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Today inventions of new products or new processes particularly in the field of medicine, in general, involves the collective effort of many highly skilled professionals and expenditure of considerable amount of money and time which only big corporations and institutions can afford. Besides, the manufacture of the article or product on a commercial scale requires further effort and money.
Accordingly, under modern conditions only big corporations or institutions can afford to engage in research and development of new products or processes, which truly passes on to the product price.
Health is one of the fundamental basic needs of all human need. The right to life includes the right to health. In legal term as well the fundamental human right treaties recognize that the right to health would encompass a number of elements from prevention to cure to access to drugs.
However, access to drugs stand out in the context of TRIPS agreement. It generally requires their availability and affordability. There is a strong link between poverty and access to drugs. Although there is going to be an increase on the prices of the drugs when the product patent regime comes in place, however with the efforts of government, the availability in terms of low prices can be envisaged. This may be called the ‘Cushion Effect’, the mechanism by which the effect of the regime in terms of high cost is not passed on to the masses.
The 1994 Agreement on Trade-Related Aspects of Property Rights (TRIPs Agreement) states that all signatories are obliged to grant patents to pharmaceutical products. As a result, the price of medicines has tended to increase, affecting people in developing countries. The adoption of a patent system in these countries has harmed poorer people who cannot afford to buy medicine. Nevertheless, the TRIPs agreement contains some provisions that allow countries to eliminate the negative consequences of granting patents.
In this paper we argue that compulsory licensing is a fundamental tool that developing countries may use in certain conditions to ensure that poor people have access to necessary medicines. This measure may produce positive social effects. Unlike developed nations, developing countries have rarely used the compulsory license as an instrument of public policy.
Also we will argue that large, global pharmaceutical companies have a moral obligation to develop affordable drugs for the developing world and to make these drugs accessible, and that developing nations should cooperate with these companies in achieving these goals. Although pharmaceutical companies and developing nations are often in conflict, we will argue that they must work together to develop drugs for the developing world.
Our paper does not ignore the important role that patents play in fostering technological progress. Our purpose is only to point out that compulsory licensing promotes social well-being to the extent that it obviates the drawbacks of a patent system. Finally, there is no risk of decreasing investment in research because the market in developing countries is not significant for multinational companies.
The TRIPs Agreement and the “patentability” of MedicinesThe TRIPs agreement, made in 1994 during the Uruguay Round, determined that all the signatories agree to establish a minimum standard of protection of intellectual property. Various themes were regulated by TRIPs, such as authors’ rights, brands, patents, confidential information and industrial designs. The application of these rules was ensured by the system of solution of controversies of the WTO, which improved the mechanism of resolving disputes which existed in GATT.
The “patentability” of pharmaceutical products, agreed upon during the Uruguay Round, raised the price of medicine, affecting a large part of the population. As a result, the right to health was seriously affected since various social groups could not have access to the medicine they need The TRIPs agreement does not only contain rules for the protection of intellectual property of interest to the developed nations. The members of the WTO considered it advisable to foresee exceptions to the general rule in order to enable the adoption of public policies in expressly determined situations. Article 7 states that the regime of intellectual property rights should contribute to the promotion of innovation, and the transference and spread of technologies able to lead to financial and social welfare. There was an attempt to obtain a balance between the guarantee of intellectual property rights, decisive for the growth of trade, and the protection of values considered fundamental.
Article 8 states that States can adopt the necessary measures to protect public health and nutrition as well as to promote public interest in sectors which are vital for social, economic and technological development. The measures adopted should, however, be compatible with the TRIPs agreement . Some exceptions were made by TRIPs to the general obligation to concede patents. Article 27 (2) authorizes members to restrict the concession of patents if the inventions may endanger human life or health. Article 30, in its turn, allows States to restrict the exclusive privileges granted by the patents. For this to happen, some prerequisites must be present. The exceptions are to be limited to the rights of monopoly, and cannot prevent the exploitation of the patent or cause unreasonable harm to the legitimate interests of the patent holder.
