Select Committee on European Scrutiny Third Report


27 Compulsory licensing of patents for pharmaceuticals

(26116)

14209/04

+ ADD 1

COM(04) 737

Draft Regulation on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems

Legal baseArticles 95 and 133 EC; co-decision; QMV
Document originated29 October 2004
Deposited in Parliament10 November 2004
DepartmentTrade and Industry
Basis of considerationEM of 29 November 2004
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentLegally and politically important
Committee's decisionCleared

Background

27.1 The TRIPS Agreement (the Agreement on trade-related Aspects of Intellectual Property Rights) requires members of the World Trade Organisation (WTO) to provide patent protection for technology-based products including pharmaceuticals. A Ministerial Declaration agreed at Doha in 2001 emphasised that the TRIPS agreement should be implemented and interpreted in a way that supports public health by promoting access both to existing medicines and the creation of new medicines.

27.2 The TRIPS agreement provides for minimum standards for intellectual property rights, in particular by restricting the circumstances in which compulsory licences may be granted (that is licences granted permitting the use of the patented invention irrespective of the consent of the patent owner). It provides that products which are manufactured under a compulsory licence must be intended predominantly for the domestic market. However, many developing countries lack the manufacturing capacity to produce pharmaceutical products, with the result that little practical advantage is gained from the grant of compulsory licences within the national territory, since such products have to manufactured elsewhere for import into such countries.

27.3 The WTO Decision of 30 August 2003 on the implementation of the 2001 Doha Declaration seeks to overcome this difficulty by allowing WTO members to grant compulsory licences for the production and sale of pharmaceutical products which are intended for export to third countries with insufficient or no domestic manufacturing capacity.

The proposed Regulation

27.4 The proposal seeks to implement the WTO Decision at Community level by allowing EC-based manufacturers to export products made under compulsory licence to developing countries which have insufficient domestic production capacity. It provides for the grant of a compulsory licence for the manufacture of a pharmaceutical product where such product is to be exported to an "importing WTO member". An eligible WTO member is defined as any least-developed member of the WTO, or any other WTO member which has notified the Council of the TRIPS agreement that it will use the system as an importer.

27.5 The authorities in the Member States which are competent to grant compulsory licences must verify that the importing WTO Member has made the appropriate declaration to the WTO specifying the names and expected quantities of the product required. Where the WTO country is not a least-developed country, the competent authority must also confirm that the importing WTO member has established either that it has no manufacturing capacity in the pharmaceutical sector or that such capacity is insufficient for meeting its needs. Where the patented product is also patented in the territory of the importing WTO member, the competent authority must also establish that the importing WTO member has granted, or intends to grant, a compulsory licence for the import of the product concerned.

27.6 The draft Regulation also provides that the compulsory licence is to be non-exclusive and that it may not be assigned. Products made under such a licence may not be imported into the Community.

27.7 The Commission argues that uniform implementation of the WTO Decision is necessary to avoid distortions of competition within the single market and to apply uniform rules to prevent the re-import into the European Union of products manufactured under compulsory licence. With respect to the legal base, the Commission proposes the use of Article 95 and 133 EC "in view of the very specific nature of the provisions of the Decision, the fact that national arrangements for compulsory licensing already exist, and the need for urgent action to allow for the export of medicines to countries with public health problems".

The Government's view

27.8 In his Explanatory Memorandum of 29 November 2004, the Parliamentary Under-Secretary of State for Science and Innovation at the Department of Trade and Industry (Lord Sainsbury of Turville) explains that the Government is sympathetic to the needs of developing countries and therefore favours the speedy implementation of the proposal so as to allow EU and UK generic manufacturers to be able to export generic pharmaceuticals to appropriate developing countries. The Minister further explains that the Government also recognises the concerns of the pharmaceutical industry that their intellectual property rights should not be undermined. Since the purpose of the WTO Decision would be defeated if pharmaceutical products supplied under that Decision were to be diverted from the markets for which they were intended, the Government also supports the anti-diversion measures contained in the proposal.

27.9 On the question of the legal base, the Minister comments as follows:

      "The dual legal base of Articles 95 and 133 would appear to be justified as the proposal is intended both to avoid distortion of competition in the single market and to provide for customs action at external borders to prevent re-imports into the Community of products sold for export under a compulsory licence. However, before accepting the dual legal base, the Government would propose to clarify that the use of Article 133 as a legal base relates solely to the provisions on border controls and not to the harmonisation of measures for the compulsory licensing of patents under TRIPS. The Government would not be prepared to concede that the harmonisation of intellectual property provisions in implementation of the WTO Decision fell under Article 133. Acceptance of a dual legal base would also be on the premise that co-decision applies to the adoption of the Regulation so as to preserve the prerogatives of the European Parliament."

Conclusion

27.10 The WTO Decision represents a compromise between the competing interests of the pharmaceutical industry and the need of developing countries for affordable medicines to address major public health problems, such as those of AIDS in sub-Saharan Africa. The proposal gives effect to that Decision within the context of the Community, and appears to us to be in an appropriate form.

27.11 We support the points made by the Minister on the legal base and his intention to ensure that the use of Article 133 EC is confined to measures on customs action at borders and is not extended to the harmonisation of intellectual property law within the Community. This latter should be undertaken, if at all, under Article 95 EC so as to safeguard the rights of the European Parliament under the co-decision procedure.

27.12 We have no further questions to put to the Minister and we are content to clear the document.


 
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