Testimony of MSF on IP Provisions in DR-CAFTA & Consequences For Access to Essential Medicines
Submitted to the Committee on Ways and Means of the House of Representatives
April 2005

INTRODUCTION

Doctors Without Borders/Médecins Sans Frontierès (MSF) is pleased to submit this testimony to the Committee on Ways and Means of the House of Representatives about the potential negative consequences of intellectual property (IP) provisions in the United States-Dominican Republic-Central America Free Trade Agreement (DR-CAFTA) on access to essential medicines in the concerned countries.

MSF is deeply concerned that provisions in the Chapter on Intellectual Property in DR-CAFTA¹ will lead to devastating consequences in terms of access to medicines for millions of people in the region with HIV/AIDS and other diseases. MSF is also concerned that this trade agreement, among others already signed or currently being negotiated, undermines the right and obligation of countries to protect public health and promote access to medicines for all, in accordance with the World Trade Organization (WTO) Ministerial Declaration on the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) and Public Health (“Doha Declaration”), which the U.S. adopted along with all other WTO members in November 2001². The Doha Declaration clearly recognized concerns about the effects of patents on prices and stated unambiguously that TRIPS can and should be interpreted and implemented in a manner “supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all.”³

MSF has called repeatedly on the Office of the United States Trade Representative (USTR) to ensure that the Doha Declaration remains a ceiling for trade negotiations on IP as they relate to public health technologies. Because of the clearly stated negotiating objectives of the U.S., however, we have been forced to go one step further in recommending that IP be excluded from bilateral and regional trade agreements altogether. The WTO TRIPS Agreement already establishes more than sufficient standards for IP protection in WTO member states.

Specifically, MSF has raised concerns about the following IP provisions in various FTAs:

· New obstacles related to pharmaceutical test data, which will delay the registration of generic medicines (“data exclusivity”) and render compulsory licensing ineffective;
· Rules that will confer abusive powers to regulatory authorities to enforce patents (“linkage”); and
· Extensions of patent terms on pharmaceuticals beyond the 20-years required in TRIPS.

Each of these provisions, which are elaborated upon below, appear in DR-CAFTA and threaten to hamper generic competition – the only reliable mechanism for ensuring lower drug prices – and therefore restrict access to affordable medicines in the Central American region.⁴

We urge members of this Committee in the strongest possible terms to take every necessary measure to ensure that the health and lives of millions of people in the Central American region are not jeopardized because of DR-CAFTA.

BACKGROUND: MSF

Doctors Without Borders/Médecins Sans Frontières (MSF) is an international independent medical humanitarian organization that delivers emergency aid to people affected by armed conflict, epidemics, natural and man-made disasters, and exclusion from health care in more than 70 countries. Through longer-term programs, MSF treats patients with infectious diseases such as HIV/AIDS, tuberculosis, malaria, and other neglected diseases, and provides medical and psychological care to marginalized groups such as street children. The organization was awarded the 1999 Nobel Peace Prize. MSF currently has field operations in two of the countries affected by DR-CAFTA – Guatemala and Honduras.

In Guatemala, MSF provides antiretroviral (ARV) treatment for more than 1,600 people with HIV/AIDS in Guatemala City, Coatepeque, and Puerto Barrios, as well as psychological support and medical care for street children in Guatemala City. In Honduras, MSF is providing ARV treatment for approximately 300 people with HIV/AIDS in Tela, as well as care for street children and victims of urban violence in Tegucigalpa.

SPOTLIGHT ON “DATA EXCLUSIVITY” AND HIV/AIDS IN GUATEMALA

Brief Summary of “Data Exclusivity” in Guatemala

There are many troubling IP provisions in DR-CAFTA, but of particular concern is the U.S. Administration’s attempt to push countries to accept new obstacles related to pharmaceutical test data (so called “data exclusivity”), which will delay the availability of generic medicines.

Guatemala is a case in point.

