Updated Friday, 17 June 2022, 11:30 AM Geneva time.
Early Friday morning, 17 June 2022, the WTO’s 12th Ministerial Conference (chaired by Timur Suleymenov, Kazakshstan), adopted a Ministerial Decision on the TRIPS Agreement (WT/MIN(22)/W/15/Rev.2). The text can be found here.
There were several changes since the June 10 version. The agreement is a limited and disappointing outcome overall that is most accurately described as a narrow and temporary exception to an export restriction, not a waiver.
There are several so called clarifications in the text on topics, which restate the existing flexibility in TRIPS, sometimes at the risk here of making the provisions seem exceptional, although some developing countries have welcomed them. Among the clarifications, none of which add new legal benefits, are paragraphs 2, 3(a) and 4 of the agreement. The Clarification offered on Article 39.3 of the TRIPS is somewhat helpful, but essentially restates the existing safeguard already part of 39.3. The clarification on paragraph 3(d) and footnote 4 on remuneration do not change TRIPS standards, but will be helpful in national settings, including by the fact that the WTO Ministerial Decision is citing “the Remuneration Guidelines for Non-Voluntary Use of a Patent on Medical Technologies published by the WHO (WHO/TCM/2005.1).” (I am the author of that document).
The TRIPS restriction on exports under Article 31
The TRIPS agreement contains 73 Articles describing various obligations on WTO members as regards the granting and enforcement of intellectual property rights.The original waiver proposal would have provided a clean waiver of 40 Articles in the TRIPS, as regards the manufacturing and supply of any COVID 19 countermeasure. The new considerably scaled back agreement focuses on just one part of the agreement, the 20 word paragraph 31.f which limits exports made under a non-voluntary authorization, often referred to as a compulsory license. The text reads.
(f) any such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use;
Article 31.f of the TRIPS is controversial, and often considered an embarrassment to the WTO, because it is designed to limit the economies of scale for products manufactured under a compulsory license, and it also has a very differential impact on countries depending upon their size. For big economies like the U.S., China, India or to some extent Brazil, the impact is less severe than would be for a country like Chile, Ecuador, Portugal, New Zealand, or Thailand, but for every country, it is an odd provision for an organization created to liberalize trade and exploit comparative advantages.
The original TRIPS agreement contains several important workarounds from the 31.f restrictions on exports. Most obviously, Article 31.k of TRIPS waives 31.f, when a compulsory license is a remedy to an anti-competitive practice, which can include, among other grounds, a finding that prices are excessive, or that a patent holder refuses to license a technology on reasonable terms, or that the patented invention is an essential facility, all highly relevant grounds for a vaccine compulsory license.
There is also the possibility to export under Article 30 of the TRIPS, if an exception passes a three step test. The Article 30 approach was strongly supported by health NGOs, generic manufacturers, the World Health Organization (WHO), and several countries in the 2002.2003 negotiations over this issue, and even tested in a 2000 WTO TRIPS dispute case (DS114) relating to the early working of patented inventions, but opposed by the European Union, which favored what is now Article 31bis of the TRIPS.
Arguably the best way to address the export issue is found in the enforcement section of the TRIPS. Under Article 44 of TRIPS, a government or a judicial authority can limit the remedies to infringement to the payment of royalties, including cases where 100 percent of manufacturing output is exported.
In terms of state practice, the Articles 31.k and 44 approaches are the most widely used, by far. (More on the export alternatives here.)
Article 31bis of the TRIPS was initially adopted by the WTO General Council on August 30, 2003, as an optional waiver of Article 31.f. The core elements of 31bis are notifications to the WTO, anti-diversion measures, restrictions on eligibility and scope.
31bis applies to drugs, vaccines and some diagnostic tests. It is permanent. It applies to all diseases. 31bis limits the members that can benefit as importers.
In the 19 years since its adoption, the 31bis mechanism has been successfully used only once, by Apotex in Canada for an export of an HIV drug to Rwanda, working with MSF. Apotex indicated it would never attempt to use the mechanism again, giving the complexity and delays they experienced. The Article 31bis mechanism is implemented through national laws, and much of the problems Apotex faced were due to Canadian law and the Canadian government administration of the statute. Few countries have bothered to implement Article 31bis in national statutes, but among those that have, the statutes in India and China offer far more streamlined approaches. India’s version is Section 92a of the patents act, titled “Compulsory licence for export of patented pharmaceutical products in certain exceptional circumstances.” The first two paragraphs in Section 92A of the India patents act read as follows:
(1) Compulsory licence shall be available for manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems, provided compulsory licence has been granted by such country or such country has, by notification or otherwise, allowed importation of the patented pharmaceutical products from India.
