Intellectual Property: U.S. Trade Policy Guidance on WTO	 
Declaration on Access to Medicines May Need Clarification	 
(28-SEP-07, GAO-07-1198).					 
                                                                 
The WTO Agreement on Trade-Related Intellectual Property (TRIPS) 
requires all 151 World Trade Organization (WTO) members to	 
provide baseline protections, including 20-year patents for	 
innovative pharmaceuticals. The Trade Act of 2002 granting Trade 
Promotion Authority (TPA) to the President outlined three	 
negotiating objectives related to intellectual property (IP). The
first two aim to strengthen IP rights and enforcement abroad. The
third calls for respect of the WTO Doha Declaration on TRIPS and 
Public Health, which addresses access by developing countries to 
patented medicines, particularly in epidemic and emergency	 
situations. This report (1) describes the Declaration and its	 
interpretation by the United States and other nations; (2)	 
analyzes how U. S. Trade Representative (USTR) has balanced	 
respect for the Doha Declaration with the other two IP objectives
in negotiating free trade agreements; and (3) evaluates the	 
extent of public health input by agencies and the private sector.
We reviewed official WTO and U.S. government documents, 	 
interviewed U.S. and foreign government officials, and obtained  
private sector views.						 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-07-1198					        
    ACCNO:   A76927						        
  TITLE:     Intellectual Property: U.S. Trade Policy Guidance on WTO 
Declaration on Access to Medicines May Need Clarification	 
     DATE:   09/28/2007 
  SUBJECT:   Access to health care				 
	     Developing countries				 
	     Foreign aid programs				 
	     Foreign trade agreements				 
	     Intellectual property				 
	     International agreements				 
	     International organizations			 
	     International relations				 
	     International trade				 
	     International trade regulation			 
	     Patents						 
	     Pharmaceutical industry				 
	     Policy evaluation					 
	     Program evaluation 				 
	     Public health					 
	     Trade agreements					 
	     Trade policies					 
	     Trade regulation					 
	     Policies and procedures				 
	     Agreement on Trade-Related Aspects of		 
	     Intellectual Property Rights			 
                                                                 

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GAO-07-1198

   

     * [1]Results in Brief
     * [2]Background

          * [3]U.S. Government Has Addressed IP and Access to Medicine
          * [4]Access to Medicines Remains a Global Challenge
          * [5]IP and Pharmaceuticals Became Part of WTO at Its Inception i
          * [6]The HIV/AIDS Pandemic Put Access to Medicine in the Forefron
          * [7]Congress Addressed IP and Public Health in Trade Promotion A

     * [8]The United States Has a Narrower Interpretation of the Doha

          * [9]The Doha Declaration Addresses Flexibilities in TRIPS That C
          * [10]The United States Has a Narrower Interpretation of the Decla
          * [11]Differences over a Narrower Versus a Broader Approach Contin

               * [12]USTR Maintained Paragraph Six Would Be Less Applicable
                 in th
               * [13]WTO Members Differed on the Legal Means to Address
                 Paragraph
               * [14]WTO Members Disagreed on Countries Covered under
                 Paragraph S
               * [15]United States Had Difficulty Joining Consensus on
                 Paragraph
               * [16]The Chairman's Statement Was a Key Condition to U.S.
                 Support

          * [17]USTR Believes the 2003 Council Decision Was a Positive One,
          * [18]General Council Issued 2005 Decision to Consider Amending th

     * [19]USTR Has Maintained Its Pursuit of High IP Standards and Mad

          * [20]USTR Believes That Strong IP Protection and Increased Market
          * [21]USTR Pursues a Menu of Pharmaceutical-Related IP Provisions
          * [22]USTR Has Made Limited Concessions on Doha Declaration Flexib
          * [23]The Pharmaceutical Industry Supports USTR's Insistence on Da

               * [24]The Pharmaceutical Industry Considers Data Exclusivity,
                 Pate
               * [25]Some Experts and NGOs Believe USTR's Continued Promotion
                 of

          * [26]Congressional Concern over IP Provisions and Access to Medic

     * [27]USTR Is Implementing and Overseeing Trade Agreements in a Ma

          * [28]USTR Reviews Compliance with FTA Obligations before Agreemen
          * [29]USTR Vigorously Pursues Implementation of Data Exclusivity,
          * [30]USTR Has Focused Attention on Data Protection and Patent Lin
          * [31]USTR Has Only Infrequently Mentioned Compulsory Licensing or
          * [32]USTR Has Acknowledged Thailand's Right to Issue a Compulsory

     * [33]Public Health Input on IP Rights Has Been Limited in U.S. Tr

          * [34]The Departments of Health and Human Services and State Endor
          * [35]Interagency IP Rights and Public Health Perspective Is Limit
          * [36]Public Health Representatives Were Recently Added to the Ind
          * [37]The Committees on Which Public Health Representatives Partic
          * [38]USTR Has Received Public Health Input through Other Formal a

     * [39]Conclusions
     * [40]Matter for Congressional Consideration
     * [41]Agency Comments and Our Evaluation
     * [42]GAO Contact
     * [43]Staff Acknowledgments

          * [44]Order by Mail or Phone

Report to Congressional Requesters

United States Government Accountability Office

GAO

September 2007

INTELLECTUAL PROPERTY

U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines May
Need Clarification

GAO-07-1198

Contents

Letter 1

Results in Brief 3
Background 6
The United States Has a Narrower Interpretation of the Doha Declaration
Than Some Other WTO Members 11
USTR Has Maintained Its Pursuit of High IP Standards and Made Some
Allowances for Doha Flexibilities in Negotiating FTAs 27
USTR Is Implementing and Overseeing Trade Agreements in a Manner
Consistent with Its Overall Approach of Promoting High Standards
concerning IP Rights 43
Public Health Input on IP Rights Has Been Limited in U.S. Trade
Negotiations 49
Conclusions 57
Matter for Congressional Consideration 58
Agency Comments and Our Evaluation 58
Appendix I Scope and Methodology 59
Appendix II Technical Assistance on IP Rights and Public Health 64
Appendix III GAO Contact and Staff Acknowledgments 67

Table

Table 1: Countries Listed in the Special 301 Report With Mention of
Pharmaceutical-related Issues Compared to All Countries Listed (2000-2007)
46

Figures

Figure 1: Timeline of Major WTO Events on IP and Public Health 10
Figure 2: FTA Pharmaceutical-Related IP Provisions and Side Letters Matrix
32
Figure 3: Data Exclusivity and Patent Protection, Three Possible Scenarios
36
Figure 4: Patent Linkage Process in the United States 40
Figure 5: Number of Pharmaceutical Provision Mentions in Special 301
Reports (2000-2007) 47
Figure 6: Public Health Representation on Industry Trade Advisory
Committees 56

Abbreviations

ADI Access to Drugs Initiative
ARV antiretroviral
CAFTA -DR Central America-Dominican Republic United States Free Trade Agreement
CIEL Center for International Environmental Law
CPPATH Center for Policy Analysis on Trade and Health
DNDI Drugs for Neglected Diseases Initiative
EU European Union
FDA Food and Drug Administration
FSI Foreign Service Institute
FTA free trade agreement
GAP Health Global Access Project
GDP Gross Domestic Product
GPhA Generic Pharmaceutical Association
HHS Department of Health and Human Services
ICTSD International Center for Trade and Sustainable Development
IFPMA International Federation of Pharmaceutical Manufacturers
  & Associations
IP intellectual property
ITAC Industry Trade Advisory Committee
MSF Doctors without Borders
NAFTA North American Free Trade Agreement
NGO nongovernmental organization
NIH National Institutes of Health
OECD Organization for Economic Cooperation and Development
OGAC Office of th e Global AIDS Coordinator
OGHA Office of Global Health Affairs
OTT Office of Technology Transfer
PPP purchasing power parity
PEPFAR President's Emergency Plan for AIDS Relief
PhRMA Pharmaceutical Research and Manufacturers of America
PTO U.S. Patent and Trademark Office
TEPAC Trade and Environment Policy Advisory Committee
TPRG Trade Policy Review Group
TPSC Trade Policy Staff Committee
TRIPS Trade-Related Aspects of Intellectual Property Rights
TPA Trade Promotion Authority
UNAIDS The Joint United Nations Program on HIV/AIDS
UNCTAD United Nations Conference on Trade and Development
USAID United States Agency for International Development
USTR U.S. Trade Representative
WHO World Health Organization
WIPO World Intellectual Property Organization
WTO World Trade Organization

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United States Government Accountability Office
Washington, DC 20548

September 28, 2007

The Honorable Edward M. Kennedy
Chairman
Committee on Health, Education, Labor and Pensions
United States Senate

The Honorable Henry A. Waxman
Chairman
Committee on Oversight and Government Reform
House of Representatives

An international effort led by the United States in the 1980s to
incorporate intellectual property (IP) protection into the trading system
culminated with the World Trade Organization (WTO) Agreement on
Trade-Related Aspects of Intellectual Property Rights (TRIPS) in 1995.
Under TRIPS, all WTO member countries are obligated to establish a minimum
standard of laws and regulations protecting copyrights, trademarks,
patents and other forms of IP rights. Patents are particularly important
to the U.S. pharmaceutical industry and provide patent owners the legal
means to prevent others from making, using, or selling new inventions for
a limited period of time, subject to certain conditions and exceptions. As
the 2000 deadline for developing countries to implement TRIPS obligations
approached, however, some developing countries expressed concern about
subjecting health-related inventions such as new drugs to IP rules,
especially given the increasingly serious AIDS epidemic. These concerns
were part of a larger and still ongoing debate over how to balance
long-term incentives for drug innovation with the short-term affordability
of existing medicines, particularly when dealing with emergency public
health situations. An international effort led by the United States in the
1980s to incorporate intellectual property (IP) protection into the
trading system culminated with the World Trade Organization (WTO)
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)
in 1995. Under TRIPS, all WTO member countries are obligated to establish
a minimum standard of laws and regulations protecting copyrights,
trademarks, patents and other forms of IP rights. Patents are particularly
important to the U.S. pharmaceutical industry and provide patent owners
the legal means to prevent others from making, using, or selling new
inventions for a limited period of time, subject to certain conditions and
exceptions. As the 2000 deadline for developing countries to implement
TRIPS obligations approached, however, some developing countries expressed
concern about subjecting health-related inventions such as new drugs to IP
rules, especially given the increasingly serious AIDS epidemic. These
concerns were part of a larger and still ongoing debate over how to
balance long-term incentives for drug innovation with the short-term
affordability of existing medicines, particularly when dealing with
emergency public health situations.

The 2001 WTO Doha Declaration on TRIPS and Public Health is recognized as
a watershed event in this debate. The declaration states, in part, that
the TRIPS Agreement does not and should not prevent members from taking
measures to protect public health and, while reiterating a commitment to
the TRIPS agreement, that the TRIPS Agreement should be interpreted and
implemented in a manner supportive of WTO members' right to protect public
health and promote access to medicines for all. Subsequently, in the
United States, the Trade Act of 2002 granting Trade Promotion Authority
(TPA) to the President outlined three principal trade negotiating
objectives related to IP, one of which referred to the Doha The 2001 WTO
Doha Declaration on TRIPS and Public Health is recognized as a watershed
event in this debate. The declaration states, in part, that the TRIPS
Agreement does not and should not prevent members from taking measures to
protect public health and, while reiterating a commitment to the TRIPS
agreement, that the TRIPS Agreement should be interpreted and implemented
in a manner supportive of WTO members' right to protect public health and
promote access to medicines for all. Subsequently, in the United States,
the Trade Act of 2002 granting Trade Promotion Authority (TPA) to the
President outlined three principal trade negotiating objectives related to
IP, one of which referred to the Doha Declaration.^1 The objectives were
(1) to promote adequate and effective protection of IP rights similar to
U.S. law, (2) to secure fair and equitable market access opportunities as
related to IP rights, and (3) to respect the Doha Declaration. Since then,
negotiations at the WTO continued through late 2005 in an effort to
resolve outstanding issues related to the Doha Declaration, and the United
States has negotiated 11 free trade agreements (FTA); several are now
being implemented. Some in Congress are concerned about how the U.S. Trade
Representative (USTR) has interpreted, pursued, and implemented TPA
principal IP objectives pertaining to the pharmaceutical industry,
particularly in light of the third objective calling for respect for the
Doha Declaration.

In response to your request, this report (1) describes the Doha
Declaration on TRIPS and Public Health and evaluates how the United States
and other key nations have interpreted its intent and meaning, (2)
analyzes how the United States has balanced respect for the Doha
Declaration with the other two IP negotiating objectives in negotiating
FTAs, (3) assesses the U.S. approach to overseeing the implementation of
pharmaceutical-related IP provisions in FTAs and other agreements, and (4)
evaluates the nature and extent of public health related agency and
private sector input into trade negotiations. You also expressed interest
in technical assistance on IP rights and public health that U.S. agencies
provide to foreign countries. Appendix II provides an overview of U.S.
technical assistance and technology transfer activities.

To meet these reporting objectives, we performed reviews of agency
documentation and correspondence, WTO documents and meeting minutes,
academic studies, pharmaceutical industry and public health advocacy group
reports and position papers, and media reports. We examined the text of
the FTAs negotiated since the Trade Act of 2002 and compared the language
of the IP pharmaceutical provisions found in each FTA. In addition, we
examined trends and patterns found in USTR's annual reports identifying
foreign countries that deny adequate and effective protection of IP
rights. We traveled to Geneva, Switzerland, to meet with officials from
the U.S. Mission in Geneva, WTO, World Health Organization (WHO), World
Intellectual Property Organization (WIPO), The Joint United Nations
Program on HIV/AIDS, the Global Fund to Fight AIDS, Tuberculosis and
Malaria, as well as nongovernmental organizations (NGO) from the
pharmaceutical sector and public health community. To evaluate the nature
and extent of interagency input to USTR from other executive branch
agencies such as the Department of State, Department of Health and Human
Services (HHS), and Department of Commerce, including the Patent and
Trademark Office (PTO), we reviewed documentation and interviewed
officials. Regarding private sector input, we interviewed agency officials
and reviewed documents such as formal advisory committee reports,
responses to Federal Register notices, and correspondence related to the
trade advisory system. Currently, there is ongoing litigation regarding
the balance of representation on certain trade advisory committees. In
accordance with GAO policy, we did not take any position on matters under
litigation, which in this case meant on the appropriateness of the current
composition of the trade advisory committees. Regarding technical
assistance, we interviewed agency officials and reviewed agency documents.
We also interviewed stakeholders to gather perspectives on the range of
issues involved, including pharmaceutical industry representatives, public
health groups, academics, and selected IP experts; each had recently
published or spoken on this issue. Access to medicines is recognized as a
complex issue driven by many factors, including funding levels,
infrastructure, and effective institutions, which are addressed by various
U.S. government programs and international efforts. As agreed with your
staff, we did not seek to independently assess the actual or potential
effect of these larger U.S. trade efforts on public health and access to
medicines.

^1Trade Act of 2002, Pub. L. No. 107-210, S 2102, 116 Stat. 933, 995-996
(codified at 19 U.S.C. S 3802).

See appendix I for a detailed discussion of our scope and methodology. See
appendix II for information about technical assistance on IP rights and
public health. We conducted our review from November 2006 through
September 2007 in accordance with generally accepted government auditing
standards.

Results in Brief

The Doha Declaration on TRIPS and Public Health was adopted by WTO members
as a carefully crafted compromise among competing perspectives that
stresses the importance of implementing the TRIPS agreement in a manner
supportive of public health. Balancing the goals of promoting both access
to existing medicines and development of new medicines, it was a separate
declaration adopted at their Fourth Ministerial Conference on November 14,
2001, in Doha, Qatar. The United States interprets the declaration as a
political statement that recognizes the severity of public health crises
while affirming the importance of IP protection. It maintains that the
declaration neither changes existing TRIPS obligations nor creates new
obligations, and does not assign public health greater priority than IP
protection. Instead, USTR says, the declaration simply clarifies certain
flexibilities already in TRIPS for WTO members facing public health
crises, including overriding patents through the issuance of compulsory
licenses under certain circumstances. Supported to some extent by other
developed countries such as the European Union (EU) members, Japan, and
Switzerland, USTR recognizes these flexibilities as being allowed for WTO
members, including those facing public health crises, but only in a
fashion that will not unduly harm patent holders. Some developing
countries believe they provide broad discretion to ensure access to
medicines when IP regulations present barriers to addressing not only
health issues, but also social welfare. Differences between the United
States and key developing WTO countries such as Thailand, Brazil, and
India over a narrower versus a broader interpretation continued well after
the 2001 declaration. Notably, in debate over how to help countries with
little or no manufacturing capacity in the pharmaceuticals sector take
full advantage of the flexibilities, controversy emerged over which
members should be eligible and for what diseases.

