Lead Author: Sanya Reid Smith
Additional Author: Mirza Alas Portillo
Organization: Third World Network
Country: Switzerland
Abstract
This submission examines the ways in which trade and investment agreements can restrict access to affordable medicines and thus harm the right to health and the ability to achieve the Sustainable Development Goals (SDGs). It highlights the incoherence between these trade and investment agreement provisions and human rights and the SDGs and makes recommendations to reduce this policy incoherence.
Submission
Impact of trade and investment agreements on access to affordable medicines
(Submission by Third World Network, an international policy research and advocacy organization that focuses on sustainable development with a priority area on the impact of trade and investment agreements on public health in developing countries.)
Intellectual property provisions
The World Trade Organization (WTO) already requires patents on medicines for 20 years for its 162 member countries, except for least developed countries (LDCs) which have transition periods.[1] Since the patented medicines have a monopoly for 20 years via the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), they are much more expensive than their generic equivalents. For example, the patented version of medicines to treat AIDS cost US$15,000 per patient per year, but the generic version only costs US$67 per patient per year.[2]
The United Nations Sub Commission on Human Rights has already stated that: “Since the implementation of the TRIPS Agreement does not adequately reflect the fundamental nature and indivisibility of all human rights, including . . . the right to health, there are apparent conflicts between the intellectual property rights regime embodied in the TRIPS Agreement, on the one hand, and international human rights law, on the other; …”[3]
SDG 3(b) includes the provision of access to affordable essential medicines and vaccines, in accordance with the Doha Declaration on the TRIPS Agreement and Public Health, which affirms the right of developing countries to use to the full the provisions in TRIPS regarding flexibilities to protect public health, and, in particular, provide access to medicines for all. However the TRIPS flexibilities are undermined by the stronger intellectual property (IP) protection (‘TRIPS+’) in some free trade agreements (FTAs), particularly those involving certain developed countries such as the United States and the European Union (see Table 1). Furthermore as a condition of joining the WTO post-1995 a number of developing countries have had to agree to TRIPS+ provisions on medicines[4] and there are another 21 countries going through this WTO accession process,[4] 8 of which are LDCs[vi].
The main TRIPS+ provisions in FTAs are outlined in Table 1.[6]
Even after the UN Special Rapporteur on the Right to Health clearly said in March 2009 that “Developed countries should not encourage developing countries and LDCs to enter into TRIPS-plus FTAs” and “Developing countries and LDCs should not introduce TRIPS-plus standards in their national laws”, the developed countries in Table 1 still sought TRIPS+ on medicine provisions in their FTAs with developing countries eg:
· Japan and Korea in their 2014 RCEP proposals above, even though they are both party to the Convention on the Rights of the Child (CRC)[1] which includes the right to health[2].
· The USA’s proposals for TRIPS+ on medicines in the TPP in 2013 etc[3].
· The European Union (EU) made TRIPS+ on medicines proposals to India in 2010 (eg for patent term extensions for delays in marketing approval and data/market exclusivity for an unspecified period)[4], even though all EU members[5] are parties to the CRC[6] which includes the right to health.
· The European Free Trade Association (EFTA)-Hong Kong FTA with TRIPS+ provisions on medicines was concluded in 2011,[7] even though all the EFTA countries[8] are parties to the CRC[9] which includes the right to health.
Effects of TRIPS+ provisions
A ban on pre-grant patent opposition prevents other countries from following India’s successful use of pre-grant oppositions to ensure access to various generic medicines.[10]
The World Health Organization (WHO) has an economic model of the impact of these TRIPS-plus provisions on medicine consumption and a country’s generic medicine manufacturers. When the WHO model was applied to Colombia, whose FTA with the US entered into force in May 2012, it found that the effect of most of these TRIPS-plus provisions is that Colombia would require an extra US$1.5billion to be spent on medicines every year by 2030.[11] If this were not spent, Colombians will have to reduce their medicine consumption by 44% by 2030.[12]
A study of the impact of the TRIPS-plus provisions of the Jordan-USFTA (entered into force December 2001; study period up to 2006) found that: one hospital alone has increased its medicine spending six-fold, medicine prices in Jordan have already increased 20% since 2001 when the FTA began, over 25% of the Ministry of Health’s budget is now spent on buying medicines, data exclusivity has delayed the introduction of cheaper generic versions of 79% of medicines launched by 21 multinational companies between 2002 and mid-2006 and ultimately the higher medicine prices are threatening the financial sustainability of government public health programs.[13]
The extension of patent terms alone (beyond the 20 years required by TRIPS) has been calculated by the Korean National Health Insurance Corporation to cost 504.5 billion won (US$529 million) for having to extend medicine patents for 3 years and 722.5 billion won (US$757 million) if it had to agree to a four year extension in its USFTA negotiations.[14]
It was recently estimated that eight years of data exclusivity alone in Canada would have added $600 million to prescription medicine costs alone in the last five years.[15]
Biologic medicines are expected to be 50% of spending and can cost about $569,000/ patient/year, often for a lifetime at monopoly prices.[16] Since they may often not be patentable, the biologic exclusivity monopoly (eg in the TPP) may be the main obstacle to accessing the cheaper generic (biosimilar) versions.
