History And Summary Of S.3175
Life-Saving Medicines Export Act of 2006
Chief Sponsor: Senator Patrick Leahy (D-Vt.)

The member nations of the World Trade Organization (WTO) have agreed to a new approach to assist people suffering from life-threatening diseases in least-developed or developing nations. Under this international agreement, nations such as the United States with pharmaceutical industries would be allowed to make and sell generic medicines to nations in need in the event the patent owners of those medicines refused to authorize such generic manufacture and sale.

On December 6, 2005, the United States announced that it "welcomes" the WTO amendment to "allow countries to override patent rights when necessary to export life-saving drugs to developing countries that face public health crises but cannot produce drugs for themselves."

U.S. Ambassador Portman called this "a landmark achievement that we hope will help developing countries devastated by HIV/AIDS and other public health crises."  The USTR press release noted that "the United States . . . is pleased that an agreement has been reached."

Participation by any nation that wants to export such generic products is voluntary.  In order to participate, each country must pass legislation to implement the WTO agreement. The World Health Assembly and the World Health Organization have adopted resolutions urging all member nations to adopt laws that would allow generic manufacturers to make and sell life-saving medicines under that international
agreement.

In July 2005, the World Bank issued a major report (No. 61) explaining the benefits of this approach and indicating that millions of lives could be saved or improved if nations with pharmaceutical manufacturing capacity took advantage of the WTO agreement.
Meanwhile, two recent World Health Organization annual reports (The World Health Reports for 2003 and 2004) demonstrate the enormous scope of the need for supplying these medicines to needy countries.  The "Life-Saving Medicines Export Act of 2006" authored by Senator Leahy would allow the U.S. generic industry to respond to these urgent international needs and could save millions of lives in impoverished nations.

Canada, Norway and the Netherlands have already enacted such legislation or rule changes.  However, aspects of the Canadian law have been an impediment to the willingness of generic companies to participate. For example, that law allows Canadian generic companies to provide such medicines for at most only four years.  The Canadian
version permits dilatory and needless litigation, omits important medicines from a complex list of covered drugs, and creates unnecessary bureaucratic hoops.

Senator Leahy's bill addresses those concerns.  The bill would provide that a participating generic manufacturer could supply such medicines for up to 14 years, making it more feasible for U.S. generic companies to make the investments needed to produce low-cost medicines for export to impoverished areas.  Under Senator Leahy's bill, U.S. generic manufacturers would be allowed to make generic versions of patented drugs without the consent of the patent holders.  Those patent holders would receive compensation under a so-called "compulsory license" and the generic companies would then be required
to sell those less-expensive generic drugs only to least-developed or developing nations.

Use of a compulsory license occurs when Congress determines that there is an important need which should be addressed.  For example, most Americans do not realize that their network television programs received by satellite or by cable are provided under a compulsory license.  The program owners (owners of the TV shows or movies)
receive a royalty for their programs under a formula.  This way Americans can watch network TV programming over satellite and cable just like it is made available over-the-air (via an antenna). This same compulsory license approach, except with respect to patented pharmaceutical products, is employed in Senator Leahy's bill.   A World Health Organization paper noted that by the end of the 1950s, "an estimated 40,000 to 50,000 compulsory licenses were issued regarding patents in the United States."

Reports by UNICEF, UNAIDS, WHO and Médecins Sans Frontières clearly show that the high prices of many life-saving medicines and diagnostics is a significant barrier to their availability in many very low income areas of the world.  Indeed, the 4th Global Report of UNAIDS notes the extremely low rate of treatment for HIV/AIDS in those
areas by pointing out that of the 5 to 6 million urgently in need of antiretroviral medicines, only some 400,000 were receiving them.

The WTO agreement contains language designed to protect the interests of the patent holders by focusing its provisions on areas of the world where these important medicines would not otherwise be available except for some of the wealthiest residents.  Thus, implementation of the agreement would not take business away from the companies owning the patents since their medicines are not purchased by low-income families in those impoverished nations.

In addition, the patent holders will receive royalties from the generic companies under Senator Leahy's bill.  Third, generic versions of products sold under the agreement have to be clearly marked as not for resale to developed nations.  Thus, the bill would not result in undercutting the higher-priced sales of the patented medicines in developed nations.

Senator Leahy's bill addresses both the urgent needs of millions of low-income families in impoverished nations while protecting the interests of the patent owners of these life-saving medicines and will hopefully help enhance America's image in the world.