USTR maintains that it balances respect for the Doha Declaration with
TPA's other two IP negotiating objectives by actively promoting high
levels of IP protection related to pharmaceuticals while making targeted
allowances for Doha Declaration flexibilities for developing country
partners. USTR believes that this continuation of long-standing U.S.
pursuit of high IP protections for pharmaceuticals creates incentives for
investment in research and development of new treatments, which in turn
enhances public health. With regard to the TPA objective to respect the
Doha Declaration, USTR officials told us that the key policy implication
was to not insist upon two pharmaceutical-related IP provisions it sees as
relevant to the Declaration with developing country trading partners.
Otherwise, USTR has continued to pursue a number of other
pharmaceutical-related IP protections that USTR does not consider related
to the Doha Declaration. Reactions to USTR's approach to its trade
negotiations have been mixed. The pharmaceutical industry considers these
types of FTA provisions to be crucial in preserving incentives for future
research and innovation. However, some academics, public health experts,
NGOs, and generic pharmaceutical producers have said such provisions could
delay entry of cheaper generic products onto the market, thereby
decreasing access to affordable medication and violating the spirit and
principles of the Doha Declaration. Several Members of Congress have also
expressed similar concern over the pharmaceutical-related IP provisions in
FTAs with developing countries, and this concern was recently addressed
through a bipartisan compromise, between Congress and the administration,
to revise, prior to their submission to Congress, the last four FTAs
concluded under TPA.

USTR's approach to overseeing the implementation of pharmaceutical-related
IP provisions is consistent with its overall negotiating approach in FTAs,
which is to secure high levels of IP protection. Following FTA
negotiations, USTR rigorously oversees trading partner implementation of
pharmaceutical-related IP provisions, in order to advise the President
whether he can determine that the FTA partner has taken the measures
necessary to comply with the provisions of the FTA that are to take effect
on the date the FTA enters into force. In addition, in its annual report
detailing global IP challenges, USTR has focused largely on the same
pharmaceutical IP provisions concentrated on during FTA negotiations, in
keeping with its strategy of gaining high levels of IP protection for
pharmaceutical products, similar to U.S. law. However, USTR has had a
measured response to Thailand and Brazil's recent usage of a TRIPS
flexibility, compulsory licensing. For example, when Thailand recently
issued a compulsory license, USTR acknowledged its right to do so,
restricting its criticism to commenting on a lack of transparency.

Input related to public health into U.S. trade negotiations has remained
limited since Congress enacted TPA. In negotiating trade agreements under
TPA, the President must seek advice and information from executive
departments and public and private sectors.^2 HHS and other agencies
involved in the interagency trade policy process generally endorse USTR's
view that strong IP protection promotes public health and access to
medicines, but interagency input has been primarily technical in nature.
For instance, HHS, the lead U.S. health agency, ensures that IP provisions
related to pharmaceuticals in FTAs do not violate U.S. law, but has not
addressed policy-related questions, such as whether FTA provisions might
affect public health in trading partner countries. Within the formal
private sector trade advisory system that plays a role under TPA in
reviewing trade agreements, a public health representative was recently
added to 2 of the 16 private sector industry trade advisory committees,
after USTR had concluded nine trade agreements. The two advisory
committees that the public health representatives were appointed to are
respectively composed of 20 and 33 private sector representatives from the
pharmaceutical and other industries. Although USTR has received limited
input on public health through the formal advisory system, the agency has
obtained some public health views through other formal and informal means
throughout the period, such as public hearings, Federal Register comments,
and written correspondence.

^2 19 U.S.C. SS 2152, 2155.

In this report, we suggest that Congress should consider this record as it
contemplates renewal of Trade Promotion Authority (TPA) and, if it has
concerns over USTR's approach to date, may wish to specify more clearly
its intentions for U.S. trade policy and input related to balancing public
health concerns and the negotiation of IP protections in trade agreements.

Background

By way of providing context for our examination of U.S. trade policy as it
relates to TPA guidance and the Doha Declaration on TRIPS and Public
Health, the following is an overview of ongoing U.S. government efforts to
address the wider issue of access to medicine and public health both
related and unrelated to IP, as well as how the WTO first became involved
in public health issues, and the origin of IP and public health in TPA.

U.S. Government Has Addressed IP and Access to Medicine

The U.S. government has supported innovation, competition, and access to
medicine. The Federal government, primarily through the National
Institutes of Health (NIH), conducts and supports medical research,
investing annually over $28 billion. About 55 percent of NIH's budget
supports basic research. While basic research may not have an immediate
impact on drug innovation, such "untargeted" research often ultimately
leads to developing new medicines and technologies.

In principle, U.S. intellectual protection laws are designed to support
innovation. Patents are considered to be especially valuable for
innovations in pharmaceuticals.^3 According to the pharmaceutical
industry, IP protection is crucial to its ability to offer new, innovative
medicines. Research and development of new drugs is very risky and
time-consuming. The industry faces high fixed or "sunk" costs associated
with lengthy discovery and clinical trials. Moreover, a large proportion
of new drugs never make it to market due to their lack of efficacy or
inadequate safety. Thus, drug companies seek a relatively high return on
the medicines they do bring to market. U.S. patents give companies a
20-year period during which they have an exclusive right to make, sell,
and use their invention.^4 They use this period when they cannot be
undercut by competitors to charge relatively higher prices, thus allowing
them to recoup their investments and earn profits. However, the effective
life of a patent is typically much shorter than this 20-year period, since
the preclinical and clinical testing phases necessary for securing FDA
marketing approvals can take more than a decade.

^3Nevertheless, critics have questioned IP rights' contributions to
innovation. A November 2006 GAO study found that new drug applications
submitted by pharmaceutical companies to the FDA had increased at a much
slower pace than R&D expenditures, and that many of these were for new
uses of existing compounds, rather than for completely new drugs. IP
rights were among the factors some experts cited as slowing drug
development. See GAO, New Drug Development: Science, Business, Regulatory,
and Intellectual Property Issues Cited as Hampering Drug Development
Efforts, [45]GAO-07-49 (Washington, D.C.: Nov. 17, 2006).

Public policy has also played a role in fostering generic competition to
hold down prices. Generic drugs--copies of brand-name drugs--can enter the
market after the brand-name's patent or other market exclusivities expire
and FDA approval is granted. Under the Hatch-Waxman Act of 1984,^5 generic
manufacturers do not have to repeat expensive research and clinical trials
to obtain approval.^6 Instead, they only need to show the FDA that their
drugs are bioequivalent to the branded medicines.^7 Because they do not
incur the same research and clinical trial expenditures, generic firms can
enter the market more quickly once patents have expired and sell drugs at
lower prices. Generic entry may also put pressure on innovator companies
to develop more new drugs.

Governments have also taken collective and individual steps to provide
medicines--particularly since 2001. At the global level, funds for
combating HIV/AIDS through the Global Fund to Combat AIDS, Tuberculosis
and Malaria, established in 2003, and UNAIDS, established in 1994, have
grown considerably since 2001. Among other things, the United States
established the President's Emergency Plan for AIDS Relief, or PEPFAR, a
5-year, $15 billion initiative run by the Office of the Global AIDS
Coordinator at State, which has supported HIV prevention activities,
antiretroviral treatment and training, and HIV-related care and training
at more than 15,000 project sites primarily in 15 focus countries, mainly
in sub-Saharan Africa.^8 More affluent developing countries, such as
Brazil and Thailand, have themselves been taking more aggressive steps to
combat AIDS and improve access, including universal access schemes paid
for with public funds.

^4 35 U.S.C. S 154.

^5Pub. L. No. 98-417, 98 Stat. 1585.

^6 21 U.S.C. S 355.

^7For the purposes of this report, bioequivalent means the generic drug
has the same rate and extent of absorption and delivers the same amount of
active ingredients into a patient's bloodstream in the same amount of time
as the name-brand patented drug.

Some of these government efforts have been undertaken with private sector
support. The research-based pharmaceutical industry has engaged in
private-public partnerships to address neglected diseases found in poor
countries, such as tuberculosis and malaria. Research-based pharmaceutical
companies have also instituted pricing schemes whereby the same drug is
sold at different prices, depending on the consumer's or country's ability
to pay. Ensuring that the supply remains in the intended market, not
resold elsewhere, is critical to this strategy's success, but can be
problematic. Governments have also supported industry efforts to donate
medicines outright--about $4.4 billion worth of medicines and other
medical help over the 2000-2005 period, according to estimates by the
London School of Economics.^9

Access to Medicines Remains a Global Challenge

Despite government and industry initiatives, available data suggest that
many people currently lack access to existing medicines. According to the
World Health Organization (WHO), one third of the global population does
not have regular access to essential medicines. This matters: WHO
estimates that over 10.5 million lives a year could be saved by 2015 by
scaling up access to existing interventions for infectious diseases,
maternal and child health, and noncommunicable diseases. Indeed, WHO says
unaffordable prices of medicine and the need for new medicines for
diseases that disproportionately affect lower income populations are among
the primary challenges in expanding access to medicines globally.
According to WHO, in developing countries today, medicines account for up
to 70 percent of health care expenditure. This compares to less than 15
percent in most high income countries, and about 10 cents of every health
care dollar spent in the United States in 2005. Because of this imbalance
in health care expenditure worldwide, WHO's various projects on access to
medicines and IP rights continue.^10 The Group of 8 Industrialized
Nations, the Organization for Economic Cooperation and Development (OECD),
and the United Nations Conference on Trade and Development (UNCTAD) are
among the other organizations that have also undertaken efforts to address
aspects of the issue.

^8United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act
of 2003, Pub. L. No. 108-25, 117 Stat. 711.

^9This compares with Giving USA's estimates that donations by U.S.
corporations and corporate foundations totaled $12.72 billion in 2006. For
further information, see "U.S. charitable giving reaches $295.02 billion
in 2006: third straight year of growth," June 27, 2007, press release,
Giving USA Foundation. www.aafrc.org .

IP and Pharmaceuticals Became Part of WTO at Its Inception in 1995

The April 1994 Final Act Embodying the Results of the Uruguay Round of
Multilateral Trade Negotiations led to the establishment of WTO on January
1, 1995. The Uruguay round was the product of long and complex
negotiations that not only liberalized manufactured goods trade in such
sectors as apparel, but also added IP and services rules and obligations
to the trading system. The WTO TRIPS Agreement was part of the Uruguay
Round's results and established minimum levels of protection that each
government has to give to IP of fellow WTO members. The United States had
fought hard to secure worldwide adoption of minimum IP protection and
enforcement standards through TRIPS as home to the world's largest and
most innovative pharmaceutical industry. TRIPS extended patent protection
for inventions of both products and processes, while allowing certain
exceptions, for at least 20 years. It also required WTO members, when
requiring as a condition of marketing approval the submission of
undisclosed test data or other data (such as data submitted to health
authorities for regulatory approval of pharmaceutical safety), the
origination of which involves considerable effort, to protect such data,
against unfair commercial use.^11 When all of the WTO agreements took
effect, developed countries were given 1 year to ensure their laws and
practices conformed with TRIPS, but developing countries were given
transition periods of 5 or more years. Even so, many developing countries
complained about having to comply with the new requirements.

^10According to the WHO, its work on trade, IP rights, and access to
medicines can be summed up under two headings: (1) monitoring and
analyzing the pharmaceutical and health implications of international
trade agreements, and (2) assisting member states in assessing and
developing pharmaceutical and health policies and regulatory measures that
maximize the positive and mitigate the negative impact of those
agreements. In May 2006, WHO established an Intergovernmental Working
Group on Public Health, Innovation and Intellectual Property with a
mandate to prepare a global strategy and plan of action on essential
health research to address conditions affecting developing countries
disproportionately. A May 2007 resolution, adopted without U.S. support,
requests WHO "to provide as appropriate, upon request, in collaboration
with other competent international organizations, technical and policy
support to countries that intend to make use of the flexibilities
contained in the agreement on Trade-Related Aspects of Intellectual
Property Rights and other international agreements in order to promote
access to pharmaceutical products, and to implement the Doha Ministerial
Declaration on the TRIPS Agreement and Public Health and other WTO
instruments."

^11TRIPS Agreement, Art. 39.3.

The HIV/AIDS Pandemic Put Access to Medicine in the Forefront for WTO

The issue of IP and access to medicine came to a head at WTO in 2001 when
the HIV/AIDS pandemic in sub-Saharan Africa was reaching catastrophic
levels. Separately, South Africa attempted to use its laws to lower prices
for imported medicines, but faced opposition from U.S. and other drug
companies that felt its actions compromised their rights. Brazil and the
United States, meanwhile, were in dispute over a Brazilian law that could
make exceptions to patents if products were not manufactured in Brazil.
Nongovernmental organizations (NGO) became involved in discussing the
implications of TRIPS to public health.

In April of 2001, WTO and the World Health Organization (WHO) jointly
sponsored a workshop on pricing and access to medicine. Initially, many
WTO members were skeptical about whether WTO was the proper forum for the
debate. However, this quickly changed when the African members
successfully pleaded their case for help in resolving the AIDS pandemic,
and WTO members subsequently devoted one day to the issue in June 2001,
then continued discussions throughout the summer of the same year.
Subsequently, the Declaration on the TRIPS Agreement and Public Health was
adopted at the fourth WTO Ministerial Conference in Doha, Qatar, on
November 14, 2001. As shown in figure 1, the Declaration on TRIPS and
Public Health was the first of three important decisions over the next
several years, all of which are discussed in detail later in this report.

Figure 1: Timeline of Major WTO Events on IP and Public Health

Congress Addressed IP and Public Health in Trade Promotion Authority Legislation

Shortly after WTO adopted the Declaration on TRIPS and Public Health,
Congress passed the Trade Act of 2002, which granted the President Trade
Promotion Authority (TPA) for reciprocal trade agreements to liberalize
U.S. trade with foreign nations. TPA contains guidance from Congress
concerning U.S. goals in negotiated trade agreements. One of the three
goals for IP specified in TPA, "to respect the Doha Declaration on TRIPS
and Public Health," was added in response to an amendment by Senator
Edward Kennedy. In his remarks about the amendment, Senator Kennedy
explained that the Declaration on TRIPS and Public Health struck a balance
between the legitimate interests of intellectual property protection and
the preservation of public health. Senator Kennedy went on to assert that
"[t]his amendment directs our trade negotiators to support the declaration
without reservation."^12 Senators Grassley and Baucus also asserted their
support for the amendment and emphasized the importance of IP issues with
respect to public health and innovation of new medicines. Congress
otherwise provided no guidance at the time on how to interpret and apply
this TPA objective. Recently, in response to the expiration of the
President's Trade Promotion Authority (TPA) on June 30, 2007, before the
Doha round of global trade talks had been successfully concluded, there
have been some calls to renew it.

The United States Has a Narrower Interpretation of the Doha Declaration Than
Some Other WTO Members

To help address public health problems affecting many developing
countries, WTO members adopted the Doha Declaration (reprinted in full
below) to stress the importance of implementing the TRIPS agreement in a
manner supportive of public health.^13 As part of a carefully worded
compromise among competing perspectives, this statement was placed in the
context of shared challenges and goals, such as promoting both access to
existing medicines and research into and development of new medicines. The
United States interprets the declaration as a political statement
recognizing public health crises and affirming the importance of IP
protection that neither changes existing TRIPS obligations nor creates new
obligations, and does not assign public health greater priority than IP
protection. Significantly, the declaration clarifies certain flexibilities
explicit in TRIPS that allow WTO members to address public health crises.
USTR argues that these flexibilities should be applied judiciously and
subject to certain conditions specified in the TRIPS agreement. Some
developing countries, however, believe these flexibilities provide broad
discretion to ensure access to medicines when IP regulations present
barriers to addressing not only health issues, but also social welfare.
Differences over a narrower versus broader interpretations continued long
after the declaration. Notably, debate over how to help countries with
little or no pharmaceuticals manufacturing capacity take full advantage of
the flexibilities, including which members should be eligible and for what
diseases, became controversial.

^12For the text of these remarks, see Congressional Record, Senate,
S4322-4324, May 14, 2002.

^13Based on paragraph 17, Ministerial Declaration, Fourth Ministerial
Conference, Doha, Qatar, November 14, 2001.

Declaration on the TRIPS Agreement and Public Health

1. We recognize the gravity of the public health problems afflicting many
developing and least-developed countries, especially those resulting from
HIV/AIDS, tuberculosis, malaria and other epidemics.

2. We stress the need for the WTO Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS Agreement) to be part of the wider
national and international action to address these problems.

