Flexibilities in International Agreements for Public Health: The Pharmaceutical Industry

1. Exclusive Rights and Public Access – Flexibilities in International Agreements and Development ObjectivesThe Public Health Example21 September 2007Short Courses on Key Economic IssuesGeneva, Switzerland Christoph Spennemann, Legal Expert, IP Division on Investment, Technology and EnterpriseDevelopment, UNCTAD

2. Overview of Presentation • The interface between exclusive rights (IPRs) and public health/production of generic pharmaceuticals • The TRIPS flexibilities for public access and local production • Conclusions

3. The interface between IPRs and public health/local production (1) • Patents provide incentives for new drugs development • Patents contribute to increased drugs prices • Local pharmaceutical production as one means to help ensure sustainable drugs supply & broad public access • 2016 window of opportunity for LDCs • No need to grant or enforce pharmaceutical patents (WTO waiver)

4. The interface between IPRs and public health/local production (2) • Pharmaceutical substances needed for local production in DCs are often patented by foreign companies • Under TRIPS governments are provided tools (« flexibilities ») to promote access by local producers to patented substances

5. Transition periods for least-developed countries (LDCs) • Until 1 July 2013 for all TRIPS obligations • Until 1 January 2016 for patents & trade secrets protection of pharmaceuticals • LDC-based producers may use patented substances for production • LDC-based traders may import & sell patented substances • Importance of domestic implementation of transition periods

6. Licensing agreements • Local producer pays for right to manufacture, distribute and use patented substances • Foreign patent holder takes advantage of lower production costs and new markets • Examples: GSK agreements with Aspen (South Africa) and Cosmos (Kenya) • Need for government or civil society involvement • TRIPS provides framework for control of abusive terms to safeguard licensee’s interests

7. Exceptions to granted patent rights (1) The patented substance may be used • for marketing approval of generic products • Approved by WTO jurisprudence • for research & new drugs development • Used in developed country legislation • Main purpose must be research/promotion of technological progress • Ultimate commercial consequences accepted by developed country jurisprudence (Germany)

8. Exceptions to granted patent rights (2) • Swiss draft patent law: innovative concept of experimental use exception • Covers both scientific and commercial activities • Provided research leads to new knowledge about patented product • Protection limited to existing know-how, but does not block follow-on innovation

9. Parallel imports • Permitted under TRIPS • Many local producers need to import substances (active pharmaceutical ingredients/APIs) that are under domestic patent • Often available at lower cost abroad (China, India) • Domestic patent holder cannot invoke patent against imports if domestic law authorizes parallel imports • No counterfeits, but produced by domestic right holder for sale on foreign market

10. Compulsory licensing (1) • Authorization by the government of a third party to use an invention without the consent of the right holder • Powerful negotiating tool for government • To influence prices (Brazilian & Thai experience) • To involve generic producers at reasonable licensing terms (South African & Thai experience) • 2006/2007:Thai Government issues 3 CLs • 2007: Brazilian Government issues 1 CL

11. Compulsory licensing (2) • Governments free to determine grounds for CLs • Problems of countries lacking domestic manufacturing capacities • WTO decision to • Facilitate exports of drugs produced under CL to needy Members • Waive compensation requirement in importing country • Facilitate regional cooperation of LDC-dominated trade agreements to attract foreign investment

12. Limiting the scope of future patents • Exclusions from patentability • Natural substances (new uses) • Methods of medical treatment (new uses) • Strict patentability requirements • To avoid patenting of new uses of known substances • To avoid patenting of minor changes of existing drugs (« ever-greening ») • Trivial patents restricted by 2007 US Supreme Court decision

13. Protection of Pharmaceutical Test Data • Data submitted to drug regulatory authorities (DRAs) for marketing approval purposes • TRIPS authorizes different approaches: • Data exclusivity  DRA may not rely on original data for examination of subsequent submissions (USA; EU countries) • Unfair competition approach  no exclusivity  reliance by DRA on original data  speeds up market entry of generic competitors

14. Overview: TRIPS flexibilities for local pharmaceutical production • LDC transition periods • Licensing agreements • Patent exceptions • Parallel imports • Compulsory licensing • Limited scope of future patents • Non-exclusive rights in test data

15. Importance of flexibilities for investment by generic producers • Flexibilities help preserve the public domain • Flexibilities help generic producers access materials and enter the market • Generic producers make investment in DCs dependent on implementation of flexibilities

16. Conclusions • TRIPS provides important tools/flexibilities to promote access to pharmaceutical substances & local production • TRIPS flexibilities useless if not implemented in domestic legislation • TRIPS flexibilities attract foreign generic firms • Regional cooperation creates bigger markets & economies of scale for pharmaceutical production

17. Contact Christoph Spennemann Legal Expert Policy Implementation Section/Intellectual Property Division on Investment, Technology and Enterprise Development (DITE) UNCTAD E-mail: Christoph.Spennemann@unctad.org Tel: ++41 (0) 22 917 59 99 Fax: ++41 (0) 22 917 01 94 http://www.unctad.org/tot-ip