 countries54. The Indian Firm Cipla has notably done
„groundbreaking work in developing an affordable AIDS treatment mode’55 by
reducing the cost of AIDS medications from $12,000-$ 15,000 to $140. India has
been able to allow their generic industry to flourish by using ‘reverse engineering56’
and the legitimate method of manufacturing generic drugs through a process different
to that of its originator drug57. Since Indian law had no product patent constraints
before 2005, generic companies have used drugs patented by different companies to
develop combination pills which are extremely popular in treating HIV/AIDS. In
developing countries; in sub-Saharan Africa particularly, there is a huge reliance on
having these generic drugs imported.

However India is one of the many countries who are a member of the World Trade
Organisation and signed up to the TRIPS agreement. This meant that by the 1st
January of this year, the Indian Government had to comply with the protection of
‘product patents’ regime under article 27(1) TRIPS. On the 26th December 2004, the
Indian government issued a Patent Ordinance which made several amendments to
India’s current patent regime (Patent Act 1970) in order to fulfil their obligation to the
WTO. Many of the provisions contained in the Ordinance are unnecessarily
constraining and critics have described these as ‘TRIPS-Plus’ as they go beyond what
is required to be in line with the TRIPS agreement, and it does not take full advantage
of the WTO safeguards for the protection of public health58. The ordinance includes
affording full TRIPS coverage to pharmaceuticals; among many other amendments59,
it requires patents to be granted on products, it limits the grounds on which objections

   The New York Times, January 18 2005
   Medicins Sans Frontieres claims that about half of the 700,000 people receiving antiretroviral
treatment for HIV/AIDS in developing countries relied on drugs from Indian generic drug makers.
   This involves chemists ‘dissecting’ a patented molecule.
   Refer to paragraph 3.1 C above for more information.
   See „Global Day of Action against Indian Patent Ordinance‟ 26th February 2005
   Over 70 amendments in total.
Chloe Bunn                                        18                     Intellectual Property Law

to patent applications may be made, and restricts the scope of compulsory licensing.
Y K Hamied, chairman of Cipla Ltd, argued that the compulsory licensing provision
in particular should be amended;60 as it was illustrated earlier that restraining
compulsory licensing leads to a greater restriction in the availability of generic drug
production and it also gives MNCs a greater chance to abuse the patent system by
creating unfair monopolies61.


Indian law states that the Ordinance will lapse if it not ratified by lawmakers within
six months of the issue date; since initially researching this area, the Indian Parliament
went into session on the 25th of February62 and on the Friday 18th March, despite
objections from the opposing political parties63, the government introduced the
‘Patent Bill 2005’ which replicates that of the controversial ordinance promulgated in

The negative effects of the new regime on the accessibility of generic drugs

The effects of this more ‘stringent’ intellectual property regime are predicted to
increase prices for essential drugs as it will reduce the advantage of competition that
the generic drugs provide; the balance of interests will therefore become more heavily
in the favour of the MNCs resulting in a greater control over prices. In response to
this criticism, Ajit Danji (Director General Organisation of Pharmaceutical Producers
of India) argues that because over 95% of the drugs in the World Health Organisation
list of essential drugs are already out of patent they will continue to be available at
low prices; plus the National Pharmaceutical Pricing Authority (NPPA) will keep on
monitoring medicine prices. This is indeed a valid point as the rules do not apply to
drugs which were patented before 1995 which inevitably means that Cipla can
continue to sell its widely distributed generic version of the HIV treatment AZT64;
however the changes appear not to take into account the needs of poorer developing