Despite the efforts made during the Uruguay Round, it was not possible to reach a definition of the expression “limited exceptions” in Article 30 of the TRIPs agreement. However, there is a close link between article 7 and article 30, which, when read together leads to the conclusion that States should make compatible the protection of the rights of the patent holder and the need to consider the legitimate interests of third parties . It can be argued that in the case of illnesses like AIDS, developing countries can establish restrictions on the rights of patent holders in order to reduce the cost of pharmaceutical products and enable the poorer part of the population to have greater access to them. Countries have the right to regulate the exercise of the rights granted by the patent in order to fulfill the public good. In this context, compulsory licensing appears as an important instrument to increase the supply of medicines at lower prices.
Compulsory License and TRIPS AgreementThe first agreements on intellectual property, made in the XIX century, assigned compulsory licensing the task of solving problems created by the patent system. It authorizes a third party to manufacture, use or sell a patented invention without the authorization of the title-holder, under clearly stated circumstances . Compulsory licensing will be granted in case of national emergency, or when a state wants the invention to have public use on noncommercial grounds. The license will not be exclusive and will be used only for the aim for which it was granted. Its main goal is to supply the domestic market in unusual situations. The title-holder is entitled to be remunerated when it is exploited by a third party. It is possible to appeal to the Judiciary Branch to review the governmental ruling that granted the compulsory license of certain inventions.
As can be noted, States enjoy undeniable flexibility to adopt public policies in the field of health. Members of the WTO are free to determine the circumstances that characterize a national emergency, which are extremely important in the public health crises caused by epidemics or pandemics. During TRIPs negotiations, attempts to introduce criteria that would define the content of the expression “public interest” failed because developing nations were uninterested in restraining flexibility to adopt governmental policies of health protection. Also, it was not possible to determine the meaning of situations of urgency, national emergency, noncommercial public use, and noncompetitive conducts. During the Uruguay Round, a proposal presented by India was accepted. It ensured ample freedom for countries to define such expressions.
Article 31 allows for the concession of compulsory license in cases of abuse of power of the monopoly granted by the patent, or when public interest demands it. Such flexibility is essential for the adoption of public policies geared to protecting health. The increase in medication costs caused by the “patentability” of pharmaceutical products can be offset by regulatory measures that will enable social groups with a lower income to have access to medications. The objective to be achieved is to strike a balance between protecting intellectual property and promoting the well-being of the population Countries are not entirely free to interpret the provisions of The TRIPs agreement of the World Trade Organization. In the case India-patents, the WTO Appellate Body believed that the terms of TRIPs must be interpreted on the grounds of “common sense is resulting from its context and in the light of the object and aim of the agreement”, according to the rules of the Vienna Conventions for the interpretation of treaties. Contradicting the wish of the pharmaceutical industry, the appellate body decided that the interpretation would take into account the text of the agreement accepted by members, and not the expectations of one of the parties.
It is interesting to observe that developing nations have seldom made use of the flexibility of the TRIPs agreement. The Doha declaration about TRIPs and public health in 2001 maintained the flexibility of the Agreement negotiated during the Uruguay Round, which allowed the implementation of public policies that facilitate access to medications. On that occasion, it was pointed out that: “We stress the importance we attach to the implementation and interpretation of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs agreement) in a way which supports public health by promoting both access to existing medicines and research into, and development of, new medicines. Due to this connection, we are adopting a separate declaration”. In the same way, it was observed that members of the WTO are entitled to determine “what constitutes a national emergency or any other circumstance of extreme urgency”. The obligation to negotiate on the grounds of article 31(b) of TRIPs, before granting the compulsory license, disappears when, in good faith, a country states there is a situation of emergency.
On that occasion, it was also necessary to avoid interpretations that would broaden the protection of intellectual property by TRIPs. The decision that nothing in the agreement would be interpreted in such a way as to prevent countries from adopting their own public health policies was of the utmost importance . The Doha declaration, however, did not address the possibility of the import of manufactured products through the concession of a compulsory license by other countries. It has been established, in this case, that the title-holder has the right to prevent the medication from being launched on other markets because his rights have not expired. From this perspective, compulsory licensing aims mainly at supplying the domestic market.
