First ever TRIPS amendment enters into force to formalise Para 6 system

In previous posts, we have blogged about the so-called Paragraph 6 System, which reconciles an apparent tension between the competing objectives of protecting patent exclusivity and ensuring access to healthcare in Least Developed Countries (LDCs).

Article 31 of the TRIPS governs uses of a patented invention without the authorisation of the patentee. In simple terms, Article 31 regulates the issue of Compulsory Licences by states party to the TRIPS. Article 31(f) clearly provides that CLs shall only be issued “predominantly for the supply of the domestic market” of the member issuing them. This represented an important problem for LDCs that did not have the necessary infrastructure to manufacture patented pharmaceutical products on their own soil, who were now prohibited from importing cheaply manufactured generics from countries such as India.

The Doha Declaration, in Paragraph 6, recognised that WTO members with inadequate manufacturing capacities could find the compulsory licence provisions of the TRIPS inaccessible, and requested the TRIPS Council to find a solution that would balance patent rights against public health in LDCs.

Two approaches to the problem were considered: either an amendment of the TRIPS to carve out such exports from Article 31(f), or an expansive interpretation of the words “limited exceptions” in Article 30. The latter proved unfeasible owing to the restrictive interpretation of Art. 30 by the WTO Panel in Canada – Patent Protection of Pharmaceutical Products, leading the WTO General Council to adopt the former.

In its Decision on the Implementation of Paragraph 6 of the Doha Declaration, the General Council agreed to a temporary waiver of the Article 31(f) obligation, enabling members to issue export-oriented CLs to countries that did not possess adequate manufacturing capacity. In December 2005, an amendment to the TRIPS was unanimously adopted, which proposed to insert a draft Article 31bis to the agreement. The amendment would only have entered into force upon ratification by two-thirds of the WTO’s members, and concretised the provisions of the waiver. This process proved to be excruciatingly slow.

In 2007, Canada notified the first ever Doha-style CL under the temporary waiver, issuing a licence to Apotex to manufacture and export an FDC of Zidovudine, Lamivudine and Nevirapine to Rwanda.

The WTO Secretariat, as well as individual LDC and developing country members at the TRIPS Council, have recently been pushing aggressively for members to ratify the Amendment. According to the Secretariat, 37% of acceptances were deposited in the last two years alone. On 23 January, the two-third mark was crossed with the deposit of instruments of acceptance from Burkina Faso, Nigeria, Liechtenstein, the UAE and Vietnam. (There has been some confusion over the exact location of the two-third milestone – the WTO has 164 members, which would place the figure required at 110. The Secretariat counts 84 acceptances, with EU member states accounting for the rest. The calculation on EU acceptances has been the subject of some controversy.)

Article 31bis now stands inserted into the Agreement, meaning that it now entirely governs export-oriented CLs.

Bottomline: Does any of this even matter?

In its press release, the Secretariat notes that the Amendment “provides a secure and sustained legal basis for both potential exporters and importers to adopt legislation and establish the means needed to allow countries with limited or no production capacity to import affordable generics from countries where pharmaceuticals are patented.”

This overwhelming optimism resonates with representatives of individual members, who gave video statements which were released to mark the amendment’s entry into force. Perhaps the only person to deviate from the tone of unrestrained satisfaction was the WHO’s Margaret Chan, who clearly noted that the Amendment would not nearly be enough to secure access to medicines, especially in sub-Saharan Africa.

The Paragraph 6 system, the temporary waiver and (by implication) its successor in the form of Article 31bis, have been subject to scathing criticism from academia on multiple counts. The waiver’s implementation has been severely lacking, with Canada’s 2007 export being its only notified use in over a decade.

The Canadian invocation of the waiver is perceived as little more than a symbolic test case. It’s also taken flak for its lack of scalability, and for failing to provide systemic incentives to keep generic manufacturers coming back for more licences.

More pertinently, some commentators (eg. Nuno Pires de Carvalho) point to the Decision as vindicating the cynicism with which they view WTO negotiations. Carvalho picks up on the timing of the 2003 Decision, coming as it did days before the failed Cancun Ministerial Conference. Carvalho notes (and Stiglitz seems to agree) that the A2M and agriculture were the two focal points of the agenda at Cancun. The evolution of the Paragraph 6 system represented a cosmetic concession for developed countries on the former front, allowing them to stonewall on the latter. In doing so, Africa and Asia effectively traded away global agricultural market access for a single shipment of AIDS medication from Canada.

The state of the WTO ecosystem today.

The system’s structure is notoriously onerous on prospective licensees, with additional red tape being imposed by individual members (eg. India). One of the many holes that riddles the Decision and its successors is the conscious emphasis that the system would still be subject to “adequate remuneration” being paid to the patentee under Article 31(h). This remuneration must be calculated in accordance with the patentee’s normal exploitation of their rights, rather than any conditions of abject poverty or public health emergencies that affect the importing member. Further, the system fails to account for test data and other supra-patent costs that a pharmaceutical licensee must incur. In summary, the Decision and the Amendment appear to have been set up to fail from the get go. If this looks like a harsh assessment, remember that the system’s acceptance by LDCs and developing countries can be squarely blamed for their lack of progress in areas as crucial as agricultural subsidies.

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