The Washington Blade - January 7, 2000
Bill Roundy

In sub-Saharan Africa, where AIDS-related illness is now the leading cause of death, many doctors do not even tell their patients that anti-HIV drugs exist because they know that their patients cannot afford even the cheapest medications. The average income in southern Africa is less than $1,000 per year, while HIV combination therapies cost $10,000 to $15,000 annually.

Countries such as these can, under certain conditions, compel drug companies to issue them a license to produce drugs that are still under patent, according to the provisions of the World Trade Organization's Trade Related Aspects of Intellectual Property Rights agreement (TRIPS). Those conditions include health emergencies and cases of anti-trust practices, among others. In return, the licensing countries pay "adequate remuneration" to the patent holder for each sale of the drug.

But U.S. trade policy has traditionally opposed such arrangements -- called "compulsory licensing" -- and has regarded the WTO TRIPS agreement as a "minimum standard," preferring that countries pay the full retail price for medicines.

At the highly publicized and embattled meeting of the World Trade Organization in Seattle last month, President Clinton announced that the U.S. is committed to increasing access to AIDS drugs for people in African countries. U.S. trade policy, he said, should be "flexible" in permitting countries to use alternate methods to acquire expensive, life-saving AIDS medication.

On that same day, Dec. 1, U.S. Trade Representative Charlene Barshevsky announced that her office would work with the U.S. Department of Health and Human Services to craft a policy to reflect that flexibility. Barshevsky also announced that, because of South Africa's statement that it would respect international property rights, the U.S. was removing South Africa from its "watch list" of countries with whom the United States has disputes regarding pharmaceutical patent protection issues.

After some initial enthusiasm, many AIDS activists are now saying that Clinton's announcement was, at best, only a first step toward addressing the difficulties in getting expensive AIDS drugs to people in developing nations who desperately need them. Since Dec. 1, only one other country, Jordan, has been removed from the watch list, they note, and details about the arrangements between HHS and the Trade Representative's office remain murky. Who sets the cost of living?

Officially, the U.S. trade representative's office, known as USTR, says that, as long as countries abide by international agreements regarding patent protections, they are free to pursue any methods necessary to acquire AIDS medications. But some AIDS activists contend that U.S. officials interpret international law more narrowly than it is intended and that U.S. negotiators have sided with drug manufacturers to keep the prices high, threatening trade sanctions against countries that sought to produce drugs cheaply.

South Africa, for instance, was added to the USTR watch list after it announced intentions to manufacture generic versions of retroviral drugs such as AZT. While South Africa has now been removed from the watch list, it remains unclear whether the country will be able to manufacture the drugs.

There is currently no country using the provisions of the TRIPS agreement to produce its own HIV medications, notes Sydney Levy, of the International Gay and Lesbian Human Rights Commission.

"There have been some advances on the issue, and we're happy, but much more needs to be done," said Levy, referring to Clinton's announcement. "We went from worse to bad."

"We welcomed the president's statement as a small step in the right direction," said Donna Rae Palmer, executive director of Mobilization Against AIDS International. But Palmer said that she would like to see all of the countries that are on the "watch list" due to pharmaceutical issues removed from the list.

"The U.S. government should be leading the international community in trying to increase access, rather than ... grudgingly backing down little by little on its interpretation of international trade policies," Palmer said. "We anxiously await a plan of action."

At stake is the ability of poor nations to cheaply produce their own AIDS drugs through "compulsory licensing," rather than purchasing the drugs directly from the pharmaceutical companies. Foreign countries are free to engage in compulsory licensing, but the United States can impose its own trade restrictions if it feels that the practice is being used unfairly.

"Once the U.S. puts trade restrictions on the table, it becomes very frightening," Levy said.

In 1998, the United States threatened Thailand with trade sanctions if Thailand continued its plans for compulsory licensing of the AIDS drug ddI. Thailand dropped plans to produce the drug and is currently in negotiations with ddI producer Bristol-Meyers Squibb to find other ways to lower the price of the antiviral medication, according to wire services.

"The U.S. has consistently taken the stand that the TRIPS agreement is a floor, not a ceiling," said Julie Davids, a spokesperson for ACT UP Philadelphia, a group that has repeatedly protested U.S. trade policy on AIDS medication. "You had all these protesters saying, æShut down WTO, because it's too restrictive,'" said Levy. "Well, now [the United States] is saying there have to be more restrictions."

Levy said that Clinton's announcement last month is important because it acknowledged that health issues are an important concern in regards to trade policy. However, he said he believes that the United States still holds countries to a higher standard than that required by the TRIPS agreement.

The USTR announcement on Dec. 1 promised that: "When a foreign government expresses concern that U.S. trade law related to intellectual property significantly impedes its ability to address a health crisis in that country, USTR will seek and give full weight to the advice of HHS regarding the health considerations involved."

