Circumventing The Consensus


When Robert Zoellick, the US Trade Representative, retires from government work in a few years, all of the top American business schools will probably be scrambling for a chance to rush him into the tenure track. Zoellick provides a stellar case for business students around the world: when faced with trade rules that block your interests, simply render those rules irrelevant.

We have to give Mr. Zoellick some credit: he does manage to be creative. At the World Trade Organization ministerial conferences that took place over the past three months, Zoellick has had his back against the wall. All of the 144 member countries of the WTO, except for the US, agreed to a trade rule that would allow the poorest of countries-those without pharmaceutical manufacturing facilities-to import cheap generic medicines, since expensive patented drugs are usually out of reach (Waddington, 2003). 8,000 people die from AIDS everyday and 95% of those persons lack access to necessary drugs (Doctors Without Borders, 2001). So in November 2001, the WTO’s trade ministers (including Mr. Zoellick) agreed to the Doha ‘Declaration on the TRIPS agreement and Public Health’ (where ‘TRIPS’ refers to the Trade-Related Aspects of Intellectual Property Rights agreement), declaring that intellectual property rights would take a backseat to public health as the WTO would support “access to medicines for all” (WTO, 2001).

The Doha Declaration states that countries can make full use of public health safeguards in TRIPS; this includes importing patented medicines from a second country that has purchased medicines from the manufacturer (called parallel importing, which can reduce prices when one country has purchased excess medicines and re-sells them to another country at lower than the manufacturer’s price) or by producing cheaper generic medicines through domestic labs for domestic consumption (called compulsory licensing; WTO, 2001). The only problem is that parallel importing only reduces prices slightly, and is rarely a viable option (as it requires a second country’s massive assistance), and compulsory licensing can only work if a country has it’s own pharmaceutical laboratories (Oxfam GB, 2002). Brazil, for example, used compulsory licensing to manufacture generic AIDS medicines. AIDS mortality in Brazil dropped by half, resulting in an 80% fall in hospitalisations (Oxfam GB, 2001). But the poorest of countries don’t have Brazil’s pharmaceutical production facilities. So, under great public pressure, the WTO ministers signed the Doha Declaration and wrote into its text a statement that by December 2002, they would come together to decide a mechanism that would allow the poorest of countries to import generic drugs (allowing generics to be traded to places without manufacturing facilities rather than merely being produced for domestic consumption in somewhat wealthier nations; WTO, 2001).

The poorest of countries have endured the destruction of health infrastructure and information systems (which were growing and contributing to increased life expectancy in even the poorest African states through the late ’70s) under Structural Adjustment Programs (SAPs) produced through the IMF and World Bank (Kim et al., 2000; Lurie et al., 1995). These regularly destroyed agricultural systems in favor of export-based production, leading to migration to urban centers as farms were lost; loss of jobs for women caused many to have no recourse other than prostitution, particularly in parts of East Asia and Southern Africa, and AIDS and TB spread exponentially with the introduction of SAPs (Bello et al., 1998). The latest clinical reports indicate that while ‘sexual behavior’ has been the focus of AIDS control for so long, often pathologizing ‘African sexuality’, most African cases have been spread through re-use of hospital needles and even outside of Africa, those well aware of ‘risk behaviors’ rarely have the agency needed to negotiate outcomes (Farmer et al., 1996, 2001; Gisselquist et al., 2002a, 2002b). These persons are often in situations of prostitution, or, like Southern African miners, put in all male barracks to mine gold and diamonds six days a week, then “kept happy” (kept from rebelling) by Anglo American’s contract with Heineken and Guiness to get workers drunk and offer them prostitutes on breaks. Now the same international financial institutions like the World Bank and the IMF are leading to the mass importation of food and rapid change in diet, correlating to the increase of non-communicable diseases like diabetes and coronary artery disease in the poorest locations, even as infectious diseases continue to spread in these locales (Zimmet, 2000).

That’s why “access to medicines for all” is of such importance, as is preventing trade deals from re-instituting the SAP-like measures that lead to migration, the destruction of health infrastructure, and further poverty. In December, when the WTO ministers were supposed to gather and finalize the legal specifics of the mechanism through which the poorest of countries-those without manufacturing facilities-could access medicines, the US Trade Representative decided that the Doha Declaration needed reinterpretation (Phillips, 2002). He stated that the mechanism though which poor countries could import medicines would have to involve licensing through both the importing and exporting country-so, for example, the Indian government would have to pass legislation to allow Pakistani citizens to access Indian generic medicines. The trade deal would also be limited to a short list of infectious epidemics-neglecting the emerging wave of non-communicable diseases that are affecting the poorest of locales as a result of trade deals and their correlated economic plans (A Global Medicine Deal, 2003). The deal would also exclude pending vaccines like the soon-to-arrive cervical cancer vaccine, which has end-stage clinical trial efficacy and would work for the 1 in 34 women in South Africa who die from cervical cancer. The vaccine would be out of reach according to the USTR’s demands (Koutsky et al., 2002).

