Minutes - TRIPS Council - View details of the intervention/statement

H.E. Ambassador Xolelwa Mlumbi-Peter
World Trade Organization
190.   Thank you very much for providing the Secretariat with an opportunity to make a presentation on how to use the Special Compulsory Licensing System. 191.   To start with it is useful to put the System into context. Where does it come from? Back in 2001, the Doha Declaration on the TRIPS Agreement and Public Health identified the problem of Members with insufficient or no manufacturing capacity in the pharmaceutical sector to make effective use of compulsory licensing. This can be found in Paragraph 6 of the Doha Declaration, which also explains why many people still refer to the mechanism as the "Paragraph 6 System". 192.   The problem identified by the Doha Declaration is about securing adequate supply of affordable generics from third country sources where the needed products are patent-protected. The difficulty does not lie on the importing Member's side because that Member can issue compulsory licences for local production and import under Article 31 TRIPS. It is located on the exporting Member's side because of the restrictive condition in Article 31(f) which requires compulsory licences to be used predominantly to supply the domestic market. Under a normal compulsory licence, only the nonpredominant part can be exported. This was considered to be potentially a problem and explains why the System puts in place two distinctive derogations from Article 31(f), as well as a derogation from the calculation of remuneration to be paid by the right holder under Article 31(h). 193.   Let's now look at when to use the System. There is place for use of the System when there is insufficient or no local manufacturing capacity in the importing Member to produce the needed medicines and this Member therefore needs to rely on imports from a generic supplier in another Member. In the exporting Member, the product needed is covered by a patent and the export of the non-predominant share of the production which would be possible under a normal compulsory licence does not satisfy the need of the importer. Hence, there would be a need to authorize the generic manufacture exclusively for export. This is typically the scenario in which the System could be used. 194.   The following are instances in which the System would not be used. This is the case when the potential importing Member has manufacturing capacity to produce what is needed in terms of medicines or pharmaceutical products. On the exporting Member's side, the System would not be used if there is no patent on the products needed by the importer and there would therefore no compulsory licence be required to manufacture for export. The same applies if there is a patent, but the standard compulsory license in the exporting Member would be sufficient to satisfy the needs of the importing country by exporting the non-predominant share of the production. Finally, the System would not be used in situations where anti-competitive practices have been determined by judicial or administrative processes. Under Article 31(k), this would lift the restrictive condition in 31(f). 195.   What does the System cover? On the 'disease side', it covers public health problems affecting developing countries and LDCs, especially those resulting from HIV/AIDS, tuberculosis and malaria, but not limited to those. It also refers to other epidemics. On the 'product side', the System covers all pharmaceutical products, including active ingredients and diagnostic kits which are patented or manufactured under patented processes. 196.   Who can use the System? LDCs automatically qualify as importers under the System. Other Members will have to notify the intention to use the System as importers. We should bear in mind that developed country Members opted out of using the System as importers. There is also a group of 11 high-income developing countries which voluntarily agreed to use the System only in circumstances of extreme urgency. And we should also note that this is different from a standard compulsory license under Article 31 which can be used by all WTO Members for local production or import of all health and other technologies. 197.   On the exporting Member's side, any WTO Member is entitled to export under the System as soon as it has export capacities. Usually, this would require implementation of this form of compulsory licence within domestic law, which most WTO Members with established capacity to export medicines have done. The data for worldwide pharmaceutical exports in 2014 for 122 countries confirm that the share of the total exports covered by WTO Members with implementing legislation amounted to more than 85% of the total pharmaceutical exports. It can thus be safely assumed that the legislative framework enabling Members with manufacturing capacities to engage in exports under the System is in place. 198.   We now come to the key question of this presentation, i.e. how to use the System? The use consists of four easy steps. The first two are notifications by the importing Member and the exporting Member. In addition, the product which is manufactured under the System needs to be clearly identified as such through labelling or marking of those products for the purpose of avoiding trade diversion to high income countries so that they will stay in the country that needs the product. And finally, the licensee is required to post the details of the shipment(s) on a website to ensure transparency about what is shipped, the quantity of the shipped product and the distinguishing features applied to it, and the destination. 199.   Let's first look at the notifications in more detail. For LDC Members, the notification would provide information about its specific needs, including the names and expected quantities of the needed products and, if the product is patent-protected in the importing LDC Member, the intention to grant a compulsory license or the actual grant of a licence. Alternatively, reference can be made to the extended transition period in the pharmaceutical sector which exempts LDCs from the obligation to protect such patents. 200.   