Letter to International Intellectual Property Institute Ms Lee Gillespie-White 201 Massachusetts N.E. Suite C3 Washington DC 20002 USA FAX: 09 1 202 478 1955 05 February 2001 Dear Ms Gillespie-White RESPONSE TO IIPI REPORT ON PATENTS AND YOUR PROPOSED CONFERENCE This response is two months overdue. Please accept our apologies. Your letter that accompanied the International Intellectual Property Institute’s Report: Patent Protection and Access to HIV/AIDS Pharmaceuticals in Sub-Saharan Africa (IIPI, 2000) initially excited us because we had little knowledge of your aims or your organisation. In the letter you invite us to be a part of a Conference that your organisation plans to hold in Johannesburg during 2001. "The focus of the conference will be on intellectual property issues and will be in the form of a conference for a day followed by a mediated discussion between government – the Departments of Health and Trade & Industry, Labour – Cosatu and NUM, pharmaceutical company representatives, medical aid schemes’ representatives and NGOs". However, after serious consideration of your report – see the attached comment written by Mr. Nathan Geffen (TAC executive member) – we cannot see our way forward in working with you. Your report defends drug companies and their economic power while seeking to blame historical inequities caused by unfair trade and local corruption as the source of high drug prices. TAC campaigns for access to affordable HIV/AIDS medicines and a quality health care system for all people. Not only is your report a serious misrepresentation of the issues regarding patents but it allows multinational drug companies the opportunity to avoid their responsibility for the deaths of many millions of people on our continent and in poor communities across the world. Your report deliberately tries to finesse this culpability. Your organisation masquerades as an independent institute neutrally mediating between the parties. You are aware that the drug companies you defend are taking the South African government to court for trying to enact simple measures such as generic substitution of off-patent drugs and price control that is milder than that of many North-American and European jurisdictions. Your organisation is not welcome to mediate any aspect of access to essential medicines or to discuss these issues with us until you honestly reappriase the facts. We will rather deal with the drug companies directly in court and on the streets. Should you wish to learn about the realities, there are a number of honest organisations in North America and Europe. We are confident that they will assist you in this process. Yours faithfully Zackie Achmat TAC chairperson ##### Analysis follows below Treatment Action Campaign (TAC) Response to the International Intellectual Property Institute (IIPI) Report: Patent Protection and Access to HIV/AIDS Pharmaceuticals in Sub-Saharan Africa (IIPI, 2000) REPORT'S CONCLUSIONS MISS THE POINT The International Intellectual Property Institute (IIPI) has produced a report called Patent Protection and Access to HIV/AIDS Pharmaceuticals in Sub-Saharan Africa which concludes that neither patents nor the Trade Related Aspects of Intellectual Property Rights (TRIPS) agreement are an impediment to access to HIV/AIDS medicine in Sub-Saharan Africa. The IIPI is planning a conference in Johannesburg this year on intellectual property issues. Lee Gillespie White of the institute, states "We are of the view that this report is the first step in what we hope will become an ongoing process." Furthermore, she says in a letter addressed to TAC’s Zackie Achmat, "I would really appreciate your views on whether the conference would be worthwhile and your input on how we might improve the basic structure." Clearly the IIPI considers this report to be a basis for discussion at the conference, and, therefore, it has been necessary for TAC to examine it to determine if the conference is to be of use to us. TAC has analysed the report and found that its conclusions are simplistic and wrong. This response explains why. On the first page of the report, the IIPI President, Bruce Lehman states "The report aims to provide unbiased information about the international patent regime." How can the IIPI offer unbiased views? The organisation is made up of people with an interest in protecting and strengthening intellectual property rights. Irrespective of whether or not this is a noble cause, it certainly does not confer objectivity on the organisation. In addition, there is no disclosure or denial of any links with government or industry. IIPI ARGUMENTS The report states "The TRIPS Agreement is not impeding access to medicines in sub-Saharan Africa. ... the TRIPS Agreement permits sufficient flexibility for African countries to expand access to HIV/AIDS drugs where other critical elements are in place..." (pg 52) The basis of the IIPI conclusions is that TRIPS is flexible enough to allow African countries to improve access to HIV/AIDS drugs, through compulsory licenses and parallel imports. Correctly, it is pointed out that TRIPS allows health requirements to override patents "... compulsory licenses are permitted on any grounds, including public health, national interest, food security, etc." (pg. 31) The report states that 8 of 16 African countries with infection rates higher than 10% do not have to conform to TRIPS until 2006. These are Burundi, CAR, Djibouti, Ethiopia, Lesotho, Malawi, Rwanda and Zambia. In