United States Government Accountability Office

GAO Report to Congressional Requesters

INTELLECTUAL 

PROPERTY 

U.S. Trade Policy 

Guidance on WTO 

Declaration on Access 

to Medicines May 

Need Clarification 

September 2007 

 

GAO-07-1198 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

September 2007

INTELLECTUAL PROPERTY 

U.S. Trade Policy Guidance on WTO Declaration on Access to Medicines May 

Highlights of GAO-07-1198, a report to Need Clarification 

congressional requestors 

The 2001 Doha Declaration on TRIPS and Public Health was adopted by WTO

members to stress the importance of implementing the TRIPS Agreement in a 

manner supportive of public health. The U.S. interprets the Declaration as a 

political statement that recognizes the severity of public health crises while 

affirming the importance of IP protection. It maintains that the Declaration 

neither changes existing TRIPS obligations, nor creates new rights and does 

not assigns public health greater priority than IP protection. USTR says the 

Declaration clarifies flexibilities already in TRIPS, including the flexibility to 

compulsorily license patents under certain circumstances. USTR recognizes 

these as being allowed for WTO members, including those facing public health 

crises, but only in a fashion that will not unduly harm patent holders. Some 

developing countries assert they provide broad discretion to ensure access to 

medicines when IP regulations present barriers to affordable care. 

USTR balances respect for the Doha Declaration with TPA’s other two IP 

negotiating objectives by actively promoting high levels of IP protection for 

pharmaceuticals while making targeted allowances for developing country 

partners. USTR believes that this longstanding U.S. pursuit of high IP 

protections for pharmaceuticals creates incentives for investment in research 

and development of new treatments, ultimately enhancing public health. With

regard to the TPA objective of respecting the Doha Declaration, USTR’s key 

policy change was to not insist upon two provisions it sees as relevant to the 

Declaration in FTAs with developing country trading partners. Otherwise, 

USTR has continued to pursue other pharmaceutical related IP protections 

that it does not consider related to the Doha Declaration. Reactions to 

USTR’s record are mixed. The pharmaceutical industry considers these types 

of FTA provisions critical for preserving incentives for research and 

innovation. However, some academics, experts, nongovernmental 

organizations (NGOs), and generic producers have expressed concerns that 

these provisions may delay entry by cheaper generic products. In response to

similar concerns in Congress, a bipartisan agreement was reached with the 

Administration to revise four recent FTA’s prior to their submission for 

Congressional approval. 

U.S. interagency and private sector input into trade negotiations related to 

public health have remained limited since Congress enacted TPA. The

Department of Health and Human Services (HHS) and other agencies 

generally endorse USTR’s view that strong IP protection promotes public 

health and access to medicines, and interagency input has been primarily 

technical in nature. Within the formal private sector trade advisory system, a

public health representative was recently added to 2 of the 16 private sector 

advisory committees, but not until USTR had concluded nine trade 

agreements. USTR did obtain some public health views through other formal 

and informal means during this period. 

The WTO Agreement on TradeRelated Intellectual Property 

(TRIPS) requires all 151 World 

Trade Organization (WTO)

members to provide baseline

protections, including 20-year 

patents for innovative 

pharmaceuticals. The Trade Act of 

2002 granting Trade Promotion 

Authority (TPA) to the President 

outlined three negotiating 

objectives related to intellectual 

property (IP). The first two aim to

strengthen IP rights and 

enforcement abroad. The third 

calls for respect of the WTO Doha

Declaration on TRIPS and Public 

Health, which addresses access by

developing countries to patented 

medicines, particularly in epidemic

and emergency situations. 

This report (1) describes the 

Declaration and its interpretation 

by the United States and other

nations; (2) analyzes how USTR 

has balanced respect for the Doha

Declaration with the other two IP

objectives in negotiating free trade 

agreements; and (3) evaluates the 

extent of public health input by

agencies and the private sector. 

We reviewed official WTO and U.S.

government documents,

interviewed U.S. and foreign 

government officials, and obtained

private sector views. 

What GAO Recommends

If Congress disagrees with USTR’s 

interpretation and implementation

of TPA guidance with regard to IP 

and public health, it should specify 

more clearly its intentions for U.S.

trade policy and public health 

policy input. 

To view the full product, including the scope 

and methodology, click on GAO-07-1198. 

For more information, contact Kireb Tager at 

(202) 512-4128 or YagerL@gao.gov. 
Contents 

Letter 1

Results in Brief 3

Background 6

The United States Has a Narrower Interpretation of the Doha 

Declaration Than Some Other WTO Members 11 

USTR Has Maintained Its Pursuit of High IP Standards and Made 

Some Allowances for Doha Flexibilities in Negotiating FTAs 27 

USTR Is Implementing and Overseeing Trade Agreements in a 

Manner Consistent with Its Overall Approach of Promoting High 

Standards concerning IP Rights 43 

Public Health Input on IP Rights Has Been Limited in U.S. Trade 

Negotiations 49

Conclusions 57

Matter for Congressional Consideration 58 

Agency Comments and Our Evaluation 58 

Appendix I Scope and Methodology 59 

Appendix II Technical Assistance on IP Rights and Public 

Health 64 

Appendix III GAO Contact and Staff Acknowledgments 67 

Table 

Table 1: Countries Listed in the Special 301 Report With Mention of 

Pharmaceutical-related Issues Compared to All Countries 

Listed (2000-2007) 46 

Figures 

Figure 1: Timeline of Major WTO Events on IP and Public Health 10 

Figure 2: FTA Pharmaceutical-Related IP Provisions and Side

Letters Matrix 32 

Figure 3: Data Exclusivity and Patent Protection, Three Possible 

Scenarios 36

Page i GAO-07-1198 Intellectual Property
Figure 4: Patent Linkage Process in the United States 40 

Figure 5: Number of Pharmaceutical Provision Mentions in Special 

301 Reports (2000-2007) 47 

Figure 6: Public Health Representation on Industry Trade Advisory 

Committees 56

Abbreviations 

ADI Access to Drugs Initiative 

ARV antiretroviral 

CAFTA -DR Central America-Dominican Republic United States Free 

 Trade Agreement 

CIEL Center for International Environmental Law 

CPPATH Center for Policy Analysis on Trade and Health 

DNDI Drugs for Neglected Diseases Initiative 

EU European Union 

FDA Food and Drug Administration 

FSI Foreign Service Institute 

FTA free trade agreement 

GAP Health Global Access Project 

GDP Gross Domestic Product 

GPhA Generic Pharmaceutical Association 

HHS Department of Health and Human Services 

ICTSD International Center for Trade and Sustainable 

 Development 

IFPMA International Federation of Pharmaceutical Manufacturers 

 & Associations 

IP intellectual property 

ITAC Industry Trade Advisory Committee 

MSF Doctors without Borders 

NAFTA North American Free Trade Agreement 

NGO nongovernmental organization 

NIH National Institutes of Health 

OECD Organization for Economic Cooperation and Development 

OGAC Office of the Global AIDS Coordinator 

OGHA Office of Global Health Affairs 

OTT Office of Technology Transfer 

PPP purchasing power parity 

PEPFAR President’s Emergency Plan for AIDS Relief 

PhRMA Pharmaceutical Research and Manufacturers of America 

Page ii GAO-07-1198 Intellectual Property
PTO U.S. Patent and Trademark Office 

TEPAC Trade and Environment Policy Advisory Committee 

TPRG Trade Policy Review Group 

TPSC Trade Policy Staff Committee 

TRIPS Trade-Related Aspects of Intellectual Property Rights 

TPA Trade Promotion Authority 

UNAIDS The Joint United Nations Program on HIV/AIDS

UNCTAD United Nations Conference on Trade and Development 

USAID United States Agency for International Development 

USTR U.S. Trade Representative

WHO World Health Organization 

WIPO World Intellectual Property Organization 

WTO World Trade Organization 

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Page iii GAO-07-1198 Intellectual Property
United States Government Accountability Office

Washington, DC 20548 

September 28, 2007 

The Honorable Edward M. Kennedy 

Chairman 

Committee on Health, Education, Labor and Pensions 

United States Senate 

The Honorable Edward M. Kennedy 

Chairman 

Committee on Health, Education, Labor and Pensions 

United States Senate 

The Honorable Henry A. Waxman 

Chairman 

Committee on Oversight and Government Reform 

House of Representatives 

The Honorable Henry A. Waxman 

Chairman 

Committee on Oversight and Government Reform 

House of Representatives 

An international effort led by the United States in the 1980s to incorporate 

intellectual property (IP) protection into the trading system culminated 

with the World Trade Organization (WTO) Agreement on Trade-Related 

Aspects of Intellectual Property Rights (TRIPS) in 1995. Under TRIPS, all

WTO member countries are obligated to establish a minimum standard of 

laws and regulations protecting copyrights, trademarks, patents and other 

forms of IP rights. Patents are particularly important to the U.S. 

pharmaceutical industry and provide patent owners the legal means to 

prevent others from making, using, or selling new inventions for a limited 

period of time, subject to certain conditions and exceptions. As the 2000

deadline for developing countries to implement TRIPS obligations 

approached, however, some developing countries expressed concern 

about subjecting health-related inventions such as new drugs to IP rules, 

especially given the increasingly serious AIDS epidemic. These concerns 

were part of a larger and still ongoing debate over how to balance longterm incentives for drug innovation with the short-term affordability of 

existing medicines, particularly when dealing with emergency public 

health situations. 

An international effort led by the United States in the 1980s to incorporate 

intellectual property (IP) protection into the trading system culminated 

with the World Trade Organization (WTO) Agreement on Trade-Related 

Aspects of Intellectual Property Rights (TRIPS) in 1995. Under TRIPS, all

WTO member countries are obligated to establish a minimum standard of 

laws and regulations protecting copyrights, trademarks, patents and other 

forms of IP rights. Patents are particularly important to the U.S. 

pharmaceutical industry and provide patent owners the legal means to 

prevent others from making, using, or selling new inventions for a limited 

period of time, subject to certain conditions and exceptions. As the 2000

deadline for developing countries to implement TRIPS obligations 

approached, however, some developing countries expressed concern 

about subjecting health-related inventions such as new drugs to IP rules, 

especially given the increasingly serious AIDS epidemic. These concerns 

were part of a larger and still ongoing debate over how to balance longterm incentives for drug innovation with the short-term affordability of 

existing medicines, particularly when dealing with emergency public 

health situations. 

The 2001 WTO Doha Declaration on TRIPS and Public Health is 

recognized as a watershed event in this debate. The declaration states, in 

part, that the TRIPS Agreement does not and should not prevent members 

from taking measures to protect public health and, while reiterating a 

commitment to the TRIPS agreement, that the TRIPS Agreement should be

interpreted and implemented in a manner supportive of WTO members’ 

right to protect public health and promote access to medicines for all. 

Subsequently, in the United States, the Trade Act of 2002 granting Trade 

Promotion Authority (TPA) to the President outlined three principal trade 

negotiating objectives related to IP, one of which referred to the Doha 

The 2001 WTO Doha Declaration on TRIPS and Public Health is 

recognized as a watershed event in this debate. The declaration states, in 

part, that the TRIPS Agreement does not and should not prevent members 

from taking measures to protect public health and, while reiterating a 

commitment to the TRIPS agreement, that the TRIPS Agreement should be

interpreted and implemented in a manner supportive of WTO members’ 

right to protect public health and promote access to medicines for all. 

Subsequently, in the United States, the Trade Act of 2002 granting Trade 

Promotion Authority (TPA) to the President outlined three principal trade 

negotiating objectives related to IP, one of which referred to the Doha 

Page 1 GAO-07-1198 Intellectual Property
Declaration.1

 The objectives were (1) to promote adequate and effective 

protection of IP rights similar to U.S. law, (2) to secure fair and equitable

market access opportunities as related to IP rights, and (3) to respect the 

Doha Declaration. Since then, negotiations at the WTO continued through 

late 2005 in an effort to resolve outstanding issues related to the Doha 

Declaration, and the United States has negotiated 11 free trade agreements 

(FTA); several are now being implemented. Some in Congress are 

concerned about how the U.S. Trade Representative (USTR) has 

interpreted, pursued, and implemented TPA principal IP objectives 

pertaining to the pharmaceutical industry, particularly in light of the third 

objective calling for respect for the Doha Declaration. 

In response to your request, this report (1) describes the Doha Declaration 

on TRIPS and Public Health and evaluates how the United States and 

other key nations have interpreted its intent and meaning, (2) analyzes 

how the United States has balanced respect for the Doha Declaration with 

the other two IP negotiating objectives in negotiating FTAs, (3) assesses 

the U.S. approach to overseeing the implementation of pharmaceuticalrelated IP provisions in FTAs and other agreements, and (4) evaluates the 

nature and extent of public health related agency and private sector input 

into trade negotiations. You also expressed interest in technical assistance

on IP rights and public health that U.S. agencies provide to foreign 

countries. Appendix II provides an overview of U.S. technical assistance 

and technology transfer activities. 

To meet these reporting objectives, we performed reviews of agency 

documentation and correspondence, WTO documents and meeting 

minutes, academic studies, pharmaceutical industry and public health

advocacy group reports and position papers, and media reports. We 

examined the text of the FTAs negotiated since the Trade Act of 2002 and 

compared the language of the IP pharmaceutical provisions found in each 

FTA. In addition, we examined trends and patterns found in USTR’s 

annual reports identifying foreign countries that deny adequate and 

effective protection of IP rights. We traveled to Geneva, Switzerland, to 

meet with officials from the U.S. Mission in Geneva, WTO, World Health 

Organization (WHO), World Intellectual Property Organization (WIPO), 

The Joint United Nations Program on HIV/AIDS, the Global Fund to Fight

AIDS, Tuberculosis and Malaria, as well as nongovernmental organizations 

 1

Trade Act of 2002, Pub. L. No. 107-210, § 2102, 116 Stat. 933, 995-996 (codified at 19 U.S.C. 

§ 3802). 

Page 2 GAO-07-1198 Intellectual Property
(NGO) from the pharmaceutical sector and public health community. To 

evaluate the nature and extent of interagency input to USTR from other 

executive branch agencies such as the Department of State, Department of 

Health and Human Services (HHS), and Department of Commerce, 

including the Patent and Trademark Office (PTO), we reviewed 

documentation and interviewed officials. Regarding private sector input, 

we interviewed agency officials and reviewed documents such as formal 

advisory committee reports, responses to Federal Register notices, and 

correspondence related to the trade advisory system. Currently, there is 

ongoing litigation regarding the balance of representation on certain trade 

advisory committees. In accordance with GAO policy, we did not take any 

position on matters under litigation, which in this case meant on the 

appropriateness of the current composition of the trade advisory 

committees. Regarding technical assistance, we interviewed agency

officials and reviewed agency documents. We also interviewed 

stakeholders to gather perspectives on the range of issues involved,

including pharmaceutical industry representatives, public health groups, 

academics, and selected IP experts; each had recently published or spoken 

on this issue. Access to medicines is recognized as a complex issue driven

by many factors, including funding levels, infrastructure, and effective 

institutions, which are addressed by various U.S. government programs 

and international efforts. As agreed with your staff, we did not seek to 

independently assess the actual or potential effect of these larger U.S. 

trade efforts on public health and access to medicines. 

See appendix I for a detailed discussion of our scope and methodology. 

See appendix II for information about technical assistance on IP rights and 

public health. We conducted our review from November 2006 through 

September 2007 in accordance with generally accepted government 

auditing standards. 

The Doha Declaration on TRIPS and Public Health was adopted by WTO 

members as a carefully crafted compromise among competing 

perspectives that stresses the importance of implementing the TRIPS 

agreement in a manner supportive of public health. Balancing the goals of

promoting both access to existing medicines and development of new 

medicines, it was a separate declaration adopted at their Fourth 

Ministerial Conference on November 14, 2001, in Doha, Qatar. The United

States interprets the declaration as a political statement that recognizes 

the severity of public health crises while affirming the importance of IP

protection. It maintains that the declaration neither changes existing 

TRIPS obligations nor creates new obligations, and does not assign public 

Results in Brief 

Page 3 GAO-07-1198 Intellectual Property
health greater priority than IP protection. Instead, USTR says, the 

declaration simply clarifies certain flexibilities already in TRIPS for WTO 

members facing public health crises, including overriding patents through 

the issuance of compulsory licenses under certain circumstances. 

Supported to some extent by other developed countries such as the 

European Union (EU) members, Japan, and Switzerland, USTR recognizes 

these flexibilities as being allowed for WTO members, including those 

facing public health crises, but only in a fashion that will not unduly harm 

patent holders. Some developing countries believe they provide broad 

discretion to ensure access to medicines when IP regulations present 

barriers to addressing not only health issues, but also social welfare. 

Differences between the United States and key developing WTO countries 

such as Thailand, Brazil, and India over a narrower versus a broader 

interpretation continued well after the 2001 declaration. Notably, in debate

over how to help countries with little or no manufacturing capacity in the 

pharmaceuticals sector take full advantage of the flexibilities, controversy 

emerged over which members should be eligible and for what diseases. 

