Trade in Generics suffer more Seizures

The latest addition to the rather questionable series of seizures by Dutch officials were a consignment of HIV/AIDS medicines by Aurobindo Pharma Ltd meant for use in Nigeria. The purchase, by the Clinton Foundation through a UN Agency, UNITAID, is the 6th incident of an export by an Indian drug firm being seized in transit in Europe for shipments meant for non-European markets. The grounds on which they were allegedly seized are that they contained counterfeit goods. UNITAID protested sharply against this seizure, proclaiming on its website that the seized goods are in fact not counterfeits and neither do they infringe any intellectual property rights, also raising concerns about the patients whom these drugs had been shipped in for.

They are medicines used in second-line treatment of HIV/AIDS manufactured by Indian company Aurobindo. These medicines have been prequalified by the WHO and have received tentative approval by the United States Food and Drug Administration,” it said.

Why exactly have drugs which have been prequalified by the WHO been seized by the Dutch officials for being counterfeit?

This latest seizure, besides raising several eyebrows, is also raising questions as to the trend that seems to be developing. Several consignments from India as well as Brazil have been stopped over the last few months by EU officials on the basis of infringement of iprs or being counterfeit products – despite the fact that these goods were in transit and not for European markets. In a previous post as per Art. 51 of the TRIPS, it has been pointed out that the TRIPS agreement provides for a certain minimum baseline of standards no doubt, but the EU’s action in seizing goods not meant for their market is well above that line, as there is a distinction which has been drawn between actions for imported goods and goods in transit.

The Indian government, aside from taking up the issue bilaterally with the EC and the Dutch authorities, recently made an intervention at the WTO Council for TRIPS meeting on the issue of the public health dimension of the TRIPS Agreement in the context of the Dutch seizures. Here, they pointed out that this was not a case of temporary detention, as some consignments have been held for over months, with procedures initiated for their destruction as well. There has been seizure of goods such as losartan which is perfectly IP legitimate generic drug in both India and the destination country Brazil; and the trade of generic drugs is also perfectly legitimate.

Medecins Sans Frontieres (MSF) has also expressed concerns over these developments as they regularly transport and temporarily store medicines in Europe en route to developing countries.

In addition to this, in the intervention, it has also been pointed out that these actions aren’t in line with the ‘General Obligations’ provided for in Part III (and Art. 41.1 and 41.2 specifically) of the TRIPS Agreement.

“Article 41.1 of TRIPS provides that enforcement procedures “shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse” and Article 41.2 provides that the procedures shall be “fair and equitable.These are ‘General Obligations’ which run through Part III of TRIPS Agreement on Enforcement of IPRs. As I just said, trade of generic drugs is perfectly legitimate. Measures taken by Dutch authorities, clearly, create barriers to such legitimate trade, particularly where there is no risk of diversion to the internal market.

Surprisingly, WHO is reacting quite meekly to the whole incident. Several NGO groups, amongst others, have also been pointing out the public health fallout that this development could lead to and have severely criticised the WHO for maintaining a silence on the seizures. Due to their silence on the issue, 16 civil society groups had contacted WHO’s Director-General Dr. Chan for an assessment of the risks that such seizures and ‘goods-in-transit’ impeding provisions may have on public health programmes.. However, the statement finally issued in mid-March seems to be more of a formality reply without any actually saying anything concrete on the issue. While they do mention that barriers to legitimate trade of generic drugs are undesirable, the action part of their statement reads as:

“In relation to this issue, WHO is continuing to follow developments and consulting with Member States and relevant international intergovernmental organizations. WHO also understands that there is ongoing dialogue among the parties concerned to resolve the matter. Given the public health impact of this issue, WHO remains ready to provide, upon request, technical and policy support to Member States.”

While the WHO seem to be trying to keep a safe distance from the issue, the Mint points out that the Dutch minister for trade, Frank Heemskerk, has admitted to there being a lacunae in their law which has given European custom officials the power of seizing these goods. As reported by Mint,

“Heemskerk added that the Netherlands “supports TRIPS”. He also admitted that the seizure of the consignments “was a technical error on the EU (council) regulations, and we will sort it out”. He added that “patent protection is important but should not be misused to hamper access to generic medicines”.