3. We recognize that intellectual property protection is important for the
development of new medicines. We also recognize the concerns about its
effects on prices.

4. We agree that the TRIPS Agreement does not and should not prevent
members from taking measures to protect 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, the provisions in the TRIPS Agreement, which provide flexibility for
this purpose.

5. Accordingly and in the light of paragraph 4 above, while maintaining
our commitments in the TRIPS Agreement, we recognize that these
flexibilities include:

           a. In applying the customary rules of interpretation of public
           international law, each provision of the TRIPS Agreement shall be
           read in the light of the object and purpose of the Agreement as
           expressed, in particular, in its objectives and principles.
           b. Each Member has the right to grant compulsory licenses and the
           freedom to determine the grounds upon which such licenses are
           granted.
           c. Each Member has the right to determine what constitutes a
           national emergency or other circumstances of extreme urgency, it
           being understood that public health crises, including those
           relating to HIV/AIDS, tuberculosis, malaria and other epidemics,
           can represent a national emergency or other circumstances of
           extreme urgency.
           d. The effect of the provisions in the TRIPS Agreement that are
           relevant to the exhaustion of intellectual property rights is to
           leave each Member free to establish its own regime for such
           exhaustion without challenge, subject to the MFN and national
           treatment provisions of Articles 3 and 4.

6. We recognize that WTO Members with insufficient or no manufacturing
capacities in the pharmaceutical sector could face difficulties in making
effective use of compulsory licensing under the TRIPS Agreement. We
instruct the Council for TRIPS to find an expeditious solution to this
problem and to report to the General Council before the end of 2002.

7. We reaffirm the commitment of developed-country Members to provide
incentives to their enterprises and institutions to promote and encourage
technology transfer to least-developed country Members pursuant to Article
66.2. We also agree that the least-developed country Members will not be
obliged, with respect to pharmaceutical products, to implement or apply
Sections 5 and 7 of Part II of the TRIPS Agreement or to enforce rights
provided for under these Sections until 1 January 2016, without prejudice
to the right of least-developed country members to seek other extensions
of the transition periods as provided for in Article 66.1 of the TRIPS
Agreement. We instruct the Council for TRIPS to take the necessary action
to give effect to this pursuant to Article 66.1 of the TRIPS Agreement.

The Doha Declaration Addresses Flexibilities in TRIPS That Can Be Used to Deal
with Public Health Crises

In the wake of the HIV/AIDS crisis at the time, some WTO members were
concerned about the extent to which the TRIPS agreement allowed them to
address public health needs. The African members known as the African
Group were among the members pushing for clarification. WTO members
formally addressed this issue in the main Doha Ministerial Declaration and
their intention to adopt a separate declaration, as shown below.

Ministerial Declaration - Fourth Session November 2001

Paragraph 17

We stress the importance we attach to implementation and interpretation of
the Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPS Agreement) in a manner supportive of public health, by promoting
both access to medicines and research and development into new medicines
and, in this connection, are adopting a separate Declaration.

The Doha Declaration is divided into seven paragraphs. Paragraphs one
through four are general principles that WTO members agreed to that
describe the relationship between IP rights and public health.

Paragraph five lays out specific flexibilities provided in TRIPS that can
be used by WTO members to address public health related problems. Below is
a summary of these flexibilities:

5(a) that each provision in TRIPS should be read in light of the
agreement's objectives and principles;

5(b) the right to grant compulsory licenses. The WTO fact sheet on TRIPS
and pharmaceuticals describes the term compulsory licensing as when a
government allows someone else to produce the patented product or process
without the consent of the patent owner--in this case in reference to
pharmaceuticals, but it could also apply to patents in any field.^14

5 (c) the right to determine what is a national emergency; and

5 (d) the right to establish an exhaustion regime without challenge. The
WTO fact sheet on TRIPS and pharmaceuticals describes the term exhaustion
as a legal principle consisting of the idea that once a company (patent
holder) has sold a batch of its product, its patent distribution rights
are exhausted with respect to that batch, and it no longer has any rights
to control distribution of that batch. Exhaustion is the legal principal
behind parallel imports. ^15

WTO members appear to agree that the TRIPS and Public Health declaration
makes no change to TRIPS itself. However, two changes are foreshadowed.
Specifically, paragraphs six and seven calls upon WTO members to take
future action in specific areas. Paragraph six mandates WTO members to
resolve a potential problem with regard to compulsory licensing by WTO
members with insufficient or no pharmaceutical manufacturing capacities.
Because TRIPS specifies that a country may only compulsory license
primarily for supplying the domestic market, countries with little or no
manufacturing capacity (and therefore no domestic company to which the
government could grant a compulsory license) could face difficulties in
effectively using compulsory licensing. They must import their medicines,
but the supplier (the exporter) would be prevented under TRIPS from
exporting them the patented medicines under a compulsory license if the
product was patented in its territory. Paragraph seven instructs WTO
members to take the steps necessary to extend the deadline from for least
developed countries to implement their TRIPS obligations with respect to
pharmaceutical products to 2016.^16

^14See http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm

^15See http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm

The United States Has a Narrower Interpretation of the Declaration Than Some
Other WTO Members

The United States believes that the declaration does not change existing
TRIPS obligations or create new rights, nor does it give public health
greater priority than IP protection. Overall, leading up to Doha and
since, the United States has consistently opposed creating broader
exemptions to TRIPS to protect public health, but instead has called for
permitting targeted exceptions to TRIPS to avoid eroding patent
protections that it deems necessary for research and development of
medicines to treat life-threatening diseases. Some developing countries
had wanted to modify TRIPS provisions if they were considered insufficient
to protect public health.

According to a USTR official, paragraph four of the declaration-"The TRIPS
agreement does not and should not prevent members from taking measures to
protect public health."--does not provide a broad exception in TRIPS for
public health purposes and in addition, the provision should be considered
in context with the rest of the declaration. Some developing countries had
originally called for the declaration to have stronger language-"Nothing
in the TRIPS agreement should prevent Members from taking measures to
protect public health."-in an attempt to make the declaration legally
binding.

With regard to paragraph five, which enumerates flexibilities in TRIPS
that may be used to address public health, the United States supports the
view that these flexibilities preserve the ability of members to formulate
public health policies while also maintaining effective patent systems.
But some developing countries see paragraph five as providing broader
discretion to address public health. For example, a group of developing
countries, including the African Group, Brazil, India, and Thailand, has
maintained that there should be a common understanding that confirms the
right of governments to ensure access to medicines at affordable prices
and to make use of TRIPS provisions whenever the scope or exercise of IP
regulations results in barriers to access to medicine. These members
believe that TRIPS objectives and principles (referred to in the last
phrase in paragraph five (a) of the declaration) support the view that
TRIPS protections are and should be contingent on IP rights contributing
to social goals, such as nutrition and social and economic welfare. (TRIPS
objectives and principles are found in articles 7 and 8 respectively,
shown below).

^16According to USTR, developed country members were required to implement
the TRIPS Agreement fully as of January 1, 1996. Developing countries were
given a transition period for many obligations until January 1, 2000.
Recognizing the particular challenges faced by least-developed countries,
in 2005, the United States worked closely with them and other WTO members
to extend the implementation date for these countries from January 2006 to
July 2013. The least developed country members in turn pledged to preserve
the progress that some had made toward TRIPs compliance.

TRIPS Article 7 - Objectives

The protection and enforcement of intellectual property rights should
contribute to the promotion of technological innovation and to the
transfer and dissemination of technology, to the mutual advantage of
producers and users of technology knowledge and in a manner conducive to
social and economic welfare, and to a balance of rights and obligations.

TRIPS Article 8 - Principles

           1. Members may, in formulating or amending their laws and
           regulations, adopt measures necessary to protect public health and
           nutrition, and to promote the public interest in sectors of vital
           importance to their socio-economic and technological development,
           provided that such measures are consistent with the provisions of
           this Agreement.

           2. Appropriate measures, provided that they are consistent with
           the provisions of this Agreement, may be needed to prevent the
           abuse of intellectual property rights by right holders or the
           resort to practices which unreasonably restrain trade or adversely
           affect the international transfer of technology.

The United States has maintained that, rather than impeding access to
medicines, patent regimes meet the objectives of article 7 by contributing
to the promotion of technological innovation and dissemination of
technology. Furthermore, the United States has argued that the final
clause in article 8-"provided that such measures are consistent with the
provisions of [the TRIPS ]Agreement"-precluded article 8 from providing
such a broad exception to the obligations of TRIPS. The European Union
(EU), Switzerland, and Japan were concerned that the countries were
suggesting the ability to make significant exceptions to patent protection
under TRIPS.

The interpretation of paragraph five (b) on compulsory licensing has
sparked the most controversy among WTO members. The WTO fact sheet on
TRIPS and pharmaceuticals describes the declaration as affirming
compulsory licensing [as a TRIPS flexibility] as part of its overall
attempt to strike a balance between promoting access to existing drugs and
promoting research and development into new drugs.^17 Significantly, the
declaration clarifies that WTO members can determine the grounds for
issuing a compulsory license. This is because TRIPS does not specifically
list the reasons that might be used to justify compulsory licensing, but
rather enumerates a number of conditions for doing so.^18

During the debate over the declaration, the United States stressed that,
while it considered compulsory licensing to sometimes be appropriate, it
believed its widespread use for any purpose could have negative
implications for the patent system and, more importantly, for the
availability and development of new drugs. Moreover, the United States
argued using compulsory licensing as a mechanism for directing industrial
policy or protecting domestic industries against foreign competition would
be contrary to the letter and purpose of TRIPS.

In addition, USTR emphasizes that while the declaration is clear that
members can determine the grounds for compulsory licensing, they still
must meet certain conditions articulated in TRIPS article 31. These are
aimed at protecting the legitimate interests of the patent holder when
circumstances allow compulsory licensing and government use of a patent
without the authorization of the patent holder. Summarized below are some
relevant excerpts from selected article 31--"Other use without
authorization of the patent holder"--provisions, including important
exceptions in recognition of the fact that time can be of the essence in
some situations, such as national emergencies. Basically, with some
exceptions, whoever issues a compulsory license must first inform the
patent holder and seek to obtain authorization (voluntary license) from
the patent holder. In all cases, they must remunerate the patent holder.

Summaries of article 31(b) (h) (k) provisions:

^17See http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm

^18The term "compulsory licensing" does not appear in the TRIPS agreement.
However, it does appear in the Paris Convention, and WTO members are
required to comply with relevant portions of that Convention (see TRIPS
article 2.1). The phrase "other use without authorization of the right
holder" appears in the title of TRIPS article 31 .

           o Prior to use, user makes effort to obtain authorization from the
           patent holder on reasonable commercial terms and conditions within
           a reasonable period of time.

           o Above authorization requirement may be waived in cases of

                        o national emergency or other circumstances of
                        extreme urgency

                        o public noncommercial use

                        o to correct anticompetitive practices as determined
                        by judicial or administrative processes.

           o Patent holder shall be

                        o notified as soon as reasonably practicable in case
                        of national emergency

                        o informed promptly in case of noncommercial use

           o Patent holder shall receive adequate remuneration.

           Some developing countries, including the African Group, Brazil,
           India, and Thailand, expressed the view that the TRIPS agreement
           in no way stands in the way of public health protection, and
           therefore that it should provide the broadest flexibility for the
           use of compulsory licensing to obtain lower cost medicines.
           Differences over compulsory licensing have continued to reemerge,
           including later during the later debate over how to resolve the
           paragraph six problem.

           Finally, the United States and some WTO members have different
           interpretations of paragraph five (d), which says that TRIPS
           leaves each member free from challenge to establish its own
           exhaustion regime, based on TRIPS article 6 (shown below).

           TRIPS Article 6 - Exhaustion

           For the purposes of dispute settlement under this Agreement,
           subject to the provisions of Articles 3 and 4, nothing in this
           Agreement shall be used to address the issue of the exhaustion of
           intellectual property rights.

           The United States stated during the debate leading up to the
           declaration that it did not interpret this to mean that TRIPS
           permits parallel imports,^19 and expressed misgivings about their
           use. To be specific, USTR pointed out that permitting parallel
           imports inhibits the patent holder's willingness to offer prices
           differentiated according to countries' ability to pay. This is
           because, when prices are higher in one country than in others,
           there is a tendency for diversion to higher income countries.
           These are precisely the markets where patent owners want to
           maintain high prices in order to recoup costs and earn the profits
           that fund future research. This differential pricing has been a
           key feature of pharmaceutical industry efforts to promote improved
           access to medicine since the Doha Declaration.

           In contrast to the U.S. position, some developing countries,
           including the African Group, Brazil, India, and Thailand, called
           parallel importation a significant way of increasing access to
           medicines, particularly for developing countries, and a relevant
           tool when compulsory licenses may be ineffective.
			  
			  Differences over a Narrower Versus a Broader Approach Continued in
			  Debating the 2003 and 2005 Council Decisions

           Differences over whether the use of compulsory licensing should be
           restricted or widespread continued during the subsequent debate
           leading up to the 2003 Council Decision on the Implementation of
           Paragraph Six. The United States believed that situations
           requiring a compulsory license for export (sometimes referred to
           as the "paragraph six solution") would likely be somewhat limited
           but emphasized that the grave health problems faced by certain
           developing and least developed countries made a solution
           imperative. The United States called for restricting compulsory
           licensing for export to a narrower set of scenarios to ensure that
           only countries facing genuine crises and with no effective
           manufacturing capacity could use it. WTO members disagreed about
           the legal means to address paragraph six and its scope and
           coverage, including which members should participate in the
           solution and for what diseases.
			  
^19For the purposes of this report, parallel or grey-market imports are
products marketed by the patent owner or by someone else with the patent
owner's permission in one country and subsequently imported into another
country without the approval of the patent owner. For example, suppose
company A had a drug patented in two countries, Belladonna and Calamine,
which it sold at a lower price in Calamine. A parallel import would occur
if a second company B bought the drug in Calamine and imported it into
Belladonna at a price that was lower than company A's price.

             USTR Maintained Paragraph Six Would Be Less Applicable in the
				 Near Term

           During deliberations in 2001 leading up to the Declaration, the
           United States maintained that situations requiring a paragraph six
           solution would likely remain somewhat limited in the near term,
           but recognized that the grave health problems faced by certain
           developing and least developed countries foreshadowed serious
           consequences should they occur. First, difficulties falling under
           paragraph six would only be expected to arise when pharmaceuticals
           were not provided by the patent holder through normal commercial
           arrangements or through discount, donation, or other aid programs.
           In addition, a paragraph six solution would only apply if a patent
           existed in the WTO member country or territory that was exporting
           the pharmaceutical. However, some developing countries at the time
           were not obligated to provide patents until January 2005, most
           notably India.^20
			  
			    WTO Members Differed on the Legal Means to Address Paragraph Six

           The legal mechanism by which to address paragraph six could also
           affect the widespread use of compulsory licensing and the
           effective force of TRIPS obligations. WTO members had to decide
           whether to craft the paragraph six solution on the basis of TRIPS
           article 30 or on a waiver of article 31. The United States and the
           EU supported article 31. The United States argued that a targeted
           moratorium or waiver of obligations of TRIPS article 31(f) (see
           below) was the most expeditious, workable, transparent,
           sustainable, and legal solution. Essentially, the TRIPS
           requirement that compulsory licensing should be primarily for
           domestic use would be waived.
			  
^20While this deadline has now passed, as a practical matter questions
still remain about how soon pharmaceuticals produced in India will be
under patent. For example, generic drugs produced in India or anywhere in
the world before 2005 would be grandfathered under the old system and thus
not effectively subject to patents.

           TRIPS Article 31

           "Other use without authorization of the patent holder"

           Where the law of a Member allows for other use of the subject
           matter of a patent without the authorization of the right holder,
           including use by the government or third parties authorized by the
           government, the following provisions shall be respected:

           Article 31 (f): Any such use shall be authorized predominantly for
           the supply of the domestic market of the Member authorizing such
           use;

           The African Group also supported the article 31 approach and had
           laid out several options for doing so. Above all, however, they
           said that they wanted an expeditious solution. According to WTO
           officials, there was a tacit agreement among the WTO members that
           the African Group "had the moral high ground" on this issue
           because the HIV/AIDS pandemic was so acute in Africa.

           Alternatively, countries such as Brazil, India, and Thailand
           argued that the best solution was to interpret TRIPS article 30
           (see below) so as to recognize the right of WTO members to
           authorize third parties to make, sell, and export patented
           public-health-related products, without the consent of the patent
           holder to address the public health needs in another country.
           These acts would be considered "limited exceptions to the
           exclusive rights" conferred by patents. The countries argued that
           an authoritative interpretation of article 30 would also have the
           advantage of avoiding the potentially cumbersome requirement under
           a waiver of article 31(f) that the exporting country must also
           grant a compulsory license as well as change its own laws to allow
           compulsory licensing for exporting.

