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Trade-Related aspects of Intellectual Property Rights

'TRIPS' stands for Trade-Related aspects of Intellectual Property Rights. It is an agreement drawn up by the World Trade Organisation (WTO) between 1986 and 1994 to ensure intellectual property rights are respected within international trade. It came into force on 1st January 1995, although implementation dates vary from country to country.¹

What are Intellectual Property Rights?

When someone comes up with a process, product, invention or design that is likely to bring them recognition or financial gain, there are always going to be those that are tempted to steal their idea. Intellectual property rights are there to ensure this doesn't happen. They can take a number of different forms, but the most commonly known are patents (for inventions and drugs etc.), copyright (for books, films and images) and registered trademarks (for company logos, slogans and brand names).

How does TRIPS work?

The TRIPS agreement brings intellectual property rights under one common set of international rules and establishes the minimum levels of protection that all countries within the World Trade Organisation must give to the intellectual property of fellow members.

The TRIPS agreement can only be enforced by the laws of individual countries; it is not an automatic universal law. For example, if country A had no intellectual property laws whatsoever, then there would essentially be nothing to stop its citizens copying, say, a new type of toaster produced by country B, even if country B did have laws to protect it. TRIPS prevents this from happening by encouraging member countries to introduce its rules as law (or face severe penalties from the WTO). Once these laws are set up in country A therefore, country B could then register the patent for the toaster with them, and copying and reproducing it would become illegal.

This system ensures that profits from any new product go exclusively to the patent holder for the full duration of the patent. This in turn funds further research and development (R&D) and, in theory, encourages innovation by ensuring those with innovative ideas are rewarded.

Which countries have to comply with TRIPS?

All the members of the World Trade Organisation (148 countries in total) will eventually have to comply with TRIPS.

When TRIPS was introduced in 1995, most developed countries already had long-standing intellectual property (IP) laws, and therefore had to make very few changes. Other developing and transitional countries however had only very basic IP laws (or no laws at all) meaning time was needed to alter legislation.

From 1995, developed countries were given 1 year to ensure their laws complied with TRIPS; developing and certain transitional economies were given five years (to 2000) and least developed countries were given until 2006 (now extended to 2016 in the case of pharmaceutical patents).²

What are Generic Drugs?

There are two basic forms of modern-day drugs - proprietary (or 'brand-named') drugs that are developed and produced by large multinational pharmaceutical companies, and generic drugs that are either copies, or the basic form of a proprietary drug. Paracetamol for example is the generic form of standard Panadol® or Tylenol®. The companies that make these brand-names may spend thousands on marketing and inventing new formulations, but the basic active ingredient in their tablets is paracetamol, which can be bought without the label for far less money. Paracetamol can be made generically because there is no longer a patent on it (patents generally only last 20 years). However, drugs that are in patent can also be copied under certain conditions, and are also known as generics.

But how can patented drugs be copied? Doesn't the TRIPS agreement make this illegal?

Normally patent protection rules under TRIPS would make it illegal to copy any proprietary drug that was still under a patent. However, at the WTO Doha ministerial conference in 2001, ministers issued a ‘waiver’ that stated intellectual property should not take precedence over public health. They therefore agreed that countries that were newly introducing TRIPS legislation into their laws, should be able to copy any drug invented before the 1995 introduction of TRIPS. Those with existing patent laws, or those who wished to start copying newer drugs invented after 1995 that had been granted a patent, could do so under a system called compulsory licensing.³

What is compulsory licensing?

A compulsory licence is a government license that enables someone other than the patent holder to copy patented or copyrighted products and processes. Governments can issue them if a patent owner abuses their rights by, for example, failing to offer their product on the market, or offering it at a price that is too high for potential buyers to afford. Competitors can then produce the product or use the process under government license without fear of prosecution. However, to copy drugs for this reason, the generic company will have to negotiate with the original manufacturer to agree royalties (a compensatory amount of money paid to the patent holder to make up for the loss of profit exclusivity).

