Canadian-made Drugs for Rwanda: The First Application of the WTO Waiver on Patents and Medicines

On July 17, 2007, Rwanda notified the World Trade Organization's (WTO) Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) that it plans to import the HIV-drug TriAvir from the Canadian company Apotex and will not enforce any patents granted in that respect in Rwanda.[1] Two months later, Canada issued a compulsory license allowing Apotex to use nine patented inventions for manufacturing and exporting TriAvir to Rwanda. On October 4, 2007, Canada notified the Council for TRIPS of the compulsory license.[2]

These actions constitute the first application of a mechanism set up by the WTO to safeguard access to medicines for countries lacking the capacity to manufacture drugs. The mechanism was meant to balance countries' obligations to grant patents under the TRIPS Agreement and their ability to provide cheap drugs to their populations.[3] This Insight will explain the legal background of Canada's and Rwanda's notifications, describe the facts of the case, and explain their implications for the debate.

The Legal Background

Patents are national rights, usually granted by the national patent office, with effects only in the area for which they have been granted. The TRIPS Agreement, one of the main WTO Agreements, prescribes a minimum level of patent protection that WTO Members must provide. In the area of inventions, Members must grant patents "for any inventions (...) in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application."[4] To obtain a patent, applicants must file an application disclosing the invention.[5] If the invention is patentable, the inventor obtains a patent with a term of at least twenty years from the date of filing.[6] A patent on a product allows the patent-holder to prevent third parties from "making, using, offering for sale, selling or importing" the product in the territory of the grant without its consent.[7] To secure protection of an invention in several countries, inventors must file for patents in all of them. Pharmaceutical companies generally patent their inventions in all major markets.

The TRIPS Agreement gave Members some time to adapt their national laws to the new standards. Thus, India - the developing world's most important producer of generic (off-patent) medicine - had until January 1, 2005 to start granting product patent protection for pharmaceuticals.[8] Now only least-developed country (LDC) Members remain exempt from the obligation to grant pharmaceutical patents.[9]

As quasi-monopolies, patents generally allow inventors to sell their product at higher prices, creating an incentive to invest in research and development, but also a threat for access to medicines for the poor. The issue was recognized by the WTO in its 2001 Doha Declaration on the TRIPS agreement and public health.[10] It pointed out that the TRIPS Agreement provides for a number of so-called "flexibilities" allowing Members to weaken patents, including compulsory licenses. A compulsory license is a license granted by the government allowing the use of the invention without the patent holder's authorization. The beneficiary can produce the patented product or import it from a country where it is not patented. Article 31 of the TRIPS Agreement allows Members to grant compulsory licenses under several conditions, such as authorization on the individual merits, payment of adequate remuneration and unsuccessful efforts to obtain an authorization from the patent-holder on reasonable commercial terms within a reasonable period of time. The latter requirement may be waived, e.g., in times of national emergency.

According to Article 31(f) of the TRIPS Agreement, the grant of compulsory licenses must be predominantly for the supply of the domestic market. That provision creates a problem for countries with insufficient manufacturing capacities for drugs. These can only make use of a compulsory license by allowing the import of the drug from a generic manufacturer in another country. Until recently that usually meant importing the drug from India, which did not grant product patent protection for drugs and is home to several generic manufacturers. Now, however, all developing countries have to grant patent protection for new patentable drugs. A generic manufacturer thus needs a compulsory license in its home country to produce and export a new, patented drug. However, under Article 31(f) such a "compulsory license for export" is not permissible.

The problem was identified in the Doha Declaration and on 30 August 2003, the WTO adopted a mechanism meant to solve it.[11] The decision contains three waivers and several additional provisions. The main provision of the decision, and the only one that shall be discussed in-depth,[12] waives an exporting WTO Member's obligations under Article 31(f) of the TRIPS Agreement for compulsory licenses to produce and export pharmaceutical products to eligible importing Members for public health problems.

To put the mechanism into operation, the importing Member must notify the WTO's Council for TRIPS of the name and expected quantity of the product, confirm that it has established that it has insufficient or no manufacturing capacity for the product in question (unless it is an LDC), and confirm that it has granted or intends to grant a compulsory license if the product is patented in its territory. The exporting Member can then issue a compulsory license limited to the quantity of the drug necessary for the notifying importing Member with the whole production going to that Member. It must require the beneficiary to identify the drugs to prevent re-imports, e.g. by adding a special color,[13] and to post quantities and distinguishing features of the drug on a website before shipment begins. Several importing Members can pool as importers.[14] The exporting Member has to notify the Council for TRIPS of the grant of the license and its conditions. The notifications by importing and exporting Members do not need approval by the WTO. The mechanism is subject to an annual review by the Council for TRIPS.

As compulsory licenses for export are granted under national law, exporting Members must amend their patent laws for the mechanism to work. Several Members have done so, albeit not in a uniform manner.