           TRIPS Article 30

           Members may provide limited exceptions to the exclusive rights
           conferred by a patent, provided that such exceptions do not
           unreasonably conflict with a normal exploitation of the patent and
           do not unreasonably prejudice the legitimate interests of the
           patent owner, taking account of the legitimate interests of third
           parties.

           USTR contended that such a broad reinterpretation of article 30
           allowing members to amend their patent laws to permit compulsory
           licenses would unreasonably conflict with patent owners' normal
           exploitation of patents and with their legitimate interests.
           Furthermore, unlike article 31, article 30 contains no procedural
           safeguards, such as requirements for notifying a patent owner of
           use, establishing terms and conditions, or remuneration to the
           patent holder. USTR stated that creating an exception through
           article 30 was hard to defend legally as being consistent with
           TRIPS. Moreover, it contended that there was too much danger that
           such an exception would be misused and thus subject to dispute
           settlement challenge.
			  
			    WTO Members Disagreed on Countries Covered under Paragraph Six

           The question of which countries should be able to take advantage
           of a paragraph six solution also provoked controversy. Basically,
           the United States and other WTO members with large name-brand
           pharmaceutical industries, including the EU and Switzerland,
           wanted the paragraph six solution to focus on developing and least
           developed countries lacking pharmaceutical manufacturing capacity
           as importing beneficiaries. The United States wanted to establish
           specific procedures to clarify which developing country members
           could be considered to have insufficient or no manufacturing
           ability, and thought it inappropriate to extend the solution to
           developed countries or to countries that had manufacturing
           capacity but chose not to manufacture certain drugs based on
           policy, economic, or other reasons. WTO officials told us they
           tried to collect data on manufacturing capability, but could find
           none. Ultimately, the 2003 Council Decision required importing
           countries to explain how they had no or insufficient manufacturing
           capacity for the product in question.

           After facing strong resistance from other WTO members, the United
           States did not insist on a specific list of eligible countries.
           However, the United States maintained that not every member
           country should be able to use a paragraph six solution, and
           suggested that some members, such as OECD countries and certain
           developing countries opt out. WTO officials told us that the
           United States put pressure on many countries to opt out. In the
           end, 23 developed countries agreed to opt out, and the 10
           countries soon to join the EU partially opted out, with agreement
           to opt out completely after they joined the EU. Finally, some
           other WTO members agreed that they would only use the system as
           importers in situations of national emergency or other
           circumstances of extreme urgency.^21
			  
^21To quote the chairman's statement on the General Council decision on
the implementation of paragraph 6: "The following Members have agreed to
opt out of using the system as importers: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany, Greece, Iceland, Ireland,
Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal,
Spain, Sweden, Switzerland, United Kingdom and United States of America.
Until their accession to the European Union, Czech Republic, Cyprus,
Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and
Slovenia agree that they would only use the system as importers in
situations of national emergency or other circumstances of extreme
urgency. These countries further agree that upon their accession to the
European Union, they will opt out of using the system as importers. Some
other Members have agreed that they would only use the system as importers
in situations of national emergency or other circumstances of extreme
urgency: Hong Kong (China), Israel, Korea, Kuwait, Macao (China), Mexico,
Qatar, Singapore, Chinese Taipei, Turkey, United Arab Emirates."
			  
			    United States Had Difficulty Joining Consensus on Paragraph Six
				 concerning Diseases

           The other controversial issue was the scope of diseases to be
           covered under paragraph six of the declaration. In November and
           December 2002, the United States said that it was willing to join
           the consensus on all of a paragraph six solution draft except for
           language on the scope of diseases. The United States, the EU, and
           Japan wanted coverage limited to the diseases mentioned in
           paragraph one of the declaration, namely "HIV/AIDS, TB, malaria
           and other epidemics" of potentially pandemic proportions. Others,
           including Brazil and Argentina, disagreed and wanted no
           restrictions on diseases. According to WTO officials, some WTO
           members discussed using either paragraph one or paragraph
           four-"access to medicine for all"-of the declaration to address
           the scope of diseases, and settled on the former after being
           reassured that the declaration did not restrict itself to specific
           diseases. According to WTO officials, in April 2003, the new TRIPS
           Council Chair, Singapore, conferred with the United States and the
           U.S. pharmaceutical industry, drafted a new paragraph six text,
           and led negotiations among a few members--namely, South Africa,
           Kenya, Brazil, India, and the United States. USTR officials noted
           that this group of countries represented the spectrum of views on
           this debate. The final text contained no specifics on diseases,
           but relied on paragraph one of the declaration.
			  
			    The Chairman's Statement Was a Key Condition to U.S. Support of\
				 the Paragraph Six Solution

           USTR officials emphasized that the United States ultimately
           conditioned its consensus with a paragraph six solution on a
           statement by the chairman of the General Council that signaled
           that diversion was a key issue.^22 WTO members generally agreed
           diversion should be prevented to ensure that drugs provided under
           the paragraph six solution went where intended. The separate
           statement by the General Council chairman was designed to
           alleviate fears that the decision might be abused and undermine
           patent protection or not effectively prevent drugs from being
           diverted. The General Council chairman stated that, before
           adopting the decision, he wanted to place on the record "this
           Statement which represents several key shared understandings of
           Members regarding the Decision to be taken and the way in which it
           will be interpreted and implemented." He went on to state that
           members recognize that the purpose of the decision would be
           defeated if products were diverted from the markets for which they
           were intended, and that all reasonable measures should be taken to
           prevent such diversion. In addition, the chairman listed the WTO
           members that had agreed to opt out of using the system as
           importers.
			  
			  USTR Believes the 2003 Council Decision Was a Positive One, but
			  Some WTO Members Have Expressed Concerns since the Decision

           Ultimately, the outcome of the nearly 2-year debate over a
           paragraph six solution was the adoption of the 2003 General
           Council Decision in light of the General Council chairman's
           statement. The decision waived the prohibition in TRIPS article
           31(f) against exporting under a compulsory license to countries
           that cannot manufacture the pharmaceuticals themselves. USTR
           officials told us they considered it a positive outcome in that it
           provided a solution to the problem identified in paragraph six of
           the Doha Declaration, while preserving TRIPS rules and
           obligations.

           Other WTO members initially supported the outcome, but expressed
           some concern later. For example, the African Group suggested at a
           March 2005 meeting of the WTO TRIPS Council that the burden of
           using the decision was the reason why, up to that point, the 2003
           Council Decision had not been used by a country to waive TRIPS
           rules and import generic versions of patented drugs under a
           compulsory license. One WTO representative told us more recently
           that he considered the waiver too complicated, calling the
           packaging and labeling requirements costly and draconian because
           of the need to change production lines.
			  
^22For the purposes of this report, diversion is the importation and
resale of pharmaceuticals intended for use in another country. A typical
example might involve pharmaceuticals donated to a relief organization in
a poorer country that make their way into developed nations for sale at a
substantial markup. Diversion presents its practitioners with
opportunities to generate illegitimate profits by diverting drugs from
their intended recipients whenever pharmaceutical companies distribute
high value drugs at below market prices.

           Under the waiver, countries can produce generic copies of patented
           products under compulsory licenses to export to eligible importing
           countries, subject to certain requirements and safeguards. The
           terms of the waiver are summarized below:

           Importing members:

                        o Notify TRIPS Council: names, expected quantities,
                        of drug.

                        o Other than least developed countries, establish
                        insufficient or no manufacturing capacities for the
                        product in question.

                        o Take reasonable measures within their means, with
                        possible assistance from developed country members,
                        to prevent exportation elsewhere (diversion).

                        o If product is patented in its territory, must grant
                        or intend to grant a compulsory license in compliance
                        with TRIPS Article 31.

                                     o Remuneration waived if product is
                                     provided by exporting country.

                                     o Make a determination of a national
                                     emergency, other circumstances of
                                     extreme urgency, or a case of public
                                     noncommercial use.

           Exporting members:

                        o Export only amount necessary to meet needs of
                        eligible importing member.

                        o Export entirety of product produced under
                        compulsory license to the eligible importing
                        member(s) that has notified the TRIPS Council.

                        o Label product to identify it as being produced
                        under the system established by the decision.

                                     o Package and color uniquely, provided
                                     such distinction is feasible and does
                                     not significantly affect price.

                        o Publicize on a designated Web site distinguishing
                        features and quantities of medicine exporting.

                        o Notify TRIPS Council: name of licensee, products,
                        country to be supplied, and duration of license.

                        o Adequately remunerate patent holder in the
                        exporting member.

           All WTO members:

                        o Ensure the availability of effective legal means to
                        prevent the importation of products produced under
                        the system established by the decision and diverted
                        to their markets.

           According to USTR, in July 2004, the United States and Canada
           agreed to suspend applications, as between themselves, of a
           provision of the North American Free Trade Agreement (NAFTA) that
           parallels Article 31 (f) of the TRIPS agreement in order to ensure
           that Canada could export drugs under the terms of the 2003 Council
           Decision without violating NAFTA. The first and only WTO member to
           date to notify the WTO TRIPS Council of its intent to use a
           paragraph six solution was Rwanda, in July 2007.
			  
			  General Council Issued 2005 Decision to Consider Amending the TRIPS
			  Agreement, after Some Difficulties

           Debate at the WTO over the 2003 Council Decision still continued
           for another 2 years. In response to a call by some WTO members,
           principally driven by the African Group, to express the 2003
           Council Decision in an amendment to TRIPS as a more permanent
           solution, the 2003 Decision also called for WTO members to prepare
           an amendment to replace the decision. As a result, the General
           Council issued a decision on December 6, 2005, adopting a protocol
           amendment that is open for members to accept. It will become
           effective once the amendment is accepted by two thirds of the WTO
           membership. Thus far, eight WTO members have accepted the
           amendment, including the United States, Switzerland, El Salvador,
           the Republic of Korea, Norway, India, the Philippines, and Israel.

           The drafting of the amendment turned into another 2-year struggle.
           According to USTR, the United States wanted to ensure that
           agreements made under the 2003 Council Decision were not changed
           in the amendment. To do this, USTR proposed to include the
           chairman's statement as a footnote to the amendment. WTO members
           discussed the possible legal weight of a footnote. According to
           USTR, some members felt attaching the chairman's statement as a
           footnote might give it too much legal weight. In addition, some
           members wanted to make changes to the original 2003 Decision in
           the amendment. Eventually, the footnote was dropped and the
           members agreed to have the chairman's statement read orally,
           similar to the scenario followed in adopting the 2003 Council
           Decision. Despite losing the footnote, the United States believed
           it had achieved the delicate balance of preserving the solution
           agreed to under the 2003 Council Decision while promoting access
           to medicine with safeguards against diversion.
			  
			  USTR Has Maintained Its Pursuit of High IP Standards and Made Some
			  Allowances for Doha Flexibilities in Negotiating FTAs

           In negotiating FTAs, USTR said it balances respect for the Doha
           Declaration with its other two IP negotiating objectives in TPA by
           consistently promoting high standards of IP protection similar to
           U.S. law, while making allowances for the two specific
           flexibilities mentioned in the declaration. For example, USTR
           makes concessions to developing countries on compulsory licensing
           and parallel importing provisions specifically cited in the
           declaration. However, USTR has continued to pursue other
           pharmaceutical-related IP provisions that it does not see as
           relevant or contrary to the Doha Declaration in all of its FTAs,
           such as data exclusivity, patent term extensions, and patent
           linkage. Reactions to USTR's approach have been mixed. The
           pharmaceutical industry supports the inclusion of these
           protections in FTAs because it believes they are central to
           maintaining incentives for investment in research and development
           of new drugs. Some experts and public health advocates have raised
           concerns that USTR's approach hinders generic competition,
           reducing access to medicines and thus violating the principles of
           the declaration. Finally, certain Members of Congress have
           expressed concern over the pharmaceutical-related IP provisions in
           FTAs with developing countries, and this concern was recently
           addressed through a bipartisan compromise between Congress and the
           administration.
			  
			  USTR Believes That Strong IP Protection and Increased Market Access
			  Promotes Public Health, and Thus Respect for the Doha Declaration

           USTR has three principal negotiating objectives related to IP
           rights when negotiating FTAs with other countries. The Trade Act
           of 2002, which granted the President Trade Promotion Authority
           (TPA), contains guidance from Congress on U.S. negotiating
           objectives for trade agreements, including three goals on IP
           rights:^23

                        1. to further promote adequate and effective
                        protection of IP rights, including through ensuring
                        that the provisions of any multilateral or bilateral
                        trade agreement governing IP rights that is entered
                        into by the United States reflect a standard of
                        protection similar to that found in United States
                        law;
                        2. to secure fair, equitable, and nondiscriminatory
                        market access opportunities for United States persons
                        that rely upon IP protection; and
                        3. to respect the Doha Declaration on the TRIPS
                        Agreement and Public Health, adopted by the World
                        Trade Organization (WTO).

^2319 U.S.C. S3802.

           USTR officials explained that USTR believes it can simultaneously
           pursue policies that advance the first two objectives of promoting
           IP rights and securing market access, while fulfilling the third
           objective to respect the Doha Declaration. Specifically, the
           officials noted that in order to pursue the first two objectives
           in FTAs, USTR officials have negotiated high levels of IP
           protection in FTAs that reflect standards of protection similar to
           U.S. law, and build on the minimum standards in TRIPS. USTR
           officials stated that they pursue the second objective of securing
           market access for persons who rely on IP protection by ensuring
           that products benefit from the increased protection and market
           access in the FTAs. For example, USTR officials noted that FTAs
           with more developed countries have regulatory provisions for
           pharmaceuticals and medical devices on market approval, price
           controls, and reimbursement policies. USTR sees no inherent
           conflict between active pursuit of TPA's first two objectives of
           promoting IP protection similar to U.S. law and market access
           opportunities, and the third objective of respecting the Doha
           Declaration, but rather considers these objectives complementary.
           USTR officials stated that USTR's view is that IP rights
           ultimately enhance public health by promoting innovation for new
           medicines and that therefore this approach is consistent with the
           Doha Declaration.
			  
			  USTR Pursues a Menu of Pharmaceutical-Related IP Provisions in FTA Negotiations

           In response to the objectives laid out in TPA, USTR officials
           noted that they have pursued a menu of pharmaceutical-related IP
           provisions in its FTAs, including restrictions on compulsory
           licensing and parallel imports, and requirements to provide data
           exclusivity, patent term extensions, and patent linkage. Some of
           these pharmaceutical-related IP provisions go beyond the minimum
           levels of protection outlined in TRIPS, provoking complaints from
           some that they violate the principles and spirit of the Doha
           Declaration. However, USTR considers them consistent with its
           interpretation of the declaration's intent and meaning and with
           TPA guidance.

           The FTA pharmaceutical-related IP provisions, to the extent that
           they are similar across the FTAs, have been summarized below.
           However, it is important to note that variations across the
           provisions exist and have not been presented in these summaries.
           Moreover, not every FTA reviewed contained every provision
           summarized below.

           Compulsory Licensing: Generally, provisions on compulsory
           licensing limit the ability of a country to issue a compulsory
           license to a few specific scenarios: to remedy anticompetitive
           practices in cases of public noncommercial use, in cases of
           national emergency, or other circumstances of extreme urgency.

           Parallel Imports: Generally, provisions on parallel importation
           require the country to preserve the patent owner's exclusive right
           to sell or import its product in the country in a variety of
           contexts.

           Data Exclusivity: Generally, data exclusivity provisions state
           that a generic company cannot obtain marketing approval based on
           the safety and efficacy data of the innovator company for a period
           of at least 5 years from the date marketing approval was granted
           to the innovator. Thus, this provision provides the innovator 5
           years of effective marketing exclusivity, unless the generic firm
           produces its own safety and efficacy data with new drug trials.

           Patent Term Extensions: Generally, patent term extension
           provisions require the country to provide a patent term extension
           to the patent owner to compensate for unreasonable delays in
           granting the patent, or for unreasonable curtailment of the
           effective patent term as a result of the marketing approval
           process.

           Patent Linkage: Generally, provisions on patent linkage establish
           a relationship between the market approval process of generic
           drugs and the patent status of the originator product. Under this
           relationship, the governmental body responsible for granting
           market approval prevents third parties from making or selling
           copies of patented products without the authorization of the
           patent holder by withholding marketing approval until either the
           expiration of the patent or a determination by a governmental
           body, either executive or judicial, that the patents are either
           not infringed, invalid or unenforceable. In addition, the identity
           of the generic company requesting marketing approval must be made
           available to the patent owner.