The fact that some countries are unable to benefit from the flexibility offered by TRIPs is particularly serious. Once it is granted, compulsory licensing does not produce the expected results due to the lack of technical ability of local industry. This problem was solved by the General Council of the WTO on August 30, 2003, by a decision that protected the flexibility of TRIPs, as it was agreed that countries that met some requirements would not be subject to the restrictions in article 31(F). The member countries of the WTO will be able to import medicines through compulsory licensing if domestic industry proves unable to supply the needs of the domestic market. This privilege is ensured to less developed members of the WTO and to any member who at any time notifies the Council of TRIPs Agreement of their intention to use the system, which is provided for in the decision of the General Council in cases of national emergency or other circumstances of extreme urgency, or in cases of non-commercial public use. The decision of the General Council established a number of safeguards to prevent medications produced through compulsory licensing for developing countries from supplying the market of developed countries. Such safeguards include, among other requirements, the form, color, and type of packaging of the products sold.
The decision, which will be interpreted and implemented in good faith, will deal with public health issues and will not aim at achieving goals of commercial or industrial policies. Countries can indicate, according to domestic interests, the hypotheses for granting compulsory licensing. Carlos Correia points out those developing countries should use compulsory licensing to promote access to medications in the following situations:
a) refusal to accept, which occurs whenever the patent-holder refuses to grant the required voluntary license in reasonable terms, when the non-granting of the license affects the availability of a product or the development of a new activity;
b) a declared state of national emergency, as in cases of natural catastrophes, wars or epidemics;
c) when there is a public health crisis, to ensure the population’s access to essential medications, or situations of public interest, including those of national security;
d) identification of anti-competitive behavior;
e) governmental use, to foster access to medicines on non-commercial grounds;
f) when lack or insufficiency in exploiting the patent hinders access to health or prevents the development of a vital sector of the country’s economy;
g) when a certain patent can be made use of through exploiting a pre-existing patent, provided that the original patent covers an invention that represents an important technological advance;
h) public interest.
As can be noted, States enjoy undeniable flexibility to adopt public policies in the field of health. Members of the WTO are free to determine the circumstances that characterize a national emergency, which are extremely important in the public health crises caused by epidemics or pandemics . During TRIPs negotiations, attempts to introduce criteria that would define the content of the expression “public interest” failed because developing nations were uninterested in restraining flexibility to adopt governmental policies of health protection. Also, it was not possible to determine the meaning of situations of urgency, national emergency, noncommercial public use, and noncompetitive conducts. During the Uruguay Round, a proposal presented by India was accepted. It ensured ample freedom for countries to define such expressions.
Article 31 allows for the concession of compulsory license in cases of abuse of power of the monopoly granted by the patent, or when public interest demands it. Such flexibility is essential for the adoption of public policies geared to protecting health. The increase in medication costs caused by the “patentability” of pharmaceutical products can be offset by regulatory measures that will enable social groups with a lower income to have access to medications. The objective to be achieved is to strike a balance between protecting intellectual property and promoting the well-being of the population Countries are not entirely free to interpret the provisions of The TRIPs agreement of the World Trade Organization. In the case India-patents, the WTO Appellate Body believed that the terms of TRIPs must be interpreted on the grounds of “common sense resulting from its context and in the light of the object and aim of the agreement”, according to the rules of the Vienna Conventions for the interpretation of treaties. Contradicting the wish of the pharmaceutical industry, the appellate body decided that the interpretation would take into account the text of the agreement accepted by members, and not the expectations of one of the parties.
The Pharmaceutical Industry and Social ResponsibilityLet’s consider the pharmaceutical industry’s obligations to developing nations. One popular conception of private businesses is that they are either immoral or amoral, operating outside the bounds of morality and barely within scope of the law. During the 20th century, many business professors and economists provided a theoretical basis for this idea by arguing that companies have one primary obligation, to make profit. By pursuing profit, companies manage their resources effectively and produce goods and services that benefit society. Laws can be useful in regulating corporate conduct, but corporations have no moral obligations over and above the requirement to comply with law. We suspect that many people regard pharmaceutical companies in the same light: pharmaceutical companies are moral pariahs.
Although many, if not most, companies frequently ignore moral standards, there are solid arguments for holding that businesses have moral responsibilities beyond merely obeying the law. All businesses are shaped by and depend upon social values, such as honesty, integrity, fidelity, diligence, and fairness. These values provide a social infrastructure for contractual arrangements, employer-employee relations, marketing, investing, trading, and so on. Values play a key role in creating a climate within and among companies for conducting business. Without these values in place, corruption, theft, fraud, disloyalty, and other ethical problems would make it impossible to do business. Thus, most businesses today recognize the importance of ethical conduct in business and many adopt and enforce codes of conduct.
