Critically Discuss The Role And Effectiveness Of The WTO In Making Pharmaceutical Products Accessible To Developing Countries

Introduction:

The World trade Organisation (WTO) is an international organisation that started in January 1, 1995 under theMarrakech Agreement, it was set up by its founders to liberalise and supervise international trade. The world trade organisation solves issues that deal with regulating and reforming trade between participating countries; it creates a dispute resolution which is used in enforcing participants, ensuring that all participating nations adhere to the WTO agreements signed by government representatives and formally approved and invested with legal authority by their parliaments and it also provides an underlying structure for formalising and negotiating trade agreements.

“The WTO now has 153 members”[1]representing “more than 95% of the total world trade”[2] and 30 candidates still seeking membership. The world trade organisation (WTO) is regulated ministerially by a conference who meets every two years, a director general who is appointed by the conference and a general council which ensures the observance of the decisions made by the conference.

Good health plays a major role in determining the welfare of we as humans as it ensures we are able to perform daily functions which aid in improving ones standard of living; being one of many other benefits. It is widely known and greatly emphasised that a greater population of people living in developing countries suffer from various parasitic and infectious diseases (e.g. malaria) in comparison to the population in the developed world; and pharmaceutical products have played a major role in reducing the number of cases that occur.

But due to the knowledge that major pharmaceutical organisations have a reluctance to research or produce drugs that could aid in fighting some of the diseases (this is because it is not advantageous to them as majority of the population in the developing world will not be able to afford the products), the situation in a lot of the developing world has become pandemic.

In this paper I am going to discuss the role and the effectiveness of the WTO in making pharmaceutical products accessible to developing countries; looking at the prospects for addressing pharmaceutical misuse by improving healthcare delivery systems and drug regulation issues. The paper will include 3 sections and a conclusion on the subject. In section 1 I will take a look at the different characteristics of the pharmaceutical market in developing countries, assessing problems and difficulties and potential solutions, section 2 will evaluate the effects of protecting the intellectual property rights on developing countries health and the role of the WTO with regards to the issue and lastly section 3 will take a look at the controversy regarding differential drug pricing and priorities for foreign assistance in healthcare matters. I will conclude by summarising the paper and gathering together overall arguments.

Section I

The Pharmaceutical Market in Developing Countries:

“Thepharmaceutical industrydevelops, produces, and marketsdrugslicensedfor use asmedications.”[3]These companies are subjected to a lot of laws and regulation with regards to patents, marketing and testing of drugs (this includes generic and/or brand medications). “This industry is one of the most 'multinational' of modern manufacturing industries; the firms which dominate it in the developed countries also operate in almost every less-developed country outside the socialist bloc.”[4]

The role of the pharmaceutical companies in the developing world has come under a lot of criticism in recent years and has become a matter of some debate, some of the issues in question include: “the use of the most unfortunate members of the population being used in clinical trials in states lacking a strong rule of law and usually without adequate protection measures”[5] (For example “TheKano trovafloxacin trial litigation whichbegan in 1996 when thepharmaceutical companyPfizerconducted tests oftrovafloxacin (aquinoloneantibiotic) inNigeriaon 100 children”[6], five of whom died, with many others suffering life-altering injuries. “All of the children treated with the drug were already severely ill withmeningitis”[7]. “Pfizer also treated 100 children with a standard anti-meningitis drug ceftriaxone (a cephalosporin antibiotic), six of those 100 children died”[8]), criticism for the price of patented AIDS medication which could limit therapeutic options for patients in the third world (which is where the highest cases of AIDS are recorded). Another major concern with the major pharmaceutical companies is their alleged reluctance to invest in treatments of diseases in less economically advanced countries (for example Malaria) as it is seen as being less profitable. “Many people, most of them in tropical countries of the Third World, die of preventable, curable diseases.... Malaria, tuberculosis, acute lower-respiratory infectionsin 1998, these claimed 6.1 million lives. People died because the drugs to treat those illnesses are nonexistent or are no longer effective. They died because it doesn't pay to keep them alive.”[9]

Research findings show that developing countries spend a higher percentage (%) of their health budgets on pharmaceuticals in comparison to the developed world, but The Pharmaceutical research and Manufacturers of America (PhRMA), estimates that “7.5 percent of their market is in Latin America, 7 percent is in south east Asia and China; and only 1 percent of its market is in Africa (this includes middle income countries like south Africa)”[10]. There is a major issue with health care in developing countries, especially in the most rural of areas which is the misuse of pharmaceutical funds. The better off population in these developing countries are able to afford better health care in privately run clinics but the vast majority have to use public health care services. A lot of the public hospitals/clinics lack the appropriate drugs to administer to patients and they also lack sufficient man power to cater to the vast number of patients, as such they are forced into using untrained or under qualified medical support staff (both of the factors listed above are due to corruption of the personnel's in charge holding on to public funds (this includes staff salaries, money for pharmaceutical products etc)). The current situation in the under developed countries has lead to new patents and laws developed in other to try to improve the pharmaceutical market in these countries.

Section II

Effects of Intellectual property rights on developing countries:

“Intellectual property(IP) is a term referring to a number of distinct types oflegal monopoliesover creations of the mind, both artistic and commercial, and the corresponding fields of law”[11]. The common types of intellectual property rights include industrial design rights, trademarks, copyrights and patents (these allow the owners of intellectual property rights to reap monopoly profits). The profits are supposed to encourage new inventions such as pharmaceuticals whose cost of development can sometimes be very high. (Private rights also have their social benefits).