In December 2005, Members decided on an amendment to the TRIPS Agreement to make the mechanism permanent.[15] The amendment transforms the mechanism of the 30 August 2003 decision into an Article 31bis of the TRIPS Agreement and an Annex to the Agreement, using identical wording wherever possible. Under the rules of the WTO Agreement, the amendment will take effect for the Members that have accepted it upon acceptance by two thirds of the WTO Members. Members set themselves an extendable deadline of 1 December 2007 to reach the two thirds threshold. Currently 12 of 151 Members have accepted the amendment.[16]

The Rwanda - Canada Case

Canada had been at the forefront of the mechanism's implementation, amending its national law in May 2004.[27] The amendment came into force in May 2005.[28] It imposes a number of conditions for obtaining a compulsory license for export, including the conditions of the 2003 WTO decision but also additional ones. Thus, the Canadian law is only applicable to a products listed in its Schedule 1,[19] requires a review of the drug according to the Canadian Food and Drugs Act[20] and provides only a two-year term for the compulsory license.[21]

The road towards the first application of the mechanism started when the NGO Médecins Sans Frontières (MSF) committed itself to test the new law. In December 2004, the Canadian company Apotex agreed to produce a fixed-dose combination of the three HIV/AIDS drugs zidovudine, lamivudine, nevirapine later to be known as TriAvir. Nine Canadian patents are related to the drugs. Four of these are owned by the Glaxo Group, two by the Wellcome Foundation, two by Shire Biochem and one by Boehringer Ingelheim and Dr. Karl Thomae GmbH.[22] A similar combination drug did not exist in Canada.

As Schedule 1 of the Canadian Patent Act originally did not include fixed-dose combinations, it had to be amended, which was done in September 2005.[23] Health Canada did not approve the new drug until August 2006.[24] Apotex's attempts to negotiate voluntary licenses with the patent holders stalled. It complained that the innovative companies could attach any condition preventing a deal.[25] Also, Apotex failed to fulfill the requirements for a compulsory license under the Canadian Patent Act because there was no importing country. MSF could not find such a country, as no developing country government it worked with was willing to be named, possibly because of the criticism that Brazil and Thailand encountered after they had resorted to compulsory licenses.[26]

Rwanda was not the country MSF was originally working with, but in May 2007 it signaled its willingness to use the mechanism.[27] On 13 July 2007, Apotex sought a voluntary license from the four patent-holders, as required by the Canadian Patent Act before a compulsory license for export can be issued.[28] Apotex specified that it wants to sell and export 15.6 million tablets at its own cost of US $ 0.405 per tablet and requested a royalty-free license. On July 17 the Council for TRIPS received and circulated the Rwandan request. Apotex filed for and on 19 September 2007 obtained a two-year-compulsory license on the nine Canadian patents for manufacturing 15.6 million tablets and exporting them to Rwanda. Canada notified the Council for TRIPS of the license on October 4, 2007.[29]

Implications

The first application of the mechanism shows that it is too cumbersome to work effectively. Rwanda could have imported a similar combination drug from India, which is available at $0.14 per tablet[30] and not yet affected by India's new patent legislation. It would only have had to impose a compulsory license in its own territory, and possibly not even need this step, as it is not clear whether any of the nine inventions have been patented in Rwanda.

Apotex concluded that the mechanism would have to be changed to work effectively.[31] The process proved cumbersome and the generic manufacturer has few incentives to go through with it. It is not economic to produce for merely one importing country, and it is difficult to convince countries to notify the WTO of their need to import. Additionally, Canada imposes a maximum term of two years for the compulsory license, not enough to recoup the investment for producing a generic drug.

Given the defects of the mechanism, the Director General of the European Generic Medicines Association concluded at a hearing of the European Parliament that it is unlikely that any company in Europe would make use of the mechanism.[32]

About the Authors
Dr. Holger P. Hestermeyer, LL.M. (Berkeley), an ASIL member, is a Senior Research Fellow of the Max Planck Institute for Comparative Public Law and International Law, Heidelberg, Germany and currently a Senior Visiting Scholar at UC Berkeley School of Law. He is the author of HUMAN RIGHTS AND THE WTO. THE CASE OF PATENTS AND ACCESS TO MEDICINES (Oxford University Press 2007). In preparation for this article the author spoke with representatives of Boehringer Ingelheim, the Canadian Federal Government's Patent Policy Directorate and Médecins Sans Frontières and gratefully acknowledges their willingness to answer his questions.

About the ASIL International Economic Law Interest Group
The ASIL International Economic Law Interest Group promotes academic interest, discussion, research and publication on subjects broadly related to the transnational movement and regulation of goods, services, persons and capital. International law topics include trade law, economic integration law, private law, business regulation, financial law, tax law, intellectual property law and the role of law in development. Click here to learn more about the ASIL International Economic Law Interest Group.

Footnotes