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Nations haggle over prices of life-saving drugs at WTO

It is a battle fought before. The ability of developing nations to obtain medicines for life-threatening diseases at low cost is the moot point.

business Updated: Sep 06, 2003 13:34 IST

As the expected drug deal at the World Trade Organisation's Executive General Council went into a loop over the week-end, there was a feeling of déjà vu.

It is a battle fought before. The ability of developing nations to obtain medicines for life-threatening diseases at low cost is the moot point. At last count, the WTO Executive General Council has delayed its decision on the deal. Negotiators said last-minute requests from Argentina, Philippines and several other nations, to make a statement on their interpretations of the deal, put it on hold.

What is at stake? For the Indian pharma companies focussed on generics and

 Key negotiating points in the WTO drug deal which was supposed to ease access of drugs for killer diseases like AIDS and malaria for developing countries
 * Limits on the scope of diseases
 * Procedure for grant of compulsory licenses
 * Safeguards against diversion of cheaper drugs to developed markets

export markets it is, depending on the details of the agreement, a sizeable market opportunity. Much would depend on which diseases are included. "For instance, drugs for malaria are pretty much off-patent. The opportunity for Indian pharma companies really depends on the scope of the diseases. Anti-AIDs drugs, for example represents a big opportunity," said a Mumbai-based analyst.

While developing nations want no limits on the scope of the diseases covered, the developed nations clearly want a cap.

Yet another contentious point is compulsory licensing. Big transnational pharma companies have lost market share for valuable drugs in IPR-unprotected markets in the past due to "compulsory licensing," a mechanism through which governments across the world retain protection against possible misuse of exclusive marketing rights by MNCs.

It is a notion which is prevalent in most WTO countries, even USA and UK. However, as pharma analyst Shahina Mukadam from Motilal Oswal Securities points out: "Experience shows that the actual use of compulsory licenses is a rarity.

A credible threat of their use is effective enough. Cases in point are Brazil and South Africa's negotiations with MNCs over anti-AIDs products, and the US government's spat with Bayer over Ciprofloxacin."

It is the procedure for the grant of these compulsory licenses, which was under aggressive discussion. DG Shah, secretary general of the Indian Pharmaceutical Alliance (IPA) said: "The rules for grant of compulsory licenses were so cumbersome and uncertain under the proposed agreement that it would have been counter-productive. We must push for transparent and simple rules."

Trans-national pharma majors had bitterly opposed the WTO deal. For the innovator companies who spend billions of dollars in drug development the fear is that the low-priced drugs could be diverted to the Western markets.

Ranjit Shahani, CEO Novartis and president of the Organisation of Pharmaceutical Producers of India (OPPI), however, points out: "It would have been crucial that WTO members had ratified the agreement as a signal that intellectual property protection is essential for innovation -- and for access to future medicines against diseases that still lack effective treatments today."

Shahani reckons that the agreement if it had gone through would have also provided assurance that medicines destined for the poorest countries would not have been diverted into developed country markets for commercial use.

Hence, according to the deal the copied drugs were to have a different colour, size and composition to prevent diversion to lucrative markets like the US and Europe. Shah, however, counters that the proposed safeguards against diversion should be commensurate with risk. "Extra conditionalties add to costs, which are ultimately paid by the developing nations," he said.

As the two sides work at cross-purposes ahead of the Cancun ministerial meeting, it is clear that the field is opening up for Indian companies with global ambitions in more ways than one.

First Published: Aug 30, 2003 20:56 IST