The following article is an edited transcript of a paper given at the International Conference on Compulsory Licensing: Innovation and Access for All, held in Bangkok, 21-23 November 2007. Prof. Baker has written extensively for activists about the global AIDS pandemic. He is co-founder of Boston Global Action Network, African AIDS Project and a core member of the Health Gap, an HIV/AIDS global treatment access organization. His work with Health Gap has focussed on patent barriers to affordable medicines, globalization and the AIDS pandemic, the complicity of multinational corporations in the AIDS pandemic, and the under-funding of the Global Fund to Treat AIDS, TB and Malaria.

 

 

I'd like to start by saying I feel honoured to be here with fellow activists and with representatives of a government who have stuck their neck out so far under threat of trade sanctions and product removals by one of the world's most powerful industries and by the government that wields the most power internationally. You are heroes to us around the world. I turn frequently to the Thai press to follow up on your action and I also follow closely the concerted campaign by the drug industry and by the US government to discredit what you have done, to lie, to dissemble, to make false arguments. My purpose here today is to try to reveal those false arguments and to reassure us all that the path that you have taken is the correct path. It's the legal path, it's the moral path and it's the path that we hope you will continue to pursue.

 

Myth 1. Thai compulsory licences are illegal.

 

This is the biggest falsehood of all. A direct statement by a representative of Abbot, Melissa Brotz, was ‘We do not view the compulsory licences on Kaletra to be legal'.

 

First of all we should be clear that it's lawful under TRIPS law and also under Thai law, and in fact would be legal under US law as well. And even though the US, and US drug companies continue to challenge its legality, you should rest assured that it is fully TRIPS compliant. Your licences were issued through proper procedures on valid public health grounds for public, non-commercial use, which required no advance negotiation with the patent holders. Your licences were fully compliant with Section 51 of the Thai Patent Act. Moreover you set a reasonable royalty and gave the drug companies an opportunity to negotiate or to appeal if they were dissatisfied with your licence. One of the key provisions of the Doha Declaration states ‘Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.' We have to keep that phrase in our minds. It is the unequivocal legal support for the action you took. You are an autonomous sovereign nation that gets to decide when and if you want to issue compulsory licences. As long as you do so through correct procedures, you have nothing to fear under international or Thai law.

 

Your licence was issued for public, non-commercial use and I'd like to explain that phrase. The basic premise is that Thailand has issued these licences for use within your public health system, for individuals who access these medicines through your social insurance system and also for government employees. This use is a public use. Provision of medicines by the government, for the use of its citizens, using public funds to procure the medicines, is in fact a permissible use under international law. Now members of the USTR, big pharma and right-wing think tanks would like us to think otherwise. One of them, Ron Cass, former Dean of Boston University Law School, has said ‘This phrase comprehends uses such as public research programmes, not monopoly provision by a government for-profit agency. Only the most cynical distortion of the text could conceivably cover Thailand's conduct here.' This is a total distortion of TRIPS law. Provision by government of medicines for its people is a government use. Even the UK Patent Act expressly provides that service of the crown, otherwise known as government use, or public non-commercial use, includes the production and supply of specified drugs and medicines. Now if it's in the UK law, why isn't it similarly permissible under Thai law? And of course, it is.

 

The pundits would like us to believe that non-commercial means that there's no sale for a profit, that everything has to be done on a non-profit basis. There's no sustainable way for any drug company, generic, innovator, or otherwise, to manufacture drugs on a sustainable basis without making some profit in doing so. The fact that the goods are manufactured, the fact that they're sold and distributed , the fact that they're purchased by the government and given to its people, does not suddenly render that commercial use under this provision. The use is commercial to make a profit in the private sector, but when then provision is in the public sector, it's not an impermissible use. Thailand has continued to permit sale by the drug companies in your private sector which comprises about 20% of your market, and also for the very extensive medical tourist industry that you have in Thailand.

 

Because this was a public, non-commercial use, Thailand was not obligated to negotiate with the patent owners before issuing a compulsory licence, either on price, or for a voluntary licence. Article 31 of the TRIPS Agreement makes it very clear that prior negotiations are simply not required. All that's required is notification, and in fact notification can be after the fact. The USTR has said ‘we have indicated with the appropriate Thai authorities to respond to any request for discussions by concerned stakeholders, including patent holders' and the Wall Street Journal in an editorial called ‘Theft in Thailand' claimed that the failure of consultation clearly breached the spirit if not the letter of Article 31. Nothing could be more contrary to the truth. In the very express language of the act, you were not required to negotiate with the drug companies. Moreover, not negotiating with the drug companies would be completely lawful under US law as well. 28 USC Section 1498 expressly provides that any government official and any government contractor can take and use a patented process or product for government use in the United States. No special authorization from government, no special negotiation or notification to the drug company or any other patent holder. Instead you can simply take it, notify and pay after the fact.