           Patent term extensions and patent linkage are two examples of
           pharmaceutical-related IP provisions the United States negotiates
           for in FTAs that go beyond the minimum obligations in the TRIPS
           agreement. TRIPS article 33, which lays out the term of protection
           for a patented product, states that "the term of protection
           available shall not end before the expiration of a period of
           twenty years counted from the filing date." There is no mention of
           patent term extensions to make up for delays in the patent or
           marketing approval process in the TRIPS agreement. Nevertheless,
           these patent term extension provisions exist in U.S. law^24 and
           according to USTR officials are negotiated by USTR in FTAs. In
           addition, there is no mention of coordination between the health
           regulatory authority and the patent granting office, known as
           patent linkage, in the TRIPS agreement. However, U.S. law does
           establish linkage between the FDA drug approval process of
           generics and the patent status of the originator product,^25 and
           USTR believes that such linkage is important to restrict marketing
           of infringing copies of patented drug products.

           Whether FTA provisions on data exclusivity go beyond TRIPS is less
           clear. TRIPS article 39(3) states that members who require the
           submission of undisclosed test data as a condition of marketing
           approval for a pharmaceutical or agricultural chemical product
           shall protect the data from unfair commercial use and disclosure.

           TRIPS Article 39(3)

           Members, when requiring, as a condition of approving the marketing
           of pharmaceutical or of agricultural chemical products which
           utilize new chemical entities, the submission of undisclosed test
           or other data, the origination of which involves a considerable
           effort, shall protect such data against unfair commercial use. In
           addition, Members shall protect such data against disclosure,
           except where necessary to protect the public, or unless steps are
           taken to ensure that the data are protected against unfair
           commercial use.

           There are different interpretations of the obligations under TRIPS
           39(3), and exactly what practices can be considered a fulfillment
           of this obligation. One interpretation of TRIPS 39(3) requires
           members to grant the originator of the data a period of exclusive
           use similar to that provided by data exclusivity laws in the
           United States. Under this interpretation, FTA provisions do not go
           beyond TRIPS. Others do not believe that Article 39(3) of TRIPS
           confers exclusive rights, but instead simply requires countries to
           prevent third parties from using the originators' data for unfair
           commercial purposes. This interpretation suggests that the FTA
           provision goes beyond the TRIPS requirement.
			  
^24See 35 U.S.C. S 156.

^25See 21 U.S.C. S 355.

           USTR Has Made Limited Concessions on Doha Declaration Flexibilities

           USTR officials stated that they did not change the initial demands
           USTR makes in FTA negotiations as a result of the Doha
           Declaration. However, they argued that USTR follows TPA guidance
           to respect the Doha Declaration by making concessions during
           negotiations with what it considers to be developing countries on
           the two TRIPS flexibilities specifically mentioned in the
           declaration. USTR officials told us that when developing country
           trading partners raise concerns during FTA negotiations about
           provisions that would restrict the use of parallel imports or
           compulsory licensing, USTR ultimately backs off and removes them
           from the proposed text; however, they stated that no such
           concessions were made for countries that USTR considered developed
           countries. A USTR official said that developed countries have more
           tools and resources with which to deal with public health
           situations and that they should not have to revert to such
           extraordinary measures outside of the cases specified in FTA
           provisions, such as national emergencies. Restricting these
           concessions to developing countries is in line with USTR's belief
           that the Doha Declaration is intended to apply primarily to
           developing countries with limited resources.

           USTR also attaches side letters on public health to FTAs with
           developing countries.^26 Our analysis in figure 2 shows that 7 of
           the 11 agreements include a side letter or understandings on
           public health.^27 USTR officials noted that they use the side
           letters to further clarify that the provisions of the agreement
           leave intact a series of methods a country can use to respond to
           public health emergencies.^28 However, according to a USTR
           official, these side letters do not create exceptions to the
           provisions in the FTA.
			  
^26The side letters on public health generally state that the obligations
under the IP chapter do not affect a Party's ability to take necessary
measures to protect public health by promoting access to medicines for
all, in particular concerning cases such as HIV/AIDS, tuberculosis,
malaria, and other epidemics as well as circumstances of extreme urgency.
The side letters also generally state that the obligations under the IP
chapter do not prevent the effective utilization of the TRIPS/health
solution. For specific wording, see the Colombia, Bahrain, Oman, Morocco,
CAFTA-DR, Peru, and Panama free trade agreements and associated side
letters.

^27Not captured in this number are other statements on public health in
the FTAs such as in the preamble of the Chile FTA IP chapter that states,
"Recognizing the principles set out in the Declaration on the TRIPS
Agreement on Public Health, adopted on November 14, 2001, by the WTO at
the Fourth WTO Ministerial Conference, held in Doha, Qatar." According to
USTR officials, such a statement is part of the interpretive context of an
FTA.
			  
Figure 2: FTA Pharmaceutical-Related IP Provisions and Side Letters Matrix

Note: Per capita income based on purchasing power parity (PPP) exchange
rate is from International Monetary Fund's staff estimates for 2006. Per
capita income for CAFTA-DA is an average for the region, which is total
PPP-based Gross Domestic Product (GDP) for the region divided by total
population for the region using UN estimates.

^28The side letter on public health constitutes a formal understanding
that forms part of the interpretive context of a signed/implemented FTA as
described in the Vienna Convention on the Law of Treaties, Article 31.

USTR told us that some differences in the IP provisions among FTAs
represented accommodations made to countries raising specific concerns
during negotiations. For instance, USTR officials stated that, in the
Central America-Dominican Republic-United States Free Trade Agreement
(CAFTA-DR), a transition period was included for the implementation of
patent term extensions. In the CAFTA-DR agreement, USTR dropped a proposal
for data exclusivity protection on new uses of previously discovered
chemical entities, and instead left data exclusivity in place only for new
chemical entities. In addition, USTR revised the proposed provision on
patentable subject matter in the Oman agreement in order to exclude plants
and animals from patent protection in response to Oman's concerns. USTR
officials said that most concerns raised during negotiations regarding
data exclusivity and patent linkage were not couched as health concerns,
but rather as unease related to administrative burden or implementation
concerns. When these types of implementation concerns are raised during
negotiations, USTR said it consults with the U.S. agencies responsible for
implementing those provisions in the United States, PTO, and FDA.

USTR officials stated that USTR considers the remaining pharmaceutical IP
provisions on data exclusivity, patent linkage, and patent term extension
a central part of its strategy of pursuing the first two IP negotiating
objectives, while it does not see these provisions as being specifically
addressed by the Doha Declaration. Therefore, USTR officials noted that
these three provisions are pursued universally by USTR in all of its FTAs.
USTR officials noted that these provisions are very important for
providing protection similar to that found in U.S. law and for maintaining
incentives for the pharmaceutical industry. USTR officials explained that
USTR does not believe that these three provisions are considered
flexibilities under the Doha Declaration, and therefore sees no conflict
between pursuing them and respecting the Doha Declaration. USTR officials
noted that USTR maintains that these provisions do not restrict a
country's ability to protect public health.

The pattern of IP provisions negotiated in the 11 FTAs completed to date
confirms USTR's stated negotiating strategy. Figure 2 demonstrates that
data exclusivity, patent term extension, and patent linkage provisions are
found in all 11 of the FTAs concluded under TPA, regardless of the
development level in the country. Pursuing these provisions also confirms
USTR's stated strategy of seeking high IP standards related to
pharmaceuticals in trade negotiations. On the other hand, figure 2
indicates that IP provisions on compulsory licensing are found in only 2
of 11 completed FTAs, those with Singapore and Australia, both of which
USTR considered developed countries. Only 3 of 11 FTAs--Singapore,
Australia, and Morocco--contain provisions on parallel imports. Although
Morocco is considered a developing country, USTR officials explained that
Morocco decided in 2000, well before the onset of negotiations, not to
permit parallel imports. Therefore, USTR officials stated that the
parallel importation provision reflected what was already provided in
Moroccan law.

The Pharmaceutical Industry Supports USTR's Insistence on Data Exclusivity,
Patent Linkage, and Patent Term Extensions, but Others Contend These Provisions
Contradict the Principles of the Declaration

Reactions to USTR's approach to pursuing its TPA objectives in negotiating
FTAs have been mixed, with controversy centered on the three key
provisions of data exclusivity, patent linkage, and patent term
extensions. The pharmaceutical industry stated that it supports the
inclusion of these provisions in FTAs because it believes they maintain
incentives for research and development. However, some experts and public
health advocates have raised concerns that USTR's approach delays generic
competition and reduces access to medicines. Therefore, they believe that
USTR's strategy violates the principles and goal of the Doha Declaration.

  The Pharmaceutical Industry Considers Data Exclusivity, Patent Linkage, and
  Patent Term Extensions Key Provisions

Pharmaceutical industry representatives stated that data exclusivity is a
very important IP protection that provides incentives to innovate and
invest in certain markets. Data exclusivity grants a company the exclusive
use of its safety and efficacy test data, necessary to obtain marketing
approval, for a fixed period after the marketing launch. Data exclusivity
is one method by which the innovator company can recoup the costs involved
with conducting clinical tests necessary for marketing approval, as well
as the considerable costs associated with developing a new drug. Industry
representatives explained that they consider patent protection and data
exclusivity to be separate but complementary protections. Both can
generally provide a period of exclusivity. Consequently, data exclusivity
may effectively grant another layer of market exclusivity for the new
product. Figure 3 contains three scenarios of how the periods of data
exclusivity and patent protection can interact to create market
exclusivity under U.S. law.

Figure 3: Data Exclusivity and Patent Protection, Three Possible Scenarios

Some time after the initial drug development takes place, the company
applies for a patent and the 20-year patent term begins. During the patent
term, the company completes all of the drug trials necessary to obtain the
safety and efficacy data needed for marketing approval by the FDA. After
approval is granted, the company can begin marketing its drug, and the set
period of data exclusivity period begins. Industry representatives noted
that the data exclusivity period generally is concurrent with the patent
period and therefore does not add any additional period of effective
market exclusivity, as shown in the first scenario in figure 3. However,
as shown in the second scenario, if marketing approval is obtained further
into the patent term, the 5-year data exclusivity period, which begins
when marketing approval is granted, can extend beyond the term of the
patent. As shown in the third scenario, when no patent protection exists,
data exclusivity effectively provides the entire market exclusivity
period.

Pharmaceutical industry representatives stated that the first scenario is
the most typical, with the data exclusivity running concurrently with
patent protection. However, they noted that there are many instances in
which companies do not obtain patents on their products (particularly for
small markets), or patent protection is inadequate or poorly enforced. In
these situations, data exclusivity ensures the innovator company a 5-year
period of market exclusivity. The pharmaceutical industry believes that,
in cases in which there is no patent or very little patent life remains
when the drug first enters the market, data exclusivity is critical
because without an effective market exclusivity period, incentives to
research and develop new drugs are diminished.

Pharmaceutical industry representatives have also advocated for patent
term extensions in FTAs. It is common for a substantial portion of the
patent life to be spent running drug trials. Therefore, the industry
argues that patent term extensions ensure that innovators get enough time
to recoup their costs and maintain the incentives for future innovation.
In addition, industry representatives noted that, in many developing
countries, the delays associated with getting a patent or obtaining
marketing approval for a new drug can be far more extensive than in the
United States. They argue that, under these circumstances, it is even more
critical that a safeguard mechanism exists to ensure that these delays do
not undermine the intentions of patent protection.

Patent linkage is also considered important by the pharmaceutical
industry. Patent linkage provisions in the FTAs provide for delay of
marketing approval if a generic drug product is covered by an unexpired
patent. Pharmaceutical companies claim that generic companies routinely
launch patent-infringing products during the life of a patent in many
developing countries and that patent linkage would help to minimize this
problem.

  Some Experts and NGOs Believe USTR's Continued Promotion of Data Exclusivity,
  Patent Term Extensions, and Patent Linkage Conflicts with the Principles of
  the Doha Declaration

Some experts and NGOs believe that these provisions impair access to
medicines and therefore are contrary to the "spirit" of the Doha
Declaration and TPA guidance. These NGOs, academics, and generic
pharmaceutical producers believe that these provisions limit generic
competition, thereby maintaining high prices for pharmaceutical products,
ultimately impairing access to medicines. These concerns have been
extensively discussed and documented by academics, international
organizations, think tanks, NGOs, and public health groups. Since many FTA
partners implemented these pharmaceutical-related IP provisions for the
first time very recently, it is difficult to identify the tangible effect
of these provisions. However, these groups believe that the inclusion of
these provisions has the potential to decrease public health and therefore
is contrary to the spirit and principles and goal of the Doha Declaration.

Many NGOs argue that the data exclusivity provisions included in U.S. FTAs
will damage access to medicines and public health and worry that there
might be instances where the data exclusivity period could extend beyond
the length of the patent term, as in figure 3, scenario 2. This data
exclusivity period effectively delays entry of generics onto the market,
thereby maintaining monopoly prices for a longer period of time. While
some NGOs recognize that it would be rare for the data exclusivity period
to extend beyond the patent term, they are worried that if this situation
occurs, generic competition will be delayed because of the presence of
data exclusivity. In addition, where the innovator of a new drug did not
obtain a patent in that country, either because it did not apply or
because the new drug was not patentable, data exclusivity will effectively
give the innovator a patent-like period of marketing exclusivity for the
entire period of data exclusivity, from the time marketing approval is
granted (see figure 3, scenario 3). NGOs are also concerned that data
exclusivity provisions might prevent the marketing of generic drugs
produced under a compulsory license. For instance, if a compulsory license
is granted to a generic producer, but that producer is not able to rely on
the data generated by the innovator company to obtain needed marketing
approval, it will not be possible to distribute the drugs under a
compulsory license.

Some experts and NGOs are also concerned that variations in the data
exclusivity periods across countries could further delay generic entry. An
FTA partner country must normally provide 5 years of data exclusivity to
the innovator once the product receives marketing approval.^29 If the
innovator waited to apply for marketing approval in the FTA partner
country, thereby delaying the start date of its market exclusivity period,
it would effectively extend the overall market exclusivity period beyond
the intended 5 years. Some FTAs have addressed this issue by specifying
that a country may require the innovator to apply for marketing approval
in its country within a specified period of time. For instance, in the
CAFTA-DR agreement, at their request, a Party may require that the
innovator seek marketing approval in that Party within 5 years after
obtaining marketing approval in any other territory in order to receive
data exclusivity. This way, the innovator company can only delay the start
date of its data exclusivity period by a fixed period of time.

Patent term extension provisions in FTAs have also led to questions about
their effect on access to medicines. Many NGOs and generic pharmaceutical
producers believe that the 20-year patent term in TRIPS creates a balance
between access and innovation and that extending the patent period would
have a detrimental effect on generic competition. They are also concerned
that the patent term extension provisions in U.S. FTAs do not contain the
same limits present in U.S. law. For instance, under U.S. law, innovators
cannot receive more than 14 years of patent protection through a patent
term extension after they have received market approval, and in any case,
the maximum period of extension determined on the basis of the regulatory
review period cannot exceed 5 years. This limit on patent term extensions
is not present in FTAs.

Some also assert that patent linkage might negatively affect access to
medicines. The patent linkage process in the United States involves
numerous steps and actors, designed to enable resolution of patent
disputes before marketing approval is granted for a generic drug product.
As shown in figure 4, this linkage system places the burden on the private
companies, not the regulatory authority, to monitor the patent system.

^29The Chile, Singapore, Australia, Morocco, Bahrain, CAFTA-DR, Oman, and
Republic of Korea FTAs state that 5 years of data exclusivity are to be
provided. The Peru, Colombia, and Panama FTAs will require the provision
of data exclusivity for a reasonable amount of time and state that a
reasonable amount of time normally means 5 years.

Figure 4: Patent Linkage Process in the United States

Specifically, the U.S. patent linkage system puts the onus on the generic
company producer to provide information on the applicability of an
existing patent to the drug product for which it is seeking marketing
approval. If the generic company decides to challenge the patent, it must
notify the patent holder within a specified period of time in order to
give the patent holder the chance to sue and defend the patent in the
courts. When the patent litigation is resolved, the FDA can grant
marketing approval to the generic company if the patent is overturned, and
may be obliged to wait until the patent expires if the generic drug
product is found to infringe the patent and the patent is not found to be
invalid. NGOs and generic pharmaceutical producers are concerned that
developing countries do not have the same set of protocols laid out in the
FTA agreement or in their laws, and that this will ultimately affect
access to medicines. Generic pharmaceutical representatives argue that
countries might experience regular abuses and delays in the introduction
of generic drugs if they are unable to institute an effective linkage
process.

