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Access to Essential Medicines and influence of U.S. Statecraft
By: William Stewart - 05.16.14
Economic Diplomacy and Statecraft - Dr. Rogowsky
Table of Contents
1. Introduction to Research and Methodology - pg. 2
2. TRIPS Waiver to Compulsory License - pg. 2
3. Brazil Case Study - pg. 4
4. Public Health Demand - pg. 5
5. Zimbabwe Case Study - pg. 6
6. Influence of Statecraft and Trade Policy- pg. 7
7. Concluding Recommendations for Trade Policy - pg. 8
8. Tables: Pharmaceutical Imports/Exports and Net Pharmaceutical Trade - pg. 10
Introduction to Research and Methodology

Every year over 9 million people die as a cause of infectious disease in the developing
world1
. One contributing factor is the inaccessibility of life-saving drugs due to the high price and
heavy protection of intellectual property in the developed world, especially for patented
pharmaceuticals. The purpose of this research is to assess the policy result of paragraph 6 of
the Doha Declaration on the TRIPS Agreement on Public Health Policy, and its effect on least
developed countries’ access to essential medicines. More importantly, this paper is designed to
be a general macro-view of the statecraft of public health policy in the U.S. and WTO
participants, rather than a presentation of specific technicalities involved in the drug
manufacturing industries and legislation of participating or affected jurisdictions.
After introducing and summarizing the latest on the WTO agreement, three arguments
will be synthesized in their application toward pharmaceutical procurement and delivery to LDC
in certain medical situations with two related case studies and their policy impacts including the
importance of global health interest of U.S. economic diplomacy. The grounds in which a
jurisdiction is permitted the waiver to a compulsory license followed by case studies in Brazil,
and in Zimbabwe and an analysis of U.S. statecraft on public health will attempt to provide
constructive criticism of the Doha Declaration of Access to Essential Medicine and Public Health
of the TRIPS agreement. These recommendations could improve access to medicine and
manufacturing capacity in least developed and developing countries.
TRIPS Waiver to Compulsory License
In 2001, Article 31 of the original TRIPS agreement on Public Health as part of DOHA
Declaration negotiated compulsory licenses were only authorized by health authorities for the
domestic market, which denied access to essential medications in areas of vulnerable
populations through prohibiting exports. In 2003 the provision of the TRIPS Agreement directly
covers several aspects of intellectual property rights including transition periods of market entry,
waiver to compulsory licenses, public use of patents, parallel importation, exceptions to patent
rights, and restriction on data protection2
. Parallel imports are cross-border trade in a patented
product, without the permission of the manufacturer or publisher. Parallel imports take place
when there are significant price differences for the same good in different markets.
“Paragraph 6 of the Decision required that domestic legislation must include:
a. Grounds for granting compulsory license and specific provision for public use of
patents regarding exports and imports.
1
World Health Organization: The World Health Report 2001. WHO, 144,
2003. < http://www.who.int/whr/2003/en/whr03_en.pdf>
2
World Trade Organization: General Coucnil 2003. WT/L540. < http://www.wto.org/english/tratop_e/trips_e/implem_para6_e.htm>