addition to removing all blame from the TRIPS agreement, the report also concludes that "Patents are Not the Problem". (pg. 52) The IIPI's patent surveys indicate that most anti-retrovirals are not widely patented in Africa. The report also points out that their are access problems with drugs that are no longer on patent. The IIPI state the crux of their argument as, "Where patents do exist, the TRIPS Agreement permits a great deal of flexibility to seek compulsory licenses or parallel imports of drugs under patent. The United States and European Union have indicated that they will not oppose such practices consistent with the TRIPS agreement." (pg. 53) The IIPI argues that the real reasons for lack of access are a result of poor health-care infrastructures, debt, misdirected government financing, lack of political will and inadequate international financial support, particularly from the United States. The report quotes the WHO " 'Affordability of drugs could be increased substantially however, by eliminating or reducing import duties, distribution costs and dispensing fees. These can account for up to 80% of the total price paid for drugs. In particular, import duty can be as high as 30%, while value-added and other national and local taxes can amount to 20% of a drug cost." (pp. 53-54). So the IIPI report will have us believe that (1) the pharmaceutical industry is entirely blameless for the unaffordability of HIV/AIDS medicines, (2) patent legislation has not contributed to access problems and (3) most of the blame lies on other problems such as third-world governments and their protectionist tax regimens. The IIPI is correct to point out that there are factors other than patent legislation blocking access to treatment. It also correctly identifies many of these problems. But the report fails to point out one of the most serious impediments to treatment access, the tactics that the pharmaceutical industry has used to maintain monopolies on essential medicines in Sub-Saharan Africa and other developing world regions. Most of these tactics would be far more difficult to employ were it not for the legal framework for patents established in many poor countries and the TRIPS agreement. The remainder of this response addresses the IIPI arguments which contain serious fallacies and factual omissions. GENERALISING ABOUT SUB-SAHARAN AFRICA The IIPI have conveniently, but simplistically, considered Sub-Saharan Africa as a homogenous region, where a situation relevant to one country is relevant to every other. The IIPI arguments listed above hardly apply to the Sub-Saharan country with the most number of infections, South Africa, which has over 4 million HIV/AIDS infections. South Africa has a sophisticated patent legal system. Furthermore, the health-care infrastructure, albeit far from perfect, is developed enough to put in place anti-retroviral programmes, at least in the major cities, and with effort, throughout most of the country. In contrast to the argument offered by the WHO, there are no import duties on pharmaceutical products imported into South Africa and Value Added Tax (VAT) is redeemable. So much for additional costs through taxation. The problem is that anti-retrovirals are mostly not available in the public sector because of their exorbitant cost. Even most middle-class people struggle to afford triple-drug therapy in the private sector. The primary reason for this is that only brand-name anti-retrovirals are available. In all cases, these drugs are patented or their patent situation is sufficiently unclear (e.g. ddI and d4T) so as to render it impossible thus far for cheaper generic versions to be imported from Brazil, Thailand or India, or to manufacture generics locally. The problem is not only confined to anti-retrovirals, but also to opportunistic infection medications such as fluconazole and ofloxocin, which the IIPI report fails to consider. The fluconazole example is particularly instructive. In the private sector, the cost price of fluconazole is approximately R80 per 200mg capsule. In the public sector, the state pays approximately R29 per capsule. As such, private treatment and prevention of systemic thrush and cryptococcal meningitis is unaffordable for all but the richest South Africans. Most public hospitals cannot afford to stock enough of the medicine. As such, thousands of South Africans suffer and die unnecessarily from easily curable opportunistic infections. The Treatment Action Campaign, as part of a defiance campaign against patent abuse, is importing small quantities of a high-quality generic version for less than R2 per capsule! At this price, the state hospitals could maintain a sustainable supply. Pfizer have promised a fluconazole donation to the public sector, but to date not a single donated capsule has reached any patients. Quite apart from the fact that the "donation" will last for two years (when Pfizer’s patent expires) or that it will receive tax rebates in the US. The IIPI correctly points out that when the South African government introduced new legislation to allow parallel imports for pharmaceutical products, the US placed SA on the 301 trade watch list. Yet they fail to point out that this was justified by the claim, albeit false, that South Africa was introducing legislation in breach of intellectual property law. The report also neglects to mention the situation in Kenya, where patent law has also allowed pharmaceutical companies to establish monopolies