There are a few issues that are as controversial in developing countries as the impact of intellectual property rights on health. For example, Governments in developing countries as well as various activist groups have claimed for quite a while that AIDS treatments are still unaffordable in Africa and other low income developing countries because of the established patents on antiretroviral (ARV) drugs.

On the contrary, pharmaceutical companies have argued on numerous occasions that it should be the responsibility of the high income/rich countries (i.e. their governments) to provide vaccines, drugs and all other health related necessities to the developing world and not the responsibility of the companies. (Cleary this has not been the case, as the governments in the developed countries have been less than enthusiastic with issues of promoting good health in the third world countries).

Due to various reasons including the latter, the World Trade Organisation (WTO) administered TheAgreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), which is an international agreement that sets down the minimum standards for many forms of intellectual property (IP) regulation as applied to nationals of other WTO members. (It was negotiated at the end of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT) in 1994.)

Some of the relevant requirements of TRIPS include: “Patents must be granted in all "fields of technology," although exceptions for certain public interests are allowed (Art. 27.2 and 27.3)”[12], and also “In each state, intellectual property laws may not offer any benefits to local citizens which are not available to citizens of other TRIPs signatories by the principles ofnational treatment(with certain limited exceptions, Art. 3 and 5).”[13]

All member states are obliged to follow all the requirements under TRIPS equally except the developing countries who were allowed extra time to implement all the necessary changes with regards to their laws. (Transition period was extended to 2016 for the least developed countries). In relation to developing countries, this agreement is supposed to enable countries that cannot produce pharmaceutical products themselves the ability to export said products made under compulsory licensing. This in effect has proved detrimental to the developing countries as it limits the available range of trade and industrial policy actions and it also restricts a transfer of technology or innovation which limits economic development in that respect.

Despite all the other conflicts, the most visible has been over AIDS drugs in Africa. Even with the inclusion of patents and the roles they have played with regards to maintaining higher drug costs for public health programs across Africa it has not lead to a revision of TRIPS. In its place, an interpretative statement, the DOHA declaration was issued in November 2001 (“The DOHA declaration provides the mandate for negotiations on a range of subjects, and other work including issues concerning the implementation of the present agreements”[14]) which indicated that TRIPs should not prevent states from dealing with public health crises. After DOHA, the United States (including PhRMA), and other developed countries started working in an effort to minimise the effect of the declaration.

“A 2003 agreement loosened the domestic market requirement, and allows developing countries to export to other countries where there is a national health problem as long as drugs exported are not part of a commercial or industrial policy”[15]. Pharmaceuticals exported due to the latter, are required to be packaged differently in other to prevent preconceived judgements or any convictions by markets in the developed world.

In 2003, the United States created the president's emergency plan for AIDS relief (PEPFAR) program, which received $15 billion between 2003-2007, which was then reauthorized in 2007 for $30 billion over the coming 5 years. PEPFAR began distributing generic drugs in 2007-2005 despite wavering on issues of compulsory licensing.

Since the implementation of TRIPs, there has been a lot of criticism against its policies and the WTO as a whole from Non-governmental Organisations (NGOs), academics and developing countries alike. “TRIPS' wealth redistribution effects (moving money from people in developing countries to copyright and patent owners in developed countries) and its imposition ofartificial scarcityon the citizens of countries that would otherwise have had weaker intellectual property laws are a common basis for such criticisms”[16].

Section III

Differential Drug Pricing and Foreign Assistance:

One of the policy issues regarding the use and availability of pharmaceutical products in developing countries is differential pricing. “Differential pricing, based on Ramsey pricing principles, is the second best efficient way of paying for the global joint costs of pharmaceutical R&D”[17]as it allows those who value the product at more than the marginal cost of production to obtain it, therefore the product reaches more people as opposed to a single world monopoly price. The latter will also allow pharmaceutical companies to avenue to capture almost full social surplus for their products, and as such creates more of an incentive to continue product development.

A work shop was held by the WTO (world trade organisation), WHO (world health organisation), the US-based global health council and the Norwegian foreign ministry to determine the pricing and financing of essential drugs in developing countries, there it was determined that differential pricing could play important role in making sure the poorest countries get existing drugs at affordable prices, while the patent system will continue to serve as an incentive for further research and development into new drugs. They also decided that there had to be a bilateral agreement between patent holders and manufacturers if different prices were to be charged in developed and developing nations.

Another study held by the human development report (HDR) and the United Nations development program (UNDP) called to introduce differential rich versus poor country pricing for essential high-tech products as well.

The report noted that an effective global market will encourage different prices in different countries for pharmaceutical products and with this system, research and development rather than production is the main cost to the supplier and such pricing could lead to the same products being sold in the developing countries for one-tenth or one-hundredth of the price in the developed world. (The fear is that if such discounting should occur then a demand for price reductions in the developed countries seems inevitable).

Differential pricing and price discrimination in pharmaceuticals between developed and developing countries would raise complicated legal, economic and political challenges. Physical and informational arbitrage which could undermine prices and profits in developed countries could occur as a result of low-priced drugs in the poorer countries (an example will be the pricing of AIDS drugs which highlights legal tensions between public health concerns and private intellectual property rights under the TRIPS agreement.

In order to establish a sustainable and appropriate differential pricing model, the higher income/developed countries will have to stop trying to import low drug prices from developing countries; (through the use of parallel trade and external referencing) or at least ensure that those kind of practices are less feasible.

Conclusion:

Bibliography:

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