b. Time limitation for negotiation for voluntary license so the medicine can be delivered
without inefficient delay
c. The list of diseases and pharmaceutical products should not be restricted in domestic
law including a clear definition of pharmaceutical products where the license will
be issued. Referring to the product and not the patent of the product will facilitate
efficient decision making.
d. Appeal by patent holder should not suspend implementation of compulsory license.”3
The 2002 TRIPS agreement on public health states that compulsory licenses for
developing countries do not include exports and can only be issued with domestic end users. In
2003 the Article 31 decision to have the waiver to compulsory license allowed exports to urgent
medical situations and the ratification of the amendment was on the agenda in 2005, but did not
have enough support to go through in the Doha and the negotiations failed; 2/3 of the 153 WTO
members must accept for ratification. The 2005 agreement waiver of article 31 allows
compulsory licensing for exports, however is only a waiver and not an amendment4
. This has
not been ratified and is a non controlling amendment of the TRIPS agreement, which is difficult
to be seen as an efficient policy tool by patented by top tier pharmaceutical corporations in the
developed world. Hundreds of millions of dollars are required for research and development on
a particular pharmaceutical patent and most of the demand for these drugs including exports
and imports are from high income countries5
. However, despite their heavily protected
pharmaceutical patents, the U.S., Canada, Japan, and even Brazil are the leading net importers
despite them being among the largest producers of pharmaceuticals in the world6
. The research
and development cost of a large drug company is $802 million, as researched by the Global
Alliance. As these patents have an expiration date after market entry, generic drug companies
in India and Brazil can produce cheaper drugs and export them for a much lower price under the
waiver to the compulsory licenses; and the generic brands don’t have as much investment as
the patented product, their profits are immediately realized after the sale, despite their much
lower price. Patented pharmaceuticals undermine demand of generic drug names and
sometimes view public health needs as a threat to the developed and industrialized patented
pharmaceuticals heavily protected under domestic legislation to ensure the recovery of their
investments. Weakening patent protection would negatively impact pharmaceutical research
3
Vandoren, p., and J. Van Eeckhaute. “The Tw o Decision on Paragraph 6 of the Doha Declaration on the TRIPS Agreement and
Public Health”, The Journal of World Intellectual Property, Vol. 6. November, 2003.
4
World Trade Organization. General Council of Paragraph 6 of TRIPS.
5
See Figure 3.2.
6
See Figure 3.3.1

and development. The International Federation of Pharmaceutical Manufacturers see
compulsory licensing as inhibiting access to benefits of research and development for new
treatments for patients all around the world. The generic drug companies were in favor of the
Declaration while expressing concern that more powerful countries will impose pressure to
promote patent protection7
.
Brazilian AIDS Program and U.S. Trade Dispute
Brazil has included universal access to HIV/AIDS antiretroviral treatment since
the early 90s; however currently around half a million people in Brazil are affected with
HIV, one half of which having received ARV treatment8. While this sounds insignificant,
several factors have noticeably decreased quantities of Brazil’s infected persons. The
sufficient domestic production of drugs and lower prices for production patents followed
by heavy patent law allows a compulsory license to be used without permission from the
patent holders defined by Article 68 of Brazilian Patent Law9. Additionally, Brazil has
included technology transfer and capacity building for production of generic ARV drugs
in least developed countries. The U.S. accused Brazil of breaching of Article 68 in that
patent holders are required to manufacture the product for only domestic use and took
Brazil to the Dispute Body Settlement of the WTO. If the manufacturer fails to oblige, the
patent is subject to compulsory licensing after three years; the United States argued
that the Brazilian law discriminated against United States owners’ of Brazilian patents
and that it inhibited rights to patent holders. The United States claimed that the Brazilian
law violated Article 27.1 and Article 28.1 of TRIPS which states, ‘patent shall confer on
its owner the following exclusive rights:(a) where the subject matter of a patent is a
product, to prevent third parties not having the owner’s consent from the acts of:
making, using, offering for sale, selling, or importing (6) for these purposes that
product;’10 Brazil argued that Article 68 was in line with the text and the spirit of TRIPS,
including Article 5.4 of the Paris Convention, which allows for compulsory licensing if
there is a failure to work a patent.The United States action came under fierce pressure
7
An overview of the different positions responses to the Paragraph 6 Negotiations. <w ww.cptech.org/ip/wto/p6. 2003.
8
Brazil Ministry of Health. National AIDS Drug Policy, May 2001.
<w ww.aids.gov.br/assistencia/aids_drugs_policy.htm>
9
Brazilian Patent Law . IndustrialProperty Law No 9,279 of May 14, 1996.
10
World Trade Organization: Request for the Establishment of a Panel by
the United States, BrazilMeasures Affecting Patent Protection. WTO Doc
No WT/DS199/3, Jan 9, 2001.