Congressional Concern over IP Provisions and Access to Medicines Addressed in
Bipartisan Trade Deal

Certain Members of Congress have expressed concern over the
pharmaceutical-related IP provisions in FTAs with developing countries,
and this concern was recently addressed through a bipartisan compromise
between Congress and the administration. Through letters and
correspondence with USTR, certain Members emphasized the need to better
balance IP protection for pharmaceuticals with the promotion of access to
affordable medicines, including through robust generic competition. These
Members expressed unease over the balance achieved in the FTAs negotiated
by USTR to date--specifically, the impact of the pharmaceutical-related IP
provisions in FTAs on developing countries. These Members urged USTR to
ensure that the FTA provisions do not restrict the availability of generic
competition and put affordable health care at risk. In response to these
concerns, in May 2007, Members of the congressional leadership agreed on a
bipartisan compromise with the administration to revise four of the
recently negotiated FTAs, in order to alter provisions pertaining to a
variety of areas, including IP provisions and access to medicines.

The bipartisan trade deal reached between Congress and the administration
in May 2007 stipulated that certain disputed IP provisions in FTAs with
Peru, Colombia, Panama, and Korea be revised prior to submission of the
agreements for congressional approval, by USTR and the trading
partners.^30 According to USTR officials, the agreement preserves a strong
overall level of IP protection in the FTAs, while incorporating
flexibilities aimed at ensuring that trading partners are able to achieve
the appropriate balance between innovation and promoting access to
medicines. Specifically, USTR revised the FTAs with Peru, Colombia,
Panama, and Korea to include a reference to the Doha Declaration and the
ability of each country to protect public health in the body of the
agreement, instead of in a side letter. In addition, the data exclusivity
provision in each of these agreements was revised to provide an exception
for public health.

The agreements with Peru, Colombia, and Panama were revised further to
alter the language of provisions on patent term extensions, patent
linkage, and data exclusivity. A USTR official stated that USTR and
Congress decided that these additional changes would not be applied to the
Korea FTA in view of Korea's relatively higher level of economic
development. These additional changes to the Peru, Colombia, and Panama
agreements revised the provisions on patent term extensions and patent
linkage in order to provide more flexibility for trading partners in
implementing these provisions. In addition, the data exclusivity provision
was revised further to ensure that, in some circumstances, the data
exclusivity period in those countries would not extend beyond the period
of data exclusivity provided in the United States. These changes were
renegotiated and finalized by USTR in June 2007.

^30The bipartisan trade deal also included agreements and amendments on a
variety of other areas in these FTAs, including labor standards,
environmental standards, government procurement, port security, and
investment.

USTR Is Implementing and Overseeing Trade Agreements in a Manner Consistent with
Its Overall Approach of Promoting High Standards concerning IP Rights

USTR's approach to implementing and overseeing pharmaceutical-related IP
provisions is consistent with its overall negotiating strategy pursued in
FTAs. Before a signed FTA can go into force, the President determines,
with USTR's advice, whether the FTA partner has met all obligations,
including, when appropriate, changes in laws and regulations. As part of
this process of advising the President on the determination that he is
required to make under U.S. implementation legislation for FTAs, USTR has
vigorously pursued FTA partners' implementation of pharmaceutical
provisions related to data exclusivity, patent term extension, and patent
linkage. In fact, in some cases, USTR has continued to work with countries
after the agreement has entered in force. For example, USTR is still
working with Chile to ensure that its data exclusivity provisions are
implemented in a manner consistent with the Chile FTA.

In its broader role of annually identifying countries that deny adequate
and effective protection of IP rights, USTR has frequently raised data
protection and patent linkage, in keeping with its strategy of gaining
high levels of IP protection for pharmaceutical products, similar to U.S.
law. With regard to the Doha Declaration flexibilities, USTR has not
generally pressed for restrictions on compulsory licensing and parallel
imports in its Special 301 reports. Furthermore, USTR has had a measured
response to cases to date of countries actually issuing compulsory
licenses. For example, when Thailand recently issued a compulsory license,
USTR acknowledged its right to do so and thus far is restricting its
criticism to a lack of transparency in the process.

USTR Reviews Compliance with FTA Obligations before Agreements Enter into Force

One USTR official noted that USTR oversees FTA partners' implementation of
the pharmaceutical-related IP provisions agreed to in the FTA in order to
ensure that the negotiated standards are implemented as intended. In order
for an agreement to enter into force, the President determines with the
advice of USTR whether the FTA partner has met all obligations. A USTR
official explained that USTR works with the trading partner to ensure that
its IP laws are aligned with the provisions agreed to in the FTA. The USTR
official further explained that, at the start of the implementation
process, the trading partner provides USTR a comprehensive list of its
laws related to each provision in the IP chapter of the FTA. The trading
partner also provides USTR a list detailing the intended legal changes
necessary to bring its laws into compliance with the agreement. USTR
reviews the laws and proposed changes and provides the trading partner
with comments regarding their degree of compliance. USTR monitors the
changes in the other country, and has numerous exchanges with the trading
partner on any legal changes necessary. One USTR official stated that they
are careful to ensure that the agreement is implemented exactly as it was
negotiated. For example, in response to Guatemala's proposal to have an
exception to data exclusivity written into its laws, USTR insisted that
this exception undercut the original obligations, and it was therefore
unwilling to accept the change.

A USTR official explained that when the legal changes are complete and
USTR is comfortable with the new legislation, USTR makes a recommendation
to the President for the agreement to enter into force. The administration
then makes a determination about the legal compliance before the agreement
can officially enter into force. USTR and other agencies also provide
technical assistance on implementing related IP provisions to FTA partner
and nonpartner governments. (See appendix II.)

USTR Vigorously Pursues Implementation of Data Exclusivity, Patent Term
Extension, and Patent Linkage

USTR focuses on a wide range of IP provisions including data exclusivity,
patent term extensions, and patent linkage during the FTA implementation
phase to ensure that U.S. trading partners are properly implementing and
enforcing pharmaceutical-related IP provisions. In 2005, Chile reformed
its data protection regime; however, a USTR official stated that USTR has
continued to monitor Chile's implementation of data exclusivity in
response to concerns raised by the pharmaceutical industry. Specifically,
USTR officials noted that Chile had added a requirement that, in order to
receive data exclusivity, companies must apply for marketing approval
within a year of doing so in other countries. USTR is also monitoring
Chile on specific issues with regard to the implementation of patent
linkage and patent term extensions. In particular, USTR is responding to
concerns that the Chilean health authorities issued a number of marketing
approvals of generic versions of drugs still under patent. Chile appears
to have no provision that would prevent such an approval from being issued
during the patent term. In addition, USTR noted that Chile has yet to
implement a law that would enact patent term extensions to compensate for
delays in marketing approval.

USTR Has Focused Attention on Data Protection and Patent Linkage in Its Special
301 Report

USTR officials noted that USTR regards the Special 301 report, which is
subject to different statutory requirements distinct from TPA,^31 as an
important tool for overseeing and evaluating the implementation and
adequacy of IP protection worldwide. USTR officials explained that USTR
considers all items that are related to the effectiveness and adequacy of
IP protection in its Special 301 report. They noted that in the Special
301 report there are considerations relevant to adequacy and effectiveness
that sometimes go beyond the minimum standards laid out in TRIPS. In fact,
there are many examples of situations discussed in the Special 301 reports
that are not specifically part of TRIPS. Thus, the Special 301 report
tracks progress of WTO member implementation of TRIPS and trading partner
implementation of FTAs, as well as how adequately countries are protecting
IP rights overall. While the Special 301 report focuses on a wide range of
IP protection issues related to copyrights, patents, and trademarks,
including piracy, counterfeiting, and enforcement, our analysis focuses
only on the pharmaceutical-related issues discussed in this report. Thus,
this analysis focuses only on the countries listed on the Special 301
report for which pharmaceutical-related issues were mentioned as a
concern, which represent only a subset of the issues discussed and the
total number of countries listed in the Special 301 reports over the years
2000-2007. (See table 1.)

^31See 19 U.S.C. SS 2242, 2412. Special 301 is a congressionally mandated
report that requires USTR to identify, within 30 days of the submission of
the annual National Trade Estimates report, foreign countries that (1)
deny adequate and effective protection of IP rights or fair and equitable
market access to U.S. persons that rely on IP protection, and (2), of
those countries identified in (1), priority countries. Priority countries,
as defined by law, are countries (1) that have the most onerous or
egregious acts, policies, or practices that deny adequate and effective IP
rights with the greatest adverse impact on the relevant U.S. goods, and
(2) that are not entering into good faith negotiations or making
significant progress in bilateral or multilateral negotiations to provide
adequate and effective IP protection. In making these identifications,
USTR takes into account the history of IP laws and practices of the
foreign country and the history of efforts of the United States, and the
response of the foreign country, to achieve adequate and effective
protection and enforcement of IP rights.

Table 1: Countries Listed in the Special 301 Report with Mention of
Pharmaceutical-related Issues Compared to All Countries Listed (2000-2007)

                                      2000 2001 2002 2003 2004 2005 2006 2007 
Total countries listed with                                                
mention of pharmaceutical-related                                          
issues                               17   21   21   23   37   32   31   27 
Total countries listed for all                                             
issues                               56   50   51   50   51   52   48   43 

Source: GAO analysis of Special 301 Reports.

Consistent with its emphasis in FTAs, our analysis of the Special 301
reports indicates that USTR focuses heavily on data protection in its
annual Special 301 reports. For countries listed in the Special 301
reports over the period 2000 through 2007 for whom pharmaceuticals was
cited as an issue of concern, data protection was mentioned in almost
every case. In fact, data protection is the most frequently mentioned of
all pharmaceutical issues in the Special 301 reports over that 8-year
period, appearing a total of 173 times. (See figure 5.)

USTRï¿½s focus on patent linkage is also similar to its negotiating strategy
in FTAs. The second most frequently mentioned pharmaceutical provision in
Special 301 reports from 2000 through 2007 is patent linkage, which is
mentioned 56 times. Pharmaceutical counterfeiting is also discussed
somewhat regularly in the Special 301 reports over this period, but not
as frequently as data protection or patent linkage.

USTR Has Only Infrequently Mentioned

There is limited mention of compulsory licensing or parallel imports in the
Special 301 reports. In the Special 301 reports from 2000 through 2007,
compulsory licensing regarding pharmaceuticals is only mentioned nine
times, while parallel importing related to pharmaceuticals is mentioned
only three times. While the IP objectives in TPA do not control the
coverage of the Special 301 reports, USTRï¿½s approach to these two
provisions referenced in the Doha Declaration seems similar. USTR
officials explained that USTR recognizes that the TRIPS agreement allows
countries some flexibility regarding the use of compulsory licenses and
parallel imports when protecting public health. By not mentioning these
provisions frequently in the Special 301 report, USTR acknowledges the
existence of these flexibilities, as highlighted in the Doha Declaration.
However, USTR officials also noted that the infrequency with which these
provisions are mentioned is due to the fact that the trading partners
rarely make use of these flexibilities.

USTR Has Acknowledged Thailand's Right to Issue a Compulsory License, but
Criticized Its Lack of Transparency

Thailand recently issued a compulsory license on a pharmaceutical product,
citing a public health need. In November 2006, Thailand issued a
compulsory license on a drug for treating HIV/AIDS, followed by two more
compulsory licenses issued in early 2007 for another HIV/AIDS drug and a
heart disease medication. These compulsory licenses are government-use
licenses issued under Thai law. The government of Thailand announced that
these decisions were aimed at improving access to essential medicines and
public health in Thailand. In addition, Brazil issued a compulsory license
for one of the same HIV/AIDS drugs in May 2007.

Public reaction to Thailand's and Brazil's actions has been mixed, with
some defending their right to issue a compulsory license and others
criticizing their actions as irresponsible. For instance, the
pharmaceutical industry believes that the compulsory licenses were
unnecessary and will ultimately negatively affect drug innovation, and is
concerned the licenses will set a precedent for similar actions. However,
many NGOs stated that they support countries like Thailand and Brazil
using their right to issue compulsory licenses in order to improve access
to medicines in their countries.

USTR's response to Thailand's and Brazil's issuance of compulsory licenses
has been more measured. USTR officials told us that in all speeches,
letters, and private conversations, USTR tried to recognize and convey
that Thailand has the ability to issue compulsory licenses. However, they
noted that, when issuing a compulsory license, it is important that the
issuer engage with all of the affected stakeholders, including patient
groups and patent holders, about the best way to meet public health needs.
In both the Brazil and Thailand cases, USTR has tried to focus on the
procedures and processes followed by the governments, rather than on the
validity of the licenses. USTR officials noted that, in general, they are
reluctant to insert themselves into price negotiations between governments
and the pharmaceutical industry, but that they will advocate for
transparency.

Although USTR mentioned both the Thai and possible Brazil cases of
compulsory licensing in the 2007 Special 301 report, the report limited
its criticism to issues of good governance. USTR officials noted that, at
the time the report was issued, all three compulsory licenses had already
been issued by Thailand, and that they believed the Brazilian compulsory
license was imminent. For example, in the Thai case, USTR was careful in
its report to recognize a country's ability to issue compulsory licenses
subject to WTO rules and the country's domestic laws. However, it
expressed concern about what it considered to be the lack of transparency
exhibited in Thailand, and emphasized the need for such transparency in
discussions with all relevant stakeholders in Brazil.

USTR officials stated that the decision to elevate Thailand from the watch
list in its 2006 Special 301 report to the priority watch list in 2007 was
based on broad IP concerns, not solely on its compulsory license decision.
They explained that there were many major IP concerns in Thailand and many
complaints that fueled their decision. In addition, they noted that, while
Thailand was raised to the priority watch list, Brazil, which was also
about to issue a compulsory license at the time, was lowered from the
priority watch list to the watch list. They said that Brazil's standing
improved due to impressive work in other areas of IP enforcement, and that
the imminent compulsory license did not alter USTR's decision to improve
Brazil's standing. Nevertheless, in its 2007 Special 301 report, USTR
noted that it will conduct an out-of-cycle review to evaluate Brazil's
progress in other areas and encourage additional progress in areas of
outstanding concern.

Public Health Input on IP Rights Has Been Limited in U.S. Trade Negotiations

Since TPA, public health input into U.S. trade negotiations has been
limited. In negotiating trade agreements under TPA, the President must
seek advice and information from executive departments and the public and
private sectors.^32 Although U.S. agencies generally support USTR's
negotiations approach, interagency input on U.S. trade negotiations has
not addressed the public health implications of IP pharmaceutical
provisions negotiated under TPA and has been primarily technical in
nature. For instance, HHS, the lead U.S. agency on global public health
and social welfare issues, endorses USTR's negotiating approach that
strong IP protection promotes public health and access to medicines.
However, HHS advice during trade negotiations has generally concentrated
on technical advice from one of its subagencies, the Food and Drug
Administration (FDA), to ensure that FTA provisions related to
pharmaceuticals do not violate U.S. law and are consistent with U.S.
health regulations. HHS has not addressed policy questions related to
whether FTA provisions might affect public health in FTA partner
countries. Within the formal private sector advisory system, two public
health representatives were recently added to two private sector Industry
Trade Advisory Committees (ITACs) after USTR had concluded nine trade
agreements. These two committees are respectively composed of 20 and 33
private sector representatives from the pharmaceutical and other industry
sectors. USTR has obtained some public health perspectives from
stakeholders through other formal and informal means, including public
hearings, Federal Register comments, and written correspondence.

^32 19 U.S.C. SS 2152, 2155.

The Departments of Health and Human Services and State Endorse the View that IP
Protection Supports Access to Medicine

HHS officials told us they support the USTR position concerning the Doha
Declaration and agree with USTR's view that strong IP protection promotes
innovation and access to medicines. The agency supports the
administration's vision for both global health and overall U.S. foreign
policy, and HHS's Office of Global Health Affairs (OGHA) is the U.S. focal
point for policy coordination across multilateral health and science
organizations. According to OGHA officials, the FDA's generic drug
preapproval process is a key example of HHS efforts to balance high IP
standards and access to medicines. Officials stated that the FDA generic
drug preapproval process exhibits HHS support for creating a market for
high quality generics that meet international standards. The agency has
also supported USTR's interpretation of TRIPS flexibilities in
multilateral discussions about IP and public health, such as those held at
WHO. According to officials, HHS's OGHA coordinates U.S. policy inputs and
interests as they pertain to IP rights and public health in WHO, ensures
that the U.S. policy position at WHO meetings reflects administration
priorities, and works with USTR and other U.S. agencies to advance U.S. IP
and public health interests internationally. Most recently, HHS hosted the
newly formed WHO Commission on Intellectual Property Rights, Innovation,
and Public Health, and has been the lead federal agency in coordinating
the U.S. response across agencies, including USTR, to a 2006 WHO report on
IP rights and public health.

