October 1, 2011

(A Joint Position Paper on bilateral free trade agreements and their impact on the right to health and access to affordable medicines published by the Medicines Transparency Alliance (MeTA) Philippines, Inc., Coalition for Health Advocacy and Transparency (CHAT) and the EU-ASEAN FTA Campaign Network, October 2011)

ACCESS TO MEDICINES IN THE PHILIPPINES: SOME STATISTICS

The Philippines is a lower middle income country where total health expenditures (THE) account for only 3.7% of Gross Domestic Product (GDP). Filipino households bear the heaviest burden in terms of spending for their health needs, with private out-of-pocket (OOP) expenditures reaching 56% of THE. (Philippine National Health Accounts, 2006)

(In order to move towards universal coverage, the World Health Organization (WHO) believes that countries would need to spend 4-5% of GDP on health, and keep OOP expenditures below 30-40% of THE.)

In terms of access to medicines, consider the following:

• At least 30% of our population lacks regular and sustainable access to essential medicines. The Philippines has been identified as one of 64 countries worldwide where access to medicines is classified as low to medium, at best. (World Medicines Situation Report, 2004)
• Pharmaceuticals account for 46% of total household spending on health, making medicine purchases the largest single item of health care expenditures. (Family Income and Expenditures Survey, 2000)
• About a third (31%) of all reimbursements made through the National Health Insurance Program (NHIP) are for medicines, making medicines the second largest item in payments made by Philhealth. (PHIC Report, 2010)
• A 2005 drug price survey revealed that, in the Philippines, prices for originator brand medicines sold through private retail outlets were, on average, 15 times greater than international reference prices, while lowest-price generic equivalents were more than 6 times the reference price. (Batangan, 2005)
• In a 2009 health facility survey, it was reported that, on a list of 44 essential medicines, mean availability of innovator and generic medicines in the public sector 8% and 27%, and in the private sector, 14.7% and 19.7%, respectively. (2009 WHO Health Facility Survey on Medicines)
• A study conducted by the European Commission in 2010 revealed that the level of availability of essential drugs in public health facilities at all levels was only 25.3%. (EC-TA Report on performance indicators for the Health Sector Policy Support Programme II, 2010)

DOHA DECLARATION ON THE TRIPS AGREEMENT AND PUBLIC HEALTH[1]

The Declaration on the TRIPS Agreement and Public Health – adopted by the member-countries of the World Trade Organization (WTO) during its Ministerial Conference in Doha in November 2001 – upheld the primacy of public health to promote access to medicines.

“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.”

By setting minimum standards on IPR protection, the TRIPS Agreement has resulted in the “significant loss of policy flexibilities especially for developing countries in regulating the grant and use of pharmaceutical patents and controlling the cost of medicines. The Agreement, however, has left some room for countries to put in place public interest measures, including measures to protect public health.”[2]

The Declaration underscored the right of countries to use flexibilities that are built into the TRIPS Agreement such as

• The right to grant compulsory licenses and the freedom to determine the grounds on which such licenses are granted
• The right to determine what constitutes a national emergency or circumstances of extreme urgency
• The right to establish a regime for exhaustion of intellectual property rights without challenge

In its 2005 study, the Commission on Intellectual Property Rights, Innovation and Public Health (CIPIH) found that the use of these TRIPS flexibilities can promote access to medicines in developing countries.

Notably, the CIPIH also study states that, from a public health perspective, developed and developing countries not only have the flexibility to utilize and/or facilitate the utilization of TRIPS flexibilities for public health purposes, but they, in fact, HAVE AN OBLIGATION TO DO SO.

UNIVERSALLY ACCESSIBLE CHEAPER AND QUALITY MEDICINES ACT OF 2008 (REPUBLIC ACT NO. 9502, S. 2008)

Also known as the Cheaper Medicines Law, RA 9502 is considered a landmark legislation that upholds the people’s right to health and access to affordable and quality medicines. Through this law, the government affirmed its mandate “ . . . to protect public health, and when the public interest or circumstances of extreme urgency so require, . . . adopt appropriate measures to promote and ensure access to affordable quality drugs and medicines for all[3].”

Like the DOHA Declaration, the Cheaper Medicines Law clearly tilted in favor of public health against patent protection when it stated that: “(A)ll doubts in the implementation and interpretation of the provisions of this Act, including its implementing rules and regulations, shall be resolved in favor of protecting public health[4].”