Under extreme pressure from the U.S. Administration, Guatemala went back and forth from 2003 to 2005 between proposed legislation that guarantees multinational pharmaceutical companies monopoly-like exclusivity on the Guatemalan market and amendments that would have maintained some degree of public health protection. In March 2005, despite strong opposition from civil society groups in Guatemala, the Guatemalan Congress eventually passed an amendment that provides at minimum of five years of data exclusivity and cleared the way for ratification of DR-CAFTA.

MSF is concerned that the new law, which is considered a first step in the implementation of DR-CAFTA in Guatemala, will prevent the Department of Regulation and Control of Pharmaceutical Products from granting marketing approval to generic medicines in Guatemala for five to 10 years⁵, thereby giving a market monopoly to originator drug manufacturers and preventing access to affordable medicines for five to 10 years in the country (see below for a more lengthy explanation of data exclusivity).

In a worst case scenario, the new legislation will prevent generic medicines from entering the Guatemalan market during the period of exclusivity even if the originator medicine is not marketed in Guatemala. This means that patients may have no access at all to some medicines for five years – even exorbitantly priced originator versions. While this provision is, for the moment, only in place in Guatemala, DR-CAFTA would force all parties to the agreement to implement similar laws at the national level.

HIV/AIDS in Guatemala

According to the World Health Organization (WHO) and UNAIDS, more than 78,000 Guatemalans are currently living with HIV/AIDS, and annual AIDS-related deaths totaled 5,800 in 2003. Approximately 13,500 of all those living with HIV/AIDS now are in urgent need of antiretroviral (ARV) treatment. Yet only 3,600 Guatemalans were receiving it as of December 2004.

MSF has been providing ARVs to Guatemalans since 2001 and is currently treating more than 1,600 people living with HIV/AIDS in hospitals and clinics in Guatemala City, Coatepeque, and Puerto Barrios. Our clinical outcomes parallel those found in the US and other industrialized countries.

Most of the patients in MSF’s treatment programs are receiving generic medicines, which allows MSF to treat the largest possible number of people. MSF currently pays as little as $350 per person per year for the most commonly prescribed World Health Organization-recommended first-line regimens. Generic competition on the Guatemalan market has brought down the prices of originator ARVs, and the Guatemalan government is slowly moving from purchasing only originator ARVs to including generic suppliers in the national tender.

Still, Guatemala’s social security system has spent significantly more on ARVs – in some cases more than 20 times more than MSF – because it has procured mostly originator drugs. For example, whereas MSF pays $216 per person per year for a generic version of the “back-bone” double combination of AZT+3TC, Guatemala’s social security system paid $4,818 (open tender 2004) for the same combination from the originator, GlaxoSmithKline. This is 22 times more than what MSF pays.

Guatemala has the opportunity to expand access to ARV treatment significantly, particularly because of a $40 million grant from the Global Fund to Fight AIDS, Tuberculosis and Malaria. In fact, there is no reason that Guatemalan authorities should not be able to ensure universal access to ARV treatment. But if the government is paying 20 times more – or even two times more – for ARVs, only a small fraction of those in need will be treated. Treating fewer people means condemning others to premature death.

If current data exclusivity provisions had been in effect prior to 2001, generic ARVs would not have been marketed in Guatemala and MSF would not have been able to access generics. This would have limited our ability to expand access to treatment and demonstrate the feasibility of delivering ARV treatment. In order for the Guatemalan government to expand access to ARV treatment for all those in need, it will need to retain the right to procure affordable generic AIDS medicines.

DR-CAFTA threatens the ability of Guatemala to do so.

The Example of Atazanavir

In November 2004, the Congress of Guatemala repealed Decree 9-2003, which provided for five-year data exclusivity. In December, the Congress replaced Decree 9-2003 with Decree 34-2004, which passed by an important majority. This was seen by Guatemalan civil society groups, MSF, and others as a positive step forward, and a critical moment for the government to commit to ensuring treatment for greater numbers of people with HIV/AIDS in Guatemala. (As explained above, data exclusivity was again enacted in Guatemala in March 2005.) In the roughly 18 months during which Decree 9-2003 was in effect in Guatemala, 25 medicines received “data exclusivity” protection under the law. Among those medicines affected is the ARV atazananir. Atazanavir is a protease inhibitor, which is a key part of second-line therapy for people with HIV/AIDS once they experience treatment failure on their first-line regimen, and is used widely, in the US, Europe, and Brazil.