USTR maintains that it balances respect for the Doha Declaration with 

TPA’s other two IP negotiating objectives by actively promoting high levels 

of IP protection related to pharmaceuticals while making targeted 

allowances for Doha Declaration flexibilities for developing country 

partners. USTR believes that this continuation of long-standing U.S. 

pursuit of high IP protections for pharmaceuticals creates incentives for 

investment in research and development of new treatments, which in turn 

enhances public health. With regard to the TPA objective to respect the 

Doha Declaration, USTR officials told us that the key policy implication 

was to not insist upon two pharmaceutical-related IP provisions it sees as 

relevant to the Declaration with developing country trading partners. 

Otherwise, USTR has continued to pursue a number of other 

pharmaceutical-related IP protections that USTR does not consider related 

to the Doha Declaration. Reactions to USTR’s approach to its trade 

negotiations have been mixed. The pharmaceutical industry considers 

these types of FTA provisions to be crucial in preserving incentives for 

future research and innovation. However, some academics, public health 

experts, NGOs, and generic pharmaceutical producers have said such 

provisions could delay entry of cheaper generic products onto the market, 

thereby decreasing access to affordable medication and violating the spirit 

and principles of the Doha Declaration. Several Members of Congress have 

also expressed similar concern over the pharmaceutical-related IP 

provisions in FTAs with developing countries, and this concern was 

recently addressed through a bipartisan compromise, between Congress 

Page 4 GAO-07-1198 Intellectual Property
and the administration, to revise, prior to their submission to Congress, 

the last four FTAs concluded under TPA. 

USTR’s approach to overseeing the implementation of pharmaceuticalrelated IP provisions is consistent with its overall negotiating approach in 

FTAs, which is to secure high levels of IP protection. Following FTA 

negotiations, USTR rigorously oversees trading partner implementation of 

pharmaceutical-related IP provisions, in order to advise the President 

whether he can determine that the FTA partner has taken the measures 

necessary to comply with the provisions of the FTA that are to take effect

on the date the FTA enters into force. In addition, in its annual report 

detailing global IP challenges, USTR has focused largely on the same 

pharmaceutical IP provisions concentrated on during FTA negotiations, in

keeping with its strategy of gaining high levels of IP protection for 

pharmaceutical products, similar to U.S. law. However, USTR has had a 

measured response to Thailand and Brazil’s recent usage of a TRIPS 

flexibility, compulsory licensing. For example, when Thailand recently 

issued a compulsory license, USTR acknowledged its right to do so, 

restricting its criticism to commenting on a lack of transparency. 

Input related to public health into U.S. trade negotiations has remained 

limited since Congress enacted TPA. In negotiating trade agreements 

under TPA, the President must seek advice and information from 

executive departments and public and private sectors.2

 HHS and other 

agencies involved in the interagency trade policy process generally 

endorse USTR’s view that strong IP protection promotes public health and 

access to medicines, but interagency input has been primarily technical in

nature. For instance, HHS, the lead U.S. health agency, ensures that IP 

provisions related to pharmaceuticals in FTAs do not violate U.S. law, but 

has not addressed policy-related questions, such as whether FTA 

provisions might affect public health in trading partner countries. Within 

the formal private sector trade advisory system that plays a role under 

TPA in reviewing trade agreements, a public health representative was 

recently added to 2 of the 16 private sector industry trade advisory 

committees, after USTR had concluded nine trade agreements. The two 

advisory committees that the public health representatives were appointed 

to are respectively composed of 20 and 33 private sector representatives 

from the pharmaceutical and other industries. Although USTR has 

received limited input on public health through the formal advisory 

 2

19 U.S.C. §§ 2152, 2155. 

Page 5 GAO-07-1198 Intellectual Property
system, the agency has obtained some public health views through other 

formal and informal means throughout the period, such as public hearings, 

Federal Register comments, and written correspondence. 

In this report, we suggest that Congress should consider this record as it 

contemplates renewal of Trade Promotion Authority (TPA) and, if it has 

concerns over USTR’s approach to date, may wish to specify more clearly

its intentions for U.S. trade policy and input related to balancing public 

health concerns and the negotiation of IP protections in trade agreements.

By way of providing context for our examination of U.S. trade policy as it 

relates to TPA guidance and the Doha Declaration on TRIPS and Public 

Health, the following is an overview of ongoing U.S. government efforts to 

address the wider issue of access to medicine and public health both 

related and unrelated to IP, as well as how the WTO first became involved

in public health issues, and the origin of IP and public health in TPA. 

Background 

U.S. Government Has 

Addressed IP and Access 

to Medicine 

The U.S. government has supported innovation, competition, and access to 

medicine. The Federal government, primarily through the National 

Institutes of Health (NIH), conducts and supports medical research, 

investing annually over $28 billion. About 55 percent of NIH’s budget 

supports basic research. While basic research may not have an immediate 

impact on drug innovation, such “untargeted” research often ultimately 

leads to developing new medicines and technologies. 

In principle, U.S. intellectual protection laws are designed to support 

innovation. Patents are considered to be especially valuable for 

innovations in pharmaceuticals.3

 According to the pharmaceutical 

industry, IP protection is crucial to its ability to offer new, innovative 

medicines. Research and development of new drugs is very risky and timeconsuming. The industry faces high fixed or “sunk” costs associated with 

lengthy discovery and clinical trials. Moreover, a large proportion of new 

 3

Nevertheless, critics have questioned IP rights’ contributions to innovation. A November 

2006 GAO study found that new drug applications submitted by pharmaceutical companies 

to the FDA had increased at a much slower pace than R&D expenditures, and that many of 

these were for new uses of existing compounds, rather than for completely new drugs. IP 

rights were among the factors some experts cited as slowing drug development. See GAO,

New Drug Development: Science, Business, Regulatory, and Intellectual Property Issues

Cited as Hampering Drug Development Efforts, GAO-07-49 (Washington, D.C.: Nov. 17, 

2006). 

Page 6 GAO-07-1198 Intellectual Property
drugs never make it to market due to their lack of efficacy or inadequate 

safety. Thus, drug companies seek a relatively high return on the 

medicines they do bring to market. U.S. patents give companies a 20-year

period during which they have an exclusive right to make, sell, and use 

their invention.4

 They use this period when they cannot be undercut by 

competitors to charge relatively higher prices, thus allowing them to 

recoup their investments and earn profits. However, the effective life of a 

patent is typically much shorter than this 20-year period, since the 

preclinical and clinical testing phases necessary for securing FDA 

marketing approvals can take more than a decade. 

Public policy has also played a role in fostering generic competition to 

hold down prices. Generic drugs--copies of brand-name drugs--can enter 

the market after the brand-name’s patent or other market exclusivities 

expire and FDA approval is granted. Under the Hatch-Waxman Act of 

1984,

5

 generic manufacturers do not have to repeat expensive research and 

clinical trials to obtain approval.6

 Instead, they only need to show the FDA 

that their drugs are bioequivalent to the branded medicines.7

 Because they

do not incur the same research and clinical trial expenditures, generic 

firms can enter the market more quickly once patents have expired and 

sell drugs at lower prices. Generic entry may also put pressure on 

innovator companies to develop more new drugs. 

Governments have also taken collective and individual steps to provide 

medicines—particularly since 2001. At the global level, funds for 

combating HIV/AIDS through the Global Fund to Combat AIDS, 

Tuberculosis and Malaria, established in 2003, and UNAIDS, established in 

1994, have grown considerably since 2001. Among other things, the United

States established the President’s Emergency Plan for AIDS Relief, or 

PEPFAR, a 5-year, $15 billion initiative run by the Office of the Global 

AIDS Coordinator at State, which has supported HIV prevention activities, 

antiretroviral treatment and training, and HIV-related care and training at 

more than 15,000 project sites primarily in 15 focus countries, mainly in 

 4

35 U.S.C. § 154. 

5

Pub. L. No. 98-417, 98 Stat. 1585. 

6

21 U.S.C. § 355. 

7

For the purposes of this report, bioequivalent means the generic drug has the same rate 

and extent of absorption and delivers the same amount of active ingredients into a patient’s

bloodstream in the same amount of time as the name-brand patented drug.

Page 7 GAO-07-1198 Intellectual Property
sub-Saharan Africa.8

 More affluent developing countries, such as Brazil 

and Thailand, have themselves been taking more aggressive steps to 

combat AIDS and improve access, including universal access schemes 

paid for with public funds. 

Some of these government efforts have been undertaken with private 

sector support. The research-based pharmaceutical industry has engaged

in private-public partnerships to address neglected diseases found in poor 

countries, such as tuberculosis and malaria. Research-based 

pharmaceutical companies have also instituted pricing schemes whereby 

the same drug is sold at different prices, depending on the consumer’s or 

country’s ability to pay. Ensuring that the supply remains in the intended 

market, not resold elsewhere, is critical to this strategy’s success, but can 

be problematic. Governments have also supported industry efforts to 

donate medicines outright—about $4.4 billion worth of medicines and 

other medical help over the 2000-2005 period, according to estimates by 

the London School of Economics.9

Access to Medicines 

Remains a Global 

Challenge 

Despite government and industry initiatives, available data suggest that 

many people currently lack access to existing medicines. According to the 

World Health Organization (WHO), one third of the global population does 

not have regular access to essential medicines. This matters: WHO 

estimates that over 10.5 million lives a year could be saved by 2015 by 

scaling up access to existing interventions for infectious diseases, 

maternal and child health, and noncommunicable diseases. Indeed, WHO

says unaffordable prices of medicine and the need for new medicines for 

diseases that disproportionately affect lower income populations are 

among the primary challenges in expanding access to medicines globally.

According to WHO, in developing countries today, medicines account for 

up to 70 percent of health care expenditure. This compares to less than 15

percent in most high income countries, and about 10 cents of every health

care dollar spent in the United States in 2005. Because of this imbalance in

health care expenditure worldwide, WHO’s various projects on access to 

 8

United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003, Pub. L. 

No. 108-25, 117 Stat. 711. 

9

This compares with Giving USA’s estimates that donations by U.S. corporations and

corporate foundations totaled $12.72 billion in 2006. For further information, see “U.S. 

charitable giving reaches $295.02 billion in 2006: third straight year of growth,” June 27, 

2007, press release, Giving USA Foundation. www.aafrc.org. 

Page 8 GAO-07-1198 Intellectual Property
medicines and IP rights continue.10 The Group of 8 Industrialized Nations, 

the Organization for Economic Cooperation and Development (OECD), 

and the United Nations Conference on Trade and Development (UNCTAD) 

are among the other organizations that have also undertaken efforts to 

address aspects of the issue. 

IP and Pharmaceuticals 

Became Part of WTO at Its 

Inception in 1995 

The April 1994 Final Act Embodying the Results of the Uruguay Round of 

Multilateral Trade Negotiations led to the establishment of WTO on 

January 1, 1995. The Uruguay round was the product of long and complex 

negotiations that not only liberalized manufactured goods trade in such 

sectors as apparel, but also added IP and services rules and obligations to

the trading system. The WTO TRIPS Agreement was part of the Uruguay 

Round’s results and established minimum levels of protection that each 

government has to give to IP of fellow WTO members. The United States

had fought hard to secure worldwide adoption of minimum IP protection 

and enforcement standards through TRIPS as home to the world’s largest 

and most innovative pharmaceutical industry. TRIPS extended patent 

protection for inventions of both products and processes, while allowing 

certain exceptions, for at least 20 years. It also required WTO members, 

when requiring as a condition of marketing approval the submission of 

undisclosed test data or other data (such as data submitted to health 

authorities for regulatory approval of pharmaceutical safety), the 

origination of which involves considerable effort, to protect such data, 

against unfair commercial use.11 When all of the WTO agreements took 

effect, developed countries were given 1 year to ensure their laws and 

practices conformed with TRIPS, but developing countries were given 

 10According to the WHO, its work on trade, IP rights, and access to medicines can be

summed up under two headings: (1) monitoring and analyzing the pharmaceutical and 

health implications of international trade agreements, and (2) assisting member states in 

assessing and developing pharmaceutical and health policies and regulatory measures that

maximize the positive and mitigate the negative impact of those agreements. In May 2006, 

WHO established an Intergovernmental Working Group on Public Health, Innovation and 

Intellectual Property with a mandate to prepare a global strategy and plan of action on 

essential health research to address conditions affecting developing countries 

disproportionately. A May 2007 resolution, adopted without U.S. support, requests WHO “to 

provide as appropriate, upon request, in collaboration with other competent international 

organizations, technical and policy support to countries that intend to make use of the

flexibilities contained in the agreement on Trade-Related Aspects of Intellectual Property 

Rights and other international agreements in order to promote access to pharmaceutical 

products, and to implement the Doha Ministerial Declaration on the TRIPS Agreement and 

Public Health and other WTO instruments.” 

11TRIPS Agreement, Art. 39.3. 

Page 9 GAO-07-1198 Intellectual Property
transition periods of 5 or more years. Even so, many developing countries

complained about having to comply with the new requirements. 

The HIV/AIDS Pandemic 

Put Access to Medicine in 

the Forefront for WTO 

The issue of IP and access to medicine came to a head at WTO in 2001

when the HIV/AIDS pandemic in sub-Saharan Africa was reaching 

catastrophic levels. Separately, South Africa attempted to use its laws to 

lower prices for imported medicines, but faced opposition from U.S. and 

other drug companies that felt its actions compromised their rights. Brazil 

and the United States, meanwhile, were in dispute over a Brazilian law 

that could make exceptions to patents if products were not manufactured 

in Brazil. Nongovernmental organizations (NGO) became involved in 

discussing the implications of TRIPS to public health. 

In April of 2001, WTO and the World Health Organization (WHO) jointly 

sponsored a workshop on pricing and access to medicine. Initially, many 

WTO members were skeptical about whether WTO was the proper forum 

for the debate. However, this quickly changed when the African members 

successfully pleaded their case for help in resolving the AIDS pandemic, 

and WTO members subsequently devoted one day to the issue in June 

2001, then continued discussions throughout the summer of the same year. 

Subsequently, the Declaration on the TRIPS Agreement and Public Health 

was adopted at the fourth WTO Ministerial Conference in Doha, Qatar, on

November 14, 2001. As shown in figure 1, the Declaration on TRIPS and 

Public Health was the first of three important decisions over the next 

several years, all of which are discussed in detail later in this report. 

Figure 1: Timeline of Major WTO Events on IP and Public Health

2001 2002 2003 2004 2005

Implementation of 

Paragraph 6 of the Doha

Declaration on the TRIPS

Agreement and Public 

Health Decision of

August 30, 2003 

Declaration on the 

TRIPS Agreement 

and Public Health 

Adopted on 

November 14, 2001

Amendment of the 

TRIPS Agreement

Decision of 

December 6, 2005

Source: World Trade Organization.

Page 10 GAO-07-1198 Intellectual Property
Shortly after WTO adopted the Declaration on TRIPS and Public Health, 

Congress passed the Trade Act of 2002, which granted the President Trade 

Promotion Authority (TPA) for reciprocal trade agreements to liberalize 

U.S. trade with foreign nations. TPA contains guidance from Congress 

concerning U.S. goals in negotiated trade agreements. One of the three 

goals for IP specified in TPA, “to respect the Doha Declaration on TRIPS 

and Public Health,” was added in response to an amendment by Senator 

Edward Kennedy. In his remarks about the amendment, Senator Kennedy 

explained that the Declaration on TRIPS and Public Health struck a 

balance between the legitimate interests of intellectual property protection 

and the preservation of public health. Senator Kennedy went on to assert 

that “[t]his amendment directs our trade negotiators to support the 

declaration without reservation.”12 Senators Grassley and Baucus also 

asserted their support for the amendment and emphasized the importance 

of IP issues with respect to public health and innovation of new medicines. 

Congress otherwise provided no guidance at the time on how to interpret 

and apply this TPA objective. Recently, in response to the expiration of the 

President’s Trade Promotion Authority (TPA) on June 30, 2007, before the 

Doha round of global trade talks had been successfully concluded, there 

have been some calls to renew it. 

To help address public health problems affecting many developing 

countries, WTO members adopted the Doha Declaration (reprinted in full

below) to stress the importance of implementing the TRIPS agreement in a 

manner supportive of public health.13 As part of a carefully worded 

compromise among competing perspectives, this statement was placed in 

the context of shared challenges and goals, such as promoting both access 

to existing medicines and research into and development of new 

medicines. The United States interprets the declaration as a political 

statement recognizing public health crises and affirming the importance of 

IP protection that neither changes existing TRIPS obligations nor creates 

new obligations, and does not assign public health greater priority than IP

protection. Significantly, the declaration clarifies certain flexibilities 

explicit in TRIPS that allow WTO members to address public health crises. 