The Cheaper Medicines Law likewise incorporated TRIPs flexibilities in domestic policy to provide for effective market competition as a means to drive down drug prices. Through amendments to the Intellectual Property Code of the Philippines to

• Allow parallel importation of patented medicines from other countries where these are more affordable;
• Prohibit the grant of new patents based only on newly discovered uses of a known drug substance;
• Allow local generics firms to test, produce and register their generic versions of patented drugs even before the patent of the innovator drug expires; and
• Allow the government use of patented drugs when the public interest is at stake,

the Law clearly expresses the State’s commitment and obligation to public health as an overriding development concern.

While many are impatient that the Law has not been used to the full, certain inroads have been made. Reports show that the Law has:

• Paved the way for government to intervene through the imposition of price ceilings on selected medicines, and consequently influenced market players to voluntarily reduce prices on certain drugs as well;
• Helped raise awareness about generics, encouraged their use, and provided patients with a wider range of choices. With lower priced alternatives available, patients’ compliance to treatment regimens has likewise improved; and
• Reduced applications of frivolous patents on the ground of ‘new use’, as reported by the Intellectual Property Office[5].

These gains notwithstanding, the public has expressed impatience over the failure to attain the full potential of RA 9502. We therefore urge the full use of the flexibilities allowed therein, as they are in the TRIPS Agreement; and maximize use of measures to encourage greater market competition as the most effective and sustainable means to further drive down medicine prices.

TRIPS PLUS PROVISIONS

We are concerned over reports that drafts of several regional and bilateral Free Trade Agreements (FTAs) that are currently being negotiated may contain provisions that will effectively require the Philippines to enforce even higher levels of protection of intellectual property rights (IPRs) for medicines than those mandated under the TRIPS Agreement (TRIPS- plus provisions).

The Philippines should not allow itself to be bound to accept standards of protection that go beyond what had been consented to at the multilateral level. Higher standards will, by their very nature, delay or restrict competition, and eventually impede greater access to medicines.

LEARNING FROM THE EXPERIENCE OF OTHER COUNTRIES

According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), FTAs with TRIPS-plus provisions are usually those involving the United States, the European Union and, to an extent, Japan.

Before entering into FTAs that may contain (even implicitly) TRIPS-plus provisions especially with developed countries like the US and the EU, the Philippines should seriously study their potential impact on public health, as well as on ongoing efforts to improve access to medicines (use of measures in RA 9502, for example). Impact assessment surveys (like those on FTAs negotiated by Jordan and Colombia that contain TRIPS-plus provisions) have shown the detrimental effects of such provisions on medicine prices and health spending.

US-Jordan FTA

A study by Oxfam International on the effects of the US-Jordan FTA on access to medicines[6] concluded that TRIPS-plus rules introduced into Jordan’s IP framework had a negative impact on access to medicines:

• TRIPS-plus rules, particularly data exclusivity, independently prevent generic competition for 79 per cent of medicines launched by 21 multinational pharmaceutical companies since 2001.
• Additional expenditures for medicines with no generic competitor, as a result of enforcement of data exclusivity, were between $6.3m and $22.04m.
• There has been nearly no FDI by foreign drug companies into Jordan since 2001 to synthesize or manufacture medicines in partnership with local generics companies, and this has harmed public health. The only FDI into Jordan by foreign drug companies has been to expand scientific offices, which use aggressive sales tactics to ensure that expensive patented medicines are used in lieu of inexpensive generics.
• Stricter intellectual property rules have not encouraged companies in Jordan to engage in R&D for medicines since the passage of the FTA, and these companies have not developed any new medicines.
• New product launches in Jordan are only a fraction of total product launches in the USA and the EU. Many new medicines launched in Jordan are exorbitantly priced and unaffordable for ordinary people. Few or no units of these recently launched medicines have actually been purchased on the local market.