Today, the US price of atazanavir is more than US$10,000 per person per year – there is no differential price for developing countries and it must be combined with at least two additional ARVs. There is no generic version of atazanavir available on the world market because it is a relatively new drug, but based on experience with other ARVs, it is possible that the price could drop by approximately 95% with robust generic competition.⁶

If a more affordable generic version of atazanavir is developed, however, it will not be able to enter the Guatemalan market until 2009 (given that the original atazanavir of Bristol-Myers Squibb was registered in Guatemala in February 2004). This means that BMS will have a monopoly during the entire period of exclusivity (at least five years) and, free from competition, will be able to charge whatever the market will bear – far more than what the average Guatemalan will be able to afford. It is therefore unlikely that the vast majority of Guatemalans who will need this medicine will be able to access it.

This is just one example of what could happen to all new medicines entering the Guatemalan market – not only AIDS drugs – now that a US-style data exclusivity law has been implemented. If DR-CAFTA is fully enacted in all countries, similar problems will be encountered in Costa Rica, El Salvador, Honduras, Nicaragua, and Dominican Republic. Newer medicines will be crucial to the longer-term survival of people with HIV/AIDS and other illnesses.

BRIEF ANALYSIS OF IP PROVISIONS IN DR-CAFTA & IMPLICATIONS FOR ACCESS TO MEDICINES

1. Exclusive rights over pharmaceutical test data (“data exclusivity”)

Even when a drug is not under patent, “data exclusivity” will create a new patent-like monopoly by blocking the registration of generic medicines. Data exclusivity prevents a national drug regulatory authority from using data provided by an originator company to authorize the use of an equivalent generic version of the same drug, thereby providing a de facto monopoly for the original manufacturer.

At present: To register a medicine with a national drug regulatory authority (NDRA), an applicant has to show that its medicine is safe, effective and of quality. It is the first applicant who must show clinical trial data to prove the drug’s safety and efficacy.

When generic manufacturers seek registration (or “marketing approval”) of generic versions of medicines, they only have to show that the drugs are of quality and therapeutically equivalent to the original version – in other words, they function the same way as the original medicine. The generic company does not have to submit new safety and efficacy data.

The NDRA can rely on the safety and efficacy data submitted by the originator producer to register the generic medicine. Under these conditions, the introduction of generics to the market is accelerated and facilitated.

In DR-CAFTA: Provisions in DR-CAFTA establish and expand “exclusive rights” over pharmaceutical test data provided by originator companies to prevent an NDRA from using that data to register a therapeutically equivalent generic version of the drug. The exclusivity would last for at least five years from the time the originator drug is first registered in the country. During this period, if another company wants to register a generic version of the drug, it would have to generate and submit its own test data.

Further, provisions in DR-CAFTA provide for what could be described as “data exclusivity-plus”: if the original manufacturer has not registered the drug in the country, then the data exclusivity period would start running from the date of approval in the other country (ie. usually the United States).

If accepted, “data exclusivity” provisions apply regardless of whether or not a drug is patented.

Likely impact: These provisions will keep generic versions of originator drugs that have already been registered out of a country during the period of data exclusivity (ie. five to 10 years). The requirement for a company to generate its own test data will likely discourage generic manufacturers from seeking registration for their drugs. It may even make it impossible, especially for domestic firms in developing countries, given the costs of test data and low margins of generics production.

The main effect of this provision will be on drugs which are not under patent, as the generic manufacturer will still be unable to use the originator’s test data to obtain registration. In such an instance, data exclusivity acts as a de facto patent, preventing competition.

This impact is heightened since the data exclusivity applies from the date of approval in the U.S. as it means that a brand-name originator drug does not even have to be registered (and thus available) in the country for generic competitors to be blocked from entry. This could lead to a complete lack of availability of essential medicines (either generic or originator versions) if originator companies decide for whatever reason not to market a drug in a given country.