Under the Doha agreement from 2001, it was made clear that a compulsory licence could also be issued for a drug that treats any disease causing a severe health emergency in that country. In this case, royalties do not need to be paid.

Which countries produce generic drugs?

There are many countries that produce generic drugs, but some of the main manufacturers are Canada, Brazil, South Africa, China, Thailand and India.

India is of particular importance in the industry because companies there make both the finished generic tablet form of drugs and the raw ingredients and chemicals used in their manufacture, many of which are actually exported to major multinational companies to produce their brand-named versions.

Wouldn't it be a good idea for someone to produce generic forms of AIDS drugs if they're so much cheaper?

A number of countries already do. Brazil has a very large generics industry that enables its government to supply free antiretroviral (ARV) AIDS drugs to everyone that needs them within the country. Thailand has a similar scheme.

India too produces large volumes of ARVs, both for its own people and for export. However, TRIPS has recently made generic production a little more difficult in India. Until the end of 2004, India was a little like country A in the example above: it had no regulations on product patents, only on the processes used to make them. This is one of the reasons generic manufacture has become such a large-scale industry there.

On 1st January 2005, the 5-year transition period specially awarded to India to help the country conform to TRIPS came to an end and a few months later, new patent laws came into force.⁴

Does this mean that India can no longer copy ARV drugs cheaply?

Yes and no. Although most of the ARVs that feature on the World Health Organisation's list of 'essential' treatments were not licensed for use until 1996 or later, the majority were actually invented well before TRIPS was introduced in 1995, and can therefore continue to be produced legally. For drugs invented between 1995 (when TRIPS was introduced) and 2005 (when India introduced its TRIPS-based patent laws), it is a different story. If a generic manufacturer is already producing a generic version of a drug and can prove that they have made a 'significant investment' in its production, they will not have to cease production when the patent for the original is granted. The product will automatically receive a licence, though the generic producer will have to pay the original manufacturer a 'reasonable' royalty.

If a newly patented product was invented after 2005, or it has never been manufactured in generic form, then India would have to issue a compulsory license for generic production to take place.⁵

Sadly compulsory licences are not without their problems. They can be difficult and complicated to impose and require a great deal of government time and departmental cooperation to draw up. India is a highly bureaucratic nation, so it seems unlikely that compulsory licenses will be issued smoothly without a long struggle with red tape. Compulsory licences also have political implications, as companies and countries that hold the original patents to drugs are unlikely to want to invest in a nation that is copying their products.

Are there any countries that have used compulsory licensing?

Despite endorsement by the WTO, compulsory licensing has been used very little by low and middle income countries . Thailand provides an excellent example of why this has been the case. In November 2006, Thailand issued a compulsory licence for the Merck & Co. drug Sustiva® (efavirenz).⁶ Then in February 2007, it announced it would also be breaking the patent for Kaletra® (lopinavir & ritonavir combination) through compulsory licensing, and that a number of other drugs (not all used to treat HIV) would follow.⁷ Thailand suffered repercussions from its decision however when Abbott, manufacturer of Kaletra®, announced that it would no longer be applying for licenses to sell seven of its newest products in Thailand.⁸ One of these products is a new formulation of Kaletra®, which is heat resistant and only has to be taken once a day: a far more convenient formulation for those living a hot climate such as Thailand. The country was also then placed on a US Trade Representative 'priority watch list' of countries seen to be committing intellectual property piracy.⁹ Such action could seriously damage trade relations between Thailand and the USA.

Does it matter that newer drugs are not available?

More modern antiretroviral drugs are generally less toxic, easier to take and more effective at fighting HIV. They are also essential for so-called ‘second line’ therapy.

When a person has been taking a certain combination of antiretroviral drugs for some time, or has missed a few doses, their HIV can begin to mutate and become resistant to the effects of their medication. As a result, the amount of virus in their blood begins to rise, necessitating a change in their antiretroviral regime, from first line to second line drugs.

