FEATURES NEWS THE RISING NEPAL (DAILY)

Intellectual Property Rights
Expanded Boundaries

By Ravi K. Rauniyar

AS NEPAL considers the pros and cons of its entry into the WTO, its implication on long-term economic development, poverty alleviation and public health needs a thorough debate. With the opening of the international market and the increased ease with which goods, capital and ideas flow around the world, new opportunities for growth and development have emerged for developing countries. These changes are not smooth and without problems. The far-reaching Agreement on Trade-Related Aspects of Intellectual Property Rights or TRIPS, has become a topic of heated debate worldwide and threatens to undermine the legitimate right of WTO members to formulate their own public health policies and implement them by adopting measures to protect public health.

Patent Protection

Several factors have led to the emergence of this debate. Particularly, the obligation TRIPS imposes on member countries of the WTO to recognize and strengthen patent protection on pharmaceuticals denying patients in developing countries like ours, access to life-saving essential medicines. The issues at the core of this debate are not new. The legislation in many countries, like the French law of 1844, excluded pharmaceuticals from patent protection because it was feared that the legal monopolies that such protections confer might have a negative impact on the widespread affordable access to medicines. The model of the French law was followed by many countries, including German, Italy, Japan and Spain, which began to introduce patent proection for pharmaceuticals only after the 1960s. Traditionally, laws governing the protection of intellectual property rights (IPRs) have extended only to the national boundaries of a nation where the patent was filed. However, with increasing globalization, nations have attempted to expand the protection of intellectual property rights for their own nationals beyond the boundaries of its own territories and into the international marketplace.

During the negotiations that led to the WTO, the pharmaceutical industry lobbied hard to have patent protection extended to cover pharmaceuticals. This was accepted with certain important safeguards that governments could use to help them balance public interest with the claims of patent holders. For example, ‘compulsory licensing’ allows governments to exploit a patent without the owner’s consent if it is justified by public interest. The Brazilian AIDS policy, which includes providing free drugs to people with HIV/AIDS has been highly successful because of Brazil’s ability to manufacture affordable medicines through compulsory licensing. However, a country needs to have a reasonably sophisticated pharmaceutical industry in order to produce the required medicines and must be able to achieve economies of scale to bring the prices down to affordable levels. Nepal, like the great majority of developing countries and smaller economies, fails on both counts. Such countries that lack the required infrastructure to make available locally produced pharmaceuticals could import generic drugs from the cheapest source by what is called ‘parallel importing.’ The option of parallel importing from a generic manufacturer in a large country is restricted unless compulsory license has also been issued in the exporting country to manufacture the product. It therefore becomes important for Nepal that member countries have the flexibility to grant compulsory licenses to supply foreign markets and be free to determine the grounds upon which to issue such licenses.

In the past, even when countries have acted within the scope of existing trade agreements to ensure public health for their nationals, they have been met with strong oppositions from the developed countries, particularly the United States and its powerful pharmaceutical lobby. For instance, the American government strong-armed the Thais into signing an undertaking not to allow compulsory licensing by imposing import duties on wood jewerely and other Thai good the main source of foreign exchange for Thailand. United States complaint at WTO against Brazilian patent law threatened to handicap the highly successful Brazilian AIDS control program. The American government pressure on South Africa to stop ‘parallel importing’ and the lawsuit brought by the pharmaceutical industry against the government of South Africa even in the light of a ‘national AIDS emergency’ is another example of how the safeguard mechanisms in the TRIPS Agreement have been bypassed to protect commercial interests by threatening unilateral trade sanctions. Strong public opinion both within and outside the United States led to the withdrawal of this lawsuit, thereby illustrating that public opinion is seriously concerned that intellectual property rights may be interpreted and implemented in a manner that runs counter to the promotion of public health policies.

The developed countries have argued that the provisions in the TRIPS Agreement will actually lead to positive results in terms of an increase in the flow of technology transfer and foreign direct investment (FDI) leading to an increase in the resources devoted to R&D of needed new drugs. This, they claim, ensures a dynamic pharmaceutical industry to the benefit of the developing countries. The end of ‘brain drain’ from developing countries to industrialized ones caused by the absence of patent protection in developing countries has also been pointed out. However, truth cannot be further away than this. Market forces alone are not enough to address the need for affordable medicines or to stimulate R&D for neglected diseases. A market for life saving drugs simply does not exist in the developing countries despite the fact that 90 per cent of all deaths and suffering from infectious diseases occur here. Out of the 1,223 new drugs brought into the market between 1975 and 1997, only 13 were for tropical diseases. This is a clear indication that markets do not serve the poor population. For many tropical illnesses and other disease that affect the poor, low income levels deter private investors. The positive effects in terms of increased FDI, technology transfer or R&D have not so far materialized in countries where pharmaceutical patents were introduced at the beginning of the 1990s. For instance, not only have there been no increase in FDI in pharmaceuticals but many plants have been closed down, as, for example, in Colombia where the number of formulation plants has dropped from 32 to 17. On the contrary, since the developed countries and their multinationals corporations are the main users of patent protection (only 3 per cent of world patents are owned by
inventors in the developing countries) they will also be the major beneficiaries of the strict patent laws in developing countries. Some experts have warned that this will likely lead to a transfer of income from the less developed countries to the developed countries, thereby further widening the income disparities between the two.

Corporate Interest

Nepal with a population of 23 million and per capita income of US$210 per annum is among the world’s poorest nations. Even though the government of Nepal spends 42% of its national health budget on drugs, most Nepalis are unable to afford essential medicines. With public health being threatened by new diseases and drug resistant varieties of old killers, WTO patent rules is likely to further reduce access to modern medicines for the poor. By restricting the right of governments to allow the production, marketing and import of generic drugs, competition will be restricted leading to price increases and further reduction in the already limited access of poor population to vital medicines. As it stands today, the management of the international trading system puts corporate interest before poverty reduction and public health. As developing countries formulate their pharmaceutical and health policies their foremost objective should be to ensure that public health rather than commercial interest of the developed countries have primacy. In this respect, developing countries should implement the TRIPS agreement in ways that best accommodate the protection of health policies in national legislation.

While Nepal cannot remain aloof from the multilateral trade regime, it needs to build the adequate domestic infrastructure to strengthen the country’s legal frameworks, which is necessary to meet the public health challenges posed by globalization.

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