WTO deal on generic medicines - guide

19 November 2007
by eub2 -- last modified 19 November 2007

The European Union on 19 November 2007 adopted a WTO initiative to improve access to medicines for developing countries.

Which countries will benefit from the system?

Developing and least developed WTO Members will be entitled to import pharmaceutical products under this mechanism, provided they have no or insufficient manufacturing capacity for the product in question. Any country with manufacturing capacities is allowed to export these products.

Countries which do dispose of sufficient capacity can not use this system as importers. Moreover, in order to ensure that no resources would be diverted away from those countries which really need it, developed countries have announced that they will not use the system as importers, while high income developing country Members (such as for instance Hong Kong, Singapore, Kuwait or the United Arab Emirates) have made a statement that they would not use the system except in exceptional circumstances. The ten countries which will join the EU in May 2004 have made a similar statement. Once they have joined the EU, they will not use the system as importers at all.

Which products are covered by this system? What about vaccines?

The system applies to "products from the pharmaceutical sector", including pharmaceuticals, active ingredients for their production, diagnostic kits needed for their use and, in the EC's view, vaccines as well.

What is the disease scope?

The compromise text recalls the scope already agreed in the Doha Declaration on the TRIPs Agreement and Public Health of November 2001, i.e. "public health problems afflicting many developing and least-developed countries".

Which legal mechanism will be used to implement the system? Why a temporary waiver?

The chair compromise text will, in time, result in an amendment of Article 31(f) of the TRIPs Agreement. Pending the adoption and entry into force of this amendment, the Decision immediately introduces a waiver, as a transitory and provisional measure.

Further work shall be undertaken in due course in order to transpose the waiver into a definitive amendment of the TRIPs Agreement. This process will have to be concluded within 6 months after its initiation.

Which safeguards against trade diversion are envisaged? Will they be costly and burdensome to developing countries?

As far as importing countries are concerned, they will indeed have to take measures to prevent re-exportation, but the Decision specifies that these measures must be "reasonable", "within their means" and "proportionate to their administrative capacities and to the risk of trade diversion". These conditions are designed to avoid imposing conditions that developing or least developed countries can not meet, while incentivising them to take their responsibility to make sure that the medicines reach their destinatories.

As far as exporting countries are concerned, they must oblige the beneficiary company of the compulsory licence 1) to export their entire production under the compulsory licence to the country(ies) in need; and 2) to clearly identify the products through labelling or marking and though special colouring or shaping of the products themselves.

Moreover, the system requires prior notification to the TRIPs Council. Constant monitoring by the TRIPs Council is guaranteed. This will result in full transparency - the best guarantee against diversion.

What does the Chair declaration add to this/How do both texts relate ?

The Perez Motta text makes the law: it determines how the mechanism is to be applied and under which conditions. The Perez Motta text remains unaffected. The declaration adds the last missing piece of the jigsaw by restoring the confidence among Members through a firm declaration of intent by the entire Membership to use the Perez Motta text in good faith.

Will beneficiary countries need authorisation from the WTO to use the system?

No, they won't. For the sake of transparency and information, importing and exporting Members will be required to notify the WTO regarding the use of the system. However, such notification does not amount to an authorisation request : beneficiary countries will not need to be approved by any WTO body in order to be able to use the system set out in this decision. WTO Members can automatically use the system once they have established that they have no manufacturing capacity and have notified this to the WTO.

In those cases where the product is patented in the importing country, two compulsory licences will have to be issued (one in the exporting country, one in the importing country). Does that mean that the right holder will be granted double remuneration? Is the granting of two compulsory licences not too burdensome?

Firstly, there would be no double remuneration. The text expressly states that no remuneration will have to be paid in the importing country. The remuneration for a compulsory licence shall only be paid in the exporting country. It will have to be calculated on the basis of its economic value in the importing country.

Secondly, procedures to grant compulsory licences under Article 31 are minimal and flexible, and also provide for a fast track procedure for situations of extreme urgency or national emergency (which covers, in any event, AIDS, TB and malaria but also potentially a range of other situations or diseases). What matters is that the procedure be transparent and the rights of defence of the right holder be guaranteed. It is therefore a question of ensuring that national legislation is effective. This falls under the responsibility of those Members wishing to apply the system. The fact that, in certain cases, two compulsory licences would have to be issued, should not in itself be a problem. It is mainly a question of matching and co-ordinating procedures in the producing and importing country (or countries).

Finally, a system based on compulsory licensing will be most instrumental in guaranteeing legal and economic certainty of all parties involved. The use of the system will first and foremost depend on the willingness of a generic pharmaceutical company to engage into manufacture. Generic manufacturers certainly prefer to manufacture under a compulsory licence (i.e. a formal guarantee by the government that they can legally engage into production) than under an open-ended exception under the patent law.

Source: European Commission