   This was published in a report recently by the Indian Drug Manufacturers Association.
   The changes were also heavily opposed by many groups including the Affordable Medicines
Treatment Campaign (AMTC); of course the MNCs have backed these changes to the law as it is very
much tilted in their favour.
   Once Parliament goes into session, an Ordinance lapses within six weeks if a consensus is not
reached between the government and the parties who oppose it.
   Namely the Left parties in particular Bhartiya Janeta Party (BJP)
   See „New patent law to shake up drug industry‟ - http://lists.essential.org/pipermail/ip-health/2004
Chloe Bunn                                        19                     Intellectual Property Law

countries. As noted above because the twenty year patent protection is afforded to
products, a new or enhanced ARV or even a cure one day may be available to India
through compulsory licensing, but will be out of reach for regions such as sub-
Saharan Africa because a) It is unlikely that many regions of Africa have the
capabilities to manufacture drugs through compulsory licensing, b) the amendments
‘prevent least developed countries from requesting the export from India of generic
versions of a medicine that is not under patent in the least developed country in
question.65‟ and c) MNCs will have complete monopoly over prices66. Also it does
not seem to be considered that AIDS can only be treated in ‘half measures67’ and „for
HIV patients unresponsive to the currently available formulations, access to the more
expensive second-stage AIDS drugs is critical68‟ ; the new anti-AIDS drugs that will
cost more than basic ‘initial combinations’ will be out of reach to these sufferers.

In summary the Indian government in complying with TRIPS has gone too far and the
provisions in the Bill are set to adversely affect the Indian generic drug industry
which is relied upon by millions as a means of accessing affordable HIV/AIDS drugs.
Although the government has plans to negotiate with political parties to obtain
changes to the bill, these have been viewed as „far from satisfactory in terms of
protecting and ensuring the public‟s future ability to access affordable medicines and
healthcare69‟ and it remains to be seen how steady the grounds on which the future of
the generic industry in India stands.

   Criticism put forward by the „Affordable Medicines and Treatment Campaign’ (AMTC) -
http://lists.essential.org/pipeline/ip-health/2005-January/007368.html - „Indian Trips Legislation under
     There was also the fear by many local industries that ‘evergreening’ would be permitted; this would
further hinder generic drug production as it would mean that multinationals would be granted patents
even when they make minor changes to drugs so that their patent lives get extended, thereby delaying
the introduction of generic medicines. However it has been proposed that this will not be permitted
under the Bill.
   I.e. Many patients do not respond positively to some of the ARV medicines available.
   See „New Indian Patent Law pushes up prices of anti-AIDS drugs‟
   See http://lists.essential.org/pipermail/ip-health/2005-March/007625.html
Chloe Bunn                                     20                    Intellectual Property Law

4.2 Study 2 – Brazil’s ‘radical move’: An example of how a country can put patients
over patents and reap vital rewards from the use of generic drugs.

Brazil has been considered to provide an excellent example of a model solution to the
AIDS epidemic in poorer countries. The Brazilian government in 1996 felt that the
prices of anti-retroviral treatments were „needlessly out of reach to the vast majority
of the world‟s population70‟ and was willing to „do anything necessary to source the
lowest cost quality ARVs71‟. The governement therefore implemented a national
treatment programme: ‘Programme on Universal Access to Treatment of HIV/AIDS’.
Through this programme Brazil has made cheap generic versions of the unaffordable
drugs themselves by setting up their own non-profit generics manufacturing company
to provide free ARVs for all those who need them. Since 1996 Brazil has cut the
number of people dying in half72 and the hospitalisation rate has declined by 80%;
because of this decline in hospitalisations and a decreased need to treat opportunistic
infections, the government saved a total of $472 million (US Dollars) between 1997
and 1999 making the programme almost fund itself73! Another strategy that Brazil has
adopted in relation to accesing these essential medicines is the aggressive negotiation
tactics which the government has upheld towards MNCs with regards to the prices of
their patented pharmaceuticals. For example, Brazil has often threatened to break
patents and make some kinds of ARV drugs or import cheaper versions of them from
other countries, as this pressurises the MNCs to lower their prices. A recent example
of this took place in December 2004, when the head of the AIDS programme
announced that Brazil intended to break patents on five anti-HIV/AIDS drugs this
year; this initiated Merck & co. to make plans to allow Brazil to make their patented
AIDS drug ‘Stocrim’74. This illustrates that providing the artificial barriers of
compulsory licensing are not an issue, it can be used as a tool for ‘patent busting’ so
that generic drugs can be manufactured in this way. Pedro Chequer75 stated clearly
that any local production would comply with domestic and international laws i.e. the
TRIPS agreement but also announced that „any law, be it national or international,