USTR argues that these flexibilities should be applied judiciously and 

Congress Addressed IP 

and Public Health in Trade 

Promotion Authority 

Legislation 

The United States Has 

a Narrower 

Interpretation of the 

Doha Declaration 

Than Some Other 

WTO Members 

 12For the text of these remarks, see Congressional Record, Senate, S4322-4324, May 14, 

2002. 

13Based on paragraph 17, Ministerial Declaration, Fourth Ministerial Conference, Doha, 

Qatar, November 14, 2001. 

Page 11 GAO-07-1198 Intellectual Property
subject to certain conditions specified in the TRIPS agreement. Some 

developing countries, however, believe these flexibilities provide broad 

discretion to ensure access to medicines when IP regulations present 

barriers to addressing not only health issues, but also social welfare. 

Differences over a narrower versus broader interpretations continued long

after the declaration. Notably, debate over how to help countries with little 

or no pharmaceuticals manufacturing capacity take full advantage of the 

flexibilities, including which members should be eligible and for what 

diseases, became controversial. 

Declaration on the TRIPS Agreement and Public Health 

1. We recognize the gravity of the public health problems afflicting many developing and 

least-developed countries, especially those resulting from HIV/AIDS, tuberculosis, malaria 

and other epidemics. 

2. We stress the need for the WTO Agreement on Trade-Related Aspects of Intellectual 

Property Rights (TRIPS Agreement) to be part of the wider national and international 

action to address these problems. 

3. We recognize that intellectual property protection is important for the development of 

new medicines. We also recognize the concerns about its effects on prices. 

4. We agree that the TRIPS Agreement does not and should not prevent members from

taking measures to protect public health. Accordingly, while reiterating our commitment to

the TRIPS Agreement, we affirm that the Agreement can and should be interpreted and

implemented in a manner supportive of WTO Members’ right to protect public health and, 

in particular, to promote access to medicines for all. 

In this connection, we reaffirm the right of WTO Members to use, to the full, the provisions 

in the TRIPS Agreement, which provide flexibility for this purpose.

5. Accordingly and in the light of paragraph 4 above, while maintaining our commitments in 

the TRIPS Agreement, we recognize that these flexibilities include:

a. In applying the customary rules of interpretation of public international law, each 

provision of the TRIPS Agreement shall be read in the light of the object and 

purpose of the Agreement as expressed, in particular, in its objectives and 

principles. 

b. Each Member has the right to grant compulsory licenses and the freedom to

determine the grounds upon which such licenses are granted. 

c. Each Member has the right to determine what constitutes a national emergency or 

other circumstances of extreme urgency, it being understood that public health 

crises, including those relating to HIV/AIDS, tuberculosis, malaria and other 

epidemics, can represent a national emergency or other circumstances of extreme 

urgency. 

d. The effect of the provisions in the TRIPS Agreement that are relevant to the

exhaustion of intellectual property rights is to leave each Member free to establish 

Page 12 GAO-07-1198 Intellectual Property
its own regime for such exhaustion without challenge, subject to the MFN and 

national treatment provisions of Articles 3 and 4. 

6. We recognize that WTO Members with insufficient or no manufacturing capacities in the 

pharmaceutical sector could face difficulties in making effective use of compulsory 

licensing under the TRIPS Agreement. We instruct the Council for TRIPS to find an

expeditious solution to this problem and to report to the General Council before the end of

2002. 

7. We reaffirm the commitment of developed-country Members to provide incentives to 

their enterprises and institutions to promote and encourage technology transfer to leastdeveloped country Members pursuant to Article 66.2. We also agree that the leastdeveloped country Members will not be obliged, with respect to pharmaceutical products, 

to implement or apply Sections 5 and 7 of Part II of the TRIPS Agreement or to enforce

rights provided for under these Sections until 1 January 2016, without prejudice to the right 

of least-developed country members to seek other extensions of the transition periods as 

provided for in Article 66.1 of the TRIPS Agreement. We instruct the Council for TRIPS to 

take the necessary action to give effect to this pursuant to Article 66.1 of the TRIPS 

Agreement. 

The Doha Declaration 

Addresses Flexibilities in 

TRIPS That Can Be Used 

to Deal with Public Health 

Crises

In the wake of the HIV/AIDS crisis at the time, some WTO members were 

concerned about the extent to which the TRIPS agreement allowed them 

to address public health needs. The African members known as the 

African Group were among the members pushing for clarification. WTO

members formally addressed this issue in the main Doha Ministerial 

Declaration and their intention to adopt a separate declaration, as shown 

below. 

Ministerial Declaration - Fourth Session November 2001 

Paragraph 17

We stress the importance we attach to implementation and interpretation of the Agreement 

on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) in a manner 

supportive of public health, by promoting both access to medicines and research and

development into new medicines and, in this connection, are adopting a separate 

Declaration. 

The Doha Declaration is divided into seven paragraphs. Paragraphs one 

through four are general principles that WTO members agreed to that 

describe the relationship between IP rights and public health.

Paragraph five lays out specific flexibilities provided in TRIPS that can be 

used by WTO members to address public health related problems. Below 

is a summary of these flexibilities: 

Page 13 GAO-07-1198 Intellectual Property
5(a) that each provision in TRIPS should be read in light of the 

agreement’s objectives and principles; 

5(b) the right to grant compulsory licenses. The WTO fact sheet on TRIPS 

and pharmaceuticals describes the term compulsory licensing as when a 

government allows someone else to produce the patented product or 

process without the consent of the patent owner—in this case in reference 

to pharmaceuticals, but it could also apply to patents in any field.14

5 (c) the right to determine what is a national emergency; and

5 (d) the right to establish an exhaustion regime without challenge. The 

WTO fact sheet on TRIPS and pharmaceuticals describes the term 

exhaustion as a legal principle consisting of the idea that once a company

(patent holder) has sold a batch of its product, its patent distribution 

rights are exhausted with respect to that batch, and it no longer has any 

rights to control distribution of that batch. Exhaustion is the legal 

principal behind parallel imports. 15

WTO members appear to agree that the TRIPS and Public Health 

declaration makes no change to TRIPS itself. However, two changes are 

foreshadowed. Specifically, paragraphs six and seven calls upon WTO 

members to take future action in specific areas. Paragraph six mandates 

WTO members to resolve a potential problem with regard to compulsory 

licensing by WTO members with insufficient or no pharmaceutical 

manufacturing capacities. Because TRIPS specifies that a country may 

only compulsory license primarily for supplying the domestic market, 

countries with little or no manufacturing capacity (and therefore no 

domestic company to which the government could grant a compulsory 

license) could face difficulties in effectively using compulsory licensing. 

They must import their medicines, but the supplier (the exporter) would 

be prevented under TRIPS from exporting them the patented medicines 

under a compulsory license if the product was patented in its territory. 

Paragraph seven instructs WTO members to take the steps necessary to 

 14See http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm 

15See http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm

Page 14 GAO-07-1198 Intellectual Property
extend the deadline from for least developed countries to implement their 

TRIPS obligations with respect to pharmaceutical products to 2016.16

The United States Has a 

Narrower Interpretation of 

the Declaration Than Some 

Other WTO Members 

The United States believes that the declaration does not change existing 

TRIPS obligations or create new rights, nor does it give public health 

greater priority than IP protection. Overall, leading up to Doha and since,

the United States has consistently opposed creating broader exemptions 

to TRIPS to protect public health, but instead has called for permitting 

targeted exceptions to TRIPS to avoid eroding patent protections that it 

deems necessary for research and development of medicines to treat lifethreatening diseases. Some developing countries had wanted to modify 

TRIPS provisions if they were considered insufficient to protect public 

health. 

According to a USTR official, paragraph four of the declaration–“The 

TRIPS agreement does not and should not prevent members from taking 

measures to protect public health.”—does not provide a broad exception

in TRIPS for public health purposes and in addition, the provision should 

be considered in context with the rest of the declaration. Some developing 

countries had originally called for the declaration to have stronger 

language–”Nothing in the TRIPS agreement should prevent Members from 

taking measures to protect public health.”–in an attempt to make the 

declaration legally binding. 

With regard to paragraph five, which enumerates flexibilities in TRIPS that 

may be used to address public health, the United States supports the view 

that these flexibilities preserve the ability of members to formulate public 

health policies while also maintaining effective patent systems. But some 

developing countries see paragraph five as providing broader discretion to 

address public health. For example, a group of developing countries, 

including the African Group, Brazil, India, and Thailand, has maintained 

that there should be a common understanding that confirms the right of 

governments to ensure access to medicines at affordable prices and to 

 16According to USTR, developed country members were required to implement the TRIPS 

Agreement fully as of January 1, 1996. Developing countries were given a transition period

for many obligations until January 1, 2000. Recognizing the particular challenges faced by 

least-developed countries, in 2005, the United States worked closely with them and other 

WTO members to extend the implementation date for these countries from January 2006 to

July 2013. The least developed country members in turn pledged to preserve the progress 

that some had made toward TRIPs compliance. 

Page 15 GAO-07-1198 Intellectual Property
make use of TRIPS provisions whenever the scope or exercise of IP 

regulations results in barriers to access to medicine. These members 

believe that TRIPS objectives and principles (referred to in the last phrase 

in paragraph five (a) of the declaration) support the view that TRIPS 

protections are and should be contingent on IP rights contributing to 

social goals, such as nutrition and social and economic welfare. (TRIPS 

objectives and principles are found in articles 7 and 8 respectively, shown

below). 

TRIPS Article 7 – Objectives 

The protection and enforcement of intellectual property rights should contribute to the

promotion of technological innovation and to the transfer and dissemination of technology, 

to the mutual advantage of producers and users of technology knowledge and in a manner

conducive to social and economic welfare, and to a balance of rights and obligations. 

TRIPS Article 8 – Principles

1. Members may, in formulating or amending their laws and regulations, adopt 

measures necessary to protect public health and nutrition, and to promote the 

public interest in sectors of vital importance to their socio-economic and

technological development, provided that such measures are consistent with the

provisions of this Agreement.

2. Appropriate measures, provided that they are consistent with the provisions of 

this Agreement, may be needed to prevent the abuse of intellectual property rights

by right holders or the resort to practices which unreasonably restrain trade or 

adversely affect the international transfer of technology.

The United States has maintained that, rather than impeding access to 

medicines, patent regimes meet the objectives of article 7 by contributing

to the promotion of technological innovation and dissemination of 

technology. Furthermore, the United States has argued that the final 

clause in article 8–”provided that such measures are consistent with the 

provisions of [the TRIPS ]Agreement”–precluded article 8 from providing 

such a broad exception to the obligations of TRIPS. The European Union 

(EU), Switzerland, and Japan were concerned that the countries were 

suggesting the ability to make significant exceptions to patent protection 

under TRIPS. 

The interpretation of paragraph five (b) on compulsory licensing has 

sparked the most controversy among WTO members. The WTO fact sheet 

Page 16 GAO-07-1198 Intellectual Property
on TRIPS and pharmaceuticals describes the declaration as affirming 

compulsory licensing [as a TRIPS flexibility] as part of its overall attempt 

to strike a balance between promoting access to existing drugs and 

promoting research and development into new drugs.17 Significantly, the 

declaration clarifies that WTO members can determine the grounds for 

issuing a compulsory license. This is because TRIPS does not specifically

list the reasons that might be used to justify compulsory licensing, but 

rather enumerates a number of conditions for doing so.18

During the debate over the declaration, the United States stressed that, 

while it considered compulsory licensing to sometimes be appropriate, it 

believed its widespread use for any purpose could have negative 

implications for the patent system and, more importantly, for the 

availability and development of new drugs. Moreover, the United States 

argued using compulsory licensing as a mechanism for directing industrial 

policy or protecting domestic industries against foreign competition would 

be contrary to the letter and purpose of TRIPS. 

In addition, USTR emphasizes that while the declaration is clear that 

members can determine the grounds for compulsory licensing, they still 

must meet certain conditions articulated in TRIPS article 31. These are 

aimed at protecting the legitimate interests of the patent holder when 

circumstances allow compulsory licensing and government use of a patent

without the authorization of the patent holder. Summarized below are 

some relevant excerpts from selected article 31—”Other use without 

authorization of the patent holder”—provisions, including important 

exceptions in recognition of the fact that time can be of the essence in 

some situations, such as national emergencies. Basically, with some 

exceptions, whoever issues a compulsory license must first inform the 

patent holder and seek to obtain authorization (voluntary license) from 

the patent holder. In all cases, they must remunerate the patent holder. 

Summaries of article 31(b) (h) (k) provisions: 

 17See http://www.wto.org/english/tratop_e/trips_e/factsheet_pharm00_e.htm 

18The term “compulsory licensing” does not appear in the TRIPS agreement. However, it 

does appear in the Paris Convention, and WTO members are required to comply with 

relevant portions of that Convention (see TRIPS article 2.1). The phrase “other use without 

authorization of the right holder” appears in the title of TRIPS article 31. 

Page 17 GAO-07-1198 Intellectual Property
• Prior to use, user makes effort to obtain authorization from the patent 

holder on reasonable commercial terms and conditions within a 

reasonable period of time. 

• Above authorization requirement may be waived in cases of 

• national emergency or other circumstances of extreme urgency 

• public noncommercial use 

• to correct anticompetitive practices as determined by judicial or 

administrative processes.

• Patent holder shall be 

• notified as soon as reasonably practicable in case of national

emergency 

• informed promptly in case of noncommercial use 

• Patent holder shall receive adequate remuneration. 

Some developing countries, including the African Group, Brazil, India, and 

Thailand, expressed the view that the TRIPS agreement in no way stands 

in the way of public health protection, and therefore that it should provide 

the broadest flexibility for the use of compulsory licensing to obtain lower 

cost medicines. Differences over compulsory licensing have continued to

reemerge, including later during the later debate over how to resolve the 

paragraph six problem. 

Finally, the United States and some WTO members have different 

interpretations of paragraph five (d), which says that TRIPS leaves each 

member free from challenge to establish its own exhaustion regime, based 

on TRIPS article 6 (shown below). 

TRIPS Article 6 – Exhaustion 

For the purposes of dispute settlement under this Agreement, subject to the provisions of

Articles 3 and 4, nothing in this Agreement shall be used to address the issue of the

exhaustion of intellectual property rights.

Page 18 GAO-07-1198 Intellectual Property
The United States stated during the debate leading up to the declaration 

that it did not interpret this to mean that TRIPS permits parallel imports,19

and expressed misgivings about their use. To be specific, USTR pointed 

out that permitting parallel imports inhibits the patent holder’s willingness 

to offer prices differentiated according to countries’ ability to pay. This is 

because, when prices are higher in one country than in others, there is a 

tendency for diversion to higher income countries. These are precisely the 

markets where patent owners want to maintain high prices in order to 

recoup costs and earn the profits that fund future research. This 

differential pricing has been a key feature of pharmaceutical industry 

efforts to promote improved access to medicine since the Doha 

Declaration.

In contrast to the U.S. position, some developing countries, including the 

African Group, Brazil, India, and Thailand, called parallel importation a 

significant way of increasing access to medicines, particularly for 

developing countries, and a relevant tool when compulsory licenses may 

be ineffective. 

Differences over whether the use of compulsory licensing should be 

restricted or widespread continued during the subsequent debate leading 

up to the 2003 Council Decision on the Implementation of Paragraph Six.

The United States believed that situations requiring a compulsory license 

for export (sometimes referred to as the “paragraph six solution”) would 

likely be somewhat limited but emphasized that the grave health problems 

faced by certain developing and least developed countries made a solution

imperative. The United States called for restricting compulsory licensing

for export to a narrower set of scenarios to ensure that only countries 

facing genuine crises and with no effective manufacturing capacity could

use it. WTO members disagreed about the legal means to address 

paragraph six and its scope and coverage, including which members 

should participate in the solution and for what diseases. 

Differences over a 

Narrower Versus a Broader 

Approach Continued in 

Debating the 2003 and 

2005 Council Decisions 

 19For the purposes of this report, parallel or grey-market imports are products marketed by 

the patent owner or by someone else with the patent owner’s permission in one country

and subsequently imported into another country without the approval of the patent owner. 

For example, suppose company A had a drug patented in two countries, Belladonna and

Calamine, which it sold at a lower price in Calamine. A parallel import would occur if a 

second company B bought the drug in Calamine and imported it into Belladonna at a price 

that was lower than company A’s price. 