Many people would accept the idea that moral values play an important role within business, but they might argue that they play no role in the interaction between businesses and society at large. A business could adopt and enforce a code of ethics that applies to its dealings with employees, customers, stockholders, and associates yet show absolutely no respect for other social values not directly related to business. Although it is also probably the case that many businesses ignore these other values, many writers argue that business have social responsibilities. Businesses have these responsibilities because they exist within societies where people care about the environment, public health and safety, and other values.
There are at least two reasons why businesses have social responsibilities. First, businesses that ignore their social responsibilities may face the public’s wrath. A company that wantonly pollutes, for example, will one day have do deal with additional pollution regulations. Companies that make unsafe products may have to deal with expensive lawsuits. Thus, social responsibility makes good business sense. Second, corporations are like moral agents in that they make decisions that have important effects on human beings. In making these decisions, corporations can decide to either accept or ignore social values. Although corporations do not have a mind that makes conscious choices, they can be held legally and morally responsible for their decisions and actions. If corporations are like moral agents, then they have some of the same duties that apply to other moral agents. In particular, corporations have obligations to avoid causing harm and to promote social welfare and justice.
Since pharmaceutical companies are corporations, they also have social responsibilities. At least two types of responsibilities apply to pharmaceutical companies:
1. Beneficence - Pharmaceutical companies should promote the greatest balance of benefits/harms for society. They should avoid doing harm and try to do good.
2. Justice - Pharmaceutical companies should distribute benefits and burdens equitably.
The rationale for a duty of beneficence is fairly straightforward and uncontroversial. Indeed, most countries have a variety of laws designed to regulate drug testing, manufacturing, and sales in order to prevent harms to the public and promote the development of effective drugs. In the US, the Food and Drug Administration (FDA) regulates drug testing, manufacturing, and sales (Brody, 1995). Although this duty is fairly obvious, its application is usually complex and controversial, as societies must consider benefits, harms, justice and basic liberties in deciding questions about approving the sale of new drugs.
How do the above considerations apply to developing drugs for the developing world? In general, these considerations imply that pharmaceutical companies have moral responsibilities to develop drugs that benefit society and to make those drugs available to participant populations at a reasonable price. Some pharmaceutical companies, such as Bayer Corporation, have adopted ethics and values statements that mention responsibilities to the community, customers, and the environment. Ciba-Geigy, a chemical company that merged with Sandoz (a pharmaceutical company) in 1997, adopted a vision and values statement that includes responsibilities to the environment and society . However, merely recognizing that pharmaceutical companies should be socially responsible provides little guidance in determining how companies should exercise that responsibility. It does not provide specific guidance as to what a company should do, how much is should do, how many resources it should devote to a project, or even where it should focus its attention.
To get some insight into these questions consider how an individual might decide how to act socially responsible. Most major moral theories, including Kantianism, utilitarianism, and virtue ethics, hold that individuals have duties relating to beneficence and justice. However, there is also strong theoretical support for that many moral duties, including the duty of beneficence are not absolute: there are morally acceptable and desirable limits on the amount of good one may do for others. Although we should all do our part for society, we are not required to be moral saints. Since most individuals cannot completely sacrifice themselves for the good of society, they must weigh and consider other moral obligations and commitments in light of their circumstances and conditions in order to decide how to be socially responsible. Social responsibilities, such as the duty of beneficence, are Kantian imperfect duties.
These points apply to social responsibility at the corporate level. Companies, like individuals, have obligations to be socially responsible, but these obligations are not absolute. Companies should not act like moral scoundrels, but they do not need to act like moral saints. To meet their social responsibilities, corporations must weigh and consider many factors, such as their talents, abilities, resources, interests, commitments, and obligations. As far as pharmaceutical companies are concerned, the goals of developing medications for populations and promoting access to those medications would seem to be a natural fit, given their interests, talents, and so on. But this still leaves open the question of how far a company should go in meeting this responsibility.