from the international NGO community, which feared it would have a detrimental effect
on Brazil’s successful AIDS programme11.” Brazil WTO representatives have actively
participated in debates on access to medicines and WHO meetings offering support to
increase manufacturing capacity in developing countries. However, NGOs feared that
the United States action could have a negative effect on other countries’ ability to
accept Brazil’s offer of assistance. On June 25, 2001, in a joint statement with Brazil,
the United States announced that it would withdraw the WTO panel against Brazil12.
Public Health Demands
Brazil’s model for ARV treatment has resulted in a shift of drug companies to
offer discounts for research efforts, specifically for HIV/Aids and Malaria. These
research and development efforts are usually funded by the Gates Foundation, Clinton
Initiative, Global Health Initiative, and facilitated by the World Health Organization in
addition to private pharmaceutical companies. These companies would have had
problems securing their intellectual property rights under TRIPS if they were not able to
adapt to the political forces. The emphasis here is compulsory licenses were granted
through global health authorities but the original Agreement in 2002 prevented LDCs to
import essential medications under the license; the waiver to the issuance of
compulsory licenses was drafted to increase access to these medicines. In 2008 the
Ministerial Agreement was to extend the deadline to accept the TRIPS agreement
amendment until Dec 31, 2013, and since the waiver to issue compulsory licenses for
exports has still not been ratified and will be revisited in 2016. This result is a factor of
strategic health policy by countries with prominent patented pharmaceutical industries
with heavy protection of related intellectual property. This protection assures return on
investment in patented drugs that have officially been approved for domestic and
international market entry for commercial use while providing cutting-edge treatments
for those who can pay.
11
MSF: US Action at WTO Threatens Brazil’s Successful AIDS Programme, Press Release, Feb 1, 2001. <w ww.accessmed-
msf.org>
12
Cooper H.: U.S. Drops WTO Complaint Against Brazilian Patent Law . WallStreet Journal Europe, A2. 2001

In 2003, the waiver to compulsory licenses was seen by the WTO as a temporary
resolve to members with insufficient pharmaceutical manufacturing capacities and a rapid
response to those LDCs with urgent medical needs. Pharmaceutical products defined as a
product manufactured through a patented process to eligible importing members attempt to
address the needs of least developed country members, at a discount price to global health
initiatives. Conscious public health policy should provide guidance for rapid and effective
response to a sustainable supply of quality medicines at affordable prices and ensure
competition of multiple suppliers in developed and developing countries. This debate was
largely a result of HIV/AIDS pandemic afflicting many developing countries in sub-Saharan
Africa. In May 2000, President Clinton issued a Medical Technologies Executive Order of
HIV/AIDS pharmaceuticals in sub-Saharan Africa as a result of deadlock WTO Ministerial
Conference13
.
Zimbabwe’s Emergency Medical Situation
In brief, the Minister of Justice of Zimbabwe in 2002 issued a declaration of HIV/AIDS
emergency to promote importation of generics under parallel importation, when parallel
importation is not covered under legislation of Zimbabwe’s legal infrastructure. Parallel imports
allow two countries to trade that have the same product but there is a large price discrepancy
due to market activity. In 2003 as a result of a report conducted by the Ministry of Health and
Medicines Control Authority of Zimbabwe, Varichem Pharmaceuticals LTD, a Zimbabwean
Company, was given permission to produce HIV/AIDS antiretrovirals at a cost of an average of
$40 per month. Varichem produced 7 generic versions of the patented ARV under Section 34 of
the Patents Act, which allows the Minister of Health to permit use of patent for the service of the
state and state-owned institutions. As patients were not able to afford the high price tag of the
medication, the Health Ministry supplied the generic version Combivir, at $15 per month and to
meet at least two third’s of the government’s demand for the drug. “While this allowed the
government to supply the generic HIV/AIDS at lower cost, accessibility to foreign currency for
importing the active ingredients of the drug threatened exchange which would increase the final
price to consumer.14
” These higher prices result in permissible imports of two other generic
companies in India and an unclear impact of the declaration 34 in terms of social benefit for
those infected in Zimbabwe. The decreased imported prices of generic competitors may have
had positive benefit for the patients in Zimbabwe, however at the expense of unclear economic
13
The American Presidency Project. <http://w ww.presidency.ucsb.edu/ws/?pid=61648>
14 Oh, Cecilia. Commission on Intellectual Property Rights, Innovation and Public Health. The Use of Flexibilities in TRIPS by
Developing Coutnries: Can they promote Accessto Medicines?. 2005 <
http://www.who.int/intellectualproperty/studies/TRIPSFLEXI.pdf?ua=1>