Among the points which merit being kept in mind is that the notification merely signals the need of the LDC and does not mean a commitment to procure medicines under this System. In other words, if the LDC Member finds a more affordable source from which to procure the medicines it needs, it does not have to continue the use of the System. There is no need to notify the name of the supplier, nor the expected time frame of supply and use of the medicines. This is an important point, because notifying the name of the supplier would unnecessarily limit the range of potentially interested candidates who could otherwise engage in supply of the medicines. So, keeping it open to a wide range of potential suppliers is important. Joint notifications can be made by importing Members or a regional organization on behalf of its Members with their consent. Finally, this notification is not needed when pharmaceutical products are imported from another Member under the RTA derogation in Article 31bis(3). 201.   To illustrate how this would like in practice, let's take the hypothetical example of Aradia, an LDC. Its Ministry of Health, in cooperation with an International procurement programme, determined that it needs 15 million doses of 'panaceavir'. It also exercised rights not to protect pharmaceutical patents until 2033. All its notification under the System therefore needs to say is that "Aradia needs to import 15 million doses of panaceavir." 202.   For Members that are not LDCs, two notifications would be required to use the System. The first notification is about its intention to use the System as an importer. It can be made any time, also together with the notification of its specific needs. This notification is not needed if the importing Member is an LDC or if the import takes place from another Member under the RTA derogation in Article 31bis(3). Again, making the notification does not imply a commitment to procure medicines under the System. It is just the first step and the Member remains free to get the medicines from a different source. 203.   The second notification is about the importer's specific needs. This has to be made each time the System is used by a Member for a particular medical need. It is almost identical to the notification requirement for LDC Members with one difference, i.e. the importing non-LDC Member also has to notify that it has established that it has insufficient or no manufacturing capacities in the pharmaceutical sector and how this has been established. The other notes are similar to those set out regarding LDC notification requirements. 204.   How would this look like in practice? In the hypothetical case for illustration purposes, Sanatos is a developing country. Its Ministry of Health procurement programme determined that it needs 30 million doses of 'elixivir'. The country has insufficient manufacturing capacities in the local pharmaceutical industry. In this case all the notification needs to say is that "Sanatos intends to use the System set out in Article 31bis of the TRIPS Agreement and the Annex and the Appendix to it, as an importing Member" and "Sanatos needs to import 30 million doses of elixivir. Sanatos has found that its manufacturing capacity in the pharmaceutical sector is insufficient to meet its needs for this product, on the basis of 'Pharma Sanatos 2016', the most recent report on the pharmaceutical sector prepared by the Ministry of Industry". 205.   Optionally, if no patent is in force, the notification could also indicate that "elixivir is not patent protected in the territory of Sanatos". If a patent is in force, the notification would need to confirm that "Sanatos intends to authorize use of the subject matter of the patent or patents in force for elixivir without the consent of the patent owner in accordance with the provisions in Article 31 and Article 31bis of the TRIPS Agreement". 206.   Let's now turn to the notification requirements for an exporting Member. It needs to notify the grant of a compulsory license and conditions attached to it. What exactly does it need to notify? The notification has to include the name and address of licensee; product and quantities for which the compulsory licence has been granted; importing Member(s); duration of compulsory license; website address with information on quantities being supplied and distinguishing features applied to the product manufactured for export; and, on an optional basis, other licensing conditions and patent numbers. 207.   It is important to note that in the notification that has to be made by any exporting Member for every compulsory licence issued under the System, information about details can be replaced by a copy of the compulsory license attached to the notification. The notification has to be submitted prior to export. Specific labelling/marking requirements apply to formulated products, active ingredients and finished products using such active ingredients. Before the shipment begins, the licensee may post information about the shipment on its own website or on a dedicated WTO website. This notification is not required if export takes place under the RTA derogation (Article 31bis(3)). 208.   Finally, how to notify? The preferred option would be the use of the e-TRIPS Notification and Submission System. The links in the presentation are active in the room document and can be accessed by Members. 209.   The e-TRIPS platform facilitates entry of each of the three notifications. We would encourage Members to use this facility. Other means of making notifications by email, by fax, or by mail remain also available. For Members wishing to use those options, a Guide to Notifications, including model notifications, is available on the WTO webpage. 210.   The notifications will be circulated by the Secretariat to the TRIPS Council as a formal document and can be accessed either on e-TRIPS or the TRIPS and Public Health webpage, which links to the relevant notifications on Documents Online. 211.   Please note that none of these notifications require approval by a WTO body; that the general TRIPS requirements for compulsory license in Article 31 continue to apply such as the requirement to first seek a voluntary license by the right holder in normal circumstances; and, as the System is about intellectual property, that it does not address any procedural issues relating to, for example, procurement of medicines and regulatory approval. 212.   For those who are interested in more detail, slide 14 provides a list of resources which includes very recent material like Annex 3 to the Second Edition of the Trilateral Study. This Annex addresses the operation of the Special Compulsory Licensing System. Also, the Guide to the TRIPS Agreement has a module on TRIPS and Public Health, including a specific section on using the Special Compulsory Licensing System.