   „Look at Brazil‟ – www.nytimes.com/library/magazine/home/20010128mag-aids.htm
   ‘Look at Brazil‟ – www.nytimes.com/library/magazine/home/20010128mag-aids.htm
   See „The right fix?‟ http://www.economist.com/agenda/displaystory.cfm?story_id=2020463 page 1
   „Look at Brazil‟ – www.nytimes.com/library/magazine/home/20010128mag-aids.htm
   „Merck to allow Brazil to copy AIDS Drug Stocrim‟ 2nd December See
http://www.bloomberg.com/apps/news?pid=10000086&sid=anv51yxhzdtk&refer=latin America
   Coordinator for the Health Ministry’s sexually transmitted disease and AIDS Department.
Chloe Bunn                                      21                    Intellectual Property Law

that interferes with our ethnical interests, with the Brazilian governement‟s
commitment to universal access to patients, cannot be seriously considered76‟.
Despite aggressive complaints from MNCs, Brazil’s programme has „withstood the
grumbles‟ and stamped out any fallacies that the MNCs were prepared to suggest in
relation to generic drugs77.

   „Brazil to manufacture its own AIDS drugs‟ 29th November 2004 See Reuters Foundation
    Refer to paragraph 2.4 „Why have the MNCs lobbied against Generic drugs? Are there any
drawbacks to generic drugs?‟
Chloe Bunn                                      22                     Intellectual Property Law

                                             PART 5

5.1 Possible solutions/reform to assist generic production and therefore access to
essential medicines for the future.

The current patent laws appear to infringe basic health rights and proposed reforms
are needed to alleviate the grave problems which the world’s poor faces in relation to
obtaining affordable generic medicines.

1. One proposal put forward in an Oxfam report78 would allow generic drug prices to
prevail for greater access to life saving medicines. The proposal is that developing
countries should be allowed the freedom to decide both the „duration and scope of
pharmaceutical patents79‟ and whether or not to exempt certain pharmaceutical
products from patenting. By taking anti-HIV/AIDS drugs out of the patent regime and
therefore out of the competitive market, the price of the drugs available would be
greatly lowered and in fact the prices would mirror those of the current generic ARV
prices. The reasons for this are that a) the monopoly that the MNCs enjoy over these
life-saving drugs will be taken away, and b) poorer countries would no longer have to
rely on the politically complicated ‘safeguard’ of compulsory licensing to produce or
import generic drugs and this would mean that licensing fees would not have to be
paid to a patent holder. It might be questioned who would manufacture these drugs; in
an ideal world there should be private drug companies that were both efficient and
behaved in a socially dependable way, however it seems that a sensible solution to
keep the prices at a low cost would be ‘non-profit’ organisations ideally set up and
funded by the government which would respond to the anti-HIV/AIDS drug demands
of the specific developing countries.

2. There is a definite need for more generic drug production within developing
countries themselves; this too would then be able to meet the market demand of the
developing country it is set up to manufacture for. The approach that Brazil has taken
has shown that this can be done if the government are willing to take a risk to solve
their pandemic. The Governments in sub-Saharan Africa should stand up for their
rights and compulsory licenses should be sought; bullying from the MNCs should be

   See Oxfam’s recommendations in the article „The threat to public health‟ May 2001
Chloe Bunn                                           23                    Intellectual Property Law

halted. If it is deemed too difficult to establish suitable pharmaceutical sectors in the
majority of least developed countries, then following Brazil’s approach, it would
appear that exerting pressure on the MNCs to lower their prices by threatening to
produce or import generic versions of their drugs, would be a step in the right

3. With regards to the legislative barriers and in particular TRIPS, it is suggested that
what is needed in relation to generic drug availability is a more patient-friendly
interpretation of the compulsory licensing provision in order to maximise the
safeguard, and a reasonable interpretation of TRIPS in general. William Haddad
suggests that „poor nations in need should have the right to produce or import
medicines using a compulsory license and paying a fee approximating five percent to
the innovator.80‟ This would serve to balance as best as it can the interests of both the
patent holder and the poorer nations.