Propriety first line drugs have plenty of competition from their generic counterparts, and so can often be bought for not much more than the generic version. Pharmaceutical companies producing second line drugs have very little generic competition however, and can therefore charge much higher prices that are often out of reach for people in resource-poor countries.

In Cameroon for example, recommended first-line treatment costs US$277 per person, per year. Recommended second-line treatment costs a massive US$4,763 however, because generic versions of these drugs are not widely available.¹⁰

The ARV drugs Lexiva® (fosamprenavir), Fuzeon® (enfuvitide or T-20), Prezista® (darunavir), Reyataz® (atazanavir) and Aptivus® (tipranavir) are are all formulations that are not currently produced generically, as they have only been developed very recently.¹¹ The new ‘melt-proof’ formulation of Kaletra® (as mentioned below) is another.

Is there any other way that India can manufacture newer generics?

The new patent laws in India only apply to new genuinely original and innovative products. So it is possible that patent applications for some drugs may be turned down because the drug is not a new formulation. Small tweaks (for example in drug potency, dose or ingredients) that do not "result in the enhancement of the known efficacy of that substance" do not classify as 'patentable'.¹²

This ruling was used successfully to block a patent for Combivir in 2006. Combivir is brand-named drug that combines two antiretrovirals – stavudine and lamivudine. It is central to many people’s antiretroviral regimes, and Indian generic versions of the combination are used widely in many African countries.

In early 2006, it came to light that the manufacturer of Combivir, GlaxoSmithKline (GSK) was attempting to patent the drug in India and Thailand, where generic production has long been established. A number of AIDS organisations in both countries lodged official complaints against GSK’s actions, claiming that Combivir was simply a combination of two pre-1995 antiretrovirals, and not a new formulation at all.¹³, ¹⁴ Thousands subsequently took to the streets in protest, and the tactic worked. On 10th August 2006, GSK released a press statement saying that they had dropped their patent applications for Combivir in both India and Thailand.¹⁵

Similar protests were held against the Swiss pharmaceutical company Novartis, who took the Indian government to court after discovering they could not patent several of their 'slightly altered' drugs. Many were worried that if Novartis won their case, it could set a precedent, and make it very difficult for future patents of 'altered' formulation drugs to be blocked, including many AIDS drugs.¹⁶ Novartis' case was however rejected on all counts in August 2007.¹⁷

Why do major pharmaceutical companies charge so much?

Major pharmaceutical companies argue that their prices reflect the amount of research and development required to manufacture the drug.

However, though it is not always easy to tell exactly how much money is spent by large pharmaceutical companies in different areas, much of their profits are thought to go on executive salaries, publicity, advertising, promotion, corporate sponsorship and branding, rather than R&D.

Why don’t more countries with AIDS epidemics produce their own drugs?

Any country wishing to produce generic drugs faces similar problems to India, unless they are a ‘least developed’ country that doesn’t have to implement TRIPS rules until 2016 (and even then, many already have some form of established patent laws).

As well as problems with IP, there are many practical issues to be overcome when establishing generic manufacturing capacity too.

Pharmaceutical industries require expertise and substantial resources to set up, as well as a readily available source of basic raw ingredients, good infrastructure and a skilled workforce. A method of regulating drugs is also needed within any country that produces them. At present the WHO does run a very successful scheme to assess generic drugs on a global scale and ensure they are bioequivalent (i.e. the same in potency and effectiveness) to their proprietary counterparts, but even they stress that they are not a regulatory or drug-safety body and should not be treated as such.

Generic production can also give rise to political difficulties. Any country that copies drugs originally manufactured by a large Western nation may risk a lack of investment from that nation and potential cuts in bilateral aid. The US in particular sees generic manufacture as damaging international trade and American company profits. To avoid this, it is therefore trying to set up “TRIPS Plus” legislation in the form of bilateral free-trade agreements in many nations (see below).

Despite these problems, with the help of expertise from Brazil, India and Thailand, a number of African nations - such as Zambia, Ghana, Tanzania, Uganda, Ethiopia and Zimbabwe - have succeeded in developing local AIDS drug manufacturing facilities.^{18 19 20 21 22 23}

What is ‘TRIPS Plus’?