on essential drugs. The Kenyan government and Kenyan NGOs, in contrast to the IIPI, consider patent law to be a barrier to price reductions. Therefore, the Kenya Industrial Property Bill, 2000 was tabled in parliament in order to allow compulsory licensing and parallel imports. Dr Chris Ouma of Action AID stated that there are many factors that affect access to medicine, "but one of the most significant barriers ... is the price of drugs." (Nairobi based Nation newspaper, 1November 2000) It is worth noting that according to the Oxfam Campaigner (Issue 38) Pfizer's fluconazole in Kenya costs $20 a day. Fluconazole is not a medication that requires a sophisticated infrastructure for successful results, so the usual arguments about infrastructure are particularly invalid here. Recent reports highlighted Glaxo Smith Kline's (GSK) efforts to stop generic manufacturer, Cipla, from donating a generic Lamivudine / AZT combination medication to Ghana. Apparently Glaxo Smith Kline do not have a patent on this medicine in Ghana, but there is sufficient complexity surrounding patent law to make this sort of tactic worthwhile for the big multinational pharmaceutical companies. John P. Kearney, CEO of GSK, South Africa has claimed in a letter to the AIDS Consortium, that they do have a patent on Combivir in Ghana, "Patent documents issued by ARIPO, the African Regional Industrial Property Organisation, indicate that they extend to Ghana (one of their contracting states). Renewal fees for these patents in respect of Ghana have been paid and accepted by ARIPO." This argument is supported by the IIPI report, which nevertheless indicates that Combivir is not patented in Ghana or the ARIPO countries generally. So Combivir's patent status in Ghana is at best unclear and this lack of clarity has been exploited fully by GSK . These are examples from just three Sub-Saharan countries, including the one with the biggest HIV population. There are many other examples from countries like Botswana, Nigeria and Uganda of abusive practices by the pharmaceutical companies who use patent legislation as the legal framework behind which to delay access to life-saving treatment. The IIPI report talks extensively about the African Regional Industrial Property Organisation (ARIPO), and the equivalent organisation for French speaking African countries, OAPI. According to the IIPI, each organisation has 15 members. Patents accepted by ARIPO and OAPI are automatically binding on all the member countries. These organisations confer a sophisticated patent legislation on their member states and it would be wrong to conclude that patents are not a reality of Sub-Saharan Africa. The IIPI report indicates that almost no anti-retrovirals are patented in the ARIPO and OAPI countries, but clearly there is conflicting evidence on this as the comments by GSK's Kearney imply. THE ROLE OF TRIPS IN DENYING ACCESS TO TREATMENT The IIPI report correctly indicates that TRIPS does allow patents to be overridden for health emergency purposes. However, this does not imply that TRIPS is not a barrier to access to treatment. The scope of TRIPS is sufficiently complex to allow pharmaceutical companies to pursue time-consuming, costly legal action in countries where they perceive their profits to be under threat. It is important to realise that this legal action is often not pursued with the intention of winning in court, but to delay the implementation of alternatives making use of generics, compulsory licenses and parallel imports. An excellent example of this is the current case against the South African government which has been delayed for over three years in the courts. South Africa at least has the financial muscle to ultimately deal with the pharmaceutical industry. How does a country like Ghana with a GDP of $35.5 billion, a fraction of the annual sales of the pharmaceutical industry, cope with a sustained campaign against making generic medicine available? The report states "The most relevant conditions prescribed in Article 31 of ... TRIPS ... include: ... the use must be authorized predominantly for the supply of the domestic market of the member authorising the use ..." (pg. 31), but fails to point out that this creates legal uncertainty with regard to African countries importing generic medicines from other countries that are manufacturing these medicines under compulsory licenses, as is likely to happen in Brazil and Thailand. Would Brazil and Thailand be in breach of TRIPS for exporting to poor countries? TAC believes that this would not be a transgression of TRIPS, but be left in no doubt that the pharmaceutical industry will argue otherwise. Another aspect of TRIPS which has a detrimental effect on access to treatment is the 20 year patent period that the agreement enforces. Kenya, prior to it conforming with TRIPS, has a patent period of 7 years. South Africa had a patent period of 16 years before its legislation was brought in line with TRIPS. This patent could be extended for 5 years if the patent holder could show that the patent was not being abused. However, this extension was hardly ever granted. The report correctly argues that political will in many poor countries is a barrier to access. But actions by the pharmaceutical industry and the US government behind the veil of TRIPS such as those described above have the effect of intimidating third-world governments out of taking appropriate action to make treatments affordable by pursuing the