(2) The Controller shall, on receipt of an application in the prescribed manner, grant a compulsory licence solely for manufacture and export of the concerned pharmaceutical product to such country under such terms and conditions as may be specified and published by him.
To date, the India statute has not been tested, but pending compulsory licenses for COVID therapeutics in Latin America may provide timely tests, if any of the cases succeed in the Latin American county.
It is important to note that Article 31bis of the TRIPS is very long, including an Article 31bis, an “Annex to the TRIPS” and and “Appendix to the Annex to the TRIPS Agreement.” The WTO analytical index for 31bis is more than five pages single spaced.
Article 31bis notifications
The Article 31bis notifications requirements are seen as a significant problem, in part because governments have to make notifications to the WTO before the exports take place, and also that the notifications involve quantities, even in cases where the importing country is not certainly how many units to purchase, or when the government is not the sole market for the product.
Governments around the world often see the use of compulsory licensing of patented inventions as politically sensitive, inviting considerable pressure from the United States, the European Union and several of its members and Switzerland. WTO notifications on the prior use of a compulsory license will typically involve several ministers or agency heads, including those working on trade, foreign affairs, health and intellectual property rights, if not heads of state. 31bis requires such notifications from both importing and exporting countries. By, as a practical matter, involving trade and foreign affairs officials, there is a greater opportunity for bilateral pressures to block actions. KEI has worked on multiple cases where importing countries were not willing to make a notification as potential importers without having a committed supplier, and the suppliers could not get their governments to make a notification regarding exporting, without the importing country having made its notifications. All of this has to be repeated for each authorization, which includes specifications of qualities and designations. These were the Rwanda and Bolivia notifications as importers, the only two received by the WTO in 19 years. (Bolivia, Rwanda), and Canada as an exporter, the one time an export was actually approved under the 31bis mechanism. (Canada)
Article 31bis anti-diversion obligations
Article 31bis does contain several sections regarding the obligations on importing and exporting countries to prevent the re-exportation of the products. Governments are not sure how burdensome the obligations are in practice, but they do go beyond the obligations included in the pre-31bis TRIPS text, and seem to be conflict with Articles 6 of the TRIPS on the exhaustion of rights. They may also increase the costs to the supplier if they cannot re-export unused products when the forecast demand is not met in one country.
The new Ministerial Decision on the TRIPS Agreement
The new Ministerial Decision on the TRIPS Agreement provides an exception to 31.f export restrictions that is temporary, applies only to vaccines and only to COVID 19, limits which countries and import or export, and contains notification and anti-diversion oblations.
Eligibility for importers and exporters
As noted, Article 31bis provides no limits on which countries can use the exception as exporters, but does limit the eligible importing countries. The 31bis limits on importing eligibility is implemented through an opt-out process, and countries were allowed to opt out as importers in general (37 members have done so, see open letter of April 7, 2020), or to declare they would only use the mechanism in emergencies.
The new Ministerial Decision on TRIPS defines eligibility for both importing and exporting in footnote 1:
For the purpose of this Decision, all developing country Members are eligible Members. Developing country Members with existing capacity to manufacture COVID-19 vaccines are encouraged to make a binding commitment not to avail themselves of this Decision. Such binding commitments include statements made by eligible Members to the General Council, such as those made at the General Council meeting on 10 May 2022, and will be recorded by the Council for TRIPS and will be compiled and published publicly on the WTO website.
While the opt-out language on eligibility is similar to the approach taken in the August 30, 2003 waiver of Article 31.f of the TRIPS, which is now part of TRIPS as 31bis, there is an important difference. The new agreement limits the countries eligible to import or export.