While initially supported by the EU and Japan, the US Trade Representative Mr. Zoellick lost all confidence as the meetings broke down in December and January. European and Japanese pressure led to changing positions of those key trade ministers, and now Mr. Zoellick is the only person at the WTO to refuse to agree to the Doha Declaration, even after signing it (Hamburger, 2003). His latest proposal is to additionally require countries to reach a ‘state of emergency’ before being able to import generic drugs (Waddington, 2003). Of course, the US and European countries don’t need to meet such requirements; the US threatened Bayer, for example, with generic importation if Bayer did not provide ciprofloxacin quickly enough during the recent anthrax scare (Reuters, 2001). Less than a dozen people were affected in that ‘emergency’.

The WTO talks also took a ludicrous turn when one company-Pfizer-began to officially negotiate with the WTO ministerial director; the USTR had no qualms about stating openly in interviews with the business press that his position was directly arbitrated through the Pharmaceutical Research and Manufacturer’s Association of America (PhRMA; Forbes, 2003; Mail & Guardian, 2003). That should come as little surprise (for a history of Pfizer’s relationship to the USTR, see www.geocities.com/medicinepolicy). The industry contributes nearly $20 million in political donations each year to both parties, most going to Republicans (see Table 1 below). And the USTR’s arguments have consistently reflected the arguments of the pharmaceutical industry.

The industry, and the USTR, claims that generics would undermine their capacity to pay for research and development–that is, the research and development that American taxpayers actually foot most of the bill for (Public Citizen, 2001). The industry doesn’t bother to release it’s own tax information, however, which reveals that Merck this year used 13% of its profits on marketing and only 5% on R&D, Pfizer spent 35% on marketing and only 15% on R&D, and the industry overall spent 27% on marketing and 11% on R&D according the Securities and Exchange Commission (Families USA, 2002). That’s not accounting for the fact that 52% of new drugs on the market aren’t even the result of R&D, but are “me too” drugs that are simple reformulations of old products slapped with new stickers (Public Citizen, 2001).

The industry still claims that generics will undermine its business, even as it continues to be ranked by Fortune Magazine as the world’s most profitable industry for 11 years in a row (having profits as a percentage of revenue nearly three times the rest of the Fortune 500 industry; Public Citizen, 2001). When confronted with the fact that Africa comprises only 1.3% of the industry’s revenues (making its loss equivalent to “about three days fluctuation in exchange rates,” according to an industry analyst quoted in The Washington Post; Gellman, 2000), the industry claims that generic drugs will get diverted to the North to undermine its key markets, and cites GlaxoSmithKline’s recent loss of AIDS drugs sent to Africa as a case in point. But a look at the GSK case shows that Glaxo failed to even track the shipments and only discovered after a year that its packages to Africa had been shipped improperly, allowing them to be smuggled to Europe (Boseley & Carroll, 2002). Tracking mechanisms, however, seem to be no trouble for neighborhood flower shops. Indian generic manufacturers, meanwhile, have shipped medicines for over two decades without a single case of “diversion”.

The perversity of these arguments seems more present when we consider that 24,000 people die each day from preventable and treatable diseases (Donnelly, 2003).

At the WTO, Kenya’s minister has refused to allow the total destruction of the Doha Agreement by the USTR, and the trade talks continue to falter each time the Doha medicine agreement comes to the table. Three such meetings have broken down in over the past few months, and trade ministers have now stated that if a deal is not reached soon, the entire trade deal process may derail in “Seattle-like” fashion (Forbes, 2003). The large WTO ministerial conference in Cancun is only months away.

Here’s where Mr. Zoellick’s creativity comes in. While the WTO discussions continue to break down, Mr. Zoellick has made his rounds to individual countries and regional representative bodies, offering small reductions in tariffs or “technical assistance” in improving intellectual property rules in exchange for agreeing to timelines for bilateral and regional trade agreements that will enforce those rules stringently, in excess of WTO standards. The large Free Trade Agreement of the Americas (FTAA) has received much attention, and has horrifically strong rules to prevent any sort of generic medicines importation to all Latin American countries-let alone considering the impact of NAFTA like policies on public health throughout the Western Hemisphere. NAFTA was disastrous for public health, as thousands of people lost jobs, farms and livelihoods in exchange for generating ‘efficiency’ and ‘labor flexibility’ for the corporate sector (Poole, 1996). Even before its amplified version, the FTAA, gets pushed through, the USTR has arranged a series of smaller agreements so that individual countries get bound by “TRIPS-plus” rules. Creating a platform for the FTAA negotiations, the US has signed a bilateral trade agreement with Chile, and has proposed a larger regional Central American agreement. An agreement with Southern African states has also been announced, and Singapore and the US are signing a deal that the White House is using for its “Enterprise for ASEAN Initiative,” a plan to expand IP rules and other trade measures to the entire East Asian bloc (for a complete listing of the trade deals, see Table 2 below). The newly industrialized countries of East Asia present an enormous market for pharmaceutical companies; just don’t mention the rates of poverty and disease (Bello et al., 1998).