Many have expressed concerns about the way the intellectual property provisions found in USFTAs make medicines more expensive, including United Nations Special Rapporteurs on the Right to Health,[17] the United Nations Committee on Economic, Social and Cultural Rights,[18] the United Nations Committee on the Rights of the Child,[19] the World Health Assembly,[20] the WHO’s Commission on Intellectual Property Rights, Innovation and Public Health,[21] the Global Fund to Fight AIDS, Tuberculosis and Malaria,[22] Ministers of Health from ten Latin American countries,[23] the Ministers of Health[24] of the African Union, the African Union’s Ministers of Trade[25] and the UK Government’s Commission on Intellectual Property Rights[26].
Other relevant provisions
In addition, to the IP chapter provisions, a number of other chapters in FTAs and investment treaties can restrict access to affordable medicines. These include:
· Provisions on medicine and medical device reimbursement systems allow manufacturers more influence on whether they are reimbursed and how much they are reimbursed.[27] This can pressure governments to spend more for the same amount of medicines/medical devices which can restrict spending on other medicines if the budget is capped (eg as it is in New Zealand’s PHARMAC system[28]).
· Investment protection provisions in FTA investment chapters or bilateral investment treaties (BITs). There are 3268 treaties with these provisions, of which 2923 are BITs.[29] These treaties generally:[30]
o have a broad definition of investment (eg including intellectual property, profits and future/expected profits etc) which is protected by the treaty.
o Protect investors’ rights in a variety of ways, including:
§ from indirect expropriation (eg government action(s) that reduce the value of the investment broadly defined as above). Even the US government has recently recognised this could be a problem for revocation of patents and compulsory licensing of patents and so has an exception for it in its more recent BITs and FTAs,[31] however the exception was not in its earlier model,[32] so is unlikely to be in older BITs and FTAs[33].
§ Requiring governments to treat foreign investors fairly and equitably. There is a wide range of other interpretations which governments have also found it difficult to comply with. This can be seen in the statistics for disputes under U.S. trade or investment treaties where: [34]
· 74 per cent of the time when investors win, there has been a violation of fair and equitable treatment (FET)
· FET has been found to have been violated in 81% of the cases won by investors when they allege a violation of FET.
· There is no equivalent exception to FET for compulsory licences, patent revocation etc (the way there is for expropriation) in the current US Model BIT[35] or TPP investment chapter[36].
o Enforce the investment protections via investor-to-state dispute settlement (ISDS) which allows the foreign investor to sue the host government at an international tribunal for unlimited monetary damages (eg for the future profits it could have made if the compulsory licence had not been issued) and compound interest, compounded monthly, which can be at commercial interest rates from the date of the government action[37] (eg issuing the compulsory licence – an important TRIPS flexibility to enable access to affordable medicines[38]).
o A pharmaceutical company is already using these provisions to sue Canada for revoking its patents on two medicines and it wants US$481million in damages,[39] claiming violations of the expropriation and fair and equitable treatment provisions in the North American Free Trade Agreement (NAFTA) with the USA and Mexico[40].
o Concern about these investment provisions have already been expressed by UN Special Rapporteurs on human rights, including the right to health[41] and a number of countries are already withdrawing from or adding safeguards to their new BITs/FTA investment chapters[42].