There is an expectation that all non-developing countries with the current ability to manufacture and export vaccines will opt out. The status of China seems to be addressed in the reference to the May 10 meeting of the General Council, where China expressed willingness to opt out. This is in some ways an astonishing result. The WTO will continue to enforce export restrictions on vaccines from most of the leading vaccine manufacturing countries including many with sophisticated technology. At an NGO briefing during the negotiations, WTO DG Ngozi Okonjo-Iweala seemed to justify this outcome on the grounds that it would be desirable protectionism to achieve the objective of promoting vaccine manufacturing capacity in Africa and other developing countries.
The new Decision had marginally less problematic notifications, the most notable improvement is that notifications can be made “as soon as possible after the information is available,” and while it is not exactly clear how different the requirement is, it does seem like an improvement from 31bis.
On the anti-diversion language, the new Decision has one notable but perhaps narrow improvement over 31bis, stating that “in exceptional circumstances, an eligible Member may re-export COVID-19 vaccines to another eligible Member for humanitarian and not-for-profit purposes, as long as the eligible Member communicates in accordance with paragraph 5.” NGOs such as TWN have pointed of that the Ministerial Decisions begins by “Noting the exceptional circumstances of the COVID-19 pandemic,” so hard to say how to interpret the “in exceptional circumstances” language here.
The time period is 5 years, which severely limits its usefulness. Paragraph 5 states:
An eligible Member may apply the provisions of this Decision until 5 years from the date of this Decision. The General Council may extend such a period taking into consideration the exceptional circumstances of the COVID-19 pandemic. The General Council will review annually the operation of this Decision.
The exception to the export restrictions will only last 5 years. There are currently no developing country vaccines manufactured under a compulsory license. Moderna is operating under a compulsory license from the United States, but the US will not be an eligible exporter. For the Ministerial Decision to have any use for vaccines, a developing country would have to issue a compulsory license on a vaccine or vaccine input, obtain regulatory approval for that vaccine, and export more than 50 percent of output. Under optimistic scenarios, it could take 2 to 3 years to bring a new COVID vaccine into the market, given the increasing challenges in obtaining regulatory approval not that emergency use authorizations have already been used for multiple vaccines. And that would only give the developer, if they began work today, a few years of sales under the exception. For this reason alone, the Indian government has predicted the Ministerial Decision would not lead to any new vaccine manufacturing. (June 14, 2022, Statement by Shri Piyush Goyal during the WTO 12th Ministerial Conference at the meeting with co-sponsors of TRIPS Waiver)
“Second, with great difficulty we got the period of 5 years. But, we all know that by the time we get an investor, get funds raised, draw plans, get equipment and set up a plant, it will probably take 2.5-3 years to do that. After that, you will start producing and within 2 years, you will have to bring down your exports to the normal compulsory license level and your capacity will remain idle.”
The Ministerial Decision text will be tied with 31bis as one of the worst ways to allow exports under a compulsory license. Articles 31.k, 30 and 40 all will dominate. (More on the alternatives here).
The big pharma industry can be pleased with the precedents on notifications and anti-diversion, which are important to them, as well as the exclusion of most vaccine manufacturers and the 5 year duration.
It is hard to imagine anything with fewer benefits than this, as a response to a global health emergency (other than the earlier negotiating texts for this Decision). The fact that the exception is limited to vaccines, has a five year duration and does not address WTO rules on trade secrets makes it particularly unlikely to provide expanded access to COVID 19 countermeasures.
The pressure this week was to reach consensus in order to make multilateralism look like it works, which seems to have been the main justification for producing this decision.
While the text is not expected to impact COVID 19 vaccine equity much or at all, there are some silver linings.
1. In terms of precedents going forward, the texts of notifications and anti-diversion are both much shorter and more usable than 31bis.
2. There is no 31bis requirement to limit imports to countries with no or insufficient manufacturing capacity, a sometimes ambiguous standard oddly unconnected to economic feasibility.
3. The fact that the Decision cites “the Remuneration Guidelines for Non-Voluntary Use of a Patent on Medical Technologies published by the WHO (WHO/TCM/2005.1)” will be useful in national settings.
4. If the decision is extended to therapeutics in six months, it may be much more value, given the supply constraints on therapeutics and the much better regulatory pathway. For therapeutics, even the language on 39.3 will be useful for some countries.
5. It’s not a TRIPS waiver, it’s a useful edit of some problematic elements of 31bis. But it also turns attention back to national governments to do things, and not wait on the WTO.