Introduction

From Patent Injustice: How World Trade Rules Threaten the Health of Poor People, Oxfam GB, February 2001

We have entered the twenty-first century in the midst of breathtaking medical advances. Computer technologies, new diagnostic and surgical techniques, and progress in bio-medical sciences have combined to produce major breakthroughs in the detection and treatment of killer diseases. The unlocking of the human genome holds out the prospect of unparalleled progress in the treatment of many diseases. Yet the advance in public health is partial, with the benefits heavily concentrated on a minority of the world’s population living in rich countries. The vicious cycle of poverty and ill-health that is destroying lives on a vast scale in poor countries remains intact.


The World Trade Organisation (WTO) and the health divide

This year, 11 million people, mostly living in developing countries, will die from infectious diseases such as pneumonia, tuberculosis, measles, and diarrhoea.
Almost half of them will be children who have not reached their fifth birthday. The overwhelming majority of the victims will be poor. The widening health divide between rich and poor countries provides a stark reminder of the inequalities that have accompanied globalization. Rising prosperity and human suffering are marching hand in hand. Governments in the industrialized world seldom miss an opportunity at high-level UN summits to stress their commitment to ambitious targets for poverty reduction, and to the achievement of ‘globalization with a human face’. But the gap between rhetoric and the real policy choices taken by these governments is widening – and nowhere more so than in the setting of world trade rules.

This Briefing Paper has been prompted by Oxfam’s growing concern over the public-health implications of intellectual property (IP) rules enshrined in the WTO. These rules, driven through the WTO by the United States, Europe, and Japan,
are the product of an intensive lobbying exercise led by the world’s largest and most powerful pharmaceutical companies: Merck, Pfizer, Glaxo Wellcome (GW), SmithKline Beecham (SB), and Eli Lilly. The financial power of these companies is enormous. Taken collectively, the largest five drugs companies have a market capitalization greater than the economies of Mexico or India – and twice the GNP of sub-Saharan Africa.

Financial power has been converted into political influence. These pharmaceutical companies have helped lead the way to WTO rules that will increase the profits accruing to drugs patent holders: namely, themselves and their shareholders. Northern transnational corporations (TNCs) account for over 90 per cent of global patents on pharmaceutical products.

The WTO’s rules have dramatically strengthened the exclusive marketing rights of the inventors of new drugs. The period of patent protection has been extended to at least 20 years. During this period, potential competitors are prohibited from
producing and marketing cheap equivalents of these products. From 2000, most developing countries are required to ensure that their national legislation protects the IP of foreign pharmaceutical companies in this way, or face the prospect of WTO-sponsored trade sanctions. Some countries are allowed more time to become compliant, but all have to grant provisional ‘market exclusivity’ for patents filed after 1995, so the rules are effectively in place now.

Complex as the WTO rules may be, the likely outcome is relatively simple. They will raise the price of medicines, including those needed for the treatment of poverty-related illness. Generic drugs industries, which specialize in developing low-cost copies of patented drugs for low-income populations, will be prevented from producing and exporting. The major source of competition and downward price pressure in domestic drugs markets will be eliminated.

The WTO patent regime for pharmaceutical products is not a future threat. It has already inflicted enormous damage. During 1998 and 1999, the South African government faced the constant threat of trade sanctions from the USA.
Its ‘crime’: amending its law to allow importation of copies of patented anti-retroviral HIV/AIDS drugs from generic-drugs suppliers. The copies cost less than one-half of the patented versions. More recently, GlaxoSmithKline (GSK) has challenged the legality of imports of anti-HIV/AIDS generic drugs to Ghana and Uganda from India. HIV/AIDS affects over 25 million people in sub-Saharan Africa alone.

The threat of trade sanctions has played a pivotal role in the development and implementation of the new WTO regime. Following complaints from the Pharmaceutical Research and Manufacturers of America (PhRMA), an industry body representing the world’s largest pharmaceutical companies, the Government of the United States has threatened unilateral trade sanctions against over 30 countries under the ‘Special 301’ provision of the country’s trade law. Countries such as India, Egypt, and Argentina, all of which have strong
generic-drugs industries, have been among the prime targets. Apart from its dubious legality in terms of WTO principles, the use of ‘Special 301’ has raised disturbing questions about corporate influence over US trade policy and, via this
channel, over WTO rules.


Future implications

The threat goes beyond HIV/AIDS. The next generation of front-line drugs which could treat major killers such as malaria, pneumonia, and diarrhoea (which collectively claim almost seven million lives a year) and tuberculosis (16 million
cases a year), will be patented. There will be no inexpensive generic versions available until after patent expiry – which under WTO rules is at least20 years from the filing date. Past evidence on price differentials between patented and generic drugs suggests that the effect on prices will be dramatic. In Thailand, the introduction of a generic competition reduced the cost of drugs for the treatment of meningitis by a factor of 14. Generic drugs for the treatment of resistant shigella, a major cause of bloody diarrhoea, are sold in India at one-eighth of the price of patented equivalents.

Increased prices resulting from patent protection will intensify the pressures faced by the poorest households in dealing with sickness. At a time when diseases such as HIV/AIDS and drug resistant variants of old killers are placing millions of lives at risk, world trade rules are threatening to raise the costs of vital drugs.

The central problem with the agreement on patents negotiated at the WTO is that, in its implementation, it is placing corporate profit before human welfare. Governments of the industrialized world – including those in the EU – have colluded in developing a set of trade rules which threatens to further restrict the access of poor people to medicines. This will lead to greater sickness, suffering, and premature death on a massive scale. Their actions raise fundamental questions about global governance, and about democracy and accountability in multilateral organizations such as the WTO. They also rest uneasily with pious declarations about internationally agreed health targets.

Failure to fundamentally reform the WTO’s patent rules will threaten the lives of some of the world’s most vulnerable people by reinforcing the lethal interaction between poverty and ill-health. But the costs of ill-health do not stop at the household. Widespread sickness acts as a brake on economic growth, and denies children the opportunity to realize their potential in education. While poor
households will bear the brunt of these costs, the consequences will extend beyond national borders. No country is immune to the spread of infectious disease, or to the consequences of the poverty and inequality generated by ill-health. That is why the entire international community has a responsibility to ensure that world trade rules promote public health.