Page 19 GAO-07-1198 Intellectual Property
During deliberations in 2001 leading up to the Declaration, the United 

States maintained that situations requiring a paragraph six solution would 

likely remain somewhat limited in the near term, but recognized that the

grave health problems faced by certain developing and least developed 

countries foreshadowed serious consequences should they occur. First, 

difficulties falling under paragraph six would only be expected to arise 

when pharmaceuticals were not provided by the patent holder through 

normal commercial arrangements or through discount, donation, or other

aid programs. In addition, a paragraph six solution would only apply if a 

patent existed in the WTO member country or territory that was exporting 

the pharmaceutical. However, some developing countries at the time were 

not obligated to provide patents until January 2005, most notably India.20 

The legal mechanism by which to address paragraph six could also affect

the widespread use of compulsory licensing and the effective force of 

TRIPS obligations. WTO members had to decide whether to craft the 

paragraph six solution on the basis of TRIPS article 30 or on a waiver of 

article 31. The United States and the EU supported article 31. The United 

States argued that a targeted moratorium or waiver of obligations of 

TRIPS article 31(f) (see below) was the most expeditious, workable, 

transparent, sustainable, and legal solution. Essentially, the TRIPS 

requirement that compulsory licensing should be primarily for domestic 

use would be waived. 

USTR Maintained Paragraph 

Six Would Be Less Applicable 

in the Near Term 

WTO Members Differed on the 

Legal Means to Address 

Paragraph Six 

 20While this deadline has now passed, as a practical matter questions still remain about how 

soon pharmaceuticals produced in India will be under patent. For example, generic drugs 

produced in India or anywhere in the world before 2005 would be grandfathered under the 

old system and thus not effectively subject to patents. 

Page 20 GAO-07-1198 Intellectual Property
TRIPS Article 31 

“Other use without authorization of the patent holder” 

Where the law of a Member allows for other use of the subject matter of a patent without

the authorization of the right holder, including use by the government or third parties

authorized by the government, the following provisions shall be respected: 

Article 31 (f): Any such use shall be authorized predominantly for the supply of the 

domestic market of the Member authorizing such use; 

The African Group also supported the article 31 approach and had laid out

several options for doing so. Above all, however, they said that they 

wanted an expeditious solution. According to WTO officials, there was a 

tacit agreement among the WTO members that the African Group “had the 

moral high ground” on this issue because the HIV/AIDS pandemic was so 

acute in Africa. 

Alternatively, countries such as Brazil, India, and Thailand argued that the 

best solution was to interpret TRIPS article 30 (see below) so as to 

recognize the right of WTO members to authorize third parties to make, 

sell, and export patented public-health-related products, without the 

consent of the patent holder to address the public health needs in another 

country. These acts would be considered “limited exceptions to the 

exclusive rights” conferred by patents. The countries argued that an 

authoritative interpretation of article 30 would also have the advantage of

avoiding the potentially cumbersome requirement under a waiver of article 

31(f) that the exporting country must also grant a compulsory license as 

well as change its own laws to allow compulsory licensing for exporting. 

TRIPS Article 30 

Members may provide limited exceptions to the exclusive rights conferred by a patent,

provided that such exceptions do not unreasonably conflict with a normal exploitation of 

the patent and do not unreasonably prejudice the legitimate interests of the patent owner, 

taking account of the legitimate interests of third parties. 

USTR contended that such a broad reinterpretation of article 30 allowing 

members to amend their patent laws to permit compulsory licenses would 

Page 21 GAO-07-1198 Intellectual Property
unreasonably conflict with patent owners’ normal exploitation of patents 

and with their legitimate interests. Furthermore, unlike article 31, article 

30 contains no procedural safeguards, such as requirements for notifying a 

patent owner of use, establishing terms and conditions, or remuneration to 

the patent holder. USTR stated that creating an exception through article 

30 was hard to defend legally as being consistent with TRIPS. Moreover, it 

contended that there was too much danger that such an exception would 

be misused and thus subject to dispute settlement challenge.

The question of which countries should be able to take advantage of a 

paragraph six solution also provoked controversy. Basically, the United 

States and other WTO members with large name-brand pharmaceutical 

industries, including the EU and Switzerland, wanted the paragraph six 

solution to focus on developing and least developed countries lacking 

pharmaceutical manufacturing capacity as importing beneficiaries. The 

United States wanted to establish specific procedures to clarify which 

developing country members could be considered to have insufficient or 

no manufacturing ability, and thought it inappropriate to extend the 

solution to developed countries or to countries that had manufacturing 

capacity but chose not to manufacture certain drugs based on policy, 

economic, or other reasons. WTO officials told us they tried to collect data

on manufacturing capability, but could find none. Ultimately, the 2003 

Council Decision required importing countries to explain how they had no

or insufficient manufacturing capacity for the product in question. 

After facing strong resistance from other WTO members, the United States 

did not insist on a specific list of eligible countries. However, the United 

States maintained that not every member country should be able to use a 

paragraph six solution, and suggested that some members, such as OECD 

countries and certain developing countries opt out. WTO officials told us 

that the United States put pressure on many countries to opt out. In the 

end, 23 developed countries agreed to opt out, and the 10 countries soon 

to join the EU partially opted out, with agreement to opt out completely 

after they joined the EU. Finally, some other WTO members agreed that 

WTO Members Disagreed on 

Countries Covered under 

Paragraph Six 

Page 22 GAO-07-1198 Intellectual Property
they would only use the system as importers in situations of national 

emergency or other circumstances of extreme urgency.

21

The other controversial issue was the scope of diseases to be covered 

under paragraph six of the declaration. In November and December 2002, 

the United States said that it was willing to join the consensus on all of a 

paragraph six solution draft except for language on the scope of diseases. 

The United States, the EU, and Japan wanted coverage limited to the 

diseases mentioned in paragraph one of the declaration, namely 

“HIV/AIDS, TB, malaria and other epidemics” of potentially pandemic 

proportions. Others, including Brazil and Argentina, disagreed and wanted 

no restrictions on diseases. According to WTO officials, some WTO 

members discussed using either paragraph one or paragraph four–“access 

to medicine for all”–of the declaration to address the scope of diseases, 

and settled on the former after being reassured that the declaration did not 

restrict itself to specific diseases. According to WTO officials, in April 

2003, the new TRIPS Council Chair, Singapore, conferred with the United

States and the U.S. pharmaceutical industry, drafted a new paragraph six

text, and led negotiations among a few members—namely, South Africa, 

Kenya, Brazil, India, and the United States. USTR officials noted that this 

group of countries represented the spectrum of views on this debate. The 

final text contained no specifics on diseases, but relied on paragraph one 

of the declaration. 

United States Had Difficulty 

Joining Consensus on 

Paragraph Six concerning 

Diseases 

 21To quote the chairman’s statement on the General Council decision on the 

implementation of paragraph 6: “The following Members have agreed to opt out of using 

the system as importers: Australia, Austria, Belgium, Canada, Denmark, Finland, France, 

Germany, Greece, Iceland, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand,

Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom and United States of 

America. Until their accession to the European Union, Czech Republic, Cyprus, Estonia,

Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia agree that they 

would only use the system as importers in situations of national emergency or other 

circumstances of extreme urgency. These countries further agree that upon their accession 

to the European Union, they will opt out of using the system as importers. Some other 

Members have agreed that they would only use the system as importers in situations of 

national emergency or other circumstances of extreme urgency: Hong Kong (China), Israel, 

Korea, Kuwait, Macao (China), Mexico, Qatar, Singapore, Chinese Taipei, Turkey, United

Arab Emirates.” 

Page 23 GAO-07-1198 Intellectual Property
USTR officials emphasized that the United States ultimately conditioned 

its consensus with a paragraph six solution on a statement by the 

chairman of the General Council that signaled that diversion was a key 

issue.22 WTO members generally agreed diversion should be prevented to 

ensure that drugs provided under the paragraph six solution went where 

intended. The separate statement by the General Council chairman was 

designed to alleviate fears that the decision might be abused and 

undermine patent protection or not effectively prevent drugs from being 

diverted. The General Council chairman stated that, before adopting the 

decision, he wanted to place on the record “this Statement which 

represents several key shared understandings of Members regarding the 

Decision to be taken and the way in which it will be interpreted and 

implemented.” He went on to state that members recognize that the 

purpose of the decision would be defeated if products were diverted from

the markets for which they were intended, and that all reasonable 

measures should be taken to prevent such diversion. In addition, the 

chairman listed the WTO members that had agreed to opt out of using the 

system as importers. 

Ultimately, the outcome of the nearly 2-year debate over a paragraph six 

solution was the adoption of the 2003 General Council Decision in light of

the General Council chairman’s statement. The decision waived the 

prohibition in TRIPS article 31(f) against exporting under a compulsory 

license to countries that cannot manufacture the pharmaceuticals 

themselves. USTR officials told us they considered it a positive outcome in 

that it provided a solution to the problem identified in paragraph six of the 

Doha Declaration, while preserving TRIPS rules and obligations. 

Other WTO members initially supported the outcome, but expressed some 

concern later. For example, the African Group suggested at a March 2005 

meeting of the WTO TRIPS Council that the burden of using the decision 

was the reason why, up to that point, the 2003 Council Decision had not 

been used by a country to waive TRIPS rules and import generic versions 

The Chairman’s Statement Was 

a Key Condition to U.S. 

Support of the Paragraph Six 

Solution 

USTR Believes the 2003 

Council Decision Was a 

Positive One, but Some 

WTO Members Have 

Expressed Concerns since 

the Decision 

 22For the purposes of this report, diversion is the importation and resale of pharmaceuticals

intended for use in another country. A typical example might involve pharmaceuticals 

donated to a relief organization in a poorer country that make their way into developed

nations for sale at a substantial markup. Diversion presents its practitioners with 

opportunities to generate illegitimate profits by diverting drugs from their intended 

recipients whenever pharmaceutical companies distribute high value drugs at below 

market prices. 

Page 24 GAO-07-1198 Intellectual Property
of patented drugs under a compulsory license. One WTO representative 

told us more recently that he considered the waiver too complicated, 

calling the packaging and labeling requirements costly and draconian 

because of the need to change production lines. 

Under the waiver, countries can produce generic copies of patented 

products under compulsory licenses to export to eligible importing 

countries, subject to certain requirements and safeguards. The terms of 

the waiver are summarized below: 

Importing members: 

• Notify TRIPS Council: names, expected quantities, of drug. 

• Other than least developed countries, establish insufficient or no 

manufacturing capacities for the product in question. 

• Take reasonable measures within their means, with possible assistance 

from developed country members, to prevent exportation elsewhere 

(diversion). 

• If product is patented in its territory, must grant or intend to grant a 

compulsory license in compliance with TRIPS Article 31. 

• Remuneration waived if product is provided by exporting country. 

• Make a determination of a national emergency, other circumstances 

of extreme urgency, or a case of public noncommercial use. 

Exporting members: 

• Export only amount necessary to meet needs of eligible importing 

member. 

• Export entirety of product produced under compulsory license to the 

eligible importing member(s) that has notified the TRIPS Council. 

• Label product to identify it as being produced under the system 

established by the decision. 

• Package and color uniquely, provided such distinction is feasible 

and does not significantly affect price. 

Page 25 GAO-07-1198 Intellectual Property
• Publicize on a designated Web site distinguishing features and 

quantities of medicine exporting. 

• Notify TRIPS Council: name of licensee, products, country to be 

supplied, and duration of license. 

• Adequately remunerate patent holder in the exporting member. 

All WTO members: 

• Ensure the availability of effective legal means to prevent the 

importation of products produced under the system established by the 

decision and diverted to their markets. 

According to USTR, in July 2004, the United States and Canada agreed to

suspend applications, as between themselves, of a provision of the North 

American Free Trade Agreement (NAFTA) that parallels Article 31 (f) of 

the TRIPS agreement in order to ensure that Canada could export drugs 

under the terms of the 2003 Council Decision without violating NAFTA. 

The first and only WTO member to date to notify the WTO TRIPS Council 

of its intent to use a paragraph six solution was Rwanda, in July 2007. 

Debate at the WTO over the 2003 Council Decision still continued for 

another 2 years. In response to a call by some WTO members, principally 

driven by the African Group, to express the 2003 Council Decision in an 

amendment to TRIPS as a more permanent solution, the 2003 Decision 

also called for WTO members to prepare an amendment to replace the 

decision. As a result, the General Council issued a decision on December 

6, 2005, adopting a protocol amendment that is open for members to 

accept. It will become effective once the amendment is accepted by two 

thirds of the WTO membership. Thus far, eight WTO members have 

accepted the amendment, including the United States, Switzerland, El 

Salvador, the Republic of Korea, Norway, India, the Philippines, and Israel. 

The drafting of the amendment turned into another 2-year struggle. 

According to USTR, the United States wanted to ensure that agreements 

made under the 2003 Council Decision were not changed in the 

amendment. To do this, USTR proposed to include the chairman’s 

statement as a footnote to the amendment. WTO members discussed the 

possible legal weight of a footnote. According to USTR, some members 

felt attaching the chairman’s statement as a footnote might give it too 

much legal weight. In addition, some members wanted to make changes to 

General Council Issued 

2005 Decision to Consider 

Amending the TRIPS 

Agreement, after Some 

Difficulties 

Page 26 GAO-07-1198 Intellectual Property
the original 2003 Decision in the amendment. Eventually, the footnote was 

dropped and the members agreed to have the chairman’s statement read 

orally, similar to the scenario followed in adopting the 2003 Council 

Decision. Despite losing the footnote, the United States believed it had 

achieved the delicate balance of preserving the solution agreed to under 

the 2003 Council Decision while promoting access to medicine with 

safeguards against diversion. 

In negotiating FTAs, USTR said it balances respect for the Doha 

Declaration with its other two IP negotiating objectives in TPA by 

consistently promoting high standards of IP protection similar to U.S. law, 

while making allowances for the two specific flexibilities mentioned in the 

declaration. For example, USTR makes concessions to developing 

countries on compulsory licensing and parallel importing provisions 

specifically cited in the declaration. However, USTR has continued to 

pursue other pharmaceutical-related IP provisions that it does not see as 

relevant or contrary to the Doha Declaration in all of its FTAs, such as 

data exclusivity, patent term extensions, and patent linkage. Reactions to

USTR’s approach have been mixed. The pharmaceutical industry supports 

the inclusion of these protections in FTAs because it believes they are 

central to maintaining incentives for investment in research and 

development of new drugs. Some experts and public health advocates 

have raised concerns that USTR’s approach hinders generic competition, 

reducing access to medicines and thus violating the principles of the 

declaration. Finally, certain Members of Congress have expressed 

concern over the pharmaceutical-related IP provisions in FTAs with 

developing countries, and this concern was recently addressed through a 

bipartisan compromise between Congress and the administration. 

USTR has three principal negotiating objectives related to IP rights when 

negotiating FTAs with other countries. The Trade Act of 2002, which 

granted the President Trade Promotion Authority (TPA), contains 

guidance from Congress on U.S. negotiating objectives for trade 

agreements, including three goals on IP rights:23

USTR Has Maintained 

Its Pursuit of High IP 

Standards and Made 

Some Allowances for 

Doha Flexibilities in 

Negotiating FTAs 

USTR Believes That Strong 

IP Protection and 

Increased Market Access 

Promotes Public Health, 

and Thus Respect for the 

Doha Declaration 1. to further promote adequate and effective protection of IP rights, 

including through ensuring that the provisions of any multilateral or 

 2319 U.S.C. §3802. 

Page 27 GAO-07-1198 Intellectual Property
bilateral trade agreement governing IP rights that is entered into by the 

United States reflect a standard of protection similar to that found in 

United States law; 

2. to secure fair, equitable, and nondiscriminatory market access 

opportunities for United States persons that rely upon IP protection; 

and 

3. to respect the Doha Declaration on the TRIPS Agreement and Public 

Health, adopted by the World Trade Organization (WTO). 

USTR officials explained that USTR believes it can simultaneously pursue 

policies that advance the first two objectives of promoting IP rights and 

securing market access, while fulfilling the third objective to respect the 

Doha Declaration. Specifically, the officials noted that in order to pursue 

the first two objectives in FTAs, USTR officials have negotiated high levels 

of IP protection in FTAs that reflect standards of protection similar to U.S. 

law, and build on the minimum standards in TRIPS. USTR officials stated

that they pursue the second objective of securing market access for 

persons who rely on IP protection by ensuring that products benefit from

the increased protection and market access in the FTAs. For example, 

USTR officials noted that FTAs with more developed countries have 

regulatory provisions for pharmaceuticals and medical devices on market 

approval, price controls, and reimbursement policies. USTR sees no 

inherent conflict between active pursuit of TPA’s first two objectives of 

promoting IP protection similar to U.S. law and market access 

opportunities, and the third objective of respecting the Doha Declaration,

but rather considers these objectives complementary. USTR officials 

stated that USTR’s view is that IP rights ultimately enhance public health 

by promoting innovation for new medicines and that therefore this 

approach is consistent with the Doha Declaration.

In response to the objectives laid out in TPA, USTR officials noted that 

they have pursued a menu of pharmaceutical-related IP provisions in its 

FTAs, including restrictions on compulsory licensing and parallel imports, 

and requirements to provide data exclusivity, patent term extensions, and

patent linkage. Some of these pharmaceutical-related IP provisions go 

beyond the minimum levels of protection outlined in TRIPS, provoking 

complaints from some that they violate the principles and spirit of the 

Doha Declaration. However, USTR considers them consistent with its 

interpretation of the declaration’s intent and meaning and with TPA 

guidance. 