Furthermore, in all USFTAs since the Chile-USFTA, the US uses the ‘certification’ process to extract additional concessions from the other countries in the FTA, before it allows the USFTA to come into force. This has included further TRIPS+ provisions on medicines in addition to the 5 years of data exclusivity for new medicines - eg the US asked Guatemala to provide an extra 3 years of data exclusivity for new uses of an existing medicine, something not required by its USFTA text.[43] Generally, the US has used the certification process in past US free trade agreements to:[44]
· Extract extra concessions from other FTA countries beyond those in the signed text
· Ensure the implementing laws in other FTA countries interpret ambiguities in the text in favour of the USA
· Write a whole implementing law in its favour and require the other country’s parliament to pass it with no changes
· Force another country’s parliament (Australia) to change its implementing law, after it has passed it, in a way that better suits the USA.[45]
The certification process involves the other countries in the USFTA negotiating the changes to their domestic (eg IP) laws to implement the FTA with the USA. “In order for an agreement to enter into force, the President determines with the advice of USTR whether the FTA partner has met all obligations. A USTR official explained that USTR works with the trading partner to ensure that its IP laws are aligned with the provisions agreed to in the FTA. The USTR official further explained that, at the start of the implementation process, the trading partner provides USTR a comprehensive list of its laws related to each provision in the IP chapter of the FTA. The trading partner also provides USTR a list detailing the intended legal changes necessary to bring its laws into compliance with the agreement. USTR reviews the laws and proposed changes and provides the trading partner with comments regarding their degree of compliance. USTR monitors the changes in the other country, and has numerous exchanges with the trading partner on any legal changes necessary. One USTR official stated that they are careful to ensure that the agreement is implemented exactly as it was negotiated. A USTR official explained that when the legal changes are complete and USTR is comfortable with the new legislation, USTR makes a recommendation to the President for the agreement to enter into force. The administration then makes a determination about the legal compliance before the agreement can officially enter into force.”[46]
This certification process will occur for the Trans Pacific Partnership Agreement (TPP) as it is required by US law to pass the TPP under fast track authority,[47] allowed by the TPP[48] and the US government has already indicated it is considering certification in the TPP.[49] One of the provisions a number of members of the US Congress are unhappy with in the TPP is the duration of biologics exclusivity (they wanted 12 years as in US law, instead of the 5 or 8 year options in the TPP text).[40] The US government has signaled these kinds of changes could be achieved in the certification process.[51]
Recommendations
To ensure developing countries and LDCs can use the TRIPS flexibilities to protect health as set out in SDG 3(b), as recommended by the UN Special Rapporteur on the Right to Health,[52] developed countries should not ask for TRIPS+ provisions and other provisions that may undermine fulfillment of human rights obligations. Developing countries and LDCs should also not agree to such provisions. This applies whether it is in WTO accession negotiations or in FTAs.
Given the TRIPS+ provisions agreed in the TPP and the evidence of the adverse impacts of these provisions, the governments concerned should not ratify the TPP if they want to ensure access to affordable medicines, the right to health and achievement of SDG3(b).
Furthermore, bilateral investment treaties/FTA investment chapters, which undermine fulfillment of human rights including the right to health, should not be negotiated.
For existing FTAs and BITs with problematic provisions, countries should withdraw from them or renegotiate them to remove provisions that undermine the fulfillment of human rights including the right to health.
Bibliography and References
[1] https://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm
[2] http://www.doctorswithoutborders.org/publications/reports/2011/MSF_Access_Report_13th_edition.pdf and http://www.msf.org/msfinternational/invoke.cfm?objectid=63C0C1F1-E018-0C72-093AB3D906C4C469&component=toolkit.article&method=full_html.
[3] UN Sub-Commission on human rights, Resolution 2000/7: Intellectual Property Rights and Human Rights.
[4] Eg China had to agree to 6 years of data exclusivity on medicines, https://www.wto.org/english/thewto_e/acc_e/completeacc_e.htm
[5] https://www.wto.org/english/thewto_e/acc_e/completeacc_e.htm
[6] https://www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm
[7] Explanations of these TRIPS+ provisions are in http://www.unitaid.eu/images/marketdynamics/publications/TPPA-Report_Final.pdf and http://www.un.org/ga/search/view_doc.asp?symbol=A/HRC/11/12
[8] Regional Comprehensive Economic Partnership (RCEP) negotiations are between ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and Australia, China, India, Japan, Republic of Korea and New Zealand, http://dfat.gov.au/trade/agreements/rcep/Pages/regional-comprehensive-economic-partnership.aspx
[9] The US has FTAs in force with the 20 countries listed here: https://ustr.gov/trade-agreements/free-trade-agreements which have most of these TRIPS+ provisions.
