The WTO, Intellectual Property Rights, and the Access to Medicines Controversy

Publication Date: December 2006

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Law and ethics; Manufacturing and industry

Type:

Abstract:

In August 2003, the World Trade Organization (WTO) reached an agreement on the use of compulsory licenses by developing countries without manufacturing capacity to access life-sustaining medicines. This agreement was incorporated as an amendment to Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement on the eve of the Hong Kong Ministerial in December 2005. The issue of access to affordable medicines is one of great concern to developing countries whose health-care systems are often overwhelmed by HIV/AIDS and other infectious diseases. Some developing countries have viewed the TRIPS agreement as an impediment in their attempts to combat such public health emergencies by restricting drug availability and by transferring scarce resources from developing countries to developed country manufacturers. For the developing world, the issue of compulsory licenses is an important test as to whether the WTO can meet the development needs of its members, and conversely, whether the developing world can influence the actions of the world trading system.

Developed country pharmaceutical industries view the TRIPS agreement as essential to encourage innovation in the pharmaceutical sector by assuring international compensation for their intellectual property. Without such protection, industry claims it could not recoup the high costs of developing new medicines. Producers have unilaterally undertaken to reduce prices for certain HIV/AIDS medicines, but these efforts at differential pricing have not been systematic. The United States has been forceful in defending the interest of the U.S. pharmaceutical industry in the negotiations. In December 2002, the United States blocked a compromise on the compulsory licensing issue to which all other nations had agreed; however, it was also the first nation to ratify the December 2005 amendment.

In the 109th Congress, legislation was introduced (S. 3175, Leahy) to establish procedures to grant compulsory licenses for exporting patented pharmaceutical products to certain countries under the WTO Decision. This legislation was not acted upon in the 109th Congress, but it may be reintroduced in the 110th Congress.

The system of compulsory licensing may have a relatively modest effect on the availability of medicines in the developing world. Compulsory licenses have rarely been used by developing countries because many patent regimes did not protect pharmaceuticals before 2006. Countries providing patent protection to pharmaceuticals have used the threat of compulsory licensing as a method to negotiate lower drug prices. Although some countries have amended their national laws to allow compulsory licensing for pharmaceutical exports, there may be little economic incentive for a supplier to manufacture the product in the case of an LDC issuing a compulsory license.