4. A fourth suggestion to increase access to cheaper generic drugs is that a greater
number of voluntary licenses should be issued by the MNCs; the argument that this
will lead to a loss in market share and will seriously threaten their research and
development expenditure can be countered by statistical evidence which shows that
the developing countries only account for a tiny proportion, less than 10%, of the
entire pharmaceutical market81.

5.2 Conclusion

The current patent regime hinders the access to life-saving drugs by allowing them to
be monopolised by MNCs making them unaffordable to the poorer countries of the
world. The sensible solution up until now has been to allow the production of low cost
generic drugs, in countries such as India, which offer an affordable alternative to
expensive patented pharmaceuticals and therefore greatly assist in curtailing the
deaths of millions in poorer nations. The threat that generic drugs pose to the MNCs
has resulted in the price of brand named pharmaceuticals being lowered. However as
this dissertation has illustrated, the current intellectual property regime has again

     Generic Medicines: The Solution or the Problem?‟ William Haddad page 25
     Statistics from a 2003 report accessed at: http://www.yale.edu/yjhple/thoen.pdf
Chloe Bunn                                      24                    Intellectual Property Law

stepped in with the implementation of the TRIPS agreement and created another
barrier denying millions the access to generic drugs. These artificial barriers must be
amended as it appears that although „we have the medicines to convert a death
sentence into a chronic illness…we are not using them82‟. It is suggested that although
the compulsory licensing provision and the DOHA Declaration go some way in
providing a safeguard, their application is not without major practical and political
barriers which often prevent their use. It is recognised that the balance which has to be
struck between providing affordable medicines to the poor whilst protecting
innovation can be a delicate one, but in light of the TRIPS agreement and how this
affects the generic industry it appears that this balance has become tilted towards
innovation and overlooks the interests of the suffering in the developing nations. It is
clear that the solutions and reform as suggested above are greatly needed to ensure
public health takes precedence over patent rights and generic drug production is
facilitated not impeded. It should be noted that in attempting to increase the access to
generic drugs this will almost certainly result in the MNCs teamed with the powers of
western governments, using their lobbying powers to prevent this greater access83;
this should be not be allowed at any cost because „if those in need are to continue to
live, diseases are to be prevented and scientific advances are to be promoted and
encouraged84‟; this includes promoting production of generic drugs.

„The trauma of knowing life-saving drugs are readily available but unaffordable is
deeply embedded in the hidden anger of the powerless.85‟

   Quote from President William Clinton, see „Generic Medicines: The Solution or the Problem?‟
William Haddad page 2
   Refer to paragraph 2.4 ‘Why have the MNCs lobbied against Generic drugs? Are there any
drawbacks to generic drugs?’
   „Generic Medicines: The Solution or the Problem?‟ William Haddad page 4
   „Generic Medicines: The Solution or the Problem?‟ William Haddad page 13
Chloe Bunn                                25                Intellectual Property Law


6.1 Cited Articles/Papers

„India‟s Choice‟ The New York Times Editorial January 18th 2005

„Raking it in – How much is too much?‟ The Guardian Friday February 4th 2005

6.2 Cited Articles from websites:

 „Global report on the HIV/AIDS epidemic‟. UNAIDS

„The AIDS pandemic in the 21st Century’, Stanecki K. A.
(2002) Draft Report, July 2002, XIV
International Conference on AIDS, Barcelona, US Census Bureau.