'TRIPS Plus’ laws are those that go beyond the requirements of TRIPS to protect intellectual property. Such laws are often drawn up as part of ‘bilateral free trade agreements’ with the United States. Usually they will involve the US promising better investment and improved trade with a particular nation, in return for a guarantee that a country will introduce strong legislation to protect US intellectual property rights. This may mean restrictions on compulsory licences or parallel importing (a system by which countries can ‘shop around’ and buy drugs from third parties to ensure they receive the optimum price for a product), or it could mean the extension of patents beyond the standard 20 years suggested by TRIPS.²⁴

Free trade agreements between the USA and various countries in Central America for example, restrict generic copying by allowing major pharmaceutical companies to keep their clinical data secret for five years. The Central American agreement also contains a clause that prevents a generic producer from registering (and thus selling) a copied product without the express permission of the original manufacturer, even if they have used a compulsory licence to make it. This restriction lasts for the entire lifetime of the patent.

Thankfully, TRIPS Plus has not yet been introduced in sub-Saharan African countries thanks to an executive order signed by President Bill Clinton in 2000. The order bars the US government from asking Southern African nations to sign free-trade agreements that impose tighter controls on generics than the WTO requires. President Bush endorsed this order when he came to office in 2001. However, his administration continued to pursue a free-trade agreement with the Southern African Customs Union for several years, until it finally suspended negotiations in April 2006.²⁵

What happens in countries that really can't manufacture their own drugs? Can they import them?

The members of the WTO battled with this problem for several years, as exporting and importing generic drugs is quite different from producing them for use within a country itself. A generic drug that may be legally produced in India for example, could be under patent (and therefore illegal) in, say, Kenya. The solution that the WTO came up with was to invite members that were unable to produce pharmaceuticals at home and were suffering a serious health crisis to import generics from other nations under compulsory licenses. This was known as the 'paragraph 6' waiver and was introduced to the TRIPS agreement in 2003.²⁶

Is this waiver permanent or just an ‘emergency solution’?

Until December 2005, the 2003 paragraph six waiver, though still valid, was not a permanent part of the TRIPS regulations. However, after negotiations at the 2005 WTO ministerial in Hong Kong, ministers decided that by 1 December 2007, the waiver should be made permanent.²⁷

This decision is potentially beneficial to poorer nations, as it ensures health concerns continue to be made a priority, and makes it far more difficult for any developed nation (such as the US) to change the wording and make generic importation more difficult.

However, conversely, it also means that the waiver cannot be simplified or refined by developing nations to make it easier for compulsory licences to be issued, and drugs to be generically copied.

Thailand is to date the only country to have issued a compulsory licence for an antiretroviral drug, suggesting that the process is perhaps unworkable for many countries.

Is there any other way to get round a patent, other than a compulsory licence?

Major pharmaceutical companies can decide to bypass the TRIPS system and make it easier for their drugs to be produced generically by issuing voluntary licenses. This basically means that the patent holder allows other people to copy their drugs under certain conditions.

Obviously pharmaceutical companies are not going to do this as it means they take a significant cut in profits. But they are a valid option in some circumstances and often seen as preferable to a compulsory license, which may not allow the original drug producer to negotiate any royalties or conditions.

In 2001, thirty-nine major pharmaceutical companies tried to prosecute the South African government for passing a law (which they said was against TRIPS regulations) that allowed easy production and importation of generics. Following immense pressure from the South African government, the European Parliament and 300,000 people from over 130 countries that signed a petition against the action however, they were forced to back down. In an effort to put an end to the continuing row, one of the companies, GlaxoSmithKline, even granted a voluntary license to a major South African generics producer (Aspen), allowing them to share the rights to their drugs AZT, 3TC and the combination Combivir without charge. In return, Aspen had to promise to give 30 percent of their net sales to one or more non-governmental organisations fighting HIV and AIDS in South Africa, which they continue to do to this day.²⁸

Does the USA allow generic drugs to be used in the AIDS treatment programmes it funds?