USTR Pursues a Menu of 

Pharmaceutical-Related IP 

Provisions in FTA 

Negotiations 

Page 28 GAO-07-1198 Intellectual Property
The FTA pharmaceutical-related IP provisions, to the extent that they are

similar across the FTAs, have been summarized below. However, it is 

important to note that variations across the provisions exist and have not 

been presented in these summaries. Moreover, not every FTA reviewed 

contained every provision summarized below. 

Compulsory Licensing: Generally, provisions on compulsory licensing 

limit the ability of a country to issue a compulsory license to a few specific 

scenarios: to remedy anticompetitive practices in cases of public 

noncommercial use, in cases of national emergency, or other 

circumstances of extreme urgency. 

Parallel Imports: Generally, provisions on parallel importation require the 

country to preserve the patent owner’s exclusive right to sell or import its 

product in the country in a variety of contexts. 

Data Exclusivity: Generally, data exclusivity provisions state that a 

generic company cannot obtain marketing approval based on the safety 

and efficacy data of the innovator company for a period of at least 5 years 

from the date marketing approval was granted to the innovator. Thus, this 

provision provides the innovator 5 years of effective marketing exclusivity,

unless the generic firm produces its own safety and efficacy data with new 

drug trials. 

Patent Term Extensions: Generally, patent term extension provisions 

require the country to provide a patent term extension to the patent owner 

to compensate for unreasonable delays in granting the patent, or for 

unreasonable curtailment of the effective patent term as a result of the 

marketing approval process. 

Patent Linkage: Generally, provisions on patent linkage establish a 

relationship between the market approval process of generic drugs and 

the patent status of the originator product. Under this relationship, the 

governmental body responsible for granting market approval prevents 

third parties from making or selling copies of patented products without 

the authorization of the patent holder by withholding marketing approval 

until either the expiration of the patent or a determination by a 

governmental body, either executive or judicial, that the patents are either 

not infringed, invalid or unenforceable. In addition, the identity of the 

generic company requesting marketing approval must be made available to 

the patent owner. 

Page 29 GAO-07-1198 Intellectual Property
Patent term extensions and patent linkage are two examples of 

pharmaceutical-related IP provisions the United States negotiates for in 

FTAs that go beyond the minimum obligations in the TRIPS agreement. 

TRIPS article 33, which lays out the term of protection for a patented 

product, states that “the term of protection available shall not end before 

the expiration of a period of twenty years counted from the filing date.” 

There is no mention of patent term extensions to make up for delays in the 

patent or marketing approval process in the TRIPS agreement.

Nevertheless, these patent term extension provisions exist in U.S. law24

and according to USTR officials are negotiated by USTR in FTAs. In 

addition, there is no mention of coordination between the health 

regulatory authority and the patent granting office, known as patent 

linkage, in the TRIPS agreement. However, U.S. law does establish linkage

between the FDA drug approval process of generics and the patent status

of the originator product,25 and USTR believes that such linkage is 

important to restrict marketing of infringing copies of patented drug 

products. 

Whether FTA provisions on data exclusivity go beyond TRIPS is less clear. 

TRIPS article 39(3) states that members who require the submission of 

undisclosed test data as a condition of marketing approval for a 

pharmaceutical or agricultural chemical product shall protect the data 

from unfair commercial use and disclosure. 

TRIPS Article 39(3) 

Members, when requiring, as a condition of approving the marketing of pharmaceutical or

of agricultural chemical products which utilize new chemical entities, the submission of 

undisclosed test or other data, the origination of which involves a considerable effort, shall 

protect such data against unfair commercial use. In addition, Members shall protect such 

data against disclosure, except where necessary to protect the public, or unless steps are 

taken to ensure that the data are protected against unfair commercial use. 

There are different interpretations of the obligations under TRIPS 39(3), 

and exactly what practices can be considered a fulfillment of this 

obligation. One interpretation of TRIPS 39(3) requires members to grant 

the originator of the data a period of exclusive use similar to that provided 

by data exclusivity laws in the United States. Under this interpretation, 

 24See 35 U.S.C. § 156. 

25See 21 U.S.C. § 355. 

Page 30 GAO-07-1198 Intellectual Property
FTA provisions do not go beyond TRIPS. Others do not believe that Article 

39(3) of TRIPS confers exclusive rights, but instead simply requires 

countries to prevent third parties from using the originators’ data for 

unfair commercial purposes. This interpretation suggests that the FTA 

provision goes beyond the TRIPS requirement. 

USTR officials stated that they did not change the initial demands USTR 

makes in FTA negotiations as a result of the Doha Declaration. However, 

they argued that USTR follows TPA guidance to respect the Doha 

Declaration by making concessions during negotiations with what it 

considers to be developing countries on the two TRIPS flexibilities 

specifically mentioned in the declaration. USTR officials told us that when 

developing country trading partners raise concerns during FTA 

negotiations about provisions that would restrict the use of parallel 

imports or compulsory licensing, USTR ultimately backs off and removes 

them from the proposed text; however, they stated that no such 

concessions were made for countries that USTR considered developed 

countries. A USTR official said that developed countries have more tools 

and resources with which to deal with public health situations and that 

they should not have to revert to such extraordinary measures outside of 

the cases specified in FTA provisions, such as national emergencies. 

Restricting these concessions to developing countries is in line with 

USTR’s belief that the Doha Declaration is intended to apply primarily to 

developing countries with limited resources. 

USTR also attaches side letters on public health to FTAs with developing 

countries.26 Our analysis in figure 2 shows that 7 of the 11 agreements 

include a side letter or understandings on public health.27 USTR officials 

USTR Has Made Limited 

Concessions on Doha 

Declaration Flexibilities 

 26The side letters on public health generally state that the obligations under the IP chapter 

do not affect a Party’s ability to take necessary measures to protect public health by

promoting access to medicines for all, in particular concerning cases such as HIV/AIDS, 

tuberculosis, malaria, and other epidemics as well as circumstances of extreme urgency.

The side letters also generally state that the obligations under the IP chapter do not prevent

the effective utilization of the TRIPS/health solution. For specific wording, see the 

Colombia, Bahrain, Oman, Morocco, CAFTA-DR, Peru, and Panama free trade agreements

and associated side letters. 

27Not captured in this number are other statements on public health in the FTAs such as in 

the preamble of the Chile FTA IP chapter that states, “Recognizing the principles set out in

the Declaration on the TRIPS Agreement on Public Health, adopted on November 14, 2001, 

by the WTO at the Fourth WTO Ministerial Conference, held in Doha, Qatar.” According to

USTR officials, such a statement is part of the interpretive context of an FTA. 

Page 31 GAO-07-1198 Intellectual Property
noted that they use the side letters to further clarify that the provisions of 

the agreement leave intact a series of methods a country can use to 

respond to public health emergencies.

28 However, according to a USTR 

official, these side letters do not create exceptions to the provisions in the 

FTA. 

Figure 2: FTA Pharmaceutical-Related IP Provisions and Side Letters Matrix

FTA 

Chile

Singapore

Australia 

Morocco 

CAFTA-DR

Bahrain

Oman 

Peru 

Colombia

Panama

Korea

Parallel 

importing

Patent 

extension

Data 

exclusivity 

Compulsory 

licensing 

FTA status

(signed/ 

implemented)

Patent 

linkage

Side letter 

on public 

health

Per capita 

income

Implementing Leg. 

signed Sept. 03

Implementing Leg. 

signed Sept. 03

Implementing Leg. 

signed Aug. 04

Implementing Leg. 

signed Aug. 04

Implementing Leg. 

signed Aug. 05

Implementing Leg. 

signed Jan. 06

Implementing Leg. 

signed Sept. 06

Agreement signed 

Apr. 06

Agreement signed 

Nov. 06

Agreement signed 

June 07

Agreement signed 

June 07

$12,983

$32,867

$32,938

$4,956

$23,604

$5,895

$18,841

$6,715

$8,091

$8,389

$23,926

Source: GAO analysis, International Monetary Fund (IMF), and United Nations (UN). 

Indicates that the provision is NOT present in the FTA

Indicates that the provision is present in the FTA

Indicates that language on the Doha Declaration and public health was incorporated into the body

of the agreement

Note: Per capita income based on purchasing power parity (PPP) exchange rate is from International 

Monetary Fund’s staff estimates for 2006. Per capita income for CAFTA-DA is an average for the 

region, which is total PPP-based Gross Domestic Product (GDP) for the region divided by total 

population for the region using UN estimates. 

 28The side letter on public health constitutes a formal understanding that forms part of the

interpretive context of a signed/implemented FTA as described in the Vienna Convention

on the Law of Treaties, Article 31. 

Page 32 GAO-07-1198 Intellectual Property
USTR told us that some differences in the IP provisions among FTAs 

represented accommodations made to countries raising specific concerns 

during negotiations. For instance, USTR officials stated that, in the Central 

America-Dominican Republic-United States Free Trade Agreement 

(CAFTA-DR), a transition period was included for the implementation of 

patent term extensions. In the CAFTA-DR agreement, USTR dropped a 

proposal for data exclusivity protection on new uses of previously 

discovered chemical entities, and instead left data exclusivity in place only 

for new chemical entities. In addition, USTR revised the proposed 

provision on patentable subject matter in the Oman agreement in order to 

exclude plants and animals from patent protection in response to Oman’s 

concerns. USTR officials said that most concerns raised during 

negotiations regarding data exclusivity and patent linkage were not 

couched as health concerns, but rather as unease related to administrative 

burden or implementation concerns. When these types of implementation

concerns are raised during negotiations, USTR said it consults with the 

U.S. agencies responsible for implementing those provisions in the United

States, PTO, and FDA. 

USTR officials stated that USTR considers the remaining pharmaceutical 

IP provisions on data exclusivity, patent linkage, and patent term 

extension a central part of its strategy of pursuing the first two IP 

negotiating objectives, while it does not see these provisions as being 

specifically addressed by the Doha Declaration. Therefore, USTR officials 

noted that these three provisions are pursued universally by USTR in all of 

its FTAs. USTR officials noted that these provisions are very important for 

providing protection similar to that found in U.S. law and for maintaining 

incentives for the pharmaceutical industry. USTR officials explained that 

USTR does not believe that these three provisions are considered 

flexibilities under the Doha Declaration, and therefore sees no conflict 

between pursuing them and respecting the Doha Declaration. USTR 

officials noted that USTR maintains that these provisions do not restrict a 

country’s ability to protect public health. 

The pattern of IP provisions negotiated in the 11 FTAs completed to date

confirms USTR’s stated negotiating strategy. Figure 2 demonstrates that 

data exclusivity, patent term extension, and patent linkage provisions are 

found in all 11 of the FTAs concluded under TPA, regardless of the 

development level in the country. Pursuing these provisions also confirms 

USTR’s stated strategy of seeking high IP standards related to

pharmaceuticals in trade negotiations. On the other hand, figure 2 

indicates that IP provisions on compulsory licensing are found in only 2 of 

11 completed FTAs, those with Singapore and Australia, both of which 

Page 33 GAO-07-1198 Intellectual Property
USTR considered developed countries. Only 3 of 11 FTAs—Singapore, 

Australia, and Morocco—contain provisions on parallel imports. Although 

Morocco is considered a developing country, USTR officials explained that 

Morocco decided in 2000, well before the onset of negotiations, not to 

permit parallel imports. Therefore, USTR officials stated that the parallel

importation provision reflected what was already provided in Moroccan 

law. 

The Pharmaceutical 

Industry Supports USTR’s

Insistence on Data 

Exclusivity, Patent 

Linkage, and Patent Term 

Extensions, but Others 

Contend These Provisions 

Contradict the Principles 

of the Declaration 

Reactions to USTR’s approach to pursuing its TPA objectives in 

negotiating FTAs have been mixed, with controversy centered on the three 

key provisions of data exclusivity, patent linkage, and patent term 

extensions. The pharmaceutical industry stated that it supports the 

inclusion of these provisions in FTAs because it believes they maintain 

incentives for research and development. However, some experts and 

public health advocates have raised concerns that USTR’s approach delays 

generic competition and reduces access to medicines. Therefore, they 

believe that USTR’s strategy violates the principles and goal of the Doha 

Declaration.

Page 34 GAO-07-1198 Intellectual Property
Pharmaceutical industry representatives stated that data exclusivity is a 

very important IP protection that provides incentives to innovate and 

invest in certain markets. Data exclusivity grants a company the exclusive

use of its safety and efficacy test data, necessary to obtain marketing 

approval, for a fixed period after the marketing launch. Data exclusivity is

one method by which the innovator company can recoup the costs 

involved with conducting clinical tests necessary for marketing approval,

as well as the considerable costs associated with developing a new drug. 

Industry representatives explained that they consider patent protection 

and data exclusivity to be separate but complementary protections. Both 

can generally provide a period of exclusivity. Consequently, data 

exclusivity may effectively grant another layer of market exclusivity for 

the new product. Figure 3 contains three scenarios of how the periods of 

data exclusivity and patent protection can interact to create market 

exclusivity under U.S. law. 

The Pharmaceutical Industry 

Considers Data Exclusivity, 

Patent Linkage, and Patent 

Term Extensions Key 

Provisions 

Page 35 GAO-07-1198 Intellectual Property
Figure 3: Data Exclusivity and Patent Protection, Three Possible Scenarios

Data exclusivity period

Drug trials during patent term

Drug trials with no patent

Patent

No patent

Generic competition

Source: GAO analysis.

Patent 

begins

Patent 

ends

Initial drug

development 

Drug trials

(and other research 

and development)

Generic

competition

Generic

competition

Data

exclusivity 

ends

Data

exclusivity 

ends

Data

exclusivity 

ends

Generic

competition

Scenario 2:

Data exclusivity extends beyond the 

end of the patent term because 

marketing approval is granted so far 

into the patent period that less than 

5 years remain on the patent when 

the patent holder enters the market. 

Scenario 1:

Marketing approval is granted about 

8-10 years into the 20 year patent 

term and therefore the 5-year data

exclusivity for new chemical entities

runs concurrently with patent term. 

Most typical scenario for a new drug 

in the U.S.

Scenario 3: 

No patent is obtained by the innovator 

company, therefore data exclusivity 

provides 5 years of marketing 

exclusivity for new chemical entities for 

the innovator company. This scenario 

is more likely in countries where 

patents have not been obtained or are 

poorly enforced.

Data 

exclusivity 

period for 

innovator

20 years

Patent

Patent

20 years

Patent 

begins

Marketing 

approval 

granted

Marketing 

approval 

granted

Patent 

ends

Initial drug

development 

Drug trials

(and other research and development)

Data exclusivity 

period for 

innovator

Marketing

approval 

granted

Initial drug

development 

Drug trials

(and other research 

and development)

Data 

exclusivity 

period for 

innovator

No patent

Page 36 GAO-07-1198 Intellectual Property
Some time after the initial drug development takes place, the company 

applies for a patent and the 20-year patent term begins. During the patent 

term, the company completes all of the drug trials necessary to obtain the

safety and efficacy data needed for marketing approval by the FDA. After 

approval is granted, the company can begin marketing its drug, and the set 

period of data exclusivity period begins. Industry representatives noted 

that the data exclusivity period generally is concurrent with the patent 

period and therefore does not add any additional period of effective 

market exclusivity, as shown in the first scenario in figure 3. However, as 

shown in the second scenario, if marketing approval is obtained further 

into the patent term, the 5-year data exclusivity period, which begins when 

marketing approval is granted, can extend beyond the term of the patent. 

As shown in the third scenario, when no patent protection exists, data 

exclusivity effectively provides the entire market exclusivity period. 

Pharmaceutical industry representatives stated that the first scenario is 

the most typical, with the data exclusivity running concurrently with 

patent protection. However, they noted that there are many instances in 

which companies do not obtain patents on their products (particularly for 

small markets), or patent protection is inadequate or poorly enforced. In 

these situations, data exclusivity ensures the innovator company a 5-year 

period of market exclusivity. The pharmaceutical industry believes that, in

cases in which there is no patent or very little patent life remains when the 

drug first enters the market, data exclusivity is critical because without an 

effective market exclusivity period, incentives to research and develop

new drugs are diminished. 

Pharmaceutical industry representatives have also advocated for patent 

term extensions in FTAs. It is common for a substantial portion of the 

patent life to be spent running drug trials. Therefore, the industry argues 

that patent term extensions ensure that innovators get enough time to 

recoup their costs and maintain the incentives for future innovation. In 

addition, industry representatives noted that, in many developing 

countries, the delays associated with getting a patent or obtaining 

marketing approval for a new drug can be far more extensive than in the

United States. They argue that, under these circumstances, it is even more 

critical that a safeguard mechanism exists to ensure that these delays do 

not undermine the intentions of patent protection. 