[10] The EU has FTAs with many countries: http://trade.ec.europa.eu/doclib/docs/2006/december/tradoc_118238.pdf which have varying IP provisions
[11] EFTA has FTAs with 36 countries, http://www.efta.int/free-trade/free-trade-agreements. These are examples of some of their provisions
[12] http://bilaterals.org/IMG/pdf/rcep_wgip_jp_revised_draft_text_3oct2014.pdf
[13] http://bilaterals.org/?rcep-draft-ip-chapter-2014
[14] https://www.mfat.govt.nz/en/about-us/who-we-are/treaty-making-process/trans-pacific-partnership-tpp/text-of-the-trans-pacific-partnership
[15] https://ustr.gov/sites/default/files/uploads/agreements/fta/singapore/asset_upload_file708_4036.pdf
[16] http://bilaterals.org/?eu-asean-fta-draft-ipr-chapter
[17] According to some analyses
[18] http://www.efta.int/free-trade/free-trade-agreements/korea
[19] http://www.efta.int/media/documents/legal-texts/free-trade-relations/lebanon/annexes-rou-jd/87E615BD9EDD4DD1B59A294E3AFB0333.pdf with compensation option
[20] http://www.efta.int/free-trade/free-trade-agreements/hong-kong with compensation option
[21] http://www.efta.int/free-trade/free-trade-agreements/ukraine
[22] Via injunctions rather than an automatic stop on marketing approval
[23] http://www.efta.int/free-trade/free-trade-agreements/jordan
[24] https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=IV-11&chapter=4&lang=en
[25] http://www.un.org/documents/ga/res/44/a44r025.htm
[26] http://keionline.org/sites/default/files/Wikileaks-secret-TPP-treaty-IP-chapter.pdf
[27] http://bilaterals.org/?eu-india-fta-consultation-draft-on
[28] http://europa.eu/about-eu/countries/index_en.htm
[29] https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=IV-11&chapter=4&lang=en
[30] http://www.efta.int/free-trade/free-trade-agreements/hong-kong. Although there have not been leaks showing EFTA’s IP proposals in its FTA negotiations that these authors know of (eg at http://bilaterals.org/?-efta-ftas-), given the similarities in various EFTA FTA IP chapters (eg in the type of restriction on compulsory licensing), it is possible to infer that these proposals came from the EFTA side.
[31] http://www.efta.int/
[32] https://treaties.un.org/Pages/ViewDetails.aspx?src=IND&mtdsg_no=IV-11&chapter=4&lang=en
[33] Eg see Table 2 in http://www.unitaid.eu/images/marketdynamics/publications/TPPA-Report_Final.pdf
[34] http://www.ftamalaysia.org/article.php?aid=153
[35] http://www.ftamalaysia.org/article.php?aid=153
[36] http://apps.who.int/medicinedocs/documents/s20165en/s20165en.pdf
[37] http://english.hani.co.kr/arti/english_edition/e_business/165065.html
[38] http://www.canadiangenerics.ca/en/news/nov_14_06.shtml
[39] http://www.twn.my/title2/health.info/2015/hi150802.htm
[40] Eg Press Release, 5 July 2004, http://www.unhchr.ch/huricane/huricane.nsf/view01/35C240E546171AC1C1256EC800308A37?opendocument and http://www2.ohchr.org/english/bodies/hrcouncil/docs/11session/A.HRC.11.12_en.pdf (which says that ‘Developed countries should not encourage developing countries and LDCs to enter into TRIPS-plus FTAs’ and developing countries and LDCs should not agree to TRIPS-plus.
[41] See for example http://www.3dthree.org/pdf_3D/CostaRicaCAFTA.pdf, http://www.3dthree.org/pdf_3D/3DInformationNote7.pdf, http://www.3dthree.org/pdf_3D/EcuadorPress18May04_en.pdf and http://www.3dthree.org/pdf_3D/3DEmailnote4_Morocco-June06.pdf
[42] See for example http://www.3dthree.org/pdf_3D/ElSalvadorCOPressRelease_en.pdf, http://www.3dthree.org/pdf_3D/TBemailnote2eng-june05.pdf, http://www.3dthree.org/pdf_3D/3DEmailnote3_Thailand-Jan06.pdf, http://www.3dthree.org/pdf_3D/BotswanaCOPressRelease_en.pdf
[43] WHA56.27, May 2003, http://www.who.int/gb/ebwha/pdf_files/WHA56/ea56r27.pdf
[44] ‘Public health, Innovation and Intellectual Property Rights’, World Health Organization, April 2006. For example recommendation 4.21.
[45] http://www.theglobalfund.org/en/mediacenter/pressreleases/2011-05-26_Global_Fund_strategy_aims_to_help_shape_market_and_ensure_sustainability_of_AIDS_treatment/
[46] Declaration of Ministers of South America over Intellectual Property, Access to Medicines and Public Health, Geneva, 23 May 2006. The Ministers of Health were from Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay and Venezuela, http://lists.essential.org/pipermail/ip-health/2006-May/009594.html.