spillovers in the generic pharmaceutical industry, and full government control of imports in a
politically instable environment in 2003.
Influence of Statecraft and Trade Policy
State legislation has authority to use a patent without consent from the owner, under
varying conditions and national response to public health. The inclusion of this non-commercial
use of patents should be implemented in domestic legislation of all developing countries, but is
more promising on paper than it is in application. Debates over the effectiveness of the TRIPS
waiver vary from too restricted to too liberal, and it is clear that the majority of WTO
representatives want the waiver to be ratified, but not all. Global health officials argue that the
waiver is too restrictive in that there is still a discrepancy between the disease pandemics in
LDCs and those that actually receive treatment, specifically HIV/aids and infectious diseases.
While compulsory licenses for patented pharmaceuticals are not used in the U.S. and
developed countries due to their fully sufficient pharmaceutical production capacities, patented
companies find the waiver is too liberal because it allows countries to export the generic drug
that misuses the defined intention for urgent medical situations. Lastly the generic drug
manufacturers find the waiver effective because they are profiting off of public health demands,
in addition to their domestic consumers, however have the burden of pressure from large
pharmaceutical exporters such as U.S., Japan, Canada, and Switzerland to not use the waiver.
U.S. intellectual property trade policies toward middle income countries are insufficiently
considering public health priorities with them and their trading partners. There are a range of
recommendations for applying better regimes on intellectual property rights for pharmaceuticals
in order to facilitate the development of production capacity and access to medicines in
developing countries. Least developed and developing countries alike have responsibilities to
utilize the TRIPS waiver for public health purposes, however without a clear understanding of
international law, and specifically the Decision of Paragraph 6 of the TRIPS, governments will
fail to provide solutions for public health needs. Most countries in development provide
compulsory licenses as a critical policy tool for public health needs. The extent to which the
licenses are granted vary dependent on socio-economic, political, and sometimes purely
economic factors. In order to avoid ambiguity, these countries should incorporate in their patent
laws the conditions in which compulsory licenses may be granted. Transparent legislation with
information sharing across various levels of authority and government entities as required by
Article 31 of TRIPS will only further facilitate the decision making process at home and in the
WTO. Without the TRIPS agreement or protection of intellectual property, patented drugs would

not have been invented in the first place. High research and development costs for patented
drugs require return on investments in the certain amount of time before the patent expiration.
As a result of the business model of patent research and development, pharmaceutical
corporations producing patented medicines approved by Food and Drug Administration have
little to zero incentive to penetrate least developed markets. Generic drug companies in India
and Brazil do not have to worry about covering their investment costs while benefiting from cost
effective production and immediate profit without any patent expiration. The TRIPS agreement
requires that patents be granted to products which are industrially applicable and involve an
inventive step. Inherently, the U.S. and E.U. have great influence of intellectual property
legislation related to pharmaceuticals in developing countries as a result of historic economic
and military power. Political movements toward securing the continuation of this power with
abundant exports of patented pharmaceutical products at full price, the U.S. intellectual property
law allows corporations to focus on big investment in research and development, without
necessarily a direct transfer of technology to other capable foreign producers. The International
Federation of Drug Manufacturers opposing the compulsory licensing to overcome patent
barriers is a belief deeply rooted in the threat of denying patients and the world benefits of
research and development and the positive results from research based pharmaceutical
development. “Their argument is not with the compulsory license, but the export of the patented
product to a country where a compulsory license has been issued.15
” Heavy protection of
Intellectual Property in the developed world is considered by health officials one of many
barriers to access to essential medications in least developed countries, while pharmaceutical
companies believe that it is the innovative development of future treatment that will save lives.
Concluding Recommendations for Trade Policy Makers
Even if the waiver to the compulsory license of the TRIPS agreement allows developing
countries to export generic drugs, there are other barriers to access for essential medicines in
for least developed countries. “Despite the enormous burden of disease, drug discovery, and
development targeted at infectious and parasitic diseases in poor countries has virtually ground
to a standstill because drug companies in developed and developing nations simply
cannot recoup the cost of R&D for products to treat diseases that abound in developing
countries16
. Also, only 11 of 306 products on the WHO Model List of Essential Drugs are
15
Attaran A., Gillespie-White L.: Do Patents for Antiretroviral Drugs
Constrain Accessto AIDS Treatment in Africa? 286 JAMA 1886, 2001.
Distributed at Doha by the International Federation of Pharmaceutical
Manufacturers (IFPMA)
16
James Love, How Much Does it Cost to Develop a New Drug.