Patent linkage is also considered important by the pharmaceutical 

industry. Patent linkage provisions in the FTAs provide for delay of 

marketing approval if a generic drug product is covered by an unexpired 

patent. Pharmaceutical companies claim that generic companies routinely

Page 37 GAO-07-1198 Intellectual Property
launch patent-infringing products during the life of a patent in many 

developing countries and that patent linkage would help to minimize this 

problem. 

Some experts and NGOs believe that these provisions impair access to 

medicines and therefore are contrary to the “spirit” of the Doha 

Declaration and TPA guidance. These NGOs, academics, and generic 

pharmaceutical producers believe that these provisions limit generic 

competition, thereby maintaining high prices for pharmaceutical products, 

ultimately impairing access to medicines. These concerns have been 

extensively discussed and documented by academics, international 

organizations, think tanks, NGOs, and public health groups. Since many 

FTA partners implemented these pharmaceutical-related IP provisions for 

the first time very recently, it is difficult to identify the tangible effect of 

these provisions. However, these groups believe that the inclusion of these 

provisions has the potential to decrease public health and therefore is 

contrary to the spirit and principles and goal of the Doha Declaration. 

Some Experts and NGOs 

Believe USTR’s Continued 

Promotion of Data Exclusivity, 

Patent Term Extensions, and 

Patent Linkage Conflicts with 

the Principles of the Doha 

Declaration

Many NGOs argue that the data exclusivity provisions included in U.S. 

FTAs will damage access to medicines and public health and worry that 

there might be instances where the data exclusivity period could extend 

beyond the length of the patent term, as in figure 3, scenario 2. This data 

exclusivity period effectively delays entry of generics onto the market, 

thereby maintaining monopoly prices for a longer period of time. While 

some NGOs recognize that it would be rare for the data exclusivity period

to extend beyond the patent term, they are worried that if this situation 

occurs, generic competition will be delayed because of the presence of 

data exclusivity. In addition, where the innovator of a new drug did not 

obtain a patent in that country, either because it did not apply or because 

the new drug was not patentable, data exclusivity will effectively give the 

innovator a patent-like period of marketing exclusivity for the entire 

period of data exclusivity, from the time marketing approval is granted 

(see figure 3, scenario 3). NGOs are also concerned that data exclusivity 

provisions might prevent the marketing of generic drugs produced under a 

compulsory license. For instance, if a compulsory license is granted to a

generic producer, but that producer is not able to rely on the data 

generated by the innovator company to obtain needed marketing approval, 

it will not be possible to distribute the drugs under a compulsory license. 

Page 38 GAO-07-1198 Intellectual Property
Some experts and NGOs are also concerned that variations in the data 

exclusivity periods across countries could further delay generic entry. An 

FTA partner country must normally provide 5 years of data exclusivity to

the innovator once the product receives marketing approval.29 If the 

innovator waited to apply for marketing approval in the FTA partner 

country, thereby delaying the start date of its market exclusivity period, it

would effectively extend the overall market exclusivity period beyond the 

intended 5 years. Some FTAs have addressed this issue by specifying that

a country may require the innovator to apply for marketing approval in its 

country within a specified period of time. For instance, in the CAFTA-DR 

agreement, at their request, a Party may require that the innovator seek 

marketing approval in that Party within 5 years after obtaining marketing 

approval in any other territory in order to receive data exclusivity. This 

way, the innovator company can only delay the start date of its data 

exclusivity period by a fixed period of time. 

Patent term extension provisions in FTAs have also led to questions about 

their effect on access to medicines. Many NGOs and generic 

pharmaceutical producers believe that the 20-year patent term in TRIPS 

creates a balance between access and innovation and that extending the

patent period would have a detrimental effect on generic competition. 

They are also concerned that the patent term extension provisions in U.S. 

FTAs do not contain the same limits present in U.S. law. For instance, 

under U.S. law, innovators cannot receive more than 14 years of patent 

protection through a patent term extension after they have received

market approval, and in any case, the maximum period of extension 

determined on the basis of the regulatory review period cannot exceed 5 

years. This limit on patent term extensions is not present in FTAs. 

Some also assert that patent linkage might negatively affect access to 

medicines. The patent linkage process in the United States involves 

numerous steps and actors, designed to enable resolution of patent 

disputes before marketing approval is granted for a generic drug product.

As shown in figure 4, this linkage system places the burden on the private

companies, not the regulatory authority, to monitor the patent system. 

 29The Chile, Singapore, Australia, Morocco, Bahrain, CAFTA-DR, Oman, and Republic of 

Korea FTAs state that 5 years of data exclusivity are to be provided. The Peru, Colombia, 

and Panama FTAs will require the provision of data exclusivity for a reasonable amount of 

time and state that a reasonable amount of time normally means 5 years. 

Page 39 GAO-07-1198 Intellectual Property
Figure 4: Patent Linkage Process in the United States 

Source: GAO analysis.

Generic company claims

the patent is invalid or will 

not be infringed by the 

generic drug

Generic company applies for marketing 

approval of patented medicine

FDA may

grant marketing

approval effective on the

date of patent

expiration

FDA may grant 

marketing approval 

immediately

Patent holder sues the generic 

company for patent infringement 

within 45 days of receiving notice

Patent holder does not sue 

the generic company 

within 45 days

Patent expires

before 

30-month stay 

is over

30-month 

stay expires

Court determines

patent invalid 

before end of

30 months

Court determines

that a valid patent 

has been infringed

An automatic 30-month stay of 

approval is placed on the 

generic drug

FDA

does not

approve the drug

until patent 

expiration

Generic company 

certifies that the 

patent has

expired

Generic company must 

notify the patent holder of 

application

Generic company 

certifies the patent 

will expire on a

future date

Generic company 

certifies the patent 

information has not 

been filed by originator

1 2 3 4

Generic

Generic

Generic

Generic

Generic

Page 40 GAO-07-1198 Intellectual Property
Specifically, the U.S. patent linkage system puts the onus on the generic 

company producer to provide information on the applicability of an 

existing patent to the drug product for which it is seeking marketing 

approval. If the generic company decides to challenge the patent, it must 

notify the patent holder within a specified period of time in order to give 

the patent holder the chance to sue and defend the patent in the courts. 

When the patent litigation is resolved, the FDA can grant marketing 

approval to the generic company if the patent is overturned, and may be 

obliged to wait until the patent expires if the generic drug product is found 

to infringe the patent and the patent is not found to be invalid. NGOs and 

generic pharmaceutical producers are concerned that developing 

countries do not have the same set of protocols laid out in the FTA 

agreement or in their laws, and that this will ultimately affect access to 

medicines. Generic pharmaceutical representatives argue that countries 

might experience regular abuses and delays in the introduction of generic 

drugs if they are unable to institute an effective linkage process. 

Congressional Concern 

over IP Provisions and 

Access to Medicines 

Addressed in Bipartisan 

Trade Deal 

Certain Members of Congress have expressed concern over the 

pharmaceutical-related IP provisions in FTAs with developing countries, 

and this concern was recently addressed through a bipartisan compromise 

between Congress and the administration. Through letters and 

correspondence with USTR, certain Members emphasized the need to 

better balance IP protection for pharmaceuticals with the promotion of 

access to affordable medicines, including through robust generic 

competition. These Members expressed unease over the balance achieved

in the FTAs negotiated by USTR to date—specifically, the impact of the

pharmaceutical-related IP provisions in FTAs on developing countries. 

These Members urged USTR to ensure that the FTA provisions do not 

restrict the availability of generic competition and put affordable health 

care at risk. In response to these concerns, in May 2007, Members of the 

congressional leadership agreed on a bipartisan compromise with the 

administration to revise four of the recently negotiated FTAs, in order to 

alter provisions pertaining to a variety of areas, including IP provisions 

and access to medicines.

The bipartisan trade deal reached between Congress and the 

administration in May 2007 stipulated that certain disputed IP provisions 

in FTAs with Peru, Colombia, Panama, and Korea be revised prior to 

submission of the agreements for congressional approval, by USTR and 

Page 41 GAO-07-1198 Intellectual Property
the trading partners.30 According to USTR officials, the agreement 

preserves a strong overall level of IP protection in the FTAs, while 

incorporating flexibilities aimed at ensuring that trading partners are able

to achieve the appropriate balance between innovation and promoting 

access to medicines. Specifically, USTR revised the FTAs with Peru, 

Colombia, Panama, and Korea to include a reference to the Doha 

Declaration and the ability of each country to protect public health in the 

body of the agreement, instead of in a side letter. In addition, the data 

exclusivity provision in each of these agreements was revised to provide 

an exception for public health. 

The agreements with Peru, Colombia, and Panama were revised further to 

alter the language of provisions on patent term extensions, patent linkage, 

and data exclusivity. A USTR official stated that USTR and Congress 

decided that these additional changes would not be applied to the Korea 

FTA in view of Korea’s relatively higher level of economic development. 

These additional changes to the Peru, Colombia, and Panama agreements 

revised the provisions on patent term extensions and patent linkage in 

order to provide more flexibility for trading partners in implementing 

these provisions. In addition, the data exclusivity provision was revised 

further to ensure that, in some circumstances, the data exclusivity period

in those countries would not extend beyond the period of data exclusivity 

provided in the United States. These changes were renegotiated and 

finalized by USTR in June 2007. 

 30The bipartisan trade deal also included agreements and amendments on a variety of other 

areas in these FTAs, including labor standards, environmental standards, government

procurement, port security, and investment. 

Page 42 GAO-07-1198 Intellectual Property
USTR’s approach to implementing and overseeing pharmaceutical-related

IP provisions is consistent with its overall negotiating strategy pursued in

FTAs. Before a signed FTA can go into force, the President determines, 

with USTR’s advice, whether the FTA partner has met all obligations, 

including, when appropriate, changes in laws and regulations. As part of 

this process of advising the President on the determination that he is 

required to make under U.S. implementation legislation for FTAs, USTR 

has vigorously pursued FTA partners’ implementation of pharmaceutical 

provisions related to data exclusivity, patent term extension, and patent 

linkage. In fact, in some cases, USTR has continued to work with countries 

after the agreement has entered in force. For example, USTR is still 

working with Chile to ensure that its data exclusivity provisions are 

implemented in a manner consistent with the Chile FTA. 

In its broader role of annually identifying countries that deny adequate and 

effective protection of IP rights, USTR has frequently raised data 

protection and patent linkage, in keeping with its strategy of gaining high 

levels of IP protection for pharmaceutical products, similar to U.S. law. 

With regard to the Doha Declaration flexibilities, USTR has not generally

pressed for restrictions on compulsory licensing and parallel imports in its 

Special 301 reports. Furthermore, USTR has had a measured response to 

cases to date of countries actually issuing compulsory licenses. For 

example, when Thailand recently issued a compulsory license, USTR 

acknowledged its right to do so and thus far is restricting its criticism to a 

lack of transparency in the process. 

USTR Is

Implementing and 

Overseeing Trade 

Agreements in a 

Manner Consistent 

with Its Overall 

Approach of 

Promoting High 

Standards concerning 

IP Rights 

USTR Reviews 

Compliance with FTA 

Obligations before 

Agreements Enter into 

Force 

One USTR official noted that USTR oversees FTA partners’ 

implementation of the pharmaceutical-related IP provisions agreed to in 

the FTA in order to ensure that the negotiated standards are implemented 

as intended. In order for an agreement to enter into force, the President 

determines with the advice of USTR whether the FTA partner has met all 

obligations. A USTR official explained that USTR works with the trading 

partner to ensure that its IP laws are aligned with the provisions agreed to

in the FTA. The USTR official further explained that, at the start of the 

implementation process, the trading partner provides USTR a 

comprehensive list of its laws related to each provision in the IP chapter of

the FTA. The trading partner also provides USTR a list detailing the 

intended legal changes necessary to bring its laws into compliance with 

the agreement. USTR reviews the laws and proposed changes and 

provides the trading partner with comments regarding their degree of 

compliance. USTR monitors the changes in the other country, and has 

numerous exchanges with the trading partner on any legal changes 

Page 43 GAO-07-1198 Intellectual Property
necessary. One USTR official stated that they are careful to ensure that the

agreement is implemented exactly as it was negotiated. For example, in 

response to Guatemala’s proposal to have an exception to data exclusivity 

written into its laws, USTR insisted that this exception undercut the 

original obligations, and it was therefore unwilling to accept the change. 

A USTR official explained that when the legal changes are complete and 

USTR is comfortable with the new legislation, USTR makes a 

recommendation to the President for the agreement to enter into force. 

The administration then makes a determination about the legal 

compliance before the agreement can officially enter into force. USTR and 

other agencies also provide technical assistance on implementing related

IP provisions to FTA partner and nonpartner governments. (See appendix 

II.) 

USTR Vigorously Pursues 

Implementation of Data 

Exclusivity, Patent Term 

Extension, and Patent 

Linkage 

USTR focuses on a wide range of IP provisions including data exclusivity, 

patent term extensions, and patent linkage during the FTA implementation 

phase to ensure that U.S. trading partners are properly implementing and

enforcing pharmaceutical-related IP provisions. In 2005, Chile reformed its 

data protection regime; however, a USTR official stated that USTR has 

continued to monitor Chile’s implementation of data exclusivity in 

response to concerns raised by the pharmaceutical industry. Specifically, 

USTR officials noted that Chile had added a requirement that, in order to

receive data exclusivity, companies must apply for marketing approval

within a year of doing so in other countries. USTR is also monitoring Chile 

on specific issues with regard to the implementation of patent linkage and 

patent term extensions. In particular, USTR is responding to concerns that

the Chilean health authorities issued a number of marketing approvals of 

generic versions of drugs still under patent. Chile appears to have no

provision that would prevent such an approval from being issued during 

the patent term. In addition, USTR noted that Chile has yet to implement a 

law that would enact patent term extensions to compensate for delays in 

marketing approval. 

Page 44 GAO-07-1198 Intellectual Property
USTR officials noted that USTR regards the Special 301 report, which is 

subject to different statutory requirements distinct from TPA,31 as an 

important tool for overseeing and evaluating the implementation and 

adequacy of IP protection worldwide. USTR officials explained that USTR 

considers all items that are related to the effectiveness and adequacy of IP

protection in its Special 301 report. They noted that in the Special 301 

report there are considerations relevant to adequacy and effectiveness that 

sometimes go beyond the minimum standards laid out in TRIPS. In fact,

there are many examples of situations discussed in the Special 301 reports 

that are not specifically part of TRIPS. Thus, the Special 301 report tracks 

progress of WTO member implementation of TRIPS and trading partner 

implementation of FTAs, as well as how adequately countries are 

protecting IP rights overall. While the Special 301 report focuses on a wide 

range of IP protection issues related to copyrights, patents, and 

trademarks, including piracy, counterfeiting, and enforcement, our 

analysis focuses only on the pharmaceutical-related issues discussed in 

this report. Thus, this analysis focuses only on the countries listed on the 

Special 301 report for which pharmaceutical-related issues were 

mentioned as a concern, which represent only a subset of the issues 

discussed and the total number of countries listed in the Special 301 

reports over the years 2000-2007. (See table 1.) 

USTR Has Focused 

Attention on Data 

Protection and Patent 

Linkage in Its Special 301 

Report 

 31See 19 U.S.C. §§ 2242, 2412. Special 301 is a congressionally mandated report that requires

USTR to identify, within 30 days of the submission of the annual National Trade Estimates 

report, foreign countries that (1) deny adequate and effective protection of IP rights or fair 

and equitable market access to U.S. persons that rely on IP protection, and (2), of those 

countries identified in (1), priority countries. Priority countries, as defined by law, are 

countries (1) that have the most onerous or egregious acts, policies, or practices that deny

adequate and effective IP rights with the greatest adverse impact on the relevant U.S. 

goods, and (2) that are not entering into good faith negotiations or making significant 

progress in bilateral or multilateral negotiations to provide adequate and effective IP 

protection. In making these identifications, USTR takes into account the history of IP laws

and practices of the foreign country and the history of efforts of the United States, and the

response of the foreign country, to achieve adequate and effective protection and 

enforcement of IP rights. 

Page 45 GAO-07-1198 Intellectual Property
Table 1: Countries Listed in the Special 301 Report with Mention of Pharmaceuticalrelated Issues Compared to All Countries Listed (2000-2007) 

 2000 2001 2002 2003 2004 2005 2006 2007

Total countries listed with 

mention of pharmaceuticalrelated issues 17 21 21 23 37 32 31 27

Total countries listed for all 

issues 56 50 51 50 51 52 48 43

Source: GAO analysis of Special 301 Reports. 

Consistent with its emphasis in FTAs, our analysis of the Special 301 

reports indicates that USTR focuses heavily on data protection in its 

annual Special 301 reports. For countries listed in the Special 301 reports 

over the period 2000 through 2007 for whom pharmaceuticals was cited as 

an issue of concern, data protection was mentioned in almost every case.

In fact, data protection is the most frequently mentioned of all 

pharmaceutical issues in the Special 301 reports over that 8-year period, 

appearing a total of 173 times. (See figure 5.) 