The requirement to re-test a drug already proven to be safe and effective is medically unethical, because it forces a number of patients to take part in clinical trials which are not necessary, and requires some to take placebos in order to compare outcomes with the actual drug and therefore forego a proven treatment. It will also increase the cost of the generic medicine.

Whereas patent barriers can be overcome through compulsory licensing or government use, there is no legal “remedy” for data exclusivity. Further, data exclusivity could effectively block compulsory licenses. Even if a company is given authority to produce a generic drug under a compulsory license, it still needs to register the drug with the NDRA. Data exclusivity would prevent such registration for the period of exclusivity, and thereby prevent the use of a compulsory license during that time.

TRIPS compatibility: Nowhere does TRIPS state that countries should provide exclusive rights to the originator of the data for a given period. Rather, TRIPS simply refers generally to the need to protect “undisclosed test or other data” from “unfair commercial use” and “disclosure” (Art. 39.3), without answering the question of how such protection should occur. The language in the TRIPS Agreement makes it clear that countries can determine what constitutes “unfair” and that there are multiple approaches that countries can take to satisfy this mandate. Indeed, during negotiations on the TRIPS Agreement, prior to 1994, negotiators rejected the option to include stronger “data exclusivity” provisions in the TRIPS Agreement, as originally proposed by the United States.

2. Abusive powers to national drug regulatory authorities (NDRAs) to enforce patents

The U.S. has devised a new role for national drug regulatory authorities in DR-CAFTA through negotiating provisions that require these NDRAs to act as “enforcers” of drug patents. They will be prevented from registering a generic version of a drug that is under patent in the country unless the patent holder gives consent – even if the generic has been proved to be safe, effective, and of quality. Linking a drug’s registration (also known as its “marketing approval”) to its patent status is an underhanded way of preventing generic competition.

At present: A drug’s patent status and its registration status are two separate things. In principle, two different bodies look after the two different areas of competency: patent offices assess whether a drug is innovative and novel enough to be patented, and NDRAs assess whether a drug is of quality, safe and effective enough to be used by the population they are responsible for.

When assessing whether a generic drug should be registered, a NDRA pays no attention to whether or not a patent may be infringed, as this is simply not their job – just as it is not the job of the patent office to assess the quality, safety and efficacy of a drug. It is up to the patent owner itself to sue an infringer before a court – a practice which ensures that the validity of a patent can be publicly questioned and held up to scrutiny before it is enforced.

In DR-CAFTA: Provisions in DR-CAFTA will prevent NDRAs from registering a generic version of a drug that is under patent. Under these conditions, registration would not be granted to a generic manufacturer before the patent expires. If a drug is not registered, it cannot be legally used in a country.

Likely impact: These provisions amount to an outright ban on generic versions of patented medicines, by preventing their registration if there is a patent in force. The NDRA becomes the enforcer of a company’s private patent rights.

This is of considerable advantage to the patent holder. Rather than the company having to sue through the courts to enforce its patent, the job is done behind the scenes and without publicity by the NDRA.

It is also more likely that patents that have been awarded improperly will be wrongfully enforced. The NDRA will be obliged to enforce a patent monopoly, even though it does not have the power of a court to judge whether a patent has been properly awarded or not.⁷

Further, the linking of patent status and drug registration could undermine the possible use of compulsory licences. A company given authority to produce a generic drug under compulsory licence (ie. without the patent holder’s consent) still needs to register that drug with the NDRA. But if the NDRA is not allowed to register generics until the patent expires, the compulsory licence is effectively useless.

TRIPS compatibility: Nowhere in the WTO’s Agreement on Trade-Related Intellectual Property Rights (or TRIPS Agreement) is there any reference to an obligation to link patent protection and drug registration. On the contrary, the Preamble recognises that intellectual property rights are “private rights” – meaning that it is up to patent holders to enforce their rights, not NDRAs.

