29th February 2000

THAILAND WEIGHS OPTIONS FOR ESSENTIAL HIV MEDICINE

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Thailand could test the extent of US commitment to a more benign trade policy on access to essential medicines as it considers its options with regard to ensuring affordable access to the HIV/AIDS therapy didanosine (DDL). Thai officials are continuing to debate whether to implement a compulsory licensing regime for DDL, an effective HIV treatment unaffordable for the vast majority of Thailand’s 1 million HIV-positive patients.

DDL was developed and patented by the National Institute of Health (NIH), a US government agency. NIH then gave Bristol Meyers-Squibb — a US-based pharmaceutical company — the exclusive right to produce and sell DDL. Despite US President Clinton’s assurances that the US would “implement its health care and trade policies in a manner that ensures that people in the poorest countries won’t have to go without the medicine they so desperately need,” the Thai government has been loathe to implement compulsory licensing of DDL lest it lead to a trade dispute with the US.

Compulsory licensing is a mechanism under which governments limit patent or intellectual property rights if it is necessary to protect public health and nutrition. This is usually done by allowing domestic firms to produce a generic version of an otherwise patented drug with or without the consent of the patent holder, in return for compensation of a percentage of sales of the drug. Compulsory licensing is addressed under Article 31 of the TRIPs Agreement.

“We must be very, very careful,” said Somsong Rukphao, head of the Thai Ministry of Health’s Communicable Disease Centre. “We must consider the livelihood of our 62 million people, not just the over 1 million HIV patients.”

The issue of compulsory licensing has been the focus of demonstrations in January and again at the UNCTAD X conference in Bangkok in mid- February.

Thai Deputy Director of Intellectual Property Weerawit Weeraworawit said last week that implementing a compulsory licensing regime for DDL or other drugs was not easy because of different interpretations of the TRIPs Agreement with regard to whether there is actually a drug shortage or other emergency necessitating compulsory licensing. “If trade partners disagree with our interpretation, that poses a big problem for Thailand,” Mr. Weeraworawit said.

Thai NGOs argue that the US has signalled it would not object if Thailand implemented compulsory licensing of DDL. “If the Thai government determines that issuing a compulsory license is required to address its health care crisis, the United States will raise no objection, provided the compulsory license is issued in a manner fully consistent with the [WTO TRIPs Agreement],” said Joseph Papovich, Assistant U.S. Trade Representative for Services, Investment and Intellectual Property to the Thai NGO PHA Network of Thailand in a 27 January letter.

However, Thai officials note that the letter is merely a diplomatic gesture and is not legally binding. The wariness over a potential dispute with the US is symptomatic of the mistrust that exists between many developing countries and the US. The US announced its kinder, gentler policy at the Third WTO Ministerial in Seattle in December. But less than a year ago, the US Trade Representative was threatening both Thailand and South Africa with retaliation lest either implement compulsory licensing measures. The first real test of how this policy manifests itself in trade could come next month if Thailand moves forward with production of a powder form of DDL. In the meantime, however, Thai officials said they will continue negotiating with Bristol Meyers-Squibb on its DDL pricing in an effort to avoid compulsory licensing.

For their part, pharmaceutical companies argue that rather than benefitting developing countries, price control mechanisms such as compulsory licensing could have overall negative welfare effects for consumers and producers. First, while these mechanisms may lead to lower prices, they have a disproportionate downward effect on pharmaceutical firms’ profits. A reduction in profits could result in a reduced incentive to invest in new drugs and brands, ultimately reducing consumer choice.

“New world disorder,” DOW JONES NEWSWIRES, 14 February 2000; “Drug patents versus human rights,” FAR EASTERN ECONOMIC REVIEW, 17 February 2000; “Compulsory ddl licensing seen as unlikely,” BANGKOK POST, 2 February 2000; “Thailand battles AIDS medicine monopoly,” KYODO NEWS INTERNATIONAL, 21 February 2000; “The conflicts between parallel trade and product access and innovation: the case for pharmaceuticals,” JOURNAL OF INTERNATIONAL ECONOMIC LAW, Vol. 1, No. 4, December 1998.