Page 46 GAO-07-1198 Intellectual Property
Page 47 GAO-07-1198 Intellectual Property 

Figure 5: Number of Pharmaceutical Provision Mentions in Special 301 Reports 

(2000-2007) 

USTR’s focus on patent linkage is also similar to its negotiating strategy in 

FTAs. The second most frequently mentioned pharmaceutical provision in 

Special 301 reports from 2000 through 2007 is patent linkage, which is 

mentioned 56 times. Pharmaceutical counterfeiting is also discussed 

somewhat regularly in the Special 301 reports over this period, but not as 

frequently as data protection or patent linkage. 

There is limited mention of compulsory licensing or parallel imports in the 

Special 301 reports. In the Special 301 reports from 2000 through 2007, 

compulsory licensing regarding pharmaceuticals is only mentioned nine 

times, while parallel importing related to pharmaceuticals is mentioned 

only three times. While the IP objectives in TPA do not control the 

coverage of the Special 301 reports, USTR’s approach to these two 

provisions referenced in the Doha Declaration seems similar. USTR 

officials explained that USTR recognizes that the TRIPS agreement allows 

USTR Has Only 

Infrequently Mentioned 

Compulsory Licensing or 

Parallel Imports in Special 

301 Reports 

0

10

20

30

40

50

60

70

 

Other pharmaceutical issue

Parallel imports

Compulsory licensing 

Pharmaceutical counterfeiting 

Patent linkage

Data protection

2000 2001 2002 2003 2004 2005 2006 2007

Source: GAO analysis of Special 301 reports.

Number
countries some flexibility regarding the use of compulsory licenses and 

parallel imports when protecting public health. By not mentioning these 

provisions frequently in the Special 301 report, USTR acknowledges the 

existence of these flexibilities, as highlighted in the Doha Declaration. 

However, USTR officials also noted that the infrequency with which these 

provisions are mentioned is due to the fact that the trading partners rarely 

make use of these flexibilities. 

USTR Has Acknowledged 

Thailand’s Right to Issue a 

Compulsory License, but 

Criticized Its Lack of 

Transparency 

Thailand recently issued a compulsory license on a pharmaceutical 

product, citing a public health need. In November 2006, Thailand issued a 

compulsory license on a drug for treating HIV/AIDS, followed by two more 

compulsory licenses issued in early 2007 for another HIV/AIDS drug and a

heart disease medication. These compulsory licenses are government-use 

licenses issued under Thai law. The government of Thailand announced 

that these decisions were aimed at improving access to essential 

medicines and public health in Thailand. In addition, Brazil issued a 

compulsory license for one of the same HIV/AIDS drugs in May 2007. 

Public reaction to Thailand’s and Brazil’s actions has been mixed, with 

some defending their right to issue a compulsory license and others 

criticizing their actions as irresponsible. For instance, the pharmaceutical 

industry believes that the compulsory licenses were unnecessary and will 

ultimately negatively affect drug innovation, and is concerned the licenses 

will set a precedent for similar actions. However, many NGOs stated that 

they support countries like Thailand and Brazil using their right to issue 

compulsory licenses in order to improve access to medicines in their 

countries. 

USTR’s response to Thailand’s and Brazil’s issuance of compulsory 

licenses has been more measured. USTR officials told us that in all 

speeches, letters, and private conversations, USTR tried to recognize and

convey that Thailand has the ability to issue compulsory licenses. 

However, they noted that, when issuing a compulsory license, it is 

important that the issuer engage with all of the affected stakeholders, 

including patient groups and patent holders, about the best way to meet 

public health needs. In both the Brazil and Thailand cases, USTR has tried 

to focus on the procedures and processes followed by the governments, 

rather than on the validity of the licenses. USTR officials noted that, in

general, they are reluctant to insert themselves into price negotiations 

between governments and the pharmaceutical industry, but that they will

advocate for transparency. 

Page 48 GAO-07-1198 Intellectual Property
Although USTR mentioned both the Thai and possible Brazil cases of 

compulsory licensing in the 2007 Special 301 report, the report limited its 

criticism to issues of good governance. USTR officials noted that, at the 

time the report was issued, all three compulsory licenses had already been

issued by Thailand, and that they believed the Brazilian compulsory 

license was imminent. For example, in the Thai case, USTR was careful in

its report to recognize a country’s ability to issue compulsory licenses 

subject to WTO rules and the country’s domestic laws. However, it 

expressed concern about what it considered to be the lack of transparency

exhibited in Thailand, and emphasized the need for such transparency in 

discussions with all relevant stakeholders in Brazil. 

USTR officials stated that the decision to elevate Thailand from the watch 

list in its 2006 Special 301 report to the priority watch list in 2007 was 

based on broad IP concerns, not solely on its compulsory license decision. 

They explained that there were many major IP concerns in Thailand and 

many complaints that fueled their decision. In addition, they noted that, 

while Thailand was raised to the priority watch list, Brazil, which was also 

about to issue a compulsory license at the time, was lowered from the 

priority watch list to the watch list. They said that Brazil’s standing 

improved due to impressive work in other areas of IP enforcement, and 

that the imminent compulsory license did not alter USTR’s decision to 

improve Brazil’s standing. Nevertheless, in its 2007 Special 301 report, 

USTR noted that it will conduct an out-of-cycle review to evaluate Brazil’s 

progress in other areas and encourage additional progress in areas of 

outstanding concern. 

Since TPA, public health input into U.S. trade negotiations has been 

limited. In negotiating trade agreements under TPA, the President must 

seek advice and information from executive departments and the public 

and private sectors.32 Although U.S. agencies generally support USTR’s 

negotiations approach, interagency input on U.S. trade negotiations has 

not addressed the public health implications of IP pharmaceutical 

provisions negotiated under TPA and has been primarily technical in 

nature. For instance, HHS, the lead U.S. agency on global public health and 

social welfare issues, endorses USTR’s negotiating approach that strong IP

protection promotes public health and access to medicines. However, HHS 

advice during trade negotiations has generally concentrated on technical 

Public Health Input 

on IP Rights Has Been 

Limited in U.S. Trade 

Negotiations 

 3219 U.S.C. §§ 2152, 2155. 

Page 49 GAO-07-1198 Intellectual Property
advice from one of its subagencies, the Food and Drug Administration 

(FDA), to ensure that FTA provisions related to pharmaceuticals do not 

violate U.S. law and are consistent with U.S. health regulations. HHS has 

not addressed policy questions related to whether FTA provisions might 

affect public health in FTA partner countries. Within the formal private 

sector advisory system, two public health representatives were recently 

added to two private sector Industry Trade Advisory Committees (ITACs) 

after USTR had concluded nine trade agreements. These two committees 

are respectively composed of 20 and 33 private sector representatives 

from the pharmaceutical and other industry sectors. USTR has obtained 

some public health perspectives from stakeholders through other formal 

and informal means, including public hearings, Federal Register

comments, and written correspondence. 

The Departments of Health 

and Human Services and 

State Endorse the View 

that IP Protection 

Supports Access to 

Medicine 

HHS officials told us they support the USTR position concerning the Doha 

Declaration and agree with USTR’s view that strong IP protection 

promotes innovation and access to medicines. The agency supports the 

administration’s vision for both global health and overall U.S. foreign 

policy, and HHS’s Office of Global Health Affairs (OGHA) is the U.S. focal 

point for policy coordination across multilateral health and science 

organizations. According to OGHA officials, the FDA’s generic drug 

preapproval process is a key example of HHS efforts to balance high IP 

standards and access to medicines. Officials stated that the FDA generic 

drug preapproval process exhibits HHS support for creating a market for 

high quality generics that meet international standards. The agency has 

also supported USTR’s interpretation of TRIPS flexibilities in multilateral 

discussions about IP and public health, such as those held at WHO. 

According to officials, HHS’s OGHA coordinates U.S. policy inputs and 

interests as they pertain to IP rights and public health in WHO, ensures 

that the U.S. policy position at WHO meetings reflects administration 

priorities, and works with USTR and other U.S. agencies to advance U.S. 

IP and public health interests internationally. Most recently, HHS hosted 

the newly formed WHO Commission on Intellectual Property Rights, 

Innovation, and Public Health, and has been the lead federal agency in 

coordinating the U.S. response across agencies, including USTR, to a 2006 

WHO report on IP rights and public health. 

State Department officials also support the USTR’s view that IP protection

is important for promoting access to medicines. However, State 

Department officials said they principally demonstrate the U.S. strategy to 

balance IP rights and public health through various programs and 

initiatives. For example, State’s Office of the Global AIDS Coordinator 

Page 50 GAO-07-1198 Intellectual Property
(OGAC) works with several other agencies, including HHS, to implement 

the President’s Emergency Plan for AIDS Relief (PEPFAR), which has 

programs in over 120 countries and a special focus on 15 countries that are

primarily located in sub-Saharan Africa. OGAC and USAID also worked 

with the FDA to develop the generic drug preapproval process to support 

the purchase of low priced, high quality drugs for the PEPFAR program. 

This effort resulted in the preapproval of over 50 generic antiretrovirals 

(ARV) to date and almost $2 million in savings on generic drug purchases 

in 2006. In addition, USAID developed a centrally managed contract, the 

Partnership for Supply Chain Management, in order to work with generic 

companies to address drug supply chain challenges and increase research

and development for a steady supply of ARVs in developing countries. 

Interagency IP Rights and 

Public Health Perspective 

Is Limited to Technical 

Advice 

USTR has obtained some input on IP rights and public health in trade 

negotiations through the formal interagency trade policy process, but 

public health perspectives on USTR’s negotiating approach to

pharmaceutical issues in FTA negotiations are primarily technical in 

nature and have not included an examination of the public health impacts 

of FTA provisions.33 USTR coordinated with HHS when it first began to 

formulate its basic policy goals for negotiating FTAs, and HHS has had the

opportunity to review draft FTA texts through the interagency advisory 

system. However, HHS has had limited involvement in the actual trade 

negotiations.

34 According to USTR, most public health issues are worked 

out in advance of the negotiations. HHS and USTR occasionally convene 

an interagency working group to discuss IP rights and public health issues 

that arise at WHO or in other multilateral fora. 

 33HHS, USAID, Commerce, and State, among others, participate in varied levels of the 

interagency advisory process through the Trade Policy Review Group (TPRG) and the 

Trade Policy Staff Committee (TPSC), in which agency officials may review the texts of

FTAs and make comments. TPSC and TPRG are administered and chaired by USTR, and

the groups are composed of 19 executive agencies and offices. The TPSC is the primary

operating group, with representation at the senior civil service level, and if policy 

agreement is not reached in the TPSC, or if significant policy questions are being 

considered, issues are taken up by the TPRG, with representation at the Deputy 

USTR/Under Secretary level. 

34During the TRIPS and public health debates at the WTO, USTR officials consulted with 

HHS officials, as well as with State and PTO officials, and HHS’s Office of Global Health 

Affairs (OGHA) was very involved in developing the U.S. proposals for the paragraph six 

solution. 

Page 51 GAO-07-1198 Intellectual Property
Although USTR routinely briefs HHS after each round of FTA negotiations, 

OGHA officials stated that the health agency’s role in trade, IP rights, and 

the negotiation of pharmaceutical-related IP provisions in FTAs has 

primarily involved providing technical expertise through its subagencies 

when requested by USTR. For example, FDA officials stated that their 

overall mission is generally not related to trade, but instead focuses on 

regulatory matters as they affect public health. The agency offers technical 

advice to USTR during negotiations to ensure that FTA provisions related 

to pharmaceuticals do not violate U.S. law and are consistent with U.S. 

health regulations. For instance, the FDA has provided a perspective on 

regulatory issues in FTAs to ensure that provisions do not have 

implications for U.S. regulatory programs. HHS officials also stated that 

they have no role in assisting countries in pursuing objectives of the Doha 

Declaration. Although they have good working relationships with the 

health ministries of many countries, conversations generally focus on 

technical advice with regard to regulatory issues. For example, 

subagencies such as the FDA may provide regulatory advice and guidance

to FTA partners, during negotiations or FTA implementation, on the 

regulatory responsibilities associated with various IP provisions, the 

manner in which provisions function in the United States, and how U.S. 

regulatory systems operate. 

OGHA officials told us they are satisfied with HHS’s role and input in the 

interagency advisory process and the public health considerations 

provided in U.S. trade negotiations and policy, and the office does not 

believe IP provisions in FTAs restrict access to medicines. However, there

is little evidence that USTR consulted with HHS or OGHA regarding FTA

partner countries’ concerns about the potential impact on public health of 

specific pharmaceutical provisions in FTAs since the Doha Declaration 

and the Trade Promotion Authority Act of 2002 were agreed upon, 

although the HHS OGHA’s mission includes promoting the health of the 

world’s population. OGHA officials noted that USTR has never approached 

them to discuss such country concerns about public health. According to

USTR officials, USTR does not generally talk to HHS about countries’ 

concerns about the public health impact of FTA provisions, but instead 

relies on the countries themselves to raise concerns, since developing 

countries know their own public health systems and needs better than any 

U.S. agency would. Similarly, HHS has not been asked by USTR to conduct 

analyses of the impacts of FTA provisions on regulatory institutions in 

partner countries, and HHS has not provided such an assessment. There is 

also little evidence that the agencies have determined whether the FTAs 

affect public health, either positively or negatively, and HHS officials 

stated they do not have the technical capacity to do so. 

Page 52 GAO-07-1198 Intellectual Property
Similarly, the PTO Office of International Affairs is involved in the FTA 

negotiations process as a technical advisor under its statutory authority 

regarding IP issues. The office advises USTR on WTO issues and FTAs, 

meets with USTR to discuss strategy before each round of FTA 

negotiations, and participates in the negotiations. For example, USTR may 

ask PTO’s opinion about the use of a particular technical term. PTO also 

provides technical advice and training to FTA partner countries on 

pharmaceutical IP provisions during FTA negotiations, and provides 

clarification on the interpretation of negotiated provisions. For instance, in 

the CAFTA-DR negotiations, partner countries asked PTO to explain data 

exclusivity in further detail and how the provision functions in the United

States. According to officials, PTO never states that the U.S. method of 

implementing a particular provision is the only way to implement or fulfill 

a particular FTA obligation, but instead simply provides U.S. examples. 

The State Department is also involved in interagency coordination on 

trade and public health through the interagency advisory system as well as 

during FTA negotiations, but agency officials stated that trade and IP 

efforts are only one small part of the larger U.S. government effort to 

increase access to medicines. USTR consults with State through the 

formal interagency advisory review process, and State officials are 

included in all discussions of IP chapters in the FTAs. However, the 

agency primarily makes an effort to balance IP rights and access to 

medicines through public health initiatives it coordinates with other 

agencies or administers itself, such as PEPFAR. USAID has extensive 

global health programs and had some involvement in policy discussions at 

the time of the Doha Declaration. The development agency has had little 

or no involvement in such discussions since, however. 

Public Health 

Representatives Were 

Recently Added to the 

Industry Trade Advisory 

Committees 

In January 2007, public health representatives were added to the two 

technical ITACs most relevant to pharmaceuticals and IP rights—the 

chemicals committee (ITAC-3) and the IP committee (ITAC-15)—where 

multiple brand-name pharmaceutical companies serve. However, by the 

time that USTR and the Department of Commerce had appointed one 

public health representative to each of these two committees, USTR had 

concluded nine FTAs. 

According to Commerce officials, the appointments were prompted by an 

April 2005 request by an NGO for public health perspectives in several of 

Page 53 GAO-07-1198 Intellectual Property
the industry trade advisory committees. Within 3 months, Commerce and 

USTR agreed to consider adding public health representatives to the 

industry advisory system, but the appointments were delayed until 2007.35

Although USTR and Commerce indicated at least one public health 

representative would be appointed to both the IP committee and the 

chemicals committee in December 2005, a coalition of NGOs filed a 

lawsuit against USTR during the same month for public health

representation on six other ITACs in the trade advisory committee system 

as initially requested in 2005.

36 The lawsuit is pending an appeal, after an 

initial ruling dismissing the case on the grounds that the court could not 

find any meaningful standards in the Trade Act of 1974 under which it 

could judge the balance of the membership of the trade advisory 

committees.37 Due to the ongoing litigation relating to the composition of 

the trade advisory system, we do not make any judgments about the 

appropriateness of a particular committee’s composition. 

USTR maintains that representatives in other trade advisory committees 

provided public health input on FTAs. For instance, USTR noted that 

Trade and Environment Policy Advisory Committee (TEPAC) members 

had access to the secure private sector advisory Website, and that some 

groups in that committee had expressed concern about provisions in 

several FTAs. Specifically, some environmental and consumer group 

NGOs on the committee have submitted concerns to USTR in committee 

reports on the FTAs about the impacts certain FTA provisions have on

public health and access to medicines. In an alternative opinion attached 

to several committee reports, the minority group of TEPAC 

representatives maintained that U.S. FTAs are inconsistent with the Doha 

Declaration on TRIPS and Public Health and that FTA provisions on data 

 35Department of Commerce officials cited the Doha negotiations, the rechartering of the

industry trade advisory committees, and the time required to send out notices of position 

openings, vet applicants, and obtain security clearances. 