As the USTR continues forging its relationship with the pharmaceutical industry, access to information about the bilateral and regional trade deals is waning, and the public health community continues statistical analysis on NAFTA’s horrific effects on public health without noting that the very same effects are currently being extended to the rest of the globe. The time has come for Americans to stand up against the drug industry who charges the public twice-once at the research stage, and again at the pharmacy counter-while cutting of medicines to the poorest. Students and public health campaigners are beginning to take action. Find out more at www.geocities.com/medicinepolicy.




References:

A Global Medicine Deal. (2003 January 6). The New York Times.

Bello, W., Poh, L., & Cunningham, S. (1998). A Siamese Tragedy: Development and Disintegration in Modern Thailand. London: Zed Books.

Boseley, S. & Carroll, R. (2002 October 4). Profiteers resell Africa’s cheap drugs. Guardian UK.

Doctors Without Borders. (2001 June 21). Dying for Lack of Treatment: The International AIDS Crisis: Panel Discussion. New York: City University of New York.

Donnelly, J. (2003 January 31). None of them had to die. The Boston Globe.

Farmer, P., Connors, M., & Simmons, J. (1996). Women, Poverty & AIDS: Sex, Drugs and Structural Violence. Boston: Common Courage Press.

Farmer, P., Leandre, F., Mukherjee, J.S., Claude, M., Nevil, P., Smith-Fawzi, M.C., Koenig, S.P., Castro, A,, Becerra, M.C., Sachs, J., Attaran, A, & Kim, J-Y. (2001). Community-based approaches to HIV treatment in resource-poor settings. Lancet, 358(9279):404-9.

Families USA. (2002). Profiting from Pain: Where Prescription Drugs Dollars Go. Available online: http://www.familiesusa.org/

Forbes. (2003 January 28). Pfizer’s McKinnell says drug patent talks progress. Available online: http://www.forbes.com/business/newswire/2003/01/28/rtr860810.html

Gellman, B. (2000 December 27). An Unequal Calculus of Life and Death. The Washington Post.

Gisselquist, D., Rothenberg, R., Potterat, J., Drucker, E. (2002) HIV infections in sub-Saharan Africa not explained by sexual or vertical transmission. Int J STD AIDS, 13(10):657-66.

Gisselquist, D. (2002). Estimating HIV-1 transmission efficiency through unsafe medical injections. Int J STD AIDS, 13(3):152-9.

Hamburger, T. (2003 February 6). Campaign Funds Help Steer U.S. Stance on Drug Patents; After Aiding Republicans, Drug Companies Prevail on Limiting Drugs to Poor Nations. The Wall Street Journal.

Kim, J-Y., Millen, J., Gershman, J. & Irwin, A. (2000). Dying for Growth: Global Inequality and the Health of the Poor. Boston: Common Courage Press.

Koutsky, L.A., Ault, K.A., Wheeler, C.M., Brown, D.R., Barr, E., Alvarez, F.B., Chiacchierini, L.M., Jansen, K.U.(2002) A controlled trial of a human papillomavirus type 16 vaccine. The New England Journal of Medicine, 347: 1645-1651.

Lurie, P., Hintzen, P. & Lowe, R.A. (1995). Socioeconomic obstacles to HIV prevention and treatment in developing countries: the roles of the International Monetary Fund and the World Bank. AIDS, 9(6):539-46.

Mail & Guardian. (2003 January 27). Pfizer chief says affordable drugs deal ‘fairly close’. Available online: http://www.mg.co.za/Content/l3.asp?ao=10452

Phillips, M. (2002 December 23). U.S. Retreats From Earlier Move To Keep Drugs From Poor Nations. The Wall Street Journal.

Poole, D.L. (1996). NAFTA, American health, and Mexican health: they tie together. North Atlantic Free Trade Agreement. Health Soc Work, 21(1):3-7.

Public Citizen. (2001). Rx R&D Myths: The Case Against the Drug Industry’s R&D “Scare Card”. Available online: http://www.citizen.org/publications/release.cfm?ID=7065

Oxfam GB. (2001 July). Formula for fairness: patient rights before patent rights. Available online: http://www.oxfam.org.uk/cutthecost/downloads/pfizer.pdf

Oxfam GB. (2002 March). TRIPS and Public Health: The Next Battle. Available online: http://www.oxfam.org.uk/policy/papers/15trips/15trips.html

Reuters. (2001 October 16). New York Senator Urges U.S. to Purchase Generic Cipro.