 

Now of course we know that Thailand did in fact negotiate. Thailand negotiated for over 2-3 years with the drug companies to try to reduce prices and your White Paper noted the lack of progress in those negotiations.

 

Finally, Thailand offered a 0.5% royalty. Some may say that that royalty was low. Even so, Thailand clearly indicated a willingness to open negotiations on the amount of the royalty and there is an express provision for appeal within your Act. Although some of the pharmaceutical companies did negotiate, none of them actually negotiated to increase the royalty rate and none of them appealed within the statutory time period.

 

So in conclusion, there is no doubt whatsoever that your licences were in fact legal.

 

Myth 2. Compulsory licenses are only for emergencies.

 

Roger Bates of the American Enterprise Institute in April 2007 said "It is generally understood that compulsory licences should be confined to ‘public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics,' which represent a ‘national emergency or other circumstances of extreme urgency'." The president of your Pharmaceutical Research and Manufacturers Association took the alleged emergency rule and raised it one degree higher. He said "The law allows such actions with pharmaceutical products only in cases of extreme national emergencies, or during wartime."

 

The truth is that compulsory licences are not limited to emergencies. The international press consistently misrepresents the law in this respect. Virtually every article in the Wall Street Journal, the New York Times, the Financial Times, and other international newspapers consistently refers to emergencies as if that is a requirement. But by WTO rules countries have the freedom to determine the grounds on which licences can be granted. These are by no means limited to emergencies. They would like us to believe that the only emergencies for which licences should be granted are AIDS in Africa and avian flu, if it eventually strikes. They are trying to restrict very closely the circumstances in which countries might respond. Fortunately, Thailand has broken out of the falsehood and has issued licences not only for AIDS medicines because of your very serious problem here, but also for Plavix, a heart disease medicine, drawing attention to the fact that licences can be granted in non-emergency situations for chronic diseases.

 

Myth 3. Compulsory licenses are or should be rare.

 

Of course this is partially true because the US government ‘beats up' anyone who tries to issue a compulsory licence. It is also true because many countries have not enacted legislation to use the flexibilities they have. And there are forces within countries that sometimes resist the demands for access to medicines for all.

 

Despite the fact that licences are relatively rare, they are not rare historically. Over 50% of the members of the WTO well into the 20^th century did not provide patents on pharmaceutical products. Between 1969 and 1992, Canada issued over 600 compulsory licences. It's odd to claim that licences are rare when pharmaceutical products were rarely patented worldwide before TRIPS and when even a North American country had so bravely and consistently issued compulsory licences in the face of pharmaceutical company opposition.

 

One additional point to make in this regard is that there is no artificial limit on the number of TRIPS-compliant compulsory licences that may be issued. Now we know that Thailand has issued 3 licences already, two ARVs and one heart medicine. We know that it is currently considering licences on four cancer drugs. In addition, it is considering licences on what are estimated to be 20 other drugs for other chronic disease problems. It is important again to emphasize, as was true in Canada, that there is no artificial limit, and that you can continue to pursue this approach to accessing medicines for all.

 

Thailand has been very clear that there are limited grounds upon which licences will be granted. You've listed 5 grounds in your White Paper, all of which make perfect sense: listed on the national essential drug list; necessary to solve important public health problems; necessary in emergencies; necessary to prevent outbreaks of epidemics or pandemics; or necessary to save lives. These are all perfectly sensible criteria and are expected to apply to no more than 5-15% of patented medicines. One of the reasons it is going to be so few is that not many patented products are worth issuing compulsory licences for. Pharma hates to hear that. But it reveals how many of the patented medicines are me-too drugs with minor therapeutic advantage, if any. They are simply version B of product A. You don't need compulsory licences on those. Nor do you need compulsory licences on medicines for which there are therapeutic generic equivalents.

 

Myth 4. Compulsory licences are not OK for middle income countries.