Corporations, like individuals, must consider their resources, such as time and money, as well as other obligations and commitments, when deciding how to act responsibly. Most pharmaceutical companies will have little trouble fulfilling some minimal responsibilities if they develop drugs that benefit people and make those drugs accessible. But the harder question to answer is how far companies should go in exercising this responsibility. Companies also have commitments to their stockholders and employees. They have obligations to make a profit and to use their economic resources effectively. For example, Bayer’s values statement also mentions duties to capital investment and resource allocation. If one agrees that profit should play a key role in business decisions, then it is morally legitimate (and perhaps even morally responsible) for a company to weigh and consider financial factors when making a decision to be socially responsible.
Money is not the only factor in deciding how to exercise social responsibility. Companies may also consider social, economic, legal, or political conditions, since these factors may impact the effectiveness of a particular program aimed at meeting social responsibilities. These factors may provide significant barriers to implementing social responsibility. For example, a company might decide that it is not worth the effort to supply free medications to a country if that country is in such political turmoil that distribution is futile or impossible.
A company might also decide that it is not worth selling a medication at a discounted price in a country if that country does not honor the company’s pharmaceutical patents. On the other hand, a company might decide to initiate a research program aimed at developing a vaccine for an infectious disease, if the company obtains financial and political support from a country that would like to have such a vaccine.
Finally, companies also need to consider geography in deciding how to exercise their social responsibility. We think there are several reasons why pharmaceutical companies have social responsibilities to the developing world. First, if a company conducts business in a country, then it has duties to act responsibly in that country. This is type of social responsibility can be justified in terms of reciprocity and should not be especially controversial: if you make money in a country, you have an obligation to give something back to that country over and above taxes, and goods and services. But companies can avoid this responsibility by simply not doing business in developing nations.
A pharmaceutical company could market its products in the developed world in order to avoid the economic, social, political, and legal challenges of conducting business in the developing world. This brings us to a second, perhaps more important reason why pharmaceutical companies have social obligations to the developing world: companies should promote the welfare of humankind. This implies duties of beneficence and justice to all people, not just to people living in the US or Europe. Obviously, it may be difficult for small, local corporations to promote the welfare of humankind, but large, global corporations, such as Merck, Glaxo-Wellcome, Novartis or Pfizer, should be concerned with the welfare of humankind and they should therefore conduct business in developing nations and attempt to meet social responsibilities to developing nations. However, even global companies may decide to avoid doing business in some countries in the developing world due to adverse financial, political, legal, or other conditions.
Thus, one can conclude that global, pharmaceutical companies have social responsibilities to developing nations. How much should they do to help? These are complex issues that depend, in part, on how developing nations respond to pharmaceutical companies. If we think of exercising social responsibility as attempt to make a gift to a society (or societies), and we understand giving as a relationship (or agreement) between the giver and recipient, then we need to say a bit more about the recipient of the gift. Exercising social responsibility in the developing world depends, in part, on social, economic, political, and legal conditions in the developing world, since these conditions can either assist or impede a company’s attempt to exercise social responsibility or its business practices. Most companies, we believe, will resist doing business in the developing world if:
(1) they have no guarantee of a reasonable profit;
(2) they must overcome an unproductive business climate.
The Function of Compulsory Licensing and Impact on InnovationDebates about compulsory licensing are old. The theme was analyzed by the US senate in 1790, by the British House of Lords in 1851, and in Germany discussions started in 1853. After this, it was necessary to make the benefits of the patent system compatible with the elimination of possible undesired effects. The patent-holder does not have absolute rights, and is subject to the laws that rule competition. In certain circumstances, the government can force the patent-holder to license his invention to a third party that will exploit it through the payment of royalties. By means of compulsory licensing, the government can exploit the object of invention directly, or allow a third party to do it, without the authorization of the title-holder, in order to perform public policies that facilitate access to medication of the low- income population. The effects of compulsory licensing are to increase competition, to supply the market, and possibly to reduce prices. It is considered, in certain cases, that access to the invention should have priority over the private interest of the patent-holder and his exclusive right to exploit it. In developing countries, the patent has a marginal effect in terms of encouraging innovation, with extremely negative consequences for social well-being.
The analysis of the costs and benefits of compulsory licensing is essential to use it as an instrument to create public policies by developing countries. Discouraging innovation is regarded as the main risk caused by compulsory licensing. The prospect that profits obtained from exploiting the patent could suddenly disappear would reduce the incentive to invest in innovations. It would be more beneficial to profit from investments made by third parties than perform one’s own research to develop a new product or productive process. It is also stated that inventors have little incentive to patent their inventions, and would rather keep them as industrial secrets.
