by Professor Mustafizur Rahman, Executive Director, CPD
In the backdrop of Bangladesh’s strong capacity in the pharmaceutical sector, a recent development in the WTO should be seen as an issue of heightened interest to the concerned stakeholders. On November 6, 2015 the WTO-TRIPS Council took a decision which has far-reaching developmental consequences for the least-developed countries (LDCs), but more particularly for Bangladesh. On that day, the TRIPS Council decided to grant the LDCs an exemption from obligations to implement or apply or enforce patents as well as data protection for pharmaceutical products until January 1, 2033. The waiver allows LDCs a transition period of 17 years to comply with and implement the provisions of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement of the WTO.
It may be noted, the original stance of the LDCs was for granting of patent waiver for as long as a country remained an LDC. In the end, LDCs had to agree to a compromise version in this regard. Nonetheless, extension of the transition period of 14 years granted earlier, which expired on December 31, 2015, to a second and longer transition phase of 17 years was a remarkable achievement by any measure. The waivers are to be reviewed annually by the WTO General Council and the current decision does not preclude the possibility of further extension in future favouring the LDCs.
Whilst the original request of the LDCs to link the waiver to their graduation to non-LDC status had received broad-based support from the developing countries, the EU, UN organisations and civil societies worldwide, negotiations with the USA proved to be very tough indeed. Ensuring the support of the US and getting the US negotiators to shift from their initial offer of extension for 10 years, inclusion of mailbox waiver and ensuring that no strings are attached to the decision — all these must be seen as commendable achievements by the LDC negotiators and their supporters in the WTO.
The TRIPS decision itself is important on several counts: firstly, the waiver will allow LDCs to continue to enjoy exemptions from patent obligations for pharmaceutical products stipulated in the TRIPS agreement, which will enable the LDCs to produce these items at significantly reduced costs during the transition period. Secondly, LDCs have also secured waivers from obligations to make available the mechanism for filling patent applications for pharmaceutical products (mailbox) and from granting exclusive marketing rights to such applications for the granted period. As may be recalled, the provision of mailbox waiver was not granted to the LDCs during the first transition phase. Thirdly, the decision does not include any conditions attached to it, which would have put restrictions on the ability of the LDCs to take full advantage of the waiver or could limit the benefits that could potentially accrue from this decision.
With this decision, a modicum of life has been infused into the ongoing WTO negotiations, which had not seen any mentionable progress in the context of the ambitious Doha Development Round Agenda of the WTO. Developing countries, particularly the LDCs, were frustrated that the developmental dimensions of a Round that was hyped as a Development Round has gradually receded to the background since the time the Round was launched with such high hopes in 2001.
With the TRIPS decision, some elements of the aspiration which had informed the new Round in the first place appears to have clawed back into the negotiating table. It is also encouraging that the US, after protracted negotiations, agreed to shift from its original stance and veered towards a compromise that met the aspirations of the LDCs. Indeed, the TRIPS decision is a pointer as to how LDC concerns and interests could be accommodated through concrete steps. This decision is also in line with the spirit of the sustainable development goals (SDGs), more specifically Goal 3 of the SDGs, where specific targets have been set with a view to ensuring healthy lives and promote well-being for all at all ages. Thus, this decision is also a reflection of coherence in view of the commitments made by the developed countries in the context of the SDGs.
The TRIPS and Pharmaceuticals decision of the WTO has important implications for the economies of all the 34 LDC members of the WTO. The decision provides the LDCs with an opportunity to provide low-cost medicine to their own people, and also creates significant export opportunities for pharmaceutical enterprises in the LDCs. Waiver from patenting/licensing costs gives a significant advantage to the LDC producers who will be able to keep their costs low. Consequently, their competitive strength, both in the domestic as well as the export markets, will be enhanced. Producers, consumers and LDC economies in general should reap substantial benefit as a result of this decision. The decision has particular significance for Bangladesh. Indeed, among all the LDCs, Bangladesh is one of only a few which are in a position to reap the benefits of the decision.
Bangladesh has formidable supply-side capacity in pharmaceuticals and is capable of catering not only to the sizeable domestic demand but also has demonstrated capacity in exporting to overseas markets. The industry has to its credit a credible track record both in terms of quantitative measure and quality standards. The more than 197 small, medium and large enterprises in the pharmaceutical industry cater to about 97 percent of Bangladesh’s domestic demand.
The export target for pharmaceutical items has been set at $80.0 million in FY2015-16. Pharmaceutical items, including active pharmaceutical ingredients (APIs) and a wide range of pharmaceutical products covering all major therapeutic classes and dosage forms, as also specialist products, are exported to more than 90 countries, albeit in small amounts. On the other hand, the global pharmaceutical export market is estimated to be worth more than $520 billion (in 2014). Bangladesh’s current share in this huge market is, thus, quite insignificant.
Preferential market access that allows Bangladesh duty-, quota-free export of pharmaceutical products to almost all developed and some of the developing country markets should now provide additional competitive advantage to Bangladesh, in the wake of the TRIPS decision. The capacity for import-substitution and export-orientation demonstrated by the country’s pharmaceutical industry is something to be proud of. However, regrettably, there is no denying that Bangladesh was not able to fully realise the potential benefits originating from the TRIPS waiver during the first transition period of 14 years (2001-2015).
The joint statement signed by a number of leading NGOs, in view of the TRIPS decision, urged the LDCs “to actively use the created policy space that this renewed transition period provides, and accordingly to take immediate steps to amend their respective national laws to exclude pharmaceutical products from patent protection and test data protection with explicit provisions that this would be until January 1, 2033, or the expiry of such later transition period that may be granted by the WTO Council for TRIPS”.
In view of the enormous possibilities, there is a need to design a dedicated strategy which will enable Bangladesh to take advantage of the TRIPS waiver. Investment in the sector will need to be incentivised, specialised industrial areas and parks with needed infrastructure will need to be built and export-oriented FDI will need to be encouraged. The 200-acre API park in Munshiganj needs to be fully operationalised on an urgent basis. Bangladeshi companies have already started to make entry into developed country markets and there is a need to support these companies to strengthen their presence in these and other new markets.
Once Bangladesh graduates out of the LDC status, it will no longer be able to enjoy the preferential treatment accorded under this decision. It is likely that the UN Committee for Development Policy (CDP), which decides matters of inclusion into, and graduation from, the LDC group will consider Bangladesh for graduation in its triennial review to be undertaken in 2018. Following two successive reviews (of three years each), it is highly likely that Bangladesh will finally graduate from LDC group by the year 2024. The window of opportunity for Bangladesh is, thus, only for about 10 years. In this backdrop, Bangladesh should design, with the urgency that the matter deserves, an appropriate strategy to take fullest advantage of the WTO-TRIPS decision.
Disclaimer: An earlier version of the blog was published in the Daily Star