 

So we have the false claim that they are only for emergencies. We have the false claim that they must be limited. We have now the false claim that only certain countries can use them. Ronald Cass again in the Wall Street Journal argued "Thailand is an especially bad fit for compulsory licensing ... is comfortably in the top half of all nations ranked by per capita GDP, with an average income 15 times that of the world's poorest countries".

 

Nothing is false in that statement about where Thailand ranks but there are two very clear falsehoods in this statement. First of all, TRIPS imposes no limits whatsoever on which countries can use compulsory licences. Under TRIPS, the US could issue compulsory licences tomorrow with no problem. Every member country has the unrestricted right to issue compulsory licences, no exceptions.

 

Myth 5. Compulsory licences are limited to just a few diseases.

 

Countries have the right to issue licences on grounds they determine appropriate, including diseases for which they think they are appropriate. Pharma would like us to think that medicines for chronic diseases, which drug companies make the most money on, should be off limit. They should be able to target the middle class in developing countries and extract every cent of profit they can from them. Nothing could be more false.

 

Drug companies complain particularly about the licence on Plavix, which is a blood thinner. There is simply no limitation.

 

Myth 6. Compulsory licences may not be granted on price grounds alone.

 

What the drug companies try to argue is, "Just because we charge high prices, why in the world would you want a compulsory licence?" In fact it is exactly because they charge monopoly prices, a hundred times the cost of production, that countries need to issue compulsory licences. A World Bank study indicated that Thailand would save $3.2 billion over 20 years on ARVs alone by using the TRIPS-compliant flexibilities that you are currently using.

 

I think it is important to emphasize that compulsory licences are not needed for price alone. There are other compelling reasons for issuing them.

 

One is to prevent stock-outs and there is an instance in South Africa where one of the grounds for a new licence application before the Competition Commission is that the proprietary drug company has permitted stock-outs.

 

You can issue licences to help promote technology transfer, which is an empty promise in the TRIPS agreement. You have a right to try to build an industrial capacity and to pursue an industrial policy to have local and regional capacity. One of the reasons why Thailand is a hero to us all is that Thailand has helped to make the market for other developing countries and by setting an example, you are actually encouraging other developing countries, including middle-income countries, to issue compulsory licences. We will not have the lowest prices that we need for the chronic and neglected diseases of the poor unless we have robust generic markets with multiple competitors. We have to do that by aggregating demand from multiple countries.

 

A final reason to issue compulsory licences is to permit the production of fixed dose combinations of medicines that are owned by different patent-holders, who will not make those medicines together.

 

Myth 7. Compulsory licences are theft.

 

The Wall Street Journal had an editorial entitled "Theft in Thailand". "By seizing patents for HIV/AIDS treatments and heart disease, Thailand has asserted that governments have the right to take intellectual property whenever they please." Governments don't take intellectual property. Governments use a pre-existing right that they had, even when those patent applications were filed. No one pulled the wool over Abbott's eyes. The compulsory licence laws were on the books when the application was filed for Kaletra. The government simply allowed another company to compete. Abbott's right to sell its medicines has not been removed. It still has a right to produce. It just can't do so on a monopoly basis any longer.

 

Myth 8. Drug companies are always willing to negotiate.

 

Since when? Maybe at the speed of glaciers, they will negotiate incremental decreases in price. But basically what they want to negotiate is price, on a very narrow spectrum of diseases. They will not negotiate on chronic disease medicines. Nor will they typically give voluntary licences. So they negotiate on everything except those things that are most important - deep, sustaining, predictable, long-lasting price discounts on all medicines and voluntary licences so that drugs can be produced even more cheaply.

 

Myth 9. The Government Pharmaceutical Organization licence equals commercial abuse, and licences to generic companies inevitably lead to poor quality products.

 

This is such a deep irony for the pharmaceutical monopolies to claim that there is commercial abuse by making drugs cheaper. The claim of a monopolist that someone else is cheating is pretty hard to swallow.

 

Compulsory licences are permitted to make a profit, that's the only way they stay in business. Countries can promote their own generic industries for local and regional production.

 

The slander in terms of quality is very consistent. Drug companies have questioned the quality of generics since generics began, and they will continue to do so. The response is very simple. When a generic manufacturer produces evidence of the bio-equivalence of a product, when the generic manufacturer meets good manufacturing practice standards, then the medicines are to all intents and purposes identical, and safe, and efficacious, and of good quality.

 

Myth Number 10. Compulsory licences threaten R&D incentives.

