More on the Global Drug Patenting Crisis

    By Kevin E. Noonan --

The effects of the global crisis in patented drug pricing were evident recently in two actions (or inactions) in the European Union.

In the first, the Committee on International Trade of the European Parliament delayed voting on the Trade Related Intellectual Property Rights protocol promulgated by the World Trade Organization (WTO).  This (in)action was taken over a dispute regarding the role Europe will play in facilitating delivery of "essential" medicines to developing countries.  The activities of the European Commission and Council in negotiating drug prices within the WTO patent framework were at issue, reflecting the political divisions that have arisen under the TRIPS framework (see "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries").  These divisions have pitted those advocating measures to facilitate patented drug delivery, particularly with regard to anti-AIDS drugs, to developing countries, against pharmaceutical companies trying to protect their investment in developing these drugs and to take advantage of the purportedly pro-patent provisions of the GATT treaty negotiated more than 10 years ago.

As reported here extensively, in practice the WTO scheme has not resulted in the degree of patent protection in developing countries envisioned by many in the industrialized nations of the world during the GATT negotiations.  As the result of provisions of implementing laws in several major developing nations (such as Brasil) that contained compulsory licensing provisions, and the WTO's Doha declaration, that permit parallel importing of drugs under conditions of "medical emergency" (such as the AIDS crisis in many countries, and prospectively, an influenza pandemic), patent protection in developing countries may actually have diminished (see "Trying to Find a Solution to the Global Drug Pricing Crisis").  Patent-owning innovator drug companies have found themselves vilified (to varying degrees) unless they capitulate to developing nation's demands for drastically-reduced drug pricing (see "Worldwide Drug Pricing Regime in Chaos").

The source of this vilification has not been limited to the developing world.  Western nongovernmental organizations groups, such as Doctors without Borders have cast the debate as "saving poor people" versus  "profiteering" by Western drug companies, which makes an incendiary headline but does little to address the underlying problems posed by these competing interests.  This type of political sentiment is prevalent in Europe and is the basis in part for the inaction by the European Parliament.  Parliamentary delegates have expressed the desire for Europe to be a "world leader" in making affordable drugs available in the developing world, and Parliament passed a resolution earlier this summer that member states offer financial support to drug companies in developing countries (thereby aiding and abetting these countries' compulsory licensing schemes).  More ominous, perhaps, is a further directive that member states restrict the power of the European Commission to negotiate drug pricing with developing countries; the resolution specifically called out activities such as "data exclusivity, patent extensions and limitation of grounds of compulsory licenses" for these prohibitions.  The Commission has responded by agreeing not to include TRIPS provisions that could inhibit access to patented drugs in any of its economic partnership agreements.

The proposed WTO protocol would permit generic drug companies to export copies of patented drugs to those countries that do not have their own generic drug industry to benefit from national compulsory licensing laws.  It would incorporate the most patent-unfriendly provisions of the Doha Declaration, and be a boon for nascent (and not so nascent) generic drug industries in countries such as India and China (although that in itself may be a qualified or ambiguous boon to the populations of developing countries in light of adulterated drug problems from these sources (see "The Effect of Foreign Generics on the U.S. Drug Supply" - Part I, Part II, and Part III).  It would also fundamentally change the balance struck by the TRIPS agreements, that permitted compulsory licensing as a way for developing countries to develop their own native pharmaceutical industries, in favor of foreign (albeit a different, cheaper foreign) sources of patented (nee generic) drugs.

In contrast (and much more in keeping with the European Commission's traditional role), commission regulators sent a warning letter to the government of Thailand regarding it's compulsory licensing scheme for patented drugs.  As reported here yesterday, the Commission objected to Thailand's requirement that these drugs be priced no higher than 5% more than the cost of an equivalent generic version of the drug.  Among the companies facing these requirements is France's sanofi-aventis, whose heart medication Plavix® is the first non-anti-AIDS drug that any developing country has subjected to compulsory licensing under provisions of the Doha Declaration relating to a "national medical emergency."  These actions by the European Commission parallel actions by the U.S. Trade Representative in May, where Thailand was put on a "watchlist" of countries that were "serious offenders" of international patent laws and treaties.  Under the current international regime, however, there is little either the U.S. or Europe can do to foreclose this type of anti-patent activity even in WTO member countries.  Indeed, similar efforts to reduce patented drug prices are on-going in the U.S., and the fact that the Federal Circuit recently (see "Biotechnology Indus. Org. v. District of Columbia (Fed Cir. 2007)") struck down a District of Columbia law permitting sanctions and civil liability in cases where a company charged "excessive prices" for a patented drug should give no comfort to those who understand the balance between consumers and innovators.  The medical needs of the sick, and the political impact of allegations that the sick and needy cannot receive the medicine due to profit-hungry drug companies, means that similar efforts will continue, at least until the crisis in striking the appropriate balance between drug companies and their customers can be struck.

For additional information regarding this and other related topics, please see:

• "Trying to Find a Solution to the Global Drug Pricing Crisis," July 16, 2007
• "Pharma Sanity Lacks Global Reach," July 13, 2007
• "Brasil Prevails in Dispute with Abbott over AIDS Drug Pricing," July 9, 2007
• "Africa (Still) Depending on the Kindness of Strangers in Anti-AIDS Drug Pricing," May 29, 2007
• "U.S. Trade Policy Becoming Less Pharma-Friendly," May 18, 2007
• "The "Unfairness" of World Intellectual Property Protection According to The New Yorker," May 17, 2007
• "Worldwide Drug Pricing Regime in Chaos," May 9, 2007
• "Not Getting It about Patented Drug Prices at The Wall Street Journal," May 6, 2007
• "A Modest Proposal Regarding Drug Pricing in Developing Countries," May 2, 2007
• "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries," May 1, 2007

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