According to an HHS spokesperson, who spoke to the Blade on the condition that her name not be published, details of the arrangement are still being worked out. USTR would consult with HHS "about the nature of the health problem," said the spokesperson, but exactly what issues HHS will consult on have not been determined.

"We'll be working with USTR in the coming weeks," she said. Last hurdle or last resort?

But activists fear that an HHS recommendation will become just another hurdle for countries seeking cheaper HIV medication. Countries will have to meet the U.S. definition of a "health crisis" and establish that the country's health system will be able to properly distribute the AIDS drugs if they are made available, activists believe.

Clinton noted in his statement that, "as a related policy objective, we continue to assist developing countries [in creating] the public health infrastructure that will allow treatments to be utilized effectively. ... Without such infrastructure, there is significant risk that pharmaceuticals, including antibiotics and AIDS drugs, may not be administered to patients correctly."

In an analysis of Clinton's statement, ACT UP's Davids observed, "It seems clear that the administration wants a process whereby HHS does not only comment on the health impact of U.S. trade policy blocking access to medications, but also the æfitness' of countries to even be allowed to have medications. It's as if the high cost of patented medications serves as a fence to ward off drug purchases by nations that will not use them correctly."

According to Levy, "The U.S. says, æUnless you come and knock on our door, and prove that there is a health crisis, and that you have the health infrastructure, [you will face sanctions].'"

Possible sanctions could include removal of "most favored nation" trade status, prohibition of certain exports to the U.S., or tariffs on all U.S. imports from offending countries.

Officials at USTR have said that they plan to work cooperatively with countries that face health crises, and will give full weight to their recommendations regarding the impact of the U.S. trade policy on health issues. The consultation with HHS is only to ensure that compulsory licensing and other trade practices are not used indiscriminately, officials said.

Relaxing intellectual property laws is not an appropriate solution for all countries, noted one official, but in countries where compulsory licensing could ease health problems, USTR will be open to supporting the practice.

And not all AIDS organizations are in favor of relaxing trade rules. Peter Piot, executive director of UNAIDS, the HIV/AIDS program of the United Nations, said he believes that compulsory licensing should be used only as a last resort.

For many countries, Piot told Reuters Health Service, compulsory licensing is "not a solution right now. ... Countries need to have the capacity to produce these drugs through good manufacturing processes and so forth."

The Liberty Education Fund, an education group affiliated with the Log Cabin Republicans, has also been critical of compulsory licensing, saying that it does not address the real problems facing Africa.

Kevin Ivers, communication director for Log Cabin, maintains that compulsory licensing will actually increase the disparity in treatment between rich and poor residents of Africa, because most African governments do not have the health care infrastructure necessary to provide widespread care. Liberty Education encourages private industry to work with health organizations and universities in Africa to train medical personnel and to develop effective health care infrastructures.

"By forcing price controls and compulsory licensing under current delivery conditions in Africa, AIDS drug treatments are guaranteed to become another measure of the privileged classes of African societies, where those favored by the current delivery system will have marginally better access to treatment while other less favored will continue to be denied," Liberty Education said in a statement.

Ivers said that AIDS medications could be hoarded by African governments and withheld as a weapon against their enemies, as has happened with some food relief programs.

"When you start pumping in more drugs ... you're reinforcing and re-strengthening the broken system. That's the issue that we need to address," said Ivers.

In a statement, Davids of ACT UP argued that obtaining cheaper drugs through compulsory licensing is just one part of the solution, but a necessary one. "It is ... flatly immoral to determine that it is better for millions to have no drugs than it is for people to have imperfect access to drugs," Davids states.

Does helping harm research?

Pharmaceutical companies have consistently lobbied the United States to oppose compulsory licensing, arguing that granting exemptions from patents cuts into profits and harms their ability to research and develop new drugs, a concern that Clinton noted in his address to the WTO.

"The challenge of improving access to treatments without stifling innovation is one that eludes simple answers," he acknowledged.

Shannon Herzfeld, senior vice president of international affairs at Pharmaceutical Research and Manufacturers of America, a drug industry group, told the Washington Post that it costs about $500 million to bring a drug from idea to market.

"For every 15,000 compounds you look at, three become medicines," Herzfeld said, "Of those three, one makes a profit."

But AIDS activists say drug companies still make fantastic profits and can easily absorb the loss of profits from African nations, which only account for 1.5 percent of current sales, according to ACT UP.

In addition, drug companies spend only a fraction of their money on research and development, activists say, and much of their research is supported in part by the National Institutes of Health. According to a report by AIDS Action, major pharmaceutical companies in the United States spent almost three times as much on marketing and administration ($68 billion) as they did on research ($24 billion).

"I have no problem with [pharmaceutical companies] recovering their costs. No one wants to bankrupt them," says Levy. Drug companies should disclose the real cost of producing medicines, Levy urges, and allow society as a whole to determine a fair price for live-saving medicines.

"We're not talking about T-shirts here," he says. "People need these medicines to live."

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