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The G20 Summit in Toronto has wrapped up and, apart from a continuing pledge to resist protectionism, no progress was made on trade issues. And while not surprising, it is disappointing that the World Trade Organization (WTO) still has not improved access to essential medicines in the developing world.

The WTO’s so-called Doha Development Round continues to be an unobtainable goal. It commenced in the shadow of 9/11 and was intended to give the developing world a better deal than it did when the WTO was formed in 1995. Nine years later, there is an absence of political will to forge a new trade deal giving the developing world better market access in agricultural and manufacturing goods, even at the tail end of the current recession.

The Doha Declaration on Public Health promised to fix a barrier in the WTO’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Pharmaceutical drugs are a special case under the TRIPS regime. Pharmaceutical companies strongly supported the Uruguay Round Agreements to obtain intellectual property laws protecting their interests. Such protection has been one of the most contentious issues since the formation of the WTO. It was recognized that the conditions imposed on compulsory licensing prevented any member that did not have a domestic generic drug industry to effectively respond to a health emergency.

The most significant problem is the restriction that the goods produced must be predominantly for the supply of the domestic market. This means that Thailand could only license the production of drugs for use within its borders. As a result, a country without a generic drug manufacturing capacity might be barred from issuing any compulsory license under any circumstances, even during a health emergency.

Countries such as India, Brazil and China are noted as having substantial domestic generic industries and thus can maintain manufacturing capacity notwithstanding the restriction. In fact, India has established itself as the most important supplier of generic pharmaceuticals to the developing world. The problem is that as a result of the restrictions on compulsory licensing in the TRIPS Agreement, the generic industries in China, Brazil, or India could not supply any country experiencing a health emergency that does not have a generic drug manufacturing capacity.

In effect, what the system established under para. 6 of the Doha Declaration on Public Health was a waiver of the “predominantly-for-the-domestic-market” limitation. A developing country can determine a health emergency and issue a compulsory license to a foreign generic drug manufacturer which, in turn, can ask its own government for a compulsory license to manufacture and export the drugs. A series of notifications and production requirements are imposed under the system, including that only the product needed to meet the country’s emergency can be produced, no re-export is permitted and all of the drugs must be in specially marked packaging. The restrictions are designed to prevent these drugs from entering into commercial channels.

The problem is that the notification requirements and production restrictions are such that the scheme created by the Doha Declaration on Public Health has been used only once in seven years. It was a shipment of drugs to Rwanda by Apotex Inc., a Canadian generic manufacturer. This is a failure by any measure.

The Doha Declaration, however, is not the full story on access to essential medicines. Thailand has been at the forefront of this debate. In 2007 and 2008, the government of Thailand issued compulsory licenses for six essential medicines. This ignited a firestorm of criticism and debate on the compulsory licensing regime in the context of government use. The Thai Ministry of Health had tried to negotiate voluntary licenses, but found that to do so simply delayed the delivery of effective medicines where needed. Remarkably, the benefit of Thailand’s compulsory licensing of these drugs was the reduction in price of at least one of them to close to the generic price. 

The Ministry of Health points out the compulsory licensing scheme in Thailand does not threaten the global system of pharmaceutical patents. First, Thailand only represents 0.5 per cent of the world demand for pharmaceutical drugs. Second, compulsory licensing is only possible in less than 15 per cent of all patented drugs. Most of the drugs remain monopolized because of the complexities of production.

Unfortunately, the Thai experience cannot be generalized. Once again, the problem is that a developing country without a generic drug capacity can issue a compulsory license to a foreign drug manufacturer only in accordance with the scheme established by the Doha Declaration on Public Health.

It may be that a comprehensive trade deal is impossible for the foreseeable future. The WTO should take action to fix the problems that exist with the current scheme designed to provide access to essential medicines.

Chuck Gastle is a principal of Bennett Gastle P.C., a litigation and international trade boutique in Toronto. Murdoch Martyn is an international trade lawyer and in 2009-2010, taught a course on NAFTA at Osgoode Hall Law School.