30. The Chair recalled that, in the past, the review had been conducted pursuant to Paragraph 6 System of the 2003 Decision on the Implementation of Paragraph 6 of the Doha Declaration on the TRIPS Agreement and Public Health. Since the entry into force of the Protocol Amending the TRIPS Agreement on 23 January 2017, the review also responded to the requirements that had now been incorporated into the amended TRIPS Agreement.
31. Paragraph 7 of the Annex to the amended TRIPS Agreement and paragraph 8 of the 2003 Waiver Decision required the Council to review the functioning of the System annually, with a view to ensuring its effective operation. They also required the Council to report annually on the System's operation to the General Council. In the case of the Waiver Decision, this review was also deemed to fulfil the requirements of Article IX:4 of the WTO Agreement.
32. During the Chair's consultations in September concerning Members' preferences for approaching the annual review, a number of Members had suggested that the discussion focus on concrete problems with the application of the System, rather than an abstract consideration of issues. Some had referred to procedural complexities of the System that needed to be discussed so that the System could ensure access to medicines as intended. Others had cautioned that this agenda item should not be "another COVID-19 item". One concrete proposal that had gathered broad support was the suggestion that the Secretariat give a presentation on how to use the Special Compulsory Licensing System (as opposed to how to accept the Amendment), so as to refresh delegations' memory and provide background to the discussion.
33. The Chair suggested that she would proceed by first informing Members about the status of acceptances of the Protocol Amending the TRIPS Agreement, and then give the floor to the Secretariat to provide a presentation on how to use the Special Compulsory Licensing System to remind everyone about the detail. The floor would then be open to delegations for an exchange of views about the functioning of the System, and finally, the Council would consider its Report to the General Council.
34. The Chair updated Members on the status of acceptances of the TRIPS Protocol. The current period for accepting it ran until 31 December 2021. The amended TRIPS Agreement was thus binding for 131 WTO Members. In other words, 33 Members were yet to accept the Protocol Amending the TRIPS Agreement. She encouraged those Members to complete their domestic procedures as soon as possible.
35. When the TRIPS Amendment had entered into force in January 2017, Members had noted that it would be useful to consider how to make this new procurement tool work effectively in practice. The Chair therefore encouraged Members to engage in a constructive discussion which could also build on earlier reviews. As previous Chairs and she herself had indicated on past occasions, Members might find two documents particularly helpful to facilitate their considerations. The first document was the Council's Annual Review of 2016 (circulated in document IP/C/76); and the second document was the Secretariat's 2016 Report on Technical Cooperation Activities (circulated in document IP/C/W/618). Annex II of that report summarized key issues that delegations might wish to consider to support the practical use of the System.
36. The representatives of the WTO Secretariat, Chad (on behalf of the LDC Group), Ukraine, South Africa, India, China, Tanzania (on behalf of the African Group), Japan, Australia, the United States of America, Canada, Chile, Switzerland and the European Union took the floor.
37. The Council took note of the statements made.
38. The Chair turned to the Council's report to the General Council. A draft report had been prepared by the Secretariat (circulated in document JOB/IP/38). It was modelled on previous years' reports and contained factual information on the implementation and use of the System. Under the section on the Amendment to the TRIPS Agreement, it also included a list of Members who were yet to accept the Protocol Amending the TRIPS Agreement. As with past reports, an extract from the Council's minutes on this agenda item would be attached to the report in Annex 1 and Appendix 1.
39. The Council agreed to adopt the draft report and to attach the record of the discussion to it.
IP/C/M/96, IP/C/M/96/Add.1