EU-Colombia FTA

A study on the foreseen impact of the EU-ANDEAN FTA on access to medicines in Colombia, particularly the impact of increasing the effective duration of pharmaceutical patents and test data protection, for example, showed the following results:

• Increase of protected active ingredients from 4% to 30% of the market
• Increase in medicine prices by 46%
• Increase in health spending of up to US$ 1 billion annually
• 5 millions Colombians would lose access
• 12,000 AIDS/HIV patients would see their life expectancy decrease between 5.3 and 9.9 years

The study further concludes that the (TRIPS-plus) provisions promote an increase in the market share for protected products, thus extending periods of monopoly prices. This, in turn, hinders access to new pharmaceutical products.[7]

These and similar impact assessment studies done on various bilateral FTAs provide evidence that point to the serious negative impact of TRIPS-plus provisions on access to medicines and public health.

OTHER TRIPS PROVISIONS AFFECTING HEALTH OUTCOMES

In addition to the IPR provisions contained in FTAs, we recognize that there are others which will impact as well on the delivery of public health services and the attainment of health targets. These include:

Trade in Services

Based on the 2006 World Health Report, an optimum ratio of 2-3 health workers (doctors, nurses, midwives) per 1000 population is needed for a health system to be able to deliver at least 80% of its essential public health services.

The Philippines is far from achieving this. There is an imbalance in the supply of and demand for health professionals. While there is an excess in the national supply of nurses, there is an evident dearth in the number of health workers in far-flung communities.

The liberalization of the services sector allowed under FTAs may, in the case of the health sector, prove detrimental to efforts to address the evident inequities. Allowing the entry of foreign health professionals will result in stiff competition for limited posts in the urban areas, and a slide in the number of health workers seeking jobs in the rural communities. Filipinos must be given preference in an already congested labor market.

Investments

FTAs usually define “investments” rather broadly, with intellectual property covered under the said definition. In the EU-India and US-Malaysia FTAs, for instance, the inclusion of IPRs under the broad definition will allow foreign investors to take Government to court over disputes concerning investments, including the failure of government to protect their intellectual property.

Investment rules in FTAs and bilateral investment treaties have been frequently used by large companies to influence the legal and policy environments in the countries where they operate.[8]

NO TO TRIPS-PLUS PROVISIONS!

If adopted by the Philippines, regional and bilateral FTAs with TRIPs-plus provisions would render nugatory the Cheaper Medicines Law and compromise access to medicines.

These provisions would:

• Expand the Philippines’ obligations in patent protection. As a party to bilateral FTAs, the Philippines will be compelled to adhere to other international IP treaties beyond those which it has already signed, and those that are not required under TRIPS. This includes the Patent Law Treaty (PLT) – to which the Philippines is not a part – which aims to streamline and harmonize formal requirements for the filing of national or regional patent applications and pave the way for more patents for medicines. The provisions on the revocation conditions in Article 10 and the addition of the priority claims in Article 13 of the PLT are extra TRIPs requirements that may lead to an increase in patent claims and to evergreening patents[9].
• Increase the number of medicines being eligible for patents[10] by allowing patents on plants and animals, new uses of existing medicines and diagnostic, therapeutic and surgical methods. Patent protection for plants will not only be disadvantageous to our farmers but will also allow the exploitation of our rich biodiversity by parties other than Filipinos[11].
• Lead to granting of more patents by curtailing pre-grant opposition to patents. Any opposition to patents would have to be made, therefore, after the patent has already been granted and through court proceedings which are typically more expensive and time-consuming. With patents in force, and pending court decisions on cases, generic versions of these medicines cannot be made available.
• Extend patent protection beyond 20 years in order to compensate for delays in granting the patent or in registering the medicine. It is important to note that there is no obligation, from an international/legal perspective, to grant such extensions.[12]
• Stifle competition from more affordable generic medicines. FTA provisions pertaining to data exclusivity will have the effect of expanding the originator companies’ “exclusive rights” over test data, and would cause significant delays in the marketing of generics, as generic companies will now be required to submit their own data to prove safety and efficacy. This will bar competition and impede price reductions that would have resulted from the availability of equivalents.
• Establish the linkage between registration and patent status. Such a linkage provision in the FTA would oblige the Philippine Government to enforce protection of the rights of pharmaceutical companies, effectively transforming regulatory institutions like the Food and Drugs Administration (FDA) into a patent police.

We assert that TRIPS-plus provisions that are incorporated in FTAs are inimical to our national interest because they would undermine the Philippines’ health and development objectives.

DEFEND THE RIGHT TO HEALTH AND ACCESS TO MEDICINES!

