"Free Trade" and Medicines in the Americas.

Key Points

* Generic competition is crucial to reducing the price of medicines in developing countries.

* The U.S. is pushing a negotiating agenda for the FTAA that would dramatically limit each country's ability to undertake compulsory licensing, an important tool to promote generic competition.

* The U.S. negotiating position would make it difficult for other countries to emulate Brazil's success in providing treatment to all persons with HIV/AIDS.

The U.S. is aggressively pushing for negotiation and completion of the Free Trade Area of the Americas (FTAA) agreement, a proposed trade deal involving the economies of 34 countries in the Western Hemisphere, stretching from Canada to Chile. It is effectively an effort to expand NAFTA, the North American Free Trade Agreement, to include all of North, Central, and South America and the Caribbean (except for Cuba).

FTAA negotiations are under way with a scheduled completion date of 2005. Although the negotiating text remains secret, it is clear that the agreement will be modeled on NAFTA. The U.S. has released a summary of its negotiating objectives for the agreement, indicating what Washington would like to achieve.

According to its summary position statement, the U.S. wants to include provisions that would require countries to adopt rules concerning intellectual property rights (IPRs) even more favorable to patent holders than required by the World Trade Organization (WTO). These new obligations would dramatically limit each country's ability to constrain pharmaceutical pricing to ensure that essential medicines are affordable and accessible. In a variety of ways, the U.S. proposals would limit the ability of countries in the Americas to promote generic competition, including through compulsory licensing. Generic competition is the most important means (along with direct price controls) to reduce drug prices.

Compulsory licensing enables any government to grant a license to a company, government agency, or other party to use a patent without the authorization of the patent holder. The Costa Rican government, for example, could issue a license to a local company for an HIV/AIDS drug manufactured by Bristol-Myers Squibb. The Costa Rican firm would then manufacture the drug for sale in Costa Rica under a generic name and would pay a reasonable royalty to Bristol-Myers Squibb on each sale.

The generic competition created by compulsory licensing can lower the price of medicines by as much as 95%. For example, two Indian generic drug makers have offered to supply triple-drug combinations to people with HIV/AIDS for $350 per person per year. Aside from very limited discount programs that appear to be available only to African countries, the cost of the same "drug cocktails" produced by brand-name companies is $10,000 to $15,000 per person per year.

AIDS is not the only disease causing large numbers of preventable deaths in developing countries, but it is certainly one of the most devastating. Although the HIV/AIDS epidemic in Latin America and the Caribbean is nowhere near as serious as it is in Africa, infection rates are still high. The UN estimates that 1.4 million people have HIV/AIDS in Latin America, with 150,000 people newly infected with HIV in 2000 and more than 80,000 dying from AIDS.

If compulsory licensing brought prices for triple-drug treatments down to even $500 per person per year, most countries could provide pharmaceutical treatments to their HIV/AIDS populations. Although poor, these countries are considerably wealthier than African nations, and their HIV/AIDS populations are considerably smaller. Thus, universal access to treatment in the region is certainly within reach.

Brazil has led the way in showing how generic production can drive down prices and enable developing countries to make drug treatments universally available. It manufactures generic HIV/AIDS drugs (which are not patent-protected, because Brazil has only recently adopted a WTO-style patent system for pharmaceuticals). By doing so, it can guarantee pharmaceutical treatment to every person with HIV/AIDS.

Brazil has shown that developing countries can administer an effective HIV/AIDS treatment program, providing drugs to those with HIV/AIDS and maintaining high rates of compliance with treatment regimes. It has proven that generic production drives down prices: its cost for drug cocktails is far below that of the multinational pharmaceutical firms, and the price continues to decline. And the Brazilian experience--where infection rates are now roughly half what the World Bank had predicted in 1994--strongly suggests that treatment is an important component of prevention; healthier people are less likely to spread HIV, and people are more likely to be tested for HIV and then adopt safer practices if they know that those with HIV/AIDS have hope of being treated. However, the U.S. thrust in the FTAA negotiations significantly diminishes the prospect of other countries in the Americas emulating Brazil's public health accomplishments in curbing HIV/AIDS and other diseases.

Robert Weissman <[e-mail]> is the editor of Multinational Monitor magazine and a codirector of Essential Action, a corporate accountability group. He is also a co-author of Corporate Predators: The Hunt for MegaProfits and the Attack on Democracy (Monroe, ME: Common Courage Press, 1999; see http://www.corporatepredators.org).