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THE PHARMA REVIEW (SEPTEMBER 2009)

The TRIPS Agreement and the Pharma Industry: What Lies Beneath?

Manthan J., Udupa N.

The TRIPS (Trade related aspects of Intellectual Property Rights) agreement was discussed during the Uruguay round of GATT (General Agreement on Tariffs and Trade) negotiations. The TRIPS agreement covers a range of Intellectual Property issues. The Uruguay round of GATT negotiations was used by developed countries to introduce a number of issues that were not considered part of trade negotiations and one of these issues included, introduction of patent system and other forms of Intellectual Property Rights. Before the Uruguay round of GATT negotiations many countries had not granted patent protection for pharmaceutical products. These countries include developed countries such as Spain and Portugal and many developing countries such as India, Brazil, Mexico, Egypt. These countries were reluctant to extend patent protection to pharmaceutical products. For almost 3 years, from 1986 until May 1989, developing countries refused to negotiate an agreement on intellectual property. The controversy over the agreement on TRIPS heightened when Arthur Dunkel, the then Director-General of the GATT in December 1991 submitted a complete draft accord to help negotiators concentrate on final text of the draft. During the Uruguay round of negotiations between 1986 and 1993, the strategy of some of the developing countries was concentrated on limiting the expansion of the TRIPS agenda. Before the TRIPS agreement, countries had more flexibility in excluding certain sectors of the economy from patent protection in their national laws. It appears that the inclusion of TRIPS on the agenda of Uruguay round was a last minute political compromise and TRIPS featured as a footnote on a crowded agenda of the Uruguay round of negotiations. It has been said that the text of TRIPS agreement was originally formulated by the pharmaceutical multinational companies of major developed countries and was presented and pushed by the governments of the respective countries. Ultimately, after several round of negotiations, countries agreed to adopt standards set out in TRIPS agreement, which culminated in 1994 and set the way for establishment of World Trade Organization (WTO). India, along with other developing and underdeveloped countries, became a member of WTO. India signed the GATT on 15 April 1994, thereby making it mandatory to comply with the requirements of GATT, including the agreement on TRIPS.
 
Multinational pharmaceutical companies (MNCs) spend billions of dollars in research and development (R&D) of new medicines every year and also generate data on clinical aspects of medicine which needs to be submitted to regulatory agency for getting marketing approval. The marketing approval of drug is based on the outcome of the clinical trials and ratio of benefits to risks. If risks outweigh the benefits, the drug is not marketed and company loses large sum of money. When a company invests money for development of a new drug, it would expect to recover investment from sale of medicines without fear of competition. Patents provide a strong incentive to pharmaceutical companies to invest in R&D. Contrary to this, it is argued that patents create a barrier for accessing medicine in developing countries due to high cost of product and market monopoly enjoyed by the pharmaceutical companies with regard to patented medicines. The opponents of patents argue that many life saving medicines and medicines for AIDS and cancer are out of reach of patients in developing countries due to patent protection enjoyed by MNCs.

 

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