The EU-India Free Trade Agreement: is it the end of the world as we know it?

9 February, 2012 | Health and Education For All

This week, Indian and European Union (EU) trade negotiators in New Delhi will most likely announce that they have reached a preliminary agreement on a trade pact that will forge a new commercial relationship between the two economies. The EU wants the pact to include new intellectual property (IP) rules that go beyond current requirements under international law.  These new IP rules would serve the interests of multinational pharmaceutical companies in Europe, while drastically increasing medicines prices for millions of poor people in India and other developing countries.

If India accepts the new rules, the impact on public health would be severe, especially for the poorest people in India who buy medicines out of pocket. The Government has found that 80% of all out of pocket expenses for health care are medicines, meaning people are highly sensitive to any rise in medicine prices.  If the Indian Government caves in to EU demands, it may force Indian households to forego life-saving treatment in the future, or to make difficult choices between medicines and other basic necessities. Some States in India have recognized the negative impact of people paying out of pocket for medicines and provide free medicines instead. Such a scheme isworking particularly well in Rajisthan for example. However, such progressive programs could be put at risk if medicine costs rise as a result of this trade agreement.

Pharmacy of the developing world

Compounding these concerns is India’s role as the ‘pharmacy of the developing world’. India produces over two-thirds of all of the generic medicines (identical copies of originator medicines) used in low and middle income countries, including over 80% of all medicines used to treat HIV and AIDS.  Competition in the Indian marketplace is fierce, and producers continuously innovate new ways to reduce the cost of making quality medicines, both simple and complex.  Competition from Indian generics has reduced the cost of providing treatment for a range of illnesses through multilateral and government programs, in addition to making quality medicines more accessible for patients who must buy them out of pocket.  The price of medicines to treat HIV and AIDS fell drastically, from $10,000 USD per patient per year, to less than $80, thanks in large part to robust generic competition amongst manufacturers in India.

Yet India’s role as pharmacy of the developing world is already eroding. Today, India is a member of the World Trade Organization (WTO) and therefore already plays by certain trade rules, including in relation to intellectual property.  For instance, it must provide patents, which confer a time-limited monopoly, to innovative companies to reward them for developing new products including medicines. Indian companies must wait for a patent to expire before they can produce identical, quality copies of innovator medicines for use in India and for export to poor patients around the world. From 2005, India started granting patents for medicines, meaning delays to provide generics are increasing.

Controlling the price of medicines

It hasn’t been all bad news until now. An important feature of these global trade rules is they do not prevent countries from addressing public health concerns, including high medicine prices. Countries have recourse to a set of policy tools that can be used to keep medicine prices from rising, and to ensure that competition can be stimulated to bring down prices. The right of countries to use these tools was affirmed in 2001, when WTO members unanimously agreed to the Doha Declaration on TRIPS and Public Health, which stated that the rules must be applied in a way that promotes public health and, in particular, access to medicines for all.

Having entered trade negotiations with the EU, the Indian Government is under immense pressure from EU trade negotiators to accept stricter IP rules that contradict the Doha Declaration and to give up these tools and provisions that can safeguard the health of millions of people in India and other developing countries.  Such strict new rules can be extremely damaging when implemented in low and middle-income countries.

Stricter IP rules restrict access to medicines

Oxfam has observed over time a measurable, negative impact on access to medicines in those countries that have implemented stricter IP rules along the lines of those proposed by the EU. For instance, a 2007 Oxfam study in Jordan found that medicines prices rose by 20% following implementation of a 2001 trade agreement with the United States, with the cost of medicines to treat heart disease and cancer, the two leading causes of death in Jordan, rising markedly. A second study published in Health Affairs in 2009 found a similar impact in Guatemala following implementation of its 2005 trade deal with the United States.

