News and Analysis • Volume 13 • Number 1 • March 2009

Access to Medicines Back on Centre Stage at the WTO

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Sparked by the confiscation of a generic drugs shipment in Amsterdam in December, and similar incidents that have come to light since, poor countries’ access to affordable medicines is back on the agenda of the multilateral trading system.

On 4 December, Dutch customs authorities confiscated a shipment of losartan potassium, an anti-hypertension drug, en route from India-based Dr Reddy’s Laboratories to a Brazilian client. The Dutch action appears to have been based on EU customs law, which allows border authorities to detain goods for inspection if they are suspected of infringing an intellectual property right.

Losartan potassium is patented in the Netherlands, but not in either India or Brazil. Both countries can, and do, manufacture the drug perfectly legally. Exports to other countries where the compound is not under patent are equally lawful. The confiscated shipment was transiting through Schiphol airport, not intended for distribution in the Netherlands. After 36 days, it was released to the manufacturer, which decided to repatriate it rather than send it on to Brazil.

The incident has incensed a large number of developing countries besides Brazil and India, as well as public health groups around the world, which have denounced it as a grave threat to poor countries’ access to medicines and legitimate trade in generic - not counterfeit - drugs.

WTO Violations Alleged

India and Brazil first raised the issue at the WTO during the General Council’s 3 February session. Both countries suggested that the action of by the Dutch authorities violated the principle of freedom of transit enshrined in GATT Article V, as well as expressed serious concern about setting a precedent for the ‘extraterritorial enforcement’ of IP rights , which they said could not be reconciled with the terms of the Doha Declaration on TRIPS and Public Health (see related article on page 13).

A month later, India and Brazil brought the issue to the attention of the TRIPS Council, where their concerns were echoed by dozens of other developing countries.

Specifically, Brazil told the TRIPS Council that - contrary to its earlier assumption that the losartan confiscation was based on a complaint by the patent-holder - it now had reason to believe that Dutch customs authorities had acted ‘ex officio’ under EU legislation. Neither was the incident ‘exceptional’ or ‘isolated’ as the EU had depicted it: Brazilian investigations had identified more than a dozen instances of generic drugs consignments being detained by Dutch officials in 2008 alone. In addition, Brazil alleged that the return of the losartan consignment to India (rather than sending it on to Brazil as originally intended) was not an ‘autonomous decision’ by the exporter, but a result of negotiations with the patent-holder, who “actually threatened the destruction of the apprehended goods.” About half of last years’ Dutch seizures had in fact resulted in the destruction of the goods in transit, Brazil said.

Brazil and India reiterated their concerns about the EU’s extraterritorial application of patent rights, which they see as a violation of the TRIPS Agreement’s key principle of territoriality. They also stressed that the confiscation of legitimate generic drugs in transit ran counter to the spirit of the TRIPS Agreement and the Doha Declaration on TRIPS and Public Health, as well as the principle of freedom of transit (see legal analysis on page 13).

India stated that “measures of this nature have an adverse systemic impact on legitimate trade in generic medicines, South-South commerce, national public health policies and the principle of universal access to medicines.” In addition, barriers to legitimate trade in generic drugs would seriously impair the efforts of civil society organisations engaged in providing medicines and improving public health in the least developed parts of the world. India also denounced what it saw as a growing and co-ordinated effort to link safe, low-cost generics with counterfeit drugs. A trend had emerged, India asserted, to implement IPR protection and enforcement in a ‘maximalist manner’ in a number of fora, including the World Health Organisation.

The EU insisted, as it had done at the General Council meeting, that no TRIPS or GATT provisions had been violated by the losartan confiscation. Focusing the debate away from patent protection, the EU stressed the importance of allowing customs officials to control imports - even those destined to a third country - in order weed out dangerous products, such as fake medicines, thus saving lives in countries that lack the means to do so themselves.

India informed the membership that it was still awaiting a response from the EU and the Dutch government to its request that they “urgently review the relevant regulations and the actions of the national authorities based on such regulations, and bring them in conformity with the letter and spirit of the TRIPS Agreement, the rules-based WTO system and the Declaration on [TRIPS and] Public Health.” Both India and Brazil have evoked the possibility of a WTO dispute, but neither has yet made a decision to initiate proceedings.

Civil Society Seeks Lamy’s Good Offices

In a related development, sixteen public health, consumer and development NGOs sent a letter to WTO Director-General Pascal Lamy on 18 February, requesting him to use is ‘good offices’ to “explore with the European Union the extent to which its customs rules and provisions in trade agreements present risks to goods in transit, and undermine the commitments made in 2001 in the Doha Declaration on TRIPS and Public Health concerning access to medicines.”

Mr Lamy responded on 4 March that although the issue at stake was ‘very important and sensitive’ and deserved to be ‘adequately addressed’, good offices mediation was not relevant for the time being in view of the EU’s reiterated commitment to facilitating access to medicines and bilateral consultations underway between the Members concerned. However, he would be ready to assist Members in finding a solution “if this disagreement were to persist.”