Paragraph 6 system: Brazilian intervention at the WTO TRIPS Council

On Wednesday, 27 October 2010, Brazil delivered the following intervention during the annual review of the Paragraph 6 system at the WTO TRIPS Council. The Brazilian intervention followed Canada’s detailed explanation of her use of the Paragraph 6 system in the Apotex/Rwanda case. The Brazilian intervention voiced concern over the future prospects of access to competitively priced second and third line ARVs raising questions as to whether the Paragraph 6 system would be economically viable for generic producers.

a) Brazil has not yet tried to use the system either as an importer or exporter country. In 2007, following a case of abusive price, Brazil issued a compulsory license to an anti-retroviral medicine, Efavirenz, that is part of the cocktail of drugs freely distributed by the Ministry of Health to HIV/AIDS patients. For a number of reasons, including lack of sufficient disclosure in the patent description, it took two years for the Oswaldo Cruz Foundation, an international reference institution in medical research, to be able to produce the medicine in Brazil. During this time, Brazil imported the medicine from a supplier in India.

b) According to the detailed explanation provided by the delegation of Canada, Apotex decided to produce the antiretroviral Apo-TriAvir before there was a request from any country. I believe Apotex is a private producer of generic medicines, right? To produce the medicines, Apotex would have to issue a compulsory license with no guarantee that it would be able to export the medicines. When Rwanda was identified as an possible importer, Apotex still had to go through a process of government procurement with other companies, including, I imagine, the patent holder that has the already developed the technology and has greater economies of scale. My question is was it economically worth to Apotex? If so, why has it not tried to duplicate this experience with other countries, since the process was initially driven by Apotex?

c) We appreciate the answer provided to Canada regarding the economic returns to Apotex of the Rwanda experience. It was very important to know that there where no royalties and that Apotex most probably lost money when it had to reduce its price to 19,5 cents per dollar to be able to compete with the Indian Generic industry. It makes us question whether the paragraph 6 system is economically viable and if we are to see other examples of use of the system.

However, with the end of the transition period for implementation of the TRIPS agreement to all countries in 2005, except LDCs, affordable generics from suppliers such as India will become more and more scarce.

This is particular important to the fight against HIV/AIDS. In 2008, the report by the Swedish National Board of Trade, ‘The WTO Decision on Compulsory Licensing’ already predicted that “HIV is a highly changeable virus and patients need to switch and update their medicines regularly. Some types of AIDS medicines were launched before the TRIPS rules on patent protection for medicines were introduced in developing countries, and they could therefore be freely copied and sold in these countries. This has resulted in vigorous price competition for many of the older medicines used as the standard ‘first line’ treatment, even though most of them are still patented in high income countries. With many suppliers to choose from, there has been no need to use the Decision for these medicines.”

The report also explains that “The situation in regards to competition and price is different for the second or third line AIDS medicines, i.e. medicines that patients will need when they have developed resistance to the first line medicines. The same holds for new, more effective substitutes for first line medicines. All of these are patented in many countries and the prices are much higher than for older medicines. This is becoming a grave concern for the countries and international agencies that offer treatment. Patients need to switch to the second line medicines within a couple of years after starting treatment and these medicines may cost up to 12 times as much.”

Therefore, Brazil considers that the discussions we are having today will have a fundamental impact on the access to medicines at affordable prices in the near future. We should concentrate our efforts in the TRIPS Council and in other fora to analyze if the economic and political incentives provided by the paragraph 6 system are adequate to secure investment in the production of generic medicines at affordable prices to markets with no manufacturing capacity. We should also analyze TRIPS plus provisions that adversely affect the right to access to medicines, such as data exclusivity of clinical trials. Given that economies of scale are an essential element in what concerns incentives for investment in this area, it is also important to design ways to improve the utility of the system to small markets. These are only some elements we consider should be addressed so that the system will serve the needs it was designed for.