3. Extensions of patent terms beyond the 20-year TRIPS requirement

There is no more straight-forward way to extend a company’s monopoly over a drug than to extend the life of the drug’s patent – but the impact on patients’ access to that drug could be dire.

At present: Patents on drugs in most countries last for 20 years from the date of filing. The originator company usually applies for a patent at the stage of basic research, well before the company even applies for drug registration. The process of drug registration usually takes two-three years. The process of patent granting can also take two-three years.

In DR-CAFTA: Provisions in DR-CAFTA seek to “compensate” drug companies for any “unreasonable” time a national drug regulatory authority takes to examine an application for registration, or a patent office takes to examine a patent application. The life of the patent would be extended by the length of “unreasonable” time the authority takes to approve the respective applications.

Likely impact: The extra years added to the patent are extra years in which the patent holder can maintain a monopoly position and continue to charge artificially high prices for the drug, free from generic competition. There would be considerable questions over what is considered “reasonable”, especially given the resource constraints on NDRAs and patent offices in developing countries.

TRIPS compatibility: Nowhere in the TRIPS Agreement is any reference made to an obligation to extend patent life to “compensate” for “unreasonable” delays in granting registration or patent approval. Indeed, countries rejected such proposals when originally negotiating the TRIPS Agreement.

CONCLUSION

Over three years ago, 142 countries, including the U.S., negotiated and adopted the Doha Declaration, firmly placing public health needs above commercial interests and offering much needed clarifications about key flexibilities in the TRIPS Agreement related to public health. Today, these flexibilities are being threatened by bilateral and regional trade agreements such as DR-CAFTA.

The WTO TRIPS Agreement already establishes more than sufficient standards for IP protection in WTO member states. The promise of Doha is that the TRIPS Agreement can and should be interpreted and implemented in a manner “supportive of WTO members' right to protect public health and, in particular, to promote access to medicines for all.”⁸ DR-CAFTA threatens to make it impossible for the concerned countries to exercise the rights reaffirmed in Doha.

If DR-CAFTA is fully enacted, IP provisions may block the use of affordable generic medicines, which will be a catastrophe for our patients and millions of others in the region with HIV/AIDS and other diseases.

As a medical humanitarian organization, we cannot accept the subordination of the health needs of our patients and millions of others to U.S. trade interests.

¹Chapter 15, available at http://www.ustr.gov/Trade_Agreements/Bilateral/CAFTA/CAFTA-DR_Final_Texts/Section_Index.html

²Paragraph 4 of the Declaration states “We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protect public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO Members' right to protect public health and, in particular, to promote access to medicines for all.”

³To view the full Declaration, see http://www.wto.org/english/thewto_e/mWhinist_e/min01_e/mindecl_trips_e.htm

⁴It is important to note that USTR “side letters” about DR-CAFTA and public health – which are not legally enforceable and do not supercede the (contradictory) language in DR-CAFTA – make dangerous attempts to restrict the scope of diseases and cannot be seen as providing any assurance for countries to make use of TRIPS safeguards.

⁵Because the originator has five years of data exclusivity from the first date of approval in another country, and then receives another five years of protection from the date of approval in Guatemala, for a total of up to 10 years.

⁶In some countries, a WHO-recommended first-line fixed-dose combination (e.g. d4T/3TC/NVP) is now available for as little as $140 per patient per year (Clinton Foundation price) because of robust international generic competition. The same combination is available in Western countries as originator companies’ separate products at $8,773 per patient per year (the only country for which prices are publicly available is Australia and this price was calculated based on the schedule of Pharmaceutical Benefits for Approved Pharmacists and Medical Practitioners, May 2004; exchange rate used for conversion 1Australian $=0.72213 US$). This means that the price in developing countries for WHO-recommended first-line therapy is 98% lower than what the same combination costs in Western countries
.
⁷NDRAs could also enforce patents in other ways that could threaten public health: for example, a patent on a salt or a polymorph of a given product may also be used to block registration even if the active ingredient is off-patent.

⁸To view the full Declaration, see http://www.wto.org/english/thewto_e/mWhinist_e/min01_e/mindecl_trips_e.htm