AIDS DRUGS AND THE WTO: THE EXPERIENCE OF HONDURAS

UNCLAS SECTION 01 OF 02 TEGUCIGALPA 002861

SIPDIS

SENSITIVE

STATE FOR EB/TPP (SDONNELLY),EB/TPP/MTA/IPC, AND OES
STATE FOR WHA/CEN AND WHA/EPSC
STATE PASS USTR
COMMERCE ALSO FOR USPTO
STATE PASS AID FOR LAC/CEN

E.O. 12958: N/A
TAGS: KIPR ETRD SOCI TBIO PGOV HO WTRO
SUBJECT: AIDS DRUGS AND THE WTO: THE EXPERIENCE OF HONDURAS



1. (SBU) Summary and Action Request: The GOH has been seeking
to be the first country to use the August 30 WTO decision on
Access to Medicines in order to stretch its limited HIV/AIDS
treatment funds. Discussions with USG officials have
revealed that the GOH would not need to use this decision for
a planned upcoming medicines purchase, as it can make use of
existing provisions in the WTO TRIPS Agreement. The unhappy
GOH reaction to this discovery, however, has revealed a
fundamental misunderstanding on the GOH's part as to the
purpose of the August 30 decision. This misunderstanding may
well exist in other developing countries facing AIDS crises.
Embassy believes it would be useful to have a coordinated
outreach effort to explain the August 30 decision, existing
TRIPS flexibility and USG policy in this area for use with
foreign governments. Otherwise, (at least in Honduras and
similar countries),the USG runs the risk of being blamed for
positions the U.S. never advocated, and of losing good will
which the U.S. may have hoped to win by our support of the
August 30 decision and its eventual inclusion in the TRIPS
agreement. End Summary and Action Request.

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GOH: How Do We Use the August 30 Decision?
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2. (SBU) EconOffs were called to the Ministry of Industry and
Trade on October 17th for a meeting with Minister Norman
Garcia and Vice Minister for External Trade Irving Guerrero.
The Honduran officials explained that Honduras is preparing
to purchase generic copies of three AIDS drugs from Indian
manufacturers, and they want to make the purchase under the
terms of the August 30, 2003, decision of the WTO. (This
decision, regarding paragraph 6 of the Doha Declaration on
the TRIPS agreement and public health, as Post understands,
was intended to allow poor countries suffering from national
health emergencies to import cheaper generics made under
compulsory licensing if they are unable to manufacture the
medicines themselves.)


3. (SBU) The drugs to be purchased are AZT, 3TC and Combivir,
all patented by GlaxoSmithKline, a British firm. The
producers are two Indian companies named Cipla and Rambaxy.
The purchase would be made with the GOH's own money, and
arranged through the IDA (International Dispensary
Association),a broker based in the Netherlands. This would
be the second Honduran government purchase of AIDS medicines
this year; in August, the Ministry of Health purchased the
same drugs through the IDA using money from the Global Fund.
According to Vice Minister Guerrero, the price being offered
by the Indian manufacturers is 30 to 40 percent lower than
the best price offered by GlaxoSmithKline. The GOH's current
stocks of these drugs are expected to run out between
February and April 2004.


4. (SBU) The GOH's initial concern was that the official
mechanism for notifying the WTO of a purchase under the
August 30 decision was not yet in place. Vice Minister
Guerrero had obtained a form from the IDA that purports to be
a "waiver" form, to be used for WTO notification in such
cases. However, Guerrero acknowledged that this form was not
officially approved by the WTO. Fearing negative
repercussions if the GOH somehow failed to follow the correct
procedures for making the purchase and notifying the WTO,
Guerrero asked for EconOffs' assistance in clarifying the
proper procedures.


5. (SBU) Honduras is the HIV/AIDS epicenter in Central
America, accounting for approximately 60 percent of the HIV
infections in the region. It is estimated that Honduras has
between 66,000 and 100,000 infected persons, and that between
5,000 and 7,000 Hondurans become infected with HIV annually.
The disease disproportionately affects the Afro-Caribbean
minority on the North Coast of Honduras. As of February
2003, only 300 people were under ARV (antiretroviral)
treatment, but this increased to 1,100 people as of
September, thanks to the Global Fund-supported purchase of
ARVs. The medicines are distributed through five treatment
sites (government hospitals, not NGOs): two in Tegucigalpa,
one each in San Pedro Sula, Choluteca, and La Ceiba. There
is much to be done, however, to meet Millennium Challenge and
Special Summit of the Americas goals on AIDS treatment.

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Consultations Indicate that the Agreement Isn,t Relevant
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6. (SBU) In a series of e-mails and telephone calls between
the Embassy, State/EB, USTR and the GOH, it became clear that
the GOH did not need to use the August 30 decision in this
specific case. After receiving confirmation that the drugs
would be shipped directly from India to Honduras, it was
explained that the proposed purchase would not be covered by
the August 30 decision, since the exporting country (India)
does not have patent protection for the drugs in question.


7. (SBU) For the proposed purchase, the GOH would be able to
issue a compulsory license as outlined in Article 31 of the
TRIPS Agreement, and pay the remuneration to the patent owner
itself (if there are valid GSK patents in Honduras). The
amount of the "adequate remuneration" paid to the patent
holder, GlaxoSmithKline, would be determined by the GOH.

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The GOH Reaction: Frustration, Even Some Suspicion
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8. (SBU) The initial reaction of GOH officials to the
discussion with USG officials -- "So the August 30 decision
doesn't work, it does nothing for countries like us," and
"Why is the WTO issuing decisions that are meaningless?" --
revealed a fundamental misunderstanding of the purpose of the
August 30 decision or the working of the TRIPS Agreement.
The officials seemed disappointed they would have to pay
remuneration under TRIPS Article 31, apparently unaware that
such remuneration is also required under the provisions of
the August 30 decision. At the time, GOH officials even
suggested that the narrow coverage of the August 30 decision
was intentional and the agreement, advertised as a
breakthrough for poor countries suffering from the HIV/AIDS
epidemic, was never meant to work. The tenor of their
remarks also indicates a certain amount of blame being
apportioned to the U.S.


9. (SBU) Subsequently, GOH trade officials have come to
understand that remuneration to the patent holder must be
paid under either Article 31 or the August 30 decision, and
they do now recognize that buying generic AIDS medications
according to Article 31 and paying remuneration to the patent
holder still would result in substantial savings compared to
the full price. While the GOH has not yet determined its
next steps, it apparently has not made any effort to
negotiate a lower price directly with the patent holder.


10. (SBU) Comment: EconOffs have discussed this issue at
length with the GOH, emphasizing the USG's sincere intent to
assure cost-effective availability of AIDS medicines, and, we
believe, we have cleared up some misunderstandings. However,
we believe that detailed guidance from Washington agencies on
USG policy regarding TRIPS Article 31 and the August 30
decision would be very helpful to our efforts here to
encourage GOH respect for intellectual property rights and at
the same time address the GOH's goal of increasing HIV/AIDS
treatment. We expect that such guidance would also be useful
in many other posts around the world. End comment.
Pierce