The President's Emergency Plan for AIDS Relief (PEPFAR) only permits the purchase of drugs using federal funds if they have been approved by the American Food and Drug Administration (FDA). For some time, none of the generic drugs manufactured in India and other countries had been tested by the FDA, meaning they could not be used in PEPFAR funded projects, even though they featured on the WHO's prequalification list of essential medicines. This changed in 2004 when the FDA embarked on an expedited review process to give 'Tentative Approval' to essential AIDS drugs. As of June 2007, 46 different generic AIDS formulations had been given Tentative Approval (meaning they can be used abroad, but not in the USA), including a number of Fixed Dose Combination drugs (see below).^{29 30}

Are there any benefits to TRIPS?

The purpose of TRIPS, and all intellectual property regulations, is to encourage research and development by rewarding those that come up with innovative products. In theory, this applies to generic manufacturers as well as brand-named companies. There are some that believe that by making the simple 'reverse-engineering' of other company's drugs more difficult, generic drugs manufacturers will start to invest more in research and development, and will ultimately come up with original low-cost medicines themselves.

Some companies in India (such as Cipla and Ranbaxy) have already been doing this. Taking advantage of the fact that they are able to make lots of different drugs from various different pharmaceutical companies, they have combined some ARVs into one-a-day Fixed Dose Combination (FDC) tablets, and co-blister packs (where several different drugs are included in one package). Such FDCs and co-blister packs would be much more difficult to produce in the Western world, as they would require a partnership between two rival pharmaceutical companies (although Gilead Sciences and Bristol Myers Squibb have achieved such a collaboration³¹).

FDCs are exceedingly important in treating AIDS in the developing world, as the simpler a treatment, the easier it is for an HIV+ positive person to take regularly. However, FDCs are still not original medicines in themselves.

The danger is that if generic companies resort to making original drugs to maintain their profits, they will have to put up the prices of their other products to afford the R&D and promotional costs involved, and may eventually be forced to operate in a similar manner to the major companies whose products they once copied.

Is there any alternative to TRIPS?

Some have suggested that the only way forward is to abolish the TRIPS system for medicines altogether, and replace it with an alternative form of remuneration and reward for innovative research and development. Alternative ideas have included R&D ‘taxes’, public-private partnerships and ‘prize funds’.³² However, such concepts are controversial, and are unlikely to be implemented or even considered by the WTO for a number of years.

Generics: the future

For the moment, most people that need antiretrovirals in the developing world have a non-resistant form of the virus, and can therefore take first line therapy. However, as treatment becomes more widespread, and resistance increases, the price of second line drugs is going to become a major issue if developing nations wish to continue treating their HIV positive populations.

Some nations have already found innovative ways of securing cheaper second line drugs. In October 2005 for example, Brazil used the threat of a compulsory licence to get the pharmaceutical company Abbott to reduce the price of its drug Kaletra from $1.17 to just 63 cents a pill, which will ultimately save the government $339 million over six years.³³

Not all countries have the financial stability and autonomy of Brazil to enable them to employ such ‘bullying’ tactics, but it does provide a useful precedent.

The Clinton Foundation has also stepped in to negotiate cheaper drugs deals for many nations, and is playing a prime role in ensuring countries take full advantage of the lower cost of generic drugs.

It is going to be a number of years before the patents on most AIDS therapies expire (AZT – the oldest available anti-AIDS drug - has only just reached the end of its patent ‘time limit’), and another fifteen years or more before the most modern drugs are available for generic manufacture. And experimental drugs that may be a reality for westerners in just two or three years time, may not be available in developing countries for two or three decades.

Radical changes, such as the abolition of TRIPS, do not seem likely any time soon. So it is now up to developing country governments, drugs manufacturers, campaigners and non-governmental organisations to force the price of AIDS drugs down, and enable health authorities to secure the drugs their people so desperately need.

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