[47] Gaborone Declaration, 2nd Ordinary Session of the Conference of African Ministers of Health, Gaborone, Botswana, 10-14 October 2005, CAMH/Decl.1(II), http://lists.essential.org/pipermail/ip-health/2005-October/008440.html.
[48] AU’s Ministerial Declaration on EPA Negotiations, AU Conference of Ministers of Trade, 3rd Ordinary Session, 5-9 June 2005, Cairo, Egypt, AU/TI/MIN//DECL.(III), www.twnside.org.sg/title2/FTAs/General/AFRICAN_UNION.Cairo_Decl.doc.
[49] ‘Integrating Intellectual Property Rights and Development Policy: Report of the Commission on Intellectual Property Rights’, Commission on Intellectual Property Rights, London, 2002. For example, pages 39, 49, 113.
[50] Eg Annex 26A of the TPP, https://www.mfat.govt.nz/assets/_securedfiles/Trans-Pacific-Partnership/Text/26.-Transparency-and-Anti-Corruption-Chapter.pdf and Annex 2-D of the EU-Korea FTA: http://eur-lex.europa.eu/legal-content/EN/ALL/?uri=OJ:L:2011:127:TOC which requires governments to ‘appropriately recognise the value of the patented medicine/medical device in the amount of pricing and reimbursement it provides’ – ie presumably pay close to the monopoly price.
[51] https://www.pharmac.govt.nz/assets/purchasing-medicines-information-sheet.pdf
[52] http://unctad.org/en/PublicationsLibrary/webdiaepcb2015d1_en.pdf
[53] Annex 1 of http://www.twn.my/title2/FTAs/General/TPPHumanRights.pdf.
[54] It was in its Model BITs from 2004: http://investmentpolicyhub.unctad.org/Download/TreatyFile/2872 and 2012: http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf and is in the TPP’s investment chapter: https://www.mfat.govt.nz/en/about-us/who-we-are/treaty-making-process/trans-pacific-partnership-tpp/text-of-the-trans-pacific-partnership.
[55] Eg the exception to expropriation for compulsory licences/patent revocation etc was not in the USA’s 1998 Model BIT which is the basis for US BITs and FTA investment chapters of that time, http://investmentpolicyhub.unctad.org/Download/TreatyFile/2868
[56] US BITs signed before 2004 can be seen at http://investmentpolicyhub.unctad.org/IIA/CountryBits/223#iiaInnerMenu.
[57] http://www.citizen.org/documents/MST-Memo.pdf
[58] http://www.ustr.gov/sites/default/files/BIT%20text%20for%20ACIEP%20Meeting.pdf
[59] https://www.mfat.govt.nz/en/about-us/who-we-are/treaty-making-process/trans-pacific-partnership-tpp/text-of-the-trans-pacific-partnership
[60] Annex 1 of http://www.twn.my/title2/FTAs/General/TPPHumanRights.pdf
[61] Eg http://www.twn.my/title2/IPR/pdf/ipr10.pdf, http://www.twn.my/title2/IPR/pdf/ipr09.pdf and http://www.cptech.org/ip/health/cl/recent-examples.html.
[62] http://www.citizen.org/documents/investor-state-chart.pdf
[63] http://www.citizen.org/documents/eli-lilly-investor-state-factsheet.pdf
[64] Eg see http://www.twn.my/title2/FTAs/General/TPPHumanRights.pdf
[65] Eg see http://www.citizen.org/documents/isds-quote-sheet.pdf
[66] http://tppnocertification.org/wp-content/uploads/2014/08/Certification-memorandum.pdf
[67] http://tppnocertification.org/wp-content/uploads/2014/08/Certification-memorandum.pdf
[68] http://tppnocertification.org/australias-experience/
[69] http://applications.emro.who.int/dsaf/dsa1081.pdf
[70] https://www.congress.gov/bill/114th-congress/house-bill/2146/text?q={%22search%22%3A[%22\%22hr2146\%22%22]} : s106a)1)G
[71] Article 30.5 and https://tpplegal.files.wordpress.com/2015/12/ep1-jane-kelsey.pdf
[72] Eg Inside US Trade: Daily News, ‘Vetter Signals TPP Implementation May Be Used To Address Lawmakers' Objections’, January 19, 2016
[73] Eg http://phrma.org/note-media-elected-officials-support-12-years-data-protection-tpp
[74] Eg Inside US Trade: Daily News, ‘Vetter Signals TPP Implementation May Be Used To Address Lawmakers' Objections’, January 19, 2016
[75] http://www.un.org/ga/search/view_doc.asp?symbol=A/HRC/11/12