 

Developing countries together represent about 12% of global pharmaceutical sales. The industry's audited total sales for 2006 was $608 billion, which includes only retail sales, not certain informal sales or hospital sales. When you take this global figure, the whole of Asia, Africa and Latin America comprise about 12% of the global market. How is it possible that this relatively small percentage of the global market is what energizes research and development? The argument is simply preposterous. The press consistently makes the misrepresentation that the issuance of a compulsory licence here somehow threatens profits somewhere else. It claims that if you issue a compulsory licence in Thailand, Abbott stops making money in the US. The companies will experience no effect on their profits in the rich country markets where they make 88% of their sales, and probably 95% of their profits. These are the questions that journalists could continuously ask the drug companies about research and development.

 

If Southern markets were so important, why have drug companies invested only 1% of their research and development on neglected diseases over the past 3 decades? If the current patent system is well-designed to provide incentives for research and development in therapeutically important areas, why do its incremental innovation outputs deform research towards lifestyle diseases, me-too drugs, and ever-greening strategies? These are the questions that should be asked whenever the R&D defence is raised.

 

Myth 11. Because of the issuance of compulsory licences drug companies and the US government are justified in retaliating.

 

I am here and I am mad because of what a drug company from my country has done and because of what my government has done. It is hard to express the outrage that I am sure you felt and that other people around the world felt when on March 10^th Abbott unilaterally removed heat-stable Kaletra from the registration process. The idea that poor people living with HIV/AIDS in Thailand, who have to carry ice in lunch-boxes to keep their Kaletra cold, cannot have access to the newest heat-stable formulation, because Abbott had the nerve to take this medicine off the market is truly unbelievable. No drug company should be able to retaliate in that way. It is monstrous that it has done so. I am proud that consumers and activists in your country have taken the case to the Competition Tribunal in Thailand, challenging that decision. It is illegal, we would argue, to withhold those products from the market without justifiable reason, and to offer them abroad, but not here in Thailand and we hope that the Competition Tribunal will decide that matter promptly. Drug companies simply have to learn that this is not an acceptable tactic.

 

In the same way, it is an outrage that the US government has placed Thailand on the Special 301 Priority Watch List. It is simply unconscionable and probably contrary to US law. A provision of the US Trade Authority Act directly says that the US Trade Representative is supposed to honour the Doha Declaration. How does it honour the Doha Declaration to put Thailand on the list because it issued compulsory licences? Of course the US government didn't stop at compulsory licences. It withdrew a billion dollars of no-tariff products under its generalized system of preferences. It is hard to measure the economic costs to the 3 Thai industries affected, but it is not insignificant. Again, I think it is incredibly important that Thailand has stood up to this trade pressure, and, even after this pressure was applied, to continue to consider compulsory licences. You are standing up and you are providing an example to other developing countries, who can now act in solidarity with you and follow your lead.

 

Myth 12. A free trade agreement with the US will be beneficial to Thailand, with respect to access to medicines.

 

I know there's been a suspension of the FTA negotiations here, in large part because of the heroic activism of people living with HIV/AIDS, who swam across rivers to try to interrupt those negotiations. There is great danger in what the US is seeking, even with some of the minor modifications that the Democratic Congress is taking up for new trade measures. We don't have time to go through all these now. I hope there will be time later in the conference to look forward to the danger that may exist in the trade agreement. There will be efforts to expand the scope of patentability, to restrict pre-grant opposition, to limit compulsory licences, to impose data exclusivity, to extend patent terms, and on and on. Also this will include the right of drug companies to sue countries directly under investor protection provisions. All of these provisions would be a total disaster for Thailand

 

 

In conclusion, the crisis for access to medicines is already here. Since 2005, India has a product patent regime and although you can import from India the medicines that pre-existed the patent regime without a problem, importing the newest medicines will be much more complicated unless we find a way out of the TRIPS stranglehold that we all face. The new drugs just coming onto the market in the US as a 4^th line of attack on HIV will simply be much harder to access and much less affordable because of the complications imposed by the TRIPS agreement.

 

When we fight for access to medicines, when we fight for access to life itself, we are confronted consistently with lies and distortions, and we should call them lies. They are not just myths, these are lies that actually kill. We need to expose them and educate ourselves about them. We need to be able to stand up and refute them whenever they are made. We should continue this effort to identify and challenge each and every time pharma states a lie, or the USTR states a lie. We should stand up and say no.