„Providing drug treatment for millions‟

„The impact on life expectancy‟
- http://www.avert.org/aidsimpact.htm

AIDS „Profits over people‟ Walden Bello, Frontline – India’s National Magazine July
31 – August 13th 2004

„Access to Antiretroviral therapy in Uganda‟
Oxfam Report, Kampala 2002

„Generic Medicines – The Solution or the problem‟ by William (Bill) Haddad
October 21st 2004

„Bristol Myers Squibb offers to sell AIDS drugs in Africa at below cost‟ The Wall
Street Journal March 15th 2001

„How increased competition from generic drugs has affected prices and returns in the
pharmaceutical industry‟ June E. O'Neill Director Congressional Budget Office
article July 1998
Chloe Bunn                                26                 Intellectual Property Law

„Effort to make the Government Provide Nevirapine to pregnant HIV+ women to
prevent mother to child transmission of HIV‟ cp tech – Treatment Action Campaign
14th December 2001

 „Generic competition, price and access to medicines‟ Oxfam Briefing Paper
2002 report.

„Importation of generics cuts price in half‟, Oxfam Press release
29th January 2002

„Glaxo grants Cipla AIDS-Drug Licence‟
December 15th 2004

Brazil to break AIDS drug patents‟ BBC News article
1st December 2004

„Seeds of hope‟ Pfizer
Annual report 2002.

„Implications of the DOHA Declaration on the TRIPS agreement and Public Health‟
World Health Organisation report
June 2002
http://www.who.int/medicines/library/ par/who-edm-par-2002-3/doha-

„Undermining Access to medicines‟ Oxfam Briefing note
June 2004

‘US bullying On Drug Patents: One Year after DOHA‟, Oxfam Briefing Paper no. 33
http://www.oxfam.org.uk/policy/papers/24global fund.html

„Treat AIDS now – Blocking Access‟

„Global Day of Action against Indian Patent Ordinance 26th February 2005‟ Ip
Health Archives Lawyers
Friday 11th February

„New patent law to shake up drug industry‟ Ip Health Archives Ram
Thursday 30th December
Chloe Bunn                                27                 Intellectual Property Law

„Indian Trips Legislation under fire‟ Ip health Mike Palmedo Bridges Weekly Trade
News Digest January 19, 2004. Vol 9, no. 1

„New Indian Patent Law pushes up prices of anti-AIDS drugs‟

„Look at Brazil‟ Tina Rosenberg, New York Times
28th January 2001

„The right fix?‟ from the Economist Global Agenda
1st September 2003

„Merck to allow Brazil to copy AIDS Drug Stocrim‟ Valor Ip Health 2nd December
n America

„Brazil to manufacture its own AIDS drugs‟ Reuters Foundation
29th November 2004

„The threat to public health‟ Oxfam’s recommendations
May 2001 report

6.3 Other Cited Websites/Electronic Sources:





http://lists.essential.org/pipermail/ip-health/2005-January /007394.html





Chloe Bunn                                28                Intellectual Property Law

6.4 Background Reading


Blackstone’s Statutes on Intellectual Property
7th Edition
Andrew Christie & Stephen Gare
Pages 561-572

Intellectual Property Rights in the WTO and Developing Countries
Kluwer Academic Publishers 2001 Edited by Jayashree Watel
Pages 86 – 128


Intellectual Property Quarterly
Issue 2 (2004)
Thompson – Sweet & Maxwell Editor: Dr. Margaret Llewelyn
Article: „Use of pharmaceutical Patents without Authorisation: Some thoughts from
South Africa‟ Andries van der Merwe

Intellectual Property Quarterly
Volume 4 (2000)
London – Sweet & Maxwell 2000 Editor: Professor John N. Adams
Article: „Analysis: Affordable Medicines – TRIPS and the United States Policies‟

Electronic sources:

Article: „Africa wants generic AIDS drugs‟ 01/12/2003

Article: „Drug Companies Vs Brazil: The Threat to Public Health‟

„Declaration on the TRIPS Agreement and Public Health‟
Ministerial Conference
Fourth Session
Doha, 9-14 November 2001

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