Waddington, R. (2003 February 7). Trade negotiators battle for accord on drugs. Reuters News Service.

World Trade Organization (2001). Declaration on the TRIPS agreement and public health. Available online: http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm

Zimmet, P. (2000). Globalization, coca-colonization and the chronic disease epidemic: can the Doomsday scenario be averted? J Intern Med, 247(3):301-10.


Table 1: Pharmaceutical Industry Profit and Campaign Information Source: http://www.guardian.co.uk/aids/story/0,7369,897306,00.html

Profits 2001 Pfizer Inc $ 7,788m Glaxo SmithKline $ 7,325 m Merck & Co $ 7,282 m Bristol-Myers Squibb $ 5,242m Abbott Laboratories $ 1,550m

Political donations, US election cycle 2002 Pfizer Inc $ 1.67m Bristol-Myers Squibb $ 1.57m Glaxo SmithKline $ 1.14m Abbott Laboratories $ 0.64m Merck & Co $ 0.57m Industry total $ 19.07m

* The vast majority of donations were to the Republicans, from 77% (Merck & Co) to 93% (Abbott Laboratories). Across the industry 95% of donations go to the Republicans.

Table 2: U.S. Bilateral & Multilateral FTAs, updated to February 5, 2003

US-Jordan Free Trade Agreement (completed pre-Doha): under terms of this agreement: -compulsory licenses can only be issued in three cases: as an antitrust remedy, for public sector non-commercial use, and if the product is not being worked (importation counts as working) -requires Jordan to provide exclusivity for the same period as granted by the country where the data was filed, which is 5 years for drugs first approved in the US and 10 years for drugs first approved in Europe -patent extensions can be granted in case of regulatory delay

US-Chile Free Trade Agreement: completed on December 11, 2002 mike palmedo: “terms of this agreement as proposed by the US are much like the US-Jordan FTA” -restricts the circumstances under which compulsory licenses could be issued; patent holders would need to be granted “reasonable and entire” compensation -does not allow parallel importation -five year exclusivity for test data -requires compensation for regulatory delay -”Grounds for revoking a patent are limited to the same grounds required to originally refuse a patent, thus protecting against arbitrary revocation.” -USTR summary summary: http://www.ustr.gov/regions/whemisphere/samerica/2002-12-11-chile_summary.pdf

US-Central American Free Trade Agreement (CAFTA): begins in San Jose, Costa Rica, Jan 27 aim to complete by Dec 2003 has one of its five negotiating groups dedicated to “government procurement and IP” “the bush administration will press for…strong protections for intellectual property and for investors” in this deal according to USTR http://www.ustr.gov/releases/2003/01/03-01.pdf http://www.ustr.gov/new/fta/cafta.htm   affects: Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua

Free Trade Area of the Americas (FTAA): draft text: http://www.ftaa-alca.org/ftaadraft/eng/draft_e.asp  next Ministerial Meeting will take place on November 20-21, 2003, in Miami, Florida

US-Southern African Customs Union (SACU) Free Trade Agreement: beings in February to decide negotiations structure linked to AGOA will include negotiations on pharmaceuticals; USTR made strong comments on IP protection in this at press conference in Mauritius http://www.ustr.gov/releases/2003/01/03-02.pdf  http://www.ustr.gov/releases/2003/01/03-03.pdf  affects: Botswana, Lesotho, Namibia, South Africa, Swaziland

US-Morocco Free Trade Agreement: begins in Wash DC on Jan 21 aim to complete by Dec 2003 “improve intellectual property rights protection” will be a key component http://www.ustr.gov/releases/2003/01/03-04.pdf

US-Singapore Free Trade Agreement: aim to complete by December 2003 this is the first in a series of FTAs with Asian countries. TIFAs setup with Sri Lanka (http://www.ustr.gov/releases/2002/07/02-76.htm ), Indonesia, Thailand, Philippines. “FTAs with ASEAN countries will be based on the high standards set in the U.S.-Singapore FTA, which we are aiming to complete this year, for action by Congress next year.” – White House Statement on the “Enterprise for ASEAN Initiative” http://www.whitehouse.gov/news/releases/2002/10/20021026-7.html  ”high level of IPR protection” in Singaporean agreement according to USTR http://www.ustr.gov/regions/asia-pacific/2002-12-13-singapore_facts.pdf  http://www.ustr.gov/regions/asia-pacific/2002-11-19-singapore_factsheet.PDF

US-Australia Free Trade Agreement: begins February 2003 http://www.ustr.gov/releases/2002/11/02-110.htm

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