Why do costs keep going up as IP rules get stricter?  When armed with patent monopolies on new medicines, innovator pharmaceutical companies charge the highest price a market will bear, even if this means the product is unaffordable for government health programs and poor people. Competition from generics producers brings down prices for medicines that have gone off-patent – but new treatments remain unaffordable during the monopoly patent period. The innovator companies argue they are changing their pricing policies for new products which are under monopoly protection, and, indeed, some companies appear to be trying to find ways to improve access for patients in poorer countries. Oxfam has applauded some of these changes. Overall, however, our assessment is that this is an industry that is still failing to put access to medicines at the heart of its business model. Indeed, the cost of new medicines under patent, even when companies say they have tried their best, remains too high.

Cheaper medicines save lives

The dangers of high medicine prices are relevant for communicable diseases, such as HIV/AIDS, and also for non-communicable diseases like cancer and diabetes. The World Health Organization estimates that over 80 percent of all deaths from non-communicable diseases now occur in low-income countries. Less than six months ago, the United Nations issued a landmark political declaration on Non-Communicable Diseases, calling attention to the enormous challenges faced by rich and poor countries alike in addressing NCDs in the coming decades. Like HIV/AIDS, treatment for cancer, heart disease, and diabetes often requires extended treatment, making the cost of medicines a crucial factor as to whether patients can receive health care.

Today, in an era of economic crisis and austerity, ensuring that foreign assistance is effective means the global community must find every way possible to save money, including keeping down the price of medicines. The European Union has done much to provide effective aid in the health sector. It has harmonized its aid through budget support, and it has invested in effective multi-lateral institutions such as the Global Fund. However, these efforts are countered by an EU trade agenda that would harm public health in poor countries.

Civil society groups and public health experts around the world will hold their collective breath next week as the final deal is announced and finalized.  As in any negotiation, both sides must make trade-offs in order to reach a final agreement.  One hopes that India will recognize that public health, both of millions of Indians and millions of people in other developing countries, should not be traded off.

Rohit Malpani is a campaigns advisor at Oxfam and leads the organization’s access to medicines campaign.

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Comments

EU-India FTA

I fully appreciate the work Oxfam is doing on the EU-India FTA to draw attention to health issues and in particular the price and control of medicines, however there are other aspects of the proposed FTA that could also have an impact on the health of those with limited resources in India. Here I am referring to the impact on the dairy foods sector such as butter and milk producers, where many marginal farmers and land less labourers are dependent for their livelihood. Subsidised imports of European products in this sector would have devastating effects on the fragile sustainability of millions.

It is a difficult dillema.

It is a difficult dillema. Without IP protection good medicine cannot be develepped. With IP protection good medicine will be too expensive. 

Author's response

Thanks both for the very useful replies.  To Alan - I agree that the intellectual property provisions are not the only measures that would have an impact on public health, nutrition, food security and basic livelihoods.  Alongside those concerns that you mention, there are other direct impacts upon access to health care - including liberalization of the health sector.  While we are especially focused on the access to medicines concerns in the EU-India FTA - Oxfam has long noted many other concerns with free trade agreements that include and go far beyond health.  One earlier publication on this issue is the following: http://www.oxfam.org/sites/www.oxfam.org/files/Signing%20Away%20the%20Future.pdf

 

To 'It is a difficult dilemma' - a very astute comment.  There are many who see the access to medicines debate as a trade-off between innovation (IP) and access.  This is especially the argument of the pharmaceutical industry.  Oxfam has long recognized that intellectual property does play a role in promoting innovation, although it tends to imperfect (since it focuses innovation on what can be paid for, and not what the public health system may require).  Yet at some point IP protection does not actually generate more innovation, it merely provides higher profits to drug companies at a cost of people's health and well being.  What Oxfam is arguing is not to do away with IP protection, but in the case of the EU-India FTA - for example, to ensure that we balance IP protection (as needed to provide innovation) with flexibility and safeguards to protect public health.  We think India's existing IP framework already does a pretty good job of that - and may actually even encourage companies to be more innovative.  The EU proposal - on the other hand - tries to give away additional protection to drug companies that we do not think will generate additional innovation - and at the same time sacrifices the health and well being of millions of people living in poverty in India and across the developing world. 

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