importation or manufacture of generic drugs. Indeed, this is the most likely reason why the South African government has not made use of the Patents Act to implement compulsory licenses. INFRASTRUCTURE COSTS The IIPI report points out that poor health care infrastructure is a barrier to access to anti-retroviral medicine. "Even if antiretroviral HIV/AIDS drugs were made available free tomorrow, there is a lack of health care infrastructure to conduct testing, store and distribute medications, and monitor patient compliance with what are often very complicated regimens." Yet the report does not consider the patent status of two crucial laboratory tests necessary for running an effective anti-retroviral programme, CD4 and viral load counts. Both these tests are expensive, and patented in South Africa. This is clearly a case of patents creating a barrier to developing the appropriate infrastructure for dispensing anti-retrovirals. Interestingly, the pharmaceutical industry seems to consider the infrastructure of many African countries, such as South Africa, Botswana, Uganda and Nigeria, good enough for conducting sophisticated drug trials, which require extensive monitoring and testing. CREATING AN ECONOMY OF SCALE Currently even generic anti-retroviral prices are high. One of the reasons for this is that their simply is not sufficient co-ordination and production of these medicines. Countries like Brazil, Thailand, India and South Africa, need to co-operate in order to produce more generic anti-retrovirals in order to reduce the price through an economy of scale. Brazil and Thailand have offered to transfer knowledge for developing the technology and infrastructure for anti-retroviral programs. It is difficult for poor countries to do this, however, in a climate of consistent legal challenges from multinational pharmaceutical companies, threats from the US and EU governments and lack of clarity over TRIPS. BRAZILIAN EXAMPLE Brazil presents an example of what can be accomplished without patent legislation getting in the way of generic production. Brazil has developed an advanced generic anti-retroviral production programme and an infrastructure for approximating its policy of universal access to HIV/AIDS treatment. The result has been a 50% drop in HIV/AIDS mortality. Brazil has a slightly lower per capita GDP than South Africa and its biomedical industry is not as sophisticated, yet it has managed to start overcoming the epidemic. Although the IIPI mentions the Brazilian example, the logical conclusions are not drawn. Most African countries have not got Brazil's financial muscle with which to fight the pharmaceutical industry. The counter-example, South Africa, had much stricter patent laws than Brazil until recently. DRUG RESISTANCE FALLACY An often used argument against making access available that is often made by the pharmaceutical industry's apologists can be found on page 22 of the report, "There is concern that improper use of anti-retrovirals will lead to the emergence of mutations and new HIV strains that will be drug resistant." The drug resistance argument has unstated assumptions which value the lives of people living in rich countries over people living in poor countries. Drug resistance is a problem all over the world, more often than not in rich countries. Even if the resistance rate in poor countries turns out to be worse than that in the rich countries, a big assumption, universal access to HIV/AIDS drugs in the third-world will ultimately save and prolong more lives than if treatments are just confined to the rich countries as they are now. Denying access to treatment because of resistance problems will result in more deaths than otherwise. Only someone dedicated to preserving a better world for the rich can make this argument. The report also states that it is important to prevent the growth of a counterfeit low-quality drug industry in poor countries. We agree. The best way to prevent that from happening is to secure lower drug prices, and the best way to do that is to open African markets to generic competition. ERRORS AND OMISSIONS LEAD TO WRONG CONCLUSIONS The IIPI report has many errors and omissions, both logical and factual, of which only a few have been mentioned here. Many events that contradict their conclusions have been omitted. Some events that have been included in the report, such as the court action by 42 pharmaceutical companies against the South African government and the US government placing South Africa on the 301 trade watch list, have been conveniently neglected in the IIPI's concluding argument. The report concludes that financing is the major cause of access problems, not patents. This is disingenuous, because patents push up the costs of financing. It is possible, even probable, that once the legal issues have been settled in enough Sub-Saharan African courts, TRIPS will be sufficient in a strictly legal sense for overcoming abusive patent practices, but few countries have the luxury of interim relief against drug company actions. Every day of the battle to settle intellectual property disputes in poor countries is a day in which more people die because they cannot afford patented treatments. The patent issue is not the only problem affecting access to medicine in many sub-Saharan countries, but it is arguably the most crucial. TAC suggests that the IIPI lobby and convince President George W. Bush and his advisors not to make "aid" a tool of dubious domestic policy.