Up until now, there have been no empirical data to prove the thesis that compulsory licensing has reduced investments in R&D in developed and developing countries. Scherer concluded that compulsory licensing granted in the 40s and 50s did not limit the great progress of the North American economy in that period. The need to continue to be competitive in the future encouraged the industry to put a long-term investment plan into practice, even when compulsory licensing was granted. Shien believes that compulsory licensing affects innovation when the industry can anticipate its concession or when the market in which it will be applied shows great economic importance.
The foreseeability of compulsory licensing can affect investments in markets of great importance. However, there will be reduced impact on innovation if royalties are paid according to the existing criteria for the licensing of products on the market. Non-predictable compulsory licensing may affect a company’s decision to invest, but the licensing may occur too late for the company to change its behavior. Research conducted by the British Pharmaceutical Executives suggested that, in extreme cases, compulsory licensing is harmful to innovation. This study addressed only innovation carried out by the licensor, but ignored the impact of compulsory licensing on the licensee, who often benefits from the “spillover effects” of original innovation . In 1977, F.M. Scherer conducted an important investigation that focused on almost seven hundred companies, 44% of which were subjected to compulsory licensing. This research states that companies subjected to compulsory licensing invested more in R&D than companies that were not the object of a similar measure. This conclusion, which applies to pharmaceutical companies, shows that compulsory licensing did not cause a reduction in investments in R&D.
In a recent study, Scherer analyzed the situation of companies that were subject to compulsory licensing or that were about to be subjected to this procedure. The companies investigated did not reduce investments in R&D because they intended to be competitive in the long run.
From 1923 to 1993, Canadian legislation authorized compulsory licensing of medicines based on sections 4 (1) and 39 (4) of the Canadian Patent Act. The main effect of this policy was the development of a domestic industry geared to produce generic medicines. The Eastman Commission observed that between 1969 and 1983 almost 80% of the licensing requests were granted, amounting to an average of about twenty compulsory licenses a year. Compulsory licensing did not affect innovation in Canada significantly, which may be due to the relative insignificance of the Canadian market when compared to the world market of pharmaceutical products. Moreover, it must be remembered that the market in developing countries represents little profit for the pharmaceutical industry. Data available show that the market in developing countries contributes less than 20% of the profits obtained by pharmaceutical companies. This percentage is reduced even more if the importance of each individual market is analyzed. Only a small share of the population, usually no more than 10%, has ample access to pharmaceutical products in developing countries. Adequate use of compulsory licensing in these countries would have extremely little impact on investments in R&D. Canada had ample use of compulsory licensing for more than fifty years and even so, the North American pharmaceutical laboratories never failed to invest in innovation. This occurred because during that time, the Canadian market was not significant for profits in the pharmaceutical industry.
Compulsory Licensing as a Public Policy Tool in Developing CountriesThe use of compulsory licensing by developing countries will contribute to raising the degree of competition, which will certainly cause a reduction in the price of medicine. If this is the case, there will probably be different prices according to the characteristics of each market. Strict rules of protection of intellectual property in developed nations helped consolidate this situation. It should also be remembered that the prices of pharmaceutical products are established taking into account the reality of the market in developed countries. For this reason, compulsory licensing leads to undeniable social benefits that can be translated into easier access to medication by a significant part of the population.
Some authors state that it is necessary to analyze the kind of medicine to be licensed in order to determine the effect of compulsory licensing on investments in innovation. Certain products aim at the global market, for even if they are primarily destined for the market of developed countries, they are also useful in developing countries, which is the case of medicines to treat cancer and AIDS. Furthermore, there are specific drugs that meet the needs of developing countries and that fight diseases such as malaria or tuberculosis and some viruses found in Africa. These drugs are not a priority for the pharmaceutical industry, and this is the reason why public and philanthropic resources fund research in the area. The Center for Disease Control, and partnerships between the public and private sectors, like The International AIDS Vaccines Initiative and the Alliance for Tuberculosis Drug Development are examples of successful experiences in the research into medicines of interest to developing countries. Compulsory licensing for global drugs, when limited to developing countries, does not have a negative effect on investments in research in developed countries.