State Department officials also support the USTR's view that IP protection
is important for promoting access to medicines. However, State Department
officials said they principally demonstrate the U.S. strategy to balance
IP rights and public health through various programs and initiatives. For
example, State's Office of the Global AIDS Coordinator (OGAC) works with
several other agencies, including HHS, to implement the President's
Emergency Plan for AIDS Relief (PEPFAR), which has programs in over 120
countries and a special focus on 15 countries that are primarily located
in sub-Saharan Africa. OGAC and USAID also worked with the FDA to develop
the generic drug preapproval process to support the purchase of low
priced, high quality drugs for the PEPFAR program. This effort resulted in
the preapproval of over 50 generic antiretrovirals (ARV) to date and
almost $2 million in savings on generic drug purchases in 2006. In
addition, USAID developed a centrally managed contract, the Partnership
for Supply Chain Management, in order to work with generic companies to
address drug supply chain challenges and increase research and development
for a steady supply of ARVs in developing countries.

Interagency IP Rights and Public Health Perspective Is Limited to Technical
Advice

USTR has obtained some input on IP rights and public health in trade
negotiations through the formal interagency trade policy process, but
public health perspectives on USTR's negotiating approach to
pharmaceutical issues in FTA negotiations are primarily technical in
nature and have not included an examination of the public health impacts
of FTA provisions.^33 USTR coordinated with HHS when it first began to
formulate its basic policy goals for negotiating FTAs, and HHS has had the
opportunity to review draft FTA texts through the interagency advisory
system. However, HHS has had limited involvement in the actual trade
negotiations.^34 According to USTR, most public health issues are worked
out in advance of the negotiations. HHS and USTR occasionally convene an
interagency working group to discuss IP rights and public health issues
that arise at WHO or in other multilateral fora.

^33HHS, USAID, Commerce, and State, among others, participate in varied
levels of the interagency advisory process through the Trade Policy Review
Group (TPRG) and the Trade Policy Staff Committee (TPSC), in which agency
officials may review the texts of FTAs and make comments. TPSC and TPRG
are administered and chaired by USTR, and the groups are composed of 19
executive agencies and offices. The TPSC is the primary operating group,
with representation at the senior civil service level, and if policy
agreement is not reached in the TPSC, or if significant policy questions
are being considered, issues are taken up by the TPRG, with representation
at the Deputy USTR/Under Secretary level.

^34During the TRIPS and public health debates at the WTO, USTR officials
consulted with HHS officials, as well as with State and PTO officials, and
HHS's Office of Global Health Affairs (OGHA) was very involved in
developing the U.S. proposals for the paragraph six solution.

Although USTR routinely briefs HHS after each round of FTA negotiations,
OGHA officials stated that the health agency's role in trade, IP rights,
and the negotiation of pharmaceutical-related IP provisions in FTAs has
primarily involved providing technical expertise through its subagencies
when requested by USTR. For example, FDA officials stated that their
overall mission is generally not related to trade, but instead focuses on
regulatory matters as they affect public health. The agency offers
technical advice to USTR during negotiations to ensure that FTA provisions
related to pharmaceuticals do not violate U.S. law and are consistent with
U.S. health regulations. For instance, the FDA has provided a perspective
on regulatory issues in FTAs to ensure that provisions do not have
implications for U.S. regulatory programs. HHS officials also stated that
they have no role in assisting countries in pursuing objectives of the
Doha Declaration. Although they have good working relationships with the
health ministries of many countries, conversations generally focus on
technical advice with regard to regulatory issues. For example,
subagencies such as the FDA may provide regulatory advice and guidance to
FTA partners, during negotiations or FTA implementation, on the regulatory
responsibilities associated with various IP provisions, the manner in
which provisions function in the United States, and how U.S. regulatory
systems operate.

OGHA officials told us they are satisfied with HHS's role and input in the
interagency advisory process and the public health considerations provided
in U.S. trade negotiations and policy, and the office does not believe IP
provisions in FTAs restrict access to medicines. However, there is little
evidence that USTR consulted with HHS or OGHA regarding FTA partner
countries' concerns about the potential impact on public health of
specific pharmaceutical provisions in FTAs since the Doha Declaration and
the Trade Promotion Authority Act of 2002 were agreed upon, although the
HHS OGHA's mission includes promoting the health of the world's
population. OGHA officials noted that USTR has never approached them to
discuss such country concerns about public health. According to USTR
officials, USTR does not generally talk to HHS about countries' concerns
about the public health impact of FTA provisions, but instead relies on
the countries themselves to raise concerns, since developing countries
know their own public health systems and needs better than any U.S. agency
would. Similarly, HHS has not been asked by USTR to conduct analyses of
the impacts of FTA provisions on regulatory institutions in partner
countries, and HHS has not provided such an assessment. There is also
little evidence that the agencies have determined whether the FTAs affect
public health, either positively or negatively, and HHS officials stated
they do not have the technical capacity to do so.

Similarly, the PTO Office of International Affairs is involved in the FTA
negotiations process as a technical advisor under its statutory authority
regarding IP issues. The office advises USTR on WTO issues and FTAs, meets
with USTR to discuss strategy before each round of FTA negotiations, and
participates in the negotiations. For example, USTR may ask PTO's opinion
about the use of a particular technical term. PTO also provides technical
advice and training to FTA partner countries on pharmaceutical IP
provisions during FTA negotiations, and provides clarification on the
interpretation of negotiated provisions. For instance, in the CAFTA-DR
negotiations, partner countries asked PTO to explain data exclusivity in
further detail and how the provision functions in the United States.
According to officials, PTO never states that the U.S. method of
implementing a particular provision is the only way to implement or
fulfill a particular FTA obligation, but instead simply provides U.S.
examples.

The State Department is also involved in interagency coordination on trade
and public health through the interagency advisory system as well as
during FTA negotiations, but agency officials stated that trade and IP
efforts are only one small part of the larger U.S. government effort to
increase access to medicines. USTR consults with State through the formal
interagency advisory review process, and State officials are included in
all discussions of IP chapters in the FTAs. However, the agency primarily
makes an effort to balance IP rights and access to medicines through
public health initiatives it coordinates with other agencies or
administers itself, such as PEPFAR. USAID has extensive global health
programs and had some involvement in policy discussions at the time of the
Doha Declaration. The development agency has had little or no involvement
in such discussions since, however.

Public Health Representatives Were Recently Added to the Industry Trade Advisory
Committees

In January 2007, public health representatives were added to the two
technical ITACs most relevant to pharmaceuticals and IP rights--the
chemicals committee (ITAC-3) and the IP committee (ITAC-15)--where
multiple brand-name pharmaceutical companies serve. However, by the time
that USTR and the Department of Commerce had appointed one public health
representative to each of these two committees, USTR had concluded nine
FTAs.

According to Commerce officials, the appointments were prompted by an
April 2005 request by an NGO for public health perspectives in several of
the industry trade advisory committees. Within 3 months, Commerce and USTR
agreed to consider adding public health representatives to the industry
advisory system, but the appointments were delayed until 2007.^35 Although
USTR and Commerce indicated at least one public health representative
would be appointed to both the IP committee and the chemicals committee in
December 2005, a coalition of NGOs filed a lawsuit against USTR during the
same month for public health representation on six other ITACs in the
trade advisory committee system as initially requested in 2005.^36 The
lawsuit is pending an appeal, after an initial ruling dismissing the case
on the grounds that the court could not find any meaningful standards in
the Trade Act of 1974 under which it could judge the balance of the
membership of the trade advisory committees.^37 Due to the ongoing
litigation relating to the composition of the trade advisory system, we do
not make any judgments about the appropriateness of a particular
committee's composition.

USTR maintains that representatives in other trade advisory committees
provided public health input on FTAs. For instance, USTR noted that Trade
and Environment Policy Advisory Committee (TEPAC) members had access to
the secure private sector advisory Website, and that some groups in that
committee had expressed concern about provisions in several FTAs.
Specifically, some environmental and consumer group NGOs on the committee
have submitted concerns to USTR in committee reports on the FTAs about the
impacts certain FTA provisions have on public health and access to
medicines. In an alternative opinion attached to several committee
reports, the minority group of TEPAC representatives maintained that U.S.
FTAs are inconsistent with the Doha Declaration on TRIPS and Public Health
and that FTA provisions on data exclusivity and patent linkage, as well as
limitations on the use of compulsory licensing, reduce access to
medicines. They recommended that Congress not approve some FTAs and
requested Congress to take their public health concerns into account when
considering other FTAs.

^35Department of Commerce officials cited the Doha negotiations, the
rechartering of the industry trade advisory committees, and the time
required to send out notices of position openings, vet applicants, and
obtain security clearances.

^36Ctr. for Policy Analysis on Trade and Health (CPATH) v. Office of the
United States Trade Representative, No. 05-05177 MJJ (N.D.Cal. June 30,
2006), appeal docket, No. 06-16682 (9th Cir. Sept. 14, 2006). The industry
advisory committees cited in the lawsuit are ITAC-4 (Consumer Goods),
ITAC-5 (Distribution Services), ITAC-8 (Information and Communications
Technologies, Services and Electronic Commerce), ITAC-10 (Services and
Finance Industries), ITAC-14 (Customs Matters and Trade Facilitation) and
ITAC-16 (Standards and Technical Trade Barriers).

^37Pursuant to Federal Advisory Committee Act, an advisory committee's
membership must be "fairly balanced in terms of the points of view
represented and the functions to be performed by the advisory committee."
5 U.S.C. App. 2 S 5.

There is little evidence that USTR discussed the concerns submitted about
the public health impact of FTAs with U.S. health agencies or other
members of the public health community. A member of the TEPAC committee
also noted that although the environmental advisory committee reports
provided to USTR include the committee members' recommendations or
concerns about public health in FTAs, there is little dialogue between
USTR and committee members on these issues. In the member's opinion, this
is because the advisory consultations are not integrated into the FTA
negotiations process, which limits the ability of members to advise USTR
on the issues that arise during negotiations, including public health
concerns, as opposed to after a draft has been developed. However, USTR
notes that the concerns have been raised and discussed by the USTR
personally during TEPAC meetings.

The Committees on Which Public Health Representatives Participate Are Composed
of a Majority of Other Private Sector Industry Stakeholders

The two individuals that were appointed as public health representatives
on the ITACs individually serve on committees that are respectively
composed of a total of 20 and 33 private sector representatives from the
pharmaceutical and other industry sectors. (See figure 6.) Commerce
officials explained that, in selecting among the 10 applicants who
responded to the Federal Register notice, they considered candidates'
backgrounds to determine if the candidates understood both relevant IP
issues and which public health concerns would be relevant to the
intersection of public health, international trade, and IP rights or
pharmaceuticals, respectively, as relevant to the work of the committees.
According to these officials, the selection committee also tried to ensure
that the representatives would make meaningful contributions to the
committees and have the weight necessary to challenge the committees when
necessary. Commerce officials did not believe it was necessary to have two
public health representatives on one committee representing the same view,
and they said that they did not find any other viable candidates with
additional perspectives beyond the individuals selected. However, Commerce
officials stated that the Federal Register notice announcing the positions
on the ITACs remains open. If additional qualified public health
candidates applied would contribute another perspective to either of these
two committees applied, they said the agency would consider adding
additional public health representation.

Figure 6: Public Health Representation on Industry Trade Advisory
Committees

USTR Has Received Public Health Input through Other Formal and Informal Means

Our review showed that, although USTR has received limited input on public
health through formal advisory system communications channels, it has
received public health input through other formal and informal processes,
including input from the pharmaceutical industry and the public health
community. Pharmaceutical Research and Manufacturers of America (PhRMA),
the pharmaceutical industry trade group, has submitted annual reports to
USTR on industry concerns about IP rights globally for the agency to
consider in developing its Special 301 report. Both pharmaceutical
industry representatives and public health community members have also
provided input on IP rights and public health concerns for several FTAs
that have been concluded through USTR's formal public hearings and the
Federal Register comments. In addition, USTR has received and responded to
congressional correspondence regarding members' public health concerns
about the impact of FTAs. According to USTR officials, while there are
some minor modifications to FTA texts during each negotiation, the public
health community is aware of the provisions the United States proposes to
be included in each agreement, given past FTAs implemented, and may also
provide public health input through more informal mechanisms. For example,
USTR has received and responded to some informal input on public health in
trade negotiations through correspondence with NGOs. Moreover, USTR
officials noted that they have an open door policy and will meet with
anyone who requests a meeting, including NGOs, public health
representatives, and generic industry representatives. Both USTR and
private sector representatives, including NGOs, have confirmed that
private sector representatives have provided informal input to USTR on
public health concerns, in particular FTAs, through phone calls or
requested meetings. However, input USTR receives through such channels may
lack the weight of formal private sector input on public health issues in
trade agreements, such as trade advisory committee reports on proposed
trade agreements that are transmitted to the administration and Congress.

Conclusions

USTR has followed a consistent approach in negotiating, implementing, and
monitoring its trade agreements under TPA--namely, by protecting the
minimum standards of IP rights provided in TRIPS and promoting high IP
standards similar to U.S. law. Other than making concessions on compulsory
licensing and parallel importation provisions, and on side letters that
state that the IP chapter does not affect a country's ability to take
necessary public health measures, USTR has not changed its uniformly high
demands with regard to IP protection in its FTAs. The degree to which
USTR's policy has achieved the right balance of IP protection and
attention to public health, and more specifically whether it has respected
the Doha Declaration as called for under TPA, depends in part on the
stakeholder asking the question. This reflects a fundamental tension
between protecting IP rights in order to allow companies to recoup
investment and encourage innovation for the long term, and allowing
competitors to sell lower cost drugs for short term public health needs.
As Congress contemplates renewal of TPA, there are ongoing questions about
the overall balance of IP rights and public health.

Matter for Congressional Consideration

If Congress disagrees with USTR's interpretation and implementation of TPA
guidance with regard to IP rights and public health, it should specify
more clearly its intentions for U.S. trade policy and public health policy
input related to balancing public health concerns and the negotiation of
IP rights in trade agreements.

Agency Comments and Our Evaluation

We provided the U.S. Trade Representative; the Secretaries of the
Departments of Commerce, Health and Human Services, and State; the
Administrator of the U.S. Agency for International Development; and the
Under Secretary of Commerce for Intellectual Property and Director of the
United States Patent and Trademark Office with a draft of this report. The
U.S. Trade Representative; the Secretaries of the Departments of Commerce,
Health and Human Services, and State; and the Administrator of the U.S.
Agency for International Development chose to provide technical comments.
We modified the report where appropriate.

As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution of it until 30 days
from the date of this letter. At that time, we will send copies of this
report to the U.S. Trade Representative; the Secretaries of the
Departments of Commerce, Health and Human Services, and State; the
Administrator of the U.S. Agency for International Development; and the
Under Secretary of Commerce for Intellectual Property and Director of the
United States Patent and Trademark Office. We also will make copies
available to others upon request. In addition, the report will be
available at no charge on the GAO Web site at [46]http://www.gao.gov .

If you or your staff has any questions concerning this report, please
contact me at (202) 512-4128 or at [47][email protected] . Contact points for
our Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff members who made major
contributions to this report are listed in appendix IV.

Sincerely yours,

Loren Yager
Director, International Affairs and Trade

Appendix I: Scope and Methodology

To evaluate how the U.S. has interpreted the intent and meaning of the
Doha Declaration, we performed document reviews on agency documentation
and correspondence as well as WTO documents, and conducted interviews. We
also reviewed academic studies, pharmaceutical industry reports, position
papers, and media reports. Specifically, we examined relevant WTO legal
documents, including the declaration on TRIPS and Public Health; the 2003
General Council Chairperson's statement; the August 30, 2003, General
Council Decision on the Implementation of Paragraph 6 of the Doha
Declaration on TRIPS and Public Health; the December 6, 2005, General
Council Decision on the Amendment of TRIPS; and relevant articles of the
TRIPS agreement. We reviewed WTO TRIPS Council minutes and other official
documents, reviewed USTR official documents, interviewed USTR officials in
Washington and Geneva, and interviewed WTO officials and WTO country
representatives in Geneva.

To investigate how the United States negotiates and oversees
implementation of IP provisions related to pharmaceuticals in its trade
agreements, we interviewed USTR officials, reviewed agency documents, and
examined the text of the FTAs negotiated since the Trade Act of 2002. We
spoke to USTR officials about their views on the three IP negotiating
objectives in TPA and their overall approach for pursuing these
objectives. Specifically, we learned about the pharmaceutical provisions
pursued by USTR in the IP chapter of its FTAs, and how the pursuit of
these provisions relates to their negotiating approach. We also reviewed
agency documentation of negotiating policy, draft texts of FTAs, and other
types of documentation in order to further examine the IP negotiating
policy pursued by USTR. In order to analyze the patterns and results of
USTR's stated approach, we reviewed the text of each of the 11 FTAs
negotiated under TPA. We evaluated the pharmaceutical-related IP
provisions in each agreement and catalogued which related provisions were
present in the final text of each agreement. Using this information, we
were able to identify patterns and thereby confirm USTR's stated policy
regarding the pursuit of these provisions. We did not assess the
reliability of the per capita income data contained in figure 2 because we
are providing them as background information only.