We assert further that TRIPS-plus provisions would:

Violate the right to health enshrined in the Constitution

TRIPS-plus provisions in regional and bilateral FTAs violate the Filipino’s right to health – a basic human right enshrined in the Philippine Constitution. Article II, Section 15 thereof provides that “. . . the State shall protect and promote the right to health of the people and instill health consciousness among them.”

These provisions would likewise undermine state policy on health development and affordable health services, as defined under Article XIII, Section 11 of the Constitution which states “(T)he State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost.”

Impede the commitment to attain the Millennium Development Goals (MDGs) pertaining to health, as well as targets that have been set in the Philippine Development Plan 2011-2016

The Philippine Development Plan 2011-2016 (PDP) has declared that “No Filipino will be denied health care, even those without the means to pay[13].” The PDP also states the commitment of President Benigno C. Aquino III to attain Universal Health Care by 2016. Efforts shall be directed towards ensuring the achievement of better health outcomes, fair health financing and a responsive health system that will provide all Filipinos, especially the disadvantaged groups, with equitable access to quality health care.

Access to medicines is a vital component. The Plan has set a clear target to increase access to affordable medicines from a baseline of 73 % (2009) of the population to 85% by 2015, and to 95% by the end of Aquino’s term in 2016.

To support the attainment of these goals, the Administration should not only use flexibilities provided under the TRIPS Agreement, but safeguard these as well.

USE AND SAFEGUARD THE FLEXIBILITIES!

Despite the incorporation into our domestic law of the TRIPs flexibilities (as contained in the Intellectual Property Code and the Cheaper Medicines Law, among others), the Philippines has not made full use of them.

We should, for example, explore the use of compulsory licensing or resort to parallel importation, both TRIPS flexibilities, to provide our citizens access to essential medicines that are currently not available or manufactured in the country, or are available but only at exorbitant prices. The experience of two (2) ASEAN countries come to mind – the use of compulsory licensing in Thailand for patented antiretrovirals (ARVs) to address the emerging HIV/AIDS problem, and Malaysia’s exercise of government use provisions.

Noting these, we urge all concerned stakeholders to work together not only on pushing for the use of TRIPS flexibilities that have long been available to us, but in safeguarding these as well.

[1] Paragraph 4, Doha Declaration on the TRIPS Agreement and Public Health. World Trade Organization. Adopted 14 November 2001
[2] Musungu, S. and Oh, C., The Use of Flexibilities in TRIPS by Developing Countries: Can They Promote Access to Medicines?, Study 4C, Commission on Intellectual Property Rights, Innovation and Public Health (CIPIH), August 2005. Available at http://www.who.int/intellectualproperty/studies/TRIPSFLEXI.pdf
[3] Section 2, R.A. 9502
[4] Section 3, supra.
[5] As reported during the 23 August 2011 Hearing of the Committee on Trade and Industry of the House of Representatives
[6] All Costs, No Benefits: How TRIPS-Plus Intellectual Property Rules in the US-Jordan FTA Affect Access to Medicines. Oxfam International Briefing Paper. 2007
[7] Regional and Bilateral Trade Agreements, investment treaties and IPR. Presentation by Zenpei X., Director of Trade and Investment Division, UNESCAP. Available at http://www.unescap.org/tid/projects/iptrade_s5xuan.pdf
[8] India-EU FTA: Inclusion of IPR in Investment Chapter – Another Threat to Public Health. 2005. Available at http://donttradeourlivesaway.wordpress.com/2011/04/15/india-eu-fta-inclusion-of-ipr-in-investment-chapter-%E2%80%93-another-threat-to-public-health/
[9] Limpananont, Jiraporn. Krikorian, Gaelle. Impact of IP Provisions from EC Draft Trade Agreement with ASEAN on Access to Medicines. 2009.
[10] Reid Smith, S., Intellectual Property in Free Trade Agreements. Third World Network. 2008
[11] FTAs provide for a national treatment clause which gives nationals of the other party the same preferences and benefits as Filipinos.
[12] Data Exclusivity and Other TRIPs Plus Measures, Briefing Note. World Health Organization. March 2006.
[13] Philippine Development Plan (2011-2016). Chapter 8 on Social Development. Available at http://www.neda.gov.ph/PDP/2011-2016/CHAPTER%208.pdf