In this case, companies respond to consumer demands, and if this remains unchanged, selective compulsory licensing, which is restricted to developing countries, will have little effect on innovation. If pharmaceutical industries invest funds on a large scale in the production of medicines used by developing nations, the general concession of compulsory licensing will probably affect investments in R&D. The first conclusion to be drawn, in the opinion of these authors, refers to the need to analyze compulsory licensing in a different way when dealing with global drugs or specific medications for developing countries. Possible compulsory licenses granted to produce drugs that fight AIDS would not have a negative effect on research in the area. The situation is different when medicines are produced for the specific treatment of some diseases typical of developing countries. The threat that there might be systematic use of compulsory licensing of such medicines might force pharmaceutical companies to avoid these markets. Another frequent argument refers to the potential negative effects of compulsory licensing on the attraction of foreign investment.
So far there have been no conclusive studies showing a link between the level of protection of intellectual property and the amount of foreign resources entering a country. Choices of investment are in fact influenced by the analysis of the potential for economic growth of a country and by the soundness of its institutions. High levels of protection of intellectual property do not in themselves guarantee the transfer of technology to developing countries. To reduce the risks of abuse, developing countries should use compulsory licensing in the specific circumstances defined by already existing laws. The use of compulsory licensing as a strategy to create public policies should be linked to a framework which ensures reasonable remuneration for the patent-holder. This would attenuate the effects of compulsory licensing on technological progress. Article 31(h) of the TRIPs Agreement requires that the patent-holder receive adequate remuneration, established case-by-case according to the value of the concession. When compulsory licensing is conceded to repress anti-competitive conduct, the remuneration may receive special treatment, in the terms of article 31(k). It has already been suggested that this norm would allow the payment of reduced royalties, or even the free concession of the license.
The main problem involving the concession of compulsory licensing lies in the value of the remuneration to be paid to the patent-holder. The payment of royalties similar to those paid to the patent-holder in the case of voluntary licensing would prevent, in practice, the fulfilment of the objectives of compulsory licensing . The situation changes when the issue is compulsory licensing conceded to repress anti-competitive conduct. In this case, North American antitrust authorities have established royalties at values ranging from 0.2% to 3 %, figures considered low by the market. In other cases, compulsory licensing was conceded free of charge as happened in the case Dell Corporation vs. Bus patents. The establishment of high royalties for the compulsory licensing of medicines would have extremely negative effects on the poorer sectors of the population. On the other hand, the establishment of royalties at low levels would enable the market to be supplied, thus contributing to raising the level of social welfare.
Compulsory licensing is not widely used by developing countries to encourage access to medicines. Greater use of compulsory licensing in developing countries requires the existence of high levels of the protection of patents in developed countries. This factor would make it possible to adopt different prices according to the specific needs of each market. The granting of compulsory licenses would increase competition and decrease the prices of pharmaceutical products in developing countries. On the other hand, the price of medicines would tend to rise in the market of developed countries . For compulsory licensing to be an efficient tool to reduce the costs of the system of patents and provide greater social welfare, the ways in which it can be used must be clearly defined. It would be wrong to believe that compulsory licensing is a panacea for all the problems of public health faced by developing nations. Some questions are of a structural nature and need comprehensive policies which include the adoption of measures of different kinds. It must also be acknowledged that compulsory licensing is an exceptional resource which should be used by governments in exceptional circumstances, established by law. The rational use of compulsory licensing may favor the transfer of technology to produce medicines for countries in areas of vital interest for the health of the population.
Developing countries should use the alternatives offered by the TRIPs Agreement and create legal tools and public policies to exploit the potential offered by compulsory licensing to allow greater social equality in access to medicines. In this context it is absolutely necessary to maintain the flexibility established by the TRIPs Agreement for this to happen. The pressure for compulsory licensing not to be conceded and frequent attempts to interpret the TRIPs Agreement in a restrictive manner are extremely damaging to the interests of developing countries, and preclude them from carrying out public policies that prevent death and improve the health of a considerable part of the population.
