Letter Shows US Pressure On Global Fund For Compulsory Licensing, Generics

A 2011 letter from the top Republican on the United States Senate Finance Committee condemned efforts by the Global Fund to train public health officials on the use of flexibilities to the patent system contained in international trade rules. The letter, which also attacked the purchase of generic medicines over brand-name drugs, came just months before the US helped remove the head of the Global Fund, ultimately replacing him with an American official.

The Global Fund to Fight AIDS, Tuberculosis and Malaria, based in Geneva, was created to raise resources to fight those diseases and direct those resources toward the greatest areas of need. It has raised billions of dollars but ran into difficulties during the global financial crisis.

The 13 April 2011 letter [pdf] from Sen. Orrin Hatch, a Utah Republican, to US Secretary of State Hillary Clinton, asserted that the Global Fund had paid more for generic drugs than for brand name versions, which amounted to a US-funded program “making inefficient and unnecessarily costly procurement decisions that come with dire consequences.”

It also criticised the Global Fund’s training efforts for promoting the use of compulsory licensing, suggesting that it is an abuse of the patent system and goes against the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

“By advocating for developing countries to disregard the [TRIPS Agreement] through issuing compulsory licences to gain access to Global Fund grants, we are abusing the system,” Hatch said, calling these actions “inconsistent with patent law.”

But under TRIPS, compulsory licensing is a built-in option for governments as a way to make patented drugs more affordable for their populations in times of need. Countries are permitted to decide for themselves when they wish to use compulsory licences, and have a series of steps to follow if so. This was reinforced in the 2001 Doha Declaration on TRIPS and Public Health.

But patent-holding innovator companies, such as those in the US, suffer when governments elect this path, as they depend on high prices to recover the costs of research and development. Hence, pressure has been intense on developing countries – especially those with larger markets – that elect to use compulsory licencing.

The Hatch letter included attachments attempting to show how the Global Fund paid more for generics than for brand-name versions, though it is not entirely clear. It also encloses a Global Fund training presentation from February 2011 that included the advice that:

“The Global Fund encourages recipients to apply the flexibilities provided within the national laws and in the [TRIPS Agreement], as interpreted in the [Doha Declaration], to achieve the lowest possible price for products of assured quality.”

The presentation also said that fund recipients that lack capacity to assess intellectual property rights issues could contract the necessary expertise.

The presentation further showed price savings from the use of generics, and also called for greater access to patent information so that countries can better determine what needed medicines are still under patent and act accordingly, perhaps avoiding the “procurement bottleneck” brought on by intellectual property rights.

Global Fund Executive Director Michel Kazatchkine resigned in January 2012. After a transition period, US official Mark Dybul took the reins, becoming executive director on 21 January of this year. Dybul was known for his role in the US-based President’s Emergency Program for AIDS Relief (PEPFAR).

PEPFAR was the measure for the complaints in Hatch’s letter, which stated that the PEPFAR legislation carefully spelled out how generics would be purchased for use in certain countries only, and did not require the purchase of generics. Hatch suggested that the Fund’s promotion of generics “without regard to the health and financial consequences” may have cost “millions of dollars of excessive waste and abuse of the program.”

The transition process at the Global Fund since Kazatchkine’s departure was conducted in secret, without public scrutiny. As a result, it is not known the degree to which US industrial or bottom line interests might have contributed to the changes there, or how the change has affected the Fund’s practices in relation to procurement of drugs, patented or otherwise.