In addition, we interviewed officials from Department of State, Department
of Health and Human Services (HHS), Department of Commerce, the Patent and
Trademark Office (PTO), and the U.S. Agency for International Development
(USAID) in order to obtain their perspectives on the pharmaceutical
provisions pursued in the FTAs. We performed literature reviews of
articles and studies documenting the multiple opinions regarding these
provisions pursued by USTR. From this literature review and from agency
meetings, we identified numerous stakeholders and experts to speak with,
including pharmaceutical industry representatives, public health groups,
NGOs, academics, and IP experts. These groups include Pharmaceutical
Research and Manufacturers of America (PhRMA), Generic Pharmaceutical
Association, (GPhA), The International Federation of Pharmaceutical
Manufacturers & Associations (IFPMA), Oxfam, Doctors without Borders
(MSF), Essential Information, Consumer Project on Technology,^1 Health
Global Access Project (GAP), Health Action International, Center for
Policy Analysis on Trade and Health (CPATH), Access to Drugs Initiative
(ADI), Third World Network, Center for International Environmental Law
(CIEL), International Center for Trade and Sustainable Development
(ICTSD), Drugs for Neglected Diseases Initiative (DNDI), as well as three
academics, two intellectual property lawyers, and three public health
experts specializing in this area. We interviewed these stakeholders and
experts in order to gather a complete perspective on USTR's negotiating
strategy and the pharmaceutical-related IP provisions present in the FTAs.
We also traveled to Geneva, Switzerland, to meet with officials from the
U.S. Mission in Geneva; World Trade Organization (WTO); World Health
Organization (WHO); World Intellectual Property Organization; The Joint
United Nations Program on HIV/AIDS; United Nations Development Program;
the Global Fund to Fight AIDS, Tuberculosis and Malaria, as well as NGOs
from the pharmaceutical sector and public health community.

In order to examine how USTR implements and oversees its trade agreements,
we interviewed USTR officials, reviewed agency documentation, and analyzed
USTR's annual Special 301 reports. We spoke to USTR officials and reviewed
agency documentation about their approach to implementing and overseeing
its trade agreements. In addition, we examined trends and patterns of
citations found in USTR's annual Special 301 reports in order to analyze
how USTR oversees its trade agreements with respect to IP provisions
related to pharmaceuticals. We reviewed each Special 301 report from 2000
to 2007 in order to identify every mention of a pharmaceutical-related
issue for all countries listed on the priority watch list,^2 the watch
list,^3 and the Section 306 list^4. For each country listed in the report
in every given year, we noted whether the report mentioned anything
related to a pharmaceutical issue or concern. We reviewed the reports
using decision rules we developed to identify the most frequently
discussed pharmaceutical issues in Special 301 reports over this period.
To enhance the accuracy and soundness of our review, two GAO staff members
conducted independent reviews of the reports. These staff members had a
high degree of concurrence in the pharmaceutical issues they identified
and were able to reconcile the instances where they differed initially. We
also interviewed USTR officials about some of the factors considered
during the Special 301 process in order to determine limitations to our
analysis. Limitations to our analysis include the inherent selection bias
in the USTR reports, since the Special 301 report does not capture each IP
concern in every country. Also, there are numerous factors governing a
country's inclusion, but USTR generally focuses on countries with
relatively higher levels of development. The analysis is also limited to
only pharmaceutical-related issues raised in the Special 301 report over
this period and does not capture the weight of each concern. In addition,
pharmaceutical counterfeiting may be undercounted in this analysis due to
the fact that it may be subsumed into more general references to trademark
counterfeiting and inadequate enforcement. We also obtained and compared
the input provided to USTR by U.S. embassies and the pharmaceutical
industry. Additionally, we spoke to USTR officials about the factors taken
into account for the 2007 Special 301 report, specifically regarding the
decision of Thailand and Brazil to issue compulsory licenses on
pharmaceutical products.

^1Name recently changed to Knowledge Ecology International.

^2Countries that have the most onerous or egregious acts, policies, or
practices and whose acts, policies, or practices have the greatest adverse
impact (actual or potential) on the relevant U.S. products must be
designated as "Priority Foreign Countries." Countries placed on the
Priority Watch List are the focus of increased bilateral attention
concerning the problem areas.

^3Placement of a trading partner on the Priority Watch List or Watch List
indicates that particular problems exist in that country with respect to
IP rights protection, enforcement, or market access for persons relying on
intellectual property (IP).

^4Any country that was previously designated a Priority Foreign Country
but entered into good-faith negotiations and/or is making progress is
placed under Section 306 monitoring. Under Section 306, USTR monitors a
country's compliance with bilateral IP agreements that are the basis for
resolving an investigation under Section 301.

To investigate how USTR assists other countries in implementing FTAs and
TRIPS obligations, we interviewed agencies involved in providing technical
assistance to FTA partner and nonpartner countries, including USTR, HHS,
PTO, and USAID. We spoke with agency officials about the type of technical
assistance they provide on the FTAs, Doha Declaration flexibilities, and
public health and about the audience receiving the assistance. We also
reviewed technical assistance and training-related documents and
correspondence to corroborate the testimonial evidence.

In order to evaluate the extent of formal and informal IP and public
health input into USTR's trade agreement negotiations, we examined the
formal interagency advisory process, the formal industry advisory
committee process, and several informal means for providing input to USTR.
To examine the level of interagency consultation on trade, IP, and public
health issues between USTR and the Department of State, HHS, Department of
Commerce, PTO, and USAID, we reviewed documentation of interagency
discussions related to the TRIPS Doha Declaration and FTAs. Limited
documentation was available. We also interviewed USTR, Commerce, HHS,
State, PTO, and USAID officials about their roles in the interagency
advisory process and the public health input they provided or received
during WTO discussions on the TRIPS and Public Health Declaration and
during FTA negotiations.

To evaluate the type and extent of public health input USTR received
through the industry trade advisory process, we reviewed industry advisory
committee reports for the IP and chemicals committees, as well as the
trade and environment committee. We also evaluated the membership of the
IP and chemicals industry advisory committees to determine the composition
of industries and interests represented. However, we did not make any
judgments about the appropriateness of any particular committee's
composition. In addition, to better understand the selection and
appointment process for the public health representatives on the IP and
chemicals industry advisory committees, we interviewed USTR, Commerce, and
HHS officials and reviewed documentation related to the representatives'
appointments. We also spoke with the primary NGO involved in the initial
request for public health representation on the industry advisory
committees, as well as several other NGO and academic members of the
public health community, about their views on the public health
representative appointments. Moreover, we interviewed selected members of
the trade and environment committee, to obtain perspectives on the
advisory process and public health input provided to USTR through it.
Furthermore, we reviewed records of USTR's public hearings on FTAs,
Federal Register notice comments, and congressional and private sector
correspondence with USTR on the FTAs and the issues of IP rights and
public health. We also spoke with several NGOs about public health input
they provided to USTR through meetings and phone calls.

Appendix II: Technical Assistance on IP Rights and Public Health

Technical assistance on IP rights and public health to FTA partner and
nonpartner governments has been limited and provided mostly upon host
country request. According to USTR officials, U.S. negotiators review each
FTA provision in the text with the signatories, at which time they may
also ask for technical assistance. Also, FTA partner countries always have
the option of requesting trade-capacity building assistance from the
United States at the conclusion of negotiations. However, USTR has never
had a request for TCB on the Doha Declaration, and only on IP matters
related to enforcement. USTR does not initiate technical assistance on FTA
provisions and the use of TRIPS flexibilities, but responds to country
requests, which it forwards to the appropriate agency. U.S. agencies tend
to provide technical advice to FTA partner governments on regulatory
issues, rather than public health issues. For example, the FDA has
provided technical assistance to partner countries in developing
implementing regulatory measures. Similarly, technical assistance
activities conducted by USAID and PTO include conferences, workshops,
capacity-building cooperation agreements, and patent program certificate
programs on topics such as international IP standards in TRIPS, drafting
trade reform legislation, and enforcement of IP rights. Specific IP issues
discussed include data exclusivity, patent extensions, and implications of
FTA IP rights commitments.

According to USAID officials, USAID can provide technical assistance if
the host country has requested assistance in a particular area. Although
FTAs have helped promote training in the area of intellectual property and
public health, the agency has not done much work on those topics. USAID
officials said that most training occurs during FTA negotiations, but FTA
partner countries often receive the training from WTO or another third
party in order to gain a more objective training or perspective than they
believe they would receive from the United States. Similarly, according to
PTO officials, most requested PTO training is with respect to FTA
agreements and primarily focuses on the implementation and enforcement of
FTA provisions, and the audience is generally patent examiners conducting
enforcement activities. The PTO Global IP Academy, established in 2005, is
another example of PTO's technical assistance on IP matters to other
countries, whereby PTO trains foreign officials on IP enforcement. The
agency also advises countries on drafting implementing legislation and the
development of compliance regulations.

Agencies also provide general technical assistance to countries on TRIPS
obligations. For example, Commerce's Commercial Law Development Program,
which receives some funding from USAID, has provided training to Pakistan
on TRIPS and the role of U.S. agencies in domestic patent and data
protection. However, according to USTR, most requests related to TRIPS IP
issues fall in nonpharmaceutical IP areas, such as trademark registration,
enhancing patent processing, or enforcement capacity. PTO officials stated
that they offered a course on biotechnology that covered all aspects of
patent, copyright, and trademark WTO provisions. The State Department has
also provides a standard training on IP rights to U.S. Foreign Service
Officers through the Foreign Service Institute (FSI), which includes basic
information on patents, data protection, and other U.S. and TRIPS IP
provisions. The training also provides an overview of the Doha Declaration
and TRIPS flexibilities, including the use of compulsory licenses, as well
as a summary of the U.S. government's objectives for access to medicines.

While there has been no proactive agency effort to assist countries in
using the Doha Declaration TRIPS flexibilities, agencies have developed
and provided some information upon request. USAID has worked closely with
USTR to develop such U.S.-sponsored training that is TRIPS compliant and
has recently added discussion about the Doha Declaration and the
implementation of compulsory licensing into training on the use of TRIPS
flexibilities. For instance, USAID funded a presentation in Lebanon on
TRIPS implementation in response to requests for assistance with its WTO
accession. In addition, USAID technical assistance projects were
implemented in Egypt related to IP rights and public health, including a
conference on IP and pharmaceuticals that covered TRIPS, the Doha
Declaration, compulsory licensing, and data exclusivity, under the
auspices of the prime minister and minister of health. Similarly, USAID
presented in Uganda a workshop on Developments at Doha, including TRIPS
and public health, as part of assistance taking place in December 2001 and
January - February 2002. USTR stated that Honduras also conferred with the
United States about how to use the paragraph six waiver to issue a
compulsory license, but the drug was not under patent and training was
ultimately not necessary. PTO has also conducted training on relevant IP
provisions, including on U.S. laws and regulations related to data
exclusivity and patent linkage, in response to country requests. PTO
officials emphasized, however, that it is not PTO's role to ensure that
these countries implement the provisions in the same manner as the United
States. In fact, PTO makes an effort to understand the country's legal
context and capacity so that its advice is appropriate to its
circumstances.

In addition, U.S. agencies offer some assistance related to technology
transfer, which is referred to in paragraph seven of the Doha Declaration
on TRIPS and Public Health. For example, HHS provides significant
assistance to developing countries though its technology transfer
activities. The National Institutes of Health (NIH) has developed
innovative programs to improve how technologies are transferred to
developing countries, particularly by identifying those biomedical
research companies and institutions that have the interest and capacity to
receive and develop new biomedical products. According to HHS officials,
NIH has one of the largest biomedical technology transfer offices in the
world. NIH's Office of Technology Transfer (OTT) has successfully
transferred technologies, mostly for infectious disease diagnosis,
treatment and prevention, to institutions in developing countries such as
India, Mexico, Brazil, China, Egypt, and South Africa and currently is
working with institutions in other developing countries. NIH OTT has also
initiated a limited international technology transfer capacity building
program to train scientists and managers from institutions in developing
countries about intellectual property management and other technology
transfer-related matters. Similarly, USAID is involved in some technology
transfer assistance. According to agency officials, USAID recently
established a technology transfer program in Columbia to assist the local
generic industry.

Appendix III: GAO Contact and Staff Acknowledgments

GAO Contact

Loren Yager (202) 512-4128

Staff Acknowledgments

Kim Frankena, Assistant Director; Nina Pfeiffer; Diana Blumenfeld; Suneeti
Shah; Yesook Merrill; and Grace Lui made significant contributions to this
report. Martin De Alteriis, Karen Deans, and Etana Finkler also provided
assistance.

(320464)

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Highlights of [55]GAO-07-1198 , a report to congressional requestors

September 2007

INTELLECTUAL PROPERTY

U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines May
Need Clarification

The WTO Agreement on Trade-Related Intellectual Property (TRIPS) requires
all 151 World Trade Organization (WTO) members to provide baseline
protections, including 20-year patents for innovative pharmaceuticals. The
Trade Act of 2002 granting Trade Promotion Authority (TPA) to the
President outlined three negotiating objectives related to intellectual
property (IP). The first two aim to strengthen IP rights and enforcement
abroad. The third calls for respect of the WTO Doha Declaration on TRIPS
and Public Health, which addresses access by developing countries to
patented medicines, particularly in epidemic and emergency situations.

This report (1) describes the Declaration and its interpretation by the
United States and other nations; (2) analyzes how USTR has balanced
respect for the Doha Declaration with the other two IP objectives in
negotiating free trade agreements; and (3) evaluates the extent of public
health input by agencies and the private sector. We reviewed official WTO
and U.S. government documents, interviewed U.S. and foreign government
officials, and obtained private sector views.

[56]What GAO Recommends

If Congress disagrees with USTR's interpretation and implementation of TPA
guidance with regard to IP and public health, it should specify more
clearly its intentions for U.S. trade policy and public health policy
input.

The 2001 Doha Declaration on TRIPS and Public Health was adopted by
WTOmembers to stress the importance of implementing the TRIPS Agreement in
a manner supportive of public health. The U.S. interprets the Declaration
as a political statement that recognizes the severity of public health
crises while affirming the importance of IP protection. It maintains that
the Declaration neither changes existing TRIPS obligations, nor creates
new rights and does not assigns public health greater priority than IP
protection. USTR says the Declaration clarifies flexibilities already in
TRIPS, including the flexibility to compulsorily license patents under
certain circumstances. USTR recognizes these as being allowed for WTO
members, including those facing public health crises, but only in a
fashion that will not unduly harm patent holders. Some developing
countries assert they provide broad discretion to ensure access to
medicines when IP regulations present barriers to affordable care.

USTR balances respect for the Doha Declaration with TPA's other two IP
negotiating objectives by actively promoting high levels of IP protection
for pharmaceuticals while making targeted allowances for developing
country partners. USTR believes that this longstanding U.S. pursuit of
high IP protections for pharmaceuticals creates incentives for investment
in research and development of new treatments, ultimately enhancing public
health. With regard to the TPA objective of respecting the Doha
Declaration, USTR's key policy change was to not insist upon two
provisions it sees as relevant to the Declaration in FTAs with developing
country trading partners. Otherwise, USTR has continued to pursue other
pharmaceutical related IP protections that it does not consider related to
the Doha Declaration. Reactions to USTR's record are mixed. The
pharmaceutical industry considers these types of FTA provisions critical
for preserving incentives for research and innovation. However, some
academics, experts, nongovernmental organizations (NGOs), and generic
producers have expressed concerns that these provisions may delay entry by
cheaper generic products. In response to similar concerns in Congress, a
bipartisan agreement was reached with the Administration to revise four
recent FTA's prior to their submission for Congressional approval.

U.S. interagency and private sector input into trade negotiations related
to public health have remained limited since Congress enacted TPA. The
Department of Health and Human Services (HHS) and other agencies generally
endorse USTR's view that strong IP protection promotes public health and
access to medicines, and interagency input has been primarily technical in
nature. Within the formal private sector trade advisory system, a public
health representative was recently added to 2 of the 16 private sector
advisory committees, but not until USTR had concluded nine trade
agreements. USTR did obtain some public health views through other formal
and informal means during this period.

References

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