The Efficacy of Right To Health- Conclusion
The international legal restraints on pharmaceutical patent protection derived from trips (contained and constructed) “flexibilities” are essential for the efficacy of human rights in the sphere of access to medicines in the developing world. However, they cannot deliver right to health without complementary strong public health infrastructures and state capacity. There are no rights without resources and public procedures to provide for them. To have a right to health means to have mechanisms to enforce it and those mechanisms require extensive infrastructures and a well endowed institutional capacity that can only be put in place through finance and resources.
Provisions contained in international instruments on right to heath acknowledge that right to health is highly dependent on many factors, phases and processes, that determine its degree of efficacy : the idea of full realization , ensuring full and effective realization , to create favourable conditions at the national, regional and international level, to promote and protect the progressive realization , adoption of positive measures in order to safeguard the full realization , to reduce the possible negative impact on the realization and similar ones are ideas contained on provisions that acknowledge and reflect the fact that human right to health in the field (the territory of a state, by definition) depends on a full package of public policies.
To reduce the scope of patent protection in order to facilitate access to medicines in the developing world is only one part of the puzzle of international public policies to provide for the efficacy of the human right to health. human right to health may be relatively immune to WTO law impacts to the extent that WTO definitively solves initial problems (facilitating compulsory licensing and parallel imports…), does not create new ones in the future (i.e.: end of exemptions?) and, even more important, coordinates itself horizontally with who and the un human rights system in order to solve new arriving legal issues. There is a collective effort to find a balance at WTO structures and processes since 2000-2001. Let’s see what comes with the future and let’s see if that balance is as dynamic as society’s demands. By now, the new key function of trips in relation with public health is not to obstruct the transfer of technology, production, and export & import of generics to countries. Of course, there is space and available regulatory tools to ask for more, but this is another question not aimed at in this study.
It is important to underline, however, that access to medicines, treatment and prevention only partially depends on the multilateral trade system. WTO new legal reforms and changes are an additional legal facility, if we wish to say, to ease that access, but no more and no less than that. The core of ‘public management of human right to health’ still resides in the existence of efficient public health infrastructures and sufficient public resources to provide access, treatment and prevention. In this direction, the level allocation of public resources to right to health under icescr is formally linked to procedures of violation article 12 (paragraph 47). The general comment states that there is a state obligation “to take the necessary steps to the maximum of its available resources” derived from article 12.1 and article 2.1: “a state which is unwilling to use the maximum of its available resources for the realization of the right to health is in violation of its obligations under article 12”. additionally, in cases that “resource constraints” make “impossible” for a state “to comply fully” with obligations, the state has to bear the burden of “justifying that every effort has… been made to use all available resources at its disposal in order to satisfy, as a matter of priority, the obligations”. This justification is excluded from non-compliance on core obligations, which are “non-derogable” (paragraph 47).
Human rights are highly dependent on management and resources that derive from funding. therefore, inevitably, human right to health at a global scale is directly dependent on changing the rules of the game of world redistribution. the diverse plurality of initiatives like the who and the joint united nations programme on HIV/AIDS, or other public-private partnerships as the global fund to fight aids, tuberculosis and malaria and similar regional and sub-regional inter-state initiatives are mere palliatives of goodwill. it is interesting to notice that article 2.1 of ICESCR states that “each state party “undertakes to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present covenant by all appropriate means”. The general comment adds that “depending on the availability of resources, states should facilitate access to essential health facilities, good and services in other countries, wherever possible and provide the necessary aid when required” (paragraph 39).
The general comment emphasizes “for the avoidance of any doubt” that “it is particularly incumbent on states parties and other actors in a position to assist, to provide “international assistance and cooperation, especially economic and technical” which enable developing countries to fulfil their core [obligations] and [“obligations of comparable priority”] indicated in paragraph 43 and 44” (paragraph 45). This reference relates to article 2.1 of the convention. In this direction, world inter-state redistribution is unavoidable in order to deliver the right to health al a global scale. the primary responsibility for promoting and protecting all human rights rests with states. however, the capacity of these social artefacts in the developing world not only is it not being strengthened by (diminishing) official aid from the developed world but is being eroded through the policies deployed by these states that, paradoxically, are also progressively loosing capacity (tax evasion, fiscal competition and other unattended economic factors) as a result of tying themselves too tight to the quite simplistic and rough legal masts of international liberalization. Deriving from this scenario, even developed countries are facing several troubles to keep on delivering and providing basic (well historically established) human rights to their populations; among others the right to health.
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