International Intellectual Property laws with respect to pharmaceuticals patents in Africa, part 3

2. Parallel Importation

As previously stated, parallel importation is another method that may be used to reduce antiviral prices in Africa. Parallel importation is the process by which the original licensed purchaser buys a product and correspondingly sells it to a non-licensed third party.[1] Because pharmaceutical companies sell drugs at different prices to different nation, parallel importation is made possible..[2] Additionally, parallel importation stems from the patent theory of exhaustion.[3] The basic principle of patent exhaustion theory is that once a patented product is sold, the patent holder can no longer controls the resale price.[4]

TRIPS adopted the principle that parallel importations rights would be determined by the individual member states.[5] There are two main issues for individual member states to decide dealing with parallel importation. First, parallel importation can reduce the price of pharmaceuticals in a single country. [6]Second, parallel importation forces companies to globally raise prices. Thus, if there are more stringent patent laws restricting parallel importation, then the price of pharmaceuticals in developed nations might decrease. [7]On the other hand, through technology (such as eBay and Amazon.com), it is possible for developed nations to obtain pharmaceuticals at the reduced price offered in developing nations. [8]Although parallel importation is a highly debated topic, the drafters of TRIPS were silent on this issue, stating “Nothing in this Agreement shall be used to address the issue of the exhaustion of intellectual property rights.”  [9]

Once again, in the long term it is important that South Africa maintain strong global patent protection. This is because if South Africa weakens patent rights by allowing parallel imported drugs that may lead to other nations to decline to enter into trade agreements with South Africa. Additionally, South Africa must maintain stronger patent rights for once they become able to produce their own antivirals in the near future. Once South Africa is able to produce their own antivirals it will become important to protect their domestic economy from parallel imported goods.

3. DOHA Declaration

During November 2001, there was a WTO conference to discuss various international trade issues, including what governments can do under the TRIPS agreement. [10] The main goal of the Doha Declaration was to promote access to medicines while establishing intellectual property protection. [11] During these discussions many developing nations moved to clarify exceptions on parallel trading and compulsory licensing so they could trade with developed nations without fear of sanctions; however, developed nations stated that the language stated in TRIPS already contained adequate language. [12]More specifically, the developed nations stated that “members may adopt measures necessary to protect public health and nutrition … provided that such are consistent with the provisions of this agreement” provides adequate language. [13] The Doha Declaration States:

We agree that the TRIPS Agreement does not and should not prevent Members from taking measures to protected public health. Accordingly, while reiterating our commitment to the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and implemented in a manner supportive of WTO members right to protect public health and, in particular to promote access to medicines for all. IN this connection, we reaffirm the right of WTO Members to use, to the full provisions in the TRIPS Agreement, which provide flexibility for this purpose. [14]

Regarding compulsory licenses the Doha Declaration states “Each member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted. “ [15] Thus, each member nation can determine the reasons for granting a compulsory license and if those grounds include a reason other than a national emergency then TRIPS still requires the member to first enter good faith negotiations for a license with reasonable compensation. [16] But the Doha Declaration states that each member nation has the right to determine what comprises a national emergency.  [17]The Doha Declaration was important because it allowed the World Trade Organization to publically comment that it wanted to maintain flexibility for countries unable to manufacture pharmaceuticals domestically and allow these countries cheap and accessible antivirals. [18] The Doha declaration was important for South Africa because it allowed the nation to maintain lowered patent protection for the short term while allowing South Africa to grow into a nation with stronger patent protection. [19]

To summarize, compulsory licensing and parallel importation causes the lowering of drug prices giving poorer nations access to AIDs antivirals. However, compulsory licensing and parallel importation causes a massive intrusion on patent rights that is furthered when there are ambiguities in the wording of trade agreements. [20] Consequently, South Africa must balance of global patent rights through compulsory licensing that allows the poorest of nations to obtain antiviral drugs to fight the AIDS epidemic while concurrently providing incentives for pharmaceutical companies to invest, research and develop these drugs. [21]

C. Possible Amendments to TRIPS

Currently, TRIPS is a fairly effective, minimum standard system that provides affordable medicines to developing nations and protects international intellectual property rights. [22] However, to date the compulsory licensing provision of TRIPS has only been used in one circumstance because the price of pharmaceutical drugs is still too high for developing nations. [23]Therefore, the World Trade Organization should mandate a tiered pricing scheme based on the ability to pay for each individual member nation. [24] These price tiers could be implemented by giving tax credits to pharmaceutical companies in the developed country. [25] Tiering prices would maintain strong patent rights and  would allow the companies to provide cheaper antivirals while recouping money which could be invested to research and develop future antivirals. [26]

Furthermore, TRIPS should ban parallel importation because parallel importation allows “middle income” nations to obtain pharmaceutical for the same price as that of poor nations, which lowers patent protection globally. [27] In the future it may be necessary to implement supply distribution laws to strengthen global intellectual property rights. [28]If pharmaceutical companies are able to limit parallel importation they will be able to recoup more profit and increase their research and development costs. [29]Additionally, there have been proposals for amendments to TRIPS that would divide the member nations of the World Trade Organization into groups based on their ability to pay and adopt pharmaceutical prices depending on the ability to pay. [30]Finally, it is important that through TRIPS that developing nations have access to necessary pharmaceutical drugs while protecting intellectual property rights and allowing the research and development for future drugs.  [31]