patented in the developed world, leaving most of the drugs with the status of not being essential
and only one percent of drugs being developed for tropical disease.17
” The World Health
Organization recommends that the U.S. should consider a closer look at its trade policy
regarding intellectual property in regard to accessing medical technology to improve social and
economic development in countries experiencing a high burden of tropical disease. Countries
with high burden of disease benefit from providing domestic manufacturing capacities so they
are not reliant on importing generic medicines from the U.S. However, U.S. manufacturers
benefit heavily on these exports, and U.S. will continue to push these export driven policies and
protect the pharmaceutical industry through impermeable intellectual property legislation as long
as the waiver is not ratified into an amendment. While the pharmaceutical industry in the U.S. is
well protected through a comprehensive network of legislation, the Clinton Health Initiative and
the Gates Foundation, among others, are able to access these medicines at discounted rates in
attempts to be distributed in areas of high burden of sickness or disease, post conflict or post
disaster.
Doctors without Borders and other NGOs have raised concerns that increased patent
protections and enforcement of WTO rules will both have a negative affect in the developing
world as a result of fixed high prices and removal of generic manufacturing capacity in
developing countries as a result of competitor activity. In the meantime, the interjection of NGOs
will be the closest the U.S. will get to exporting to least developed countries; and will provide
only limited capacity building for manufacturing capability in the near future in developing
countries. “In 1999, the first international meeting on the use of compulsory licensing to increase
access to AIDS medicine, and the Amsterdam Conference on Increasing Access to Essential
Drugs in a Globalized Economy with 350 government representatives from 50 countries was
organized by the NGOS Consumer Project on Technology. Additionally, the waiver decision
suggests that Japan, Canada, Switzerland, and E.U. should all continue to enact legislation
respecting the Waiver Decision to facilitate exportation of generics and test data protection does
not inhibit access to essential generic medication in developing or developed countries18
.”
The increasing role of Multi-lateral FTAs also include efforts toward restricting access to
medicines in sanctioned jurisdictions or entities. Multilateral FTAs with economies including
prominent patented manufacturing capabilities such as Switzerland, U.S., and Canada, restrict
<www.cptech.org/ip/health/econ/howmuch.html>
17
DiMasi J.A., Hansen R.W., Grabow ski H.G.: The price of innovation: new estimates of drug development costs. JHlth Eco 2003,
22: 151-185.
18
Attaran A., Gillespie-White L.: Do Patents for Antiretroviral Drugs. Constrain Accessto AIDS Treatment in Africa? 286 JAMA
1886, 2001. Distributed at Doha by the International Federation of Pharmaceutical Manufacturers (IFPMA).

developing countries’ flexibility to export under a compulsory license. More-so, the shift has
been toward developing countries manufacturing generic drugs and using the 2003 Decision to
export their generic product to least developed countries to meet public health needs. While
generic drugs will not always be approved in jurisdiction where they seek licensing, the
continuation of restricting certain operations should not inhibit exports destined for least
developed countries, or allow a timely entry of generics in least developed markets if the
medicine has been approved by another jurisdiction. The stagnant Doha negotiations and the
long-since revision of any multi-lateral effort on TRIPS agreement on Public Health has lead the
USTR in efforts with Intellectual Property Rights Committee define objectives of negotiating
FTAs into a framework for enhanced levels of protection of intellectual property in developing
countries for generic drugs similar to U.S. laws, ensuring the protection of generic
pharmaceutical production capacity, increasing competitive exports of essential medicines, and
would provide affordable solutions for public health needs through technology transfer and
development of local manufacturing. It is crucial to have protection of patented pharmaceuticals,
however while also letting generic manufacturing sector compete on a global scale for lower
prices and helping needs for public health. The current WTO framework is inadequate regarding
the cooperation between generic and patented drugs, and needs of public health; however the
TPP and other FTA’s will provide opportunities for implementation of a permanent amendment
to the compulsory license waiver in the next years to come. Finally, the balance of more
research and development of new medicines in poor countries and promoting access to existing
medicines in countries with public health needs would largely address public health needs. The
TRIPS Agreement will only be continued to be accepted by the WTO if the flexibilities of
providing public health is ratified.

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