America has a strong self-interest in combating diseases in foreign nations.  A surprising number of new diseases have emerged in recent years:  AIDS, mad cow (Bovine Spongiform Encephalopathy), hantavirus, Lyme, West Nile, SARS, and avian flu.  Some of these new diseases are variations of existing diseases. The volume of people and cargo going to and from distant nations is astounding.  According to "Prescription
for Survival" by Philip Hilts, if you count only travel between nations with a heavy burden of disease and those with less disease, more than a million people a week are making the trip.

The more viruses and bacteria mutant inside animals and people, and the more people and goods travel throughout the world, the more residents living in the United States are at risk of being harmed by dangerous diseases.

The National Intelligence Estimate (Jan. 2000; published by the CIA and the National Intelligence Council) noted that:  "New and emerging infectious diseases will pose a rising global health threat, and will complicate U.S. and global security over the next 20 years.  These diseases will endanger U.S. citizens at home and abroad, threaten
United States armed forces deployed overseas and exacerbate social and political instability in key countries and regions."

There have been significant voluntary efforts made by brand-name pharmaceutical companies who have donated life-saving medicines and have donated time, personnel and money to help in the fight against deadly diseases in other nations.   The contribution that Merck & Company made in Botswana in the fight against HIV/AIDS is well-known
and commendable.  Foundations such as the Bill and Melinda Gates Foundation and the Clinton Foundation are taking the lead with many other foundations, charities and non-governmental organizations in addressing the health needs of low-income nations.   Some funding mechanisms have been started including the Global Fund to Fight AIDS,
Tuberculosis and Malaria and President Bush's Millennium Challenge Account. Nonetheless, much remains to be done.

If this bill is enacted it would complement these ongoing efforts and implement the WTO agreements and make low-cost life-saving pharmaceutical products, and other medicines, available to hundreds of thousands of persons without other access to those products.

# # # # #

Section-By-Section Summary Of S.3175
Life-Saving Medicines Export Act Of 2006
Chief Sponsor: Senator Patrick Leahy

Section 1 (Short Title): Sets forth the name of the Act as the "Life-Saving Medicines Export Act of 2006."

Section 2 (Purposes and Congressional Findings):   Section 2 states that the purpose of the Act is to promote public health under World Trade Organization agreements by permitting the export of generic versions of life-saving patented pharmaceutical products and other medicines (including diagnostic tools and vaccines) needed to prevent
or treat potentially life threatening diseases to residents of impoverished countries with insufficient or no manufacturing capacity to make the medicines.  The findings set forth determinations by the World Health Organization concerning the millions of low-income
persons without regular access to medicines in lesser-developed or developing nations.

Section 3  (Exportation of Generic Medicines for Public Health Purposes):  This section requires the Director of the United States Patent and Trademark Office to issue a compulsory license (permission to make and sell a patented product under this new Act) to permit generic companies to make and export medicines under the terms of WTO
international agreements under several conditions.

The recipient country must be a least-developed nation (as defined by the United Nations) or a developing nation without the ability to manufacture the medicine in question.

The recipient country (called an "eligible country" in the bill) must notify the WTO of its interest in participating in this program.

Efforts must have been made by the generic company to buy the right to make and sell the medicine under normal business arrangements with the patent holders.

The medical product exported under this Act can only be used in least-developed or developing nations (and is not for re-export except in identified circumstances relating to regional trade alliances).

Special labeling and packaging must be used to make clear that the product is sold under the authority of the WTO agreement only for use as allowed under agreement and this bill.

The permission to make and sell the product (the license) can not exceed seven years, except that the license may be extended once.

The holder of the compulsory license shall pay a royalty to the patent holder, as determined by the Director of the PTO within a limited range of possible rates set forth in the bill, taking into account such factors as humanitarian needs, the economic value to the
importing nation, and the need for low-cost pharmaceutical products by persons in the importing nation.

The maximum royalty for any shipment shall not exceed 4 percent times the commercial value of the pharmaceutical products to be exported under this Act under that supply agreement.

An alternative royalty payment approach, modeled after the approach enacted into law by Canada, would also be permitted with the same 4 percent maximum.  In addition, the Director may accept combined applications from multiple eligible countries.  Note that in emergency situations the Director may waive provisions of the bill in a manner consistent with the WTO agreements.

Section 4 (Not a patent infringement):  This section makes clear that compulsory licenses issued under this Act shall not be considered an infringement of a patent.

Section 5 (National Advisory Board on Implementation of the General Council Decision):  This section creates a diverse advisory board (of academic, patent, trade, medical, international aid, and industry experts) to advise the Director, and to report to the Congress, on ways to improve implementation of the bill to achieve its purposes.
Mandatory funding for the board is provided out of the general fund of the U.S. at $1.5 million in fiscal years 2007 and 2008, with modestly declining amounts provided in subsequent years through 2011.

 

# # # # #