However, the EU, in their statement is currently maintaining that they are well within their rights and obligations to the international community in seizing these pharma products. While denying any intention to create barriers to legitimate trade in generic medicines, they go on to say that “it is important to allow the customs authorities to control goods in transit suspected to infringe IP rights so that they can stop the traffic of potentially dangerous products, such as fake medicines, even when the shipments are destined for any country”

They also, continue on to say that they are in line with their WTO and TRIPS obligations because ‘Article 51 and footnote 13 clearly allow WTO Member(s) to apply border measures to goods under other custom situations including in transit. They also continue to claim that there has been no seizure, but merely ‘detention’ of goods, stating that the general procedure is to detain where there is a suspicion of infringement. The right-holder is then contacted, who decides whether or not to pursue the case. Interestingly, in the same para, they also go on to say “…should underline that in case of abusive complaints by the right holder, the latter would be liable to damages.” The EU seems to have forgotten about the 2001 Doha declaration wherein members of TRIPS affirmed their determination to promote access to medicines for all. Also, on what authority are the custom officials deciding whether the drugs meet the standards of their destination countries? It’s also not clear as to whether it was at the rights-holder’s behest or not.

However, to go back to an earlier post , it was pointed out that when Article 51 and footnote 13 are read with Article 52, it is seen that as per Article 52, such transit goods may only be seized when the final ‘importation’ of the good to a member state would result in a violation of of IPs in that member state – which would mean that seizure of goods in transit, wherein there was neither an infringement in the exporting country nor the importing country, would amount to a violation of Article 52 of TRIPS.

Separately, a group of NGOs had issued a statement to WTO Director General Pascal Lamy. Lamy was more favourable in response, noting that “the issue at stake is certainly very important and sensitive. As such, it deserves to be adequately addressed so that efforts to enhance access to medicines are supported and the creation of barriers to legitimate trade is avoided. . . Your letter rightly points out the strong determination of all WTO Members to promote access to medicines for all which was explicitly confirmed in 2001 when the Doha Declaration on the TRIPS Agreement and Public Health was adopted.” Also, that “it was his understanding that the matter was being handled bilaterally and that WTO dispute settlement procedures might not be relevant at this time, though he would help find a solution if the disagreement persists.”

Brazil has also released a statement on the Losartan seizure specifically after having carried out an analysis of the fact scenario and the legal implications.

In conclusion, the Indian statement goes on to point out that the tendency to promote the IP maximalist agenda has been noticed on other international forae as well, however, in this case, it is threatening to disturb the delicate balance that exists between public policy goals and IP right holders. The recent issue of the confusion of the definition of counterfeit drugs (See Prashant’s post on this ) being linked to low-cost generics is also bound to play an important role in the discussions which will come up to decide legality of these seizures and the EU’s law on this.

Unless this gets sorted out at the earliest, in addition to the delay these seizures are causing to access to medicine, they will also be causing generics to look for ‘safer’ alternative routes, which in turn are likely to affect the costs of these medicines. While the bigger companies may be ready to take on the authorities on these arbitrary seizures, many of the smaller generic companies would rather prefer staying clear of trouble and huge legal expenditures.

It would be interesting to see how the EU tries to show how this aligns with their WTO TRIPS obligations of ‘avoiding the creation of barriers to trade and providing safeguards against their abuse’ , especially in the light of the Doha Declaration wherein all members confirmed their determination to promote access to medicine to all. Hopefully, the relevant parties will realise the folly in sidestepping public health interests while trying to maximise intellectual property right standards to a higher standard than is required.

One comment.

  1. AvatarAnonymous

    UNITAID writes that the drugs do not infringe IP “to our knowledge.” We know abacavir sulfate is not patented in India, but does anyone know for certain the patent status in Nigeria?


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