36Ctr. for Policy Analysis on Trade and Health (CPATH) v. Office of the United States 

Trade Representative, No. 05-05177 MJJ (N.D.Cal. June 30, 2006), appeal docket, No. 06-

16682 (9th Cir. Sept. 14, 2006). The industry advisory committees cited in the lawsuit are 

ITAC-4 (Consumer Goods), ITAC-5 (Distribution Services), ITAC-8 (Information and 

Communications Technologies, Services and Electronic Commerce), ITAC-10 (Services 

and Finance Industries), ITAC-14 (Customs Matters and Trade Facilitation) and ITAC-16 

(Standards and Technical Trade Barriers). 

37Pursuant to Federal Advisory Committee Act, an advisory committee’s membership must 

be “fairly balanced in terms of the points of view represented and the functions to be

performed by the advisory committee.” 5 U.S.C. App. 2 § 5. 

Page 54 GAO-07-1198 Intellectual Property
exclusivity and patent linkage, as well as limitations on the use of 

compulsory licensing, reduce access to medicines. They recommended 

that Congress not approve some FTAs and requested Congress to take 

their public health concerns into account when considering other FTAs. 

There is little evidence that USTR discussed the concerns submitted about 

the public health impact of FTAs with U.S. health agencies or other 

members of the public health community. A member of the TEPAC 

committee also noted that although the environmental advisory committee 

reports provided to USTR include the committee members’ 

recommendations or concerns about public health in FTAs, there is little 

dialogue between USTR and committee members on these issues. In the 

member’s opinion, this is because the advisory consultations are not 

integrated into the FTA negotiations process, which limits the ability of 

members to advise USTR on the issues that arise during negotiations, 

including public health concerns, as opposed to after a draft has been 

developed. However, USTR notes that the concerns have been raised and 

discussed by the USTR personally during TEPAC meetings. 

The Committees on Which 

Public Health 

Representatives 

Participate Are Composed 

of a Majority of Other 

Private Sector Industry 

Stakeholders 

The two individuals that were appointed as public health representatives 

on the ITACs individually serve on committees that are respectively 

composed of a total of 20 and 33 private sector representatives from the 

pharmaceutical and other industry sectors. (See figure 6.) Commerce 

officials explained that, in selecting among the 10 applicants who 

responded to the Federal Register notice, they considered candidates’ 

backgrounds to determine if the candidates understood both relevant IP 

issues and which public health concerns would be relevant to the 

intersection of public health, international trade, and IP rights or 

pharmaceuticals, respectively, as relevant to the work of the committees. 

According to these officials, the selection committee also tried to ensure 

that the representatives would make meaningful contributions to the 

committees and have the weight necessary to challenge the committees 

when necessary. Commerce officials did not believe it was necessary to 

have two public health representatives on one committee representing the 

same view, and they said that they did not find any other viable candidates 

with additional perspectives beyond the individuals selected. However, 

Commerce officials stated that the Federal Register notice announcing the 

positions on the ITACs remains open. If additional qualified public health 

candidates applied would contribute another perspective to either of these 

two committees applied, they said the agency would consider adding 

additional public health representation. 

Page 55 GAO-07-1198 Intellectual Property
Figure 6: Public Health Representation on Industry Trade Advisory Committees 

Source: GAO analysis of USTR documents.

Committees with public

health representatives (2)

Industry Trade Advisory Committees

13%

87%

5%

Public health (1)

Brand pharmacutical (5)

Intellectual Property Committee

Other industry (14)

3%

Public health (1)

3%

Generic pharmaceutical (1)

Brand pharmacutical (10)

Other industry (21)

25%

70%

64%

30%

Chemicals Committee

Other committees (14)

USTR Has Received Public 

Health Input through Other 

Formal and Informal 

Means 

Our review showed that, although USTR has received limited input on 

public health through formal advisory system communications channels, it 

has received public health input through other formal and informal 

processes, including input from the pharmaceutical industry and the 

public health community. Pharmaceutical Research and Manufacturers of 

America (PhRMA), the pharmaceutical industry trade group, has 

submitted annual reports to USTR on industry concerns about IP rights 

globally for the agency to consider in developing its Special 301 report. 

Both pharmaceutical industry representatives and public health 

community members have also provided input on IP rights and public 

Page 56 GAO-07-1198 Intellectual Property
health concerns for several FTAs that have been concluded through 

USTR’s formal public hearings and the Federal Register comments. In 

addition, USTR has received and responded to congressional 

correspondence regarding members’ public health concerns about the 

impact of FTAs. According to USTR officials, while there are some minor 

modifications to FTA texts during each negotiation, the public health 

community is aware of the provisions the United States proposes to be 

included in each agreement, given past FTAs implemented, and may also 

provide public health input through more informal mechanisms. For 

example, USTR has received and responded to some informal input on 

public health in trade negotiations through correspondence with NGOs. 

Moreover, USTR officials noted that they have an open door policy and

will meet with anyone who requests a meeting, including NGOs, public 

health representatives, and generic industry representatives. Both USTR 

and private sector representatives, including NGOs, have confirmed that 

private sector representatives have provided informal input to USTR on 

public health concerns, in particular FTAs, through phone calls or 

requested meetings. However, input USTR receives through such channels 

may lack the weight of formal private sector input on public health issues 

in trade agreements, such as trade advisory committee reports on 

proposed trade agreements that are transmitted to the administration and 

Congress. 

USTR has followed a consistent approach in negotiating, implementing, 

and monitoring its trade agreements under TPA—namely, by protecting 

the minimum standards of IP rights provided in TRIPS and promoting high 

IP standards similar to U.S. law. Other than making concessions on 

compulsory licensing and parallel importation provisions, and on side 

letters that state that the IP chapter does not affect a country’s ability to 

take necessary public health measures, USTR has not changed its 

uniformly high demands with regard to IP protection in its FTAs. The 

degree to which USTR’s policy has achieved the right balance of IP 

protection and attention to public health, and more specifically whether it

has respected the Doha Declaration as called for under TPA, depends in 

part on the stakeholder asking the question. This reflects a fundamental 

tension between protecting IP rights in order to allow companies to 

recoup investment and encourage innovation for the long term, and 

allowing competitors to sell lower cost drugs for short term public health

needs. As Congress contemplates renewal of TPA, there are ongoing 

questions about the overall balance of IP rights and public health. 

Conclusions 

Page 57 GAO-07-1198 Intellectual Property
If Congress disagrees with USTR’s interpretation and implementation of 

TPA guidance with regard to IP rights and public health, it should specify

more clearly its intentions for U.S. trade policy and public health policy 

input related to balancing public health concerns and the negotiation of IP 

rights in trade agreements. 

We provided the U.S. Trade Representative; the Secretaries of the 

Departments of Commerce, Health and Human Services, and State; the

Administrator of the U.S. Agency for International Development; and the

Under Secretary of Commerce for Intellectual Property and Director of the 

United States Patent and Trademark Office with a draft of this report. The 

U.S. Trade Representative; the Secretaries of the Departments of 

Commerce, Health and Human Services, and State; and the Administrator 

of the U.S. Agency for International Development chose to provide 

technical comments. We modified the report where appropriate. 

Matter for 

Congressional 

Consideration 

Agency Comments 

and Our Evaluation 

As agreed with your offices, unless you publicly announce the contents of

this report earlier, we plan no further distribution of it until 30 days from 

the date of this letter. At that time, we will send copies of this report to 

the U.S. Trade Representative; the Secretaries of the Departments of 

Commerce, Health and Human Services, and State; the Administrator of 

the U.S. Agency for International Development; and the Under Secretary of 

Commerce for Intellectual Property and Director of the United States 

Patent and Trademark Office. We also will make copies available to 

others upon request. In addition, the report will be available at no charge 

on the GAO Web site at http://www.gao.gov. 

If you or your staff has any questions concerning this report, please 

contact me at (202) 512-4128 or at yagerl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. GAO staff members who made major contributions 

to this report are listed in appendix IV. 

Sincerely yours, 

Loren Yager

Director, International Affairs and Trade 

Page 58 GAO-07-1198 Intellectual Property
Appendix I: Scope and Methodology Appendix I: Scope and Methodology 

To evaluate how the U.S. has interpreted the intent and meaning of the 

Doha Declaration, we performed document reviews on agency

documentation and correspondence as well as WTO documents, and 

conducted interviews. We also reviewed academic studies, pharmaceutical 

industry reports, position papers, and media reports. Specifically, we 

examined relevant WTO legal documents, including the declaration on 

TRIPS and Public Health; the 2003 General Council Chairperson’s 

statement; the August 30, 2003, General Council Decision on the 

Implementation of Paragraph 6 of the Doha Declaration on TRIPS and 

Public Health; the December 6, 2005, General Council Decision on the 

Amendment of TRIPS; and relevant articles of the TRIPS agreement. We 

reviewed WTO TRIPS Council minutes and other official documents, 

reviewed USTR official documents, interviewed USTR officials in 

Washington and Geneva, and interviewed WTO officials and WTO country 

representatives in Geneva. 

To investigate how the United States negotiates and oversees

implementation of IP provisions related to pharmaceuticals in its trade 

agreements, we interviewed USTR officials, reviewed agency documents, 

and examined the text of the FTAs negotiated since the Trade Act of 2002. 

We spoke to USTR officials about their views on the three IP negotiating 

objectives in TPA and their overall approach for pursuing these objectives. 

Specifically, we learned about the pharmaceutical provisions pursued by 

USTR in the IP chapter of its FTAs, and how the pursuit of these 

provisions relates to their negotiating approach. We also reviewed agency

documentation of negotiating policy, draft texts of FTAs, and other types 

of documentation in order to further examine the IP negotiating policy 

pursued by USTR. In order to analyze the patterns and results of USTR’s 

stated approach, we reviewed the text of each of the 11 FTAs negotiated 

under TPA. We evaluated the pharmaceutical-related IP provisions in each 

agreement and catalogued which related provisions were present in the 

final text of each agreement. Using this information, we were able to 

identify patterns and thereby confirm USTR’s stated policy regarding the

pursuit of these provisions. We did not assess the reliability of the per 

capita income data contained in figure 2 because we are providing them as 

background information only. 

In addition, we interviewed officials from Department of State, 

Department of Health and Human Services (HHS), Department of 

Commerce, the Patent and Trademark Office (PTO), and the U.S. Agency

for International Development (USAID) in order to obtain their 

perspectives on the pharmaceutical provisions pursued in the FTAs. We 

performed literature reviews of articles and studies documenting the 

Page 59 GAO-07-1198 Intellectual Property
Appendix I: Scope and Methodology 

multiple opinions regarding these provisions pursued by USTR. From this 

literature review and from agency meetings, we identified numerous 

stakeholders and experts to speak with, including pharmaceutical industry 

representatives, public health groups, NGOs, academics, and IP experts. 

These groups include Pharmaceutical Research and Manufacturers of 

America (PhRMA), Generic Pharmaceutical Association, (GPhA), The 

International Federation of Pharmaceutical Manufacturers & Associations 

(IFPMA), Oxfam, Doctors without Borders (MSF), Essential Information, 

Consumer Project on Technology,1

 Health Global Access Project (GAP), 

Health Action International, Center for Policy Analysis on Trade and 

Health (CPATH), Access to Drugs Initiative (ADI), Third World Network, 

Center for International Environmental Law (CIEL), International Center 

for Trade and Sustainable Development (ICTSD), Drugs for Neglected 

Diseases Initiative (DNDI), as well as three academics, two intellectual 

property lawyers, and three public health experts specializing in this area. 

We interviewed these stakeholders and experts in order to gather a 

complete perspective on USTR’s negotiating strategy and the 

pharmaceutical-related IP provisions present in the FTAs. We also traveled

to Geneva, Switzerland, to meet with officials from the U.S. Mission in 

Geneva; World Trade Organization (WTO); World Health Organization 

(WHO); World Intellectual Property Organization; The Joint United 

Nations Program on HIV/AIDS; United Nations Development Program; the 

Global Fund to Fight AIDS, Tuberculosis and Malaria, as well as NGOs 

from the pharmaceutical sector and public health community. 

In order to examine how USTR implements and oversees its trade 

agreements, we interviewed USTR officials, reviewed agency

documentation, and analyzed USTR’s annual Special 301 reports. We 

spoke to USTR officials and reviewed agency documentation about their 

approach to implementing and overseeing its trade agreements. In 

addition, we examined trends and patterns of citations found in USTR’s 

annual Special 301 reports in order to analyze how USTR oversees its 

trade agreements with respect to IP provisions related to pharmaceuticals. 

We reviewed each Special 301 report from 2000 to 2007 in order to identify 

every mention of a pharmaceutical-related issue for all countries listed on 

 1

Name recently changed to Knowledge Ecology International. 

Page 60 GAO-07-1198 Intellectual Property
Appendix I: Scope and Methodology 

the priority watch list,2 the watch list,3 and the Section 306 list4. For each 

country listed in the report in every given year, we noted whether the 

report mentioned anything related to a pharmaceutical issue or concern. 

We reviewed the reports using decision rules we developed to identify the 

most frequently discussed pharmaceutical issues in Special 301 reports 

over this period. To enhance the accuracy and soundness of our review, 

two GAO staff members conducted independent reviews of the reports. 

These staff members had a high degree of concurrence in the

pharmaceutical issues they identified and were able to reconcile the 

instances where they differed initially. We also interviewed USTR officials 

about some of the factors considered during the Special 301 process in 

order to determine limitations to our analysis. Limitations to our analysis 

include the inherent selection bias in the USTR reports, since the Special 

301 report does not capture each IP concern in every country. Also, there 

are numerous factors governing a country’s inclusion, but USTR generally 

focuses on countries with relatively higher levels of development. The 

analysis is also limited to only pharmaceutical-related issues raised in the 

Special 301 report over this period and does not capture the weight of 

each concern. In addition, pharmaceutical counterfeiting may be 

undercounted in this analysis due to the fact that it may be subsumed into 

more general references to trademark counterfeiting and inadequate 

enforcement. We also obtained and compared the input provided to USTR 

by U.S. embassies and the pharmaceutical industry. Additionally, we spoke 

to USTR officials about the factors taken into account for the 2007 Special

301 report, specifically regarding the decision of Thailand and Brazil to 

issue compulsory licenses on pharmaceutical products. 

 2

Countries that have the most onerous or egregious acts, policies, or practices and whose 

acts, policies, or practices have the greatest adverse impact (actual or potential) on the 

relevant U.S. products must be designated as “Priority Foreign Countries.” Countries 

placed on the Priority Watch List are the focus of increased bilateral attention concerning 

the problem areas. 

3

Placement of a trading partner on the Priority Watch List or Watch List indicates that 

particular problems exist in that country with respect to IP rights protection, enforcement,

or market access for persons relying on intellectual property (IP). 

4

Any country that was previously designated a Priority Foreign Country but entered into

good-faith negotiations and/or is making progress is placed under Section 306 monitoring.

Under Section 306, USTR monitors a country’s compliance with bilateral IP agreements 

that are the basis for resolving an investigation under Section 301. 

Page 61 GAO-07-1198 Intellectual Property
Appendix I: Scope and Methodology 

To investigate how USTR assists other countries in implementing FTAs 

and TRIPS obligations, we interviewed agencies involved in providing 

technical assistance to FTA partner and nonpartner countries, including 

USTR, HHS, PTO, and USAID. We spoke with agency officials about the 

type of technical assistance they provide on the FTAs, Doha Declaration 

flexibilities, and public health and about the audience receiving the 

assistance. We also reviewed technical assistance and training-related 

documents and correspondence to corroborate the testimonial evidence.

In order to evaluate the extent of formal and informal IP and public health

input into USTR’s trade agreement negotiations, we examined the formal 

interagency advisory process, the formal industry advisory committee 

process, and several informal means for providing input to USTR. To 

examine the level of interagency consultation on trade, IP, and public 

health issues between USTR and the Department of State, HHS, 

Department of Commerce, PTO, and USAID, we reviewed documentation 

of interagency discussions related to the TRIPS Doha Declaration and 

FTAs. Limited documentation was available. We also interviewed USTR, 

Commerce, HHS, State, PTO, and USAID officials about their roles in the 

interagency advisory process and the public health input they provided or 

received during WTO discussions on the TRIPS and Public Health 

Declaration and during FTA negotiations. 

To evaluate the type and extent of public health input USTR received 

through the industry trade advisory process, we reviewed industry 

advisory committee reports for the IP and chemicals committees, as well 

as the trade and environment committee. We also evaluated the 

membership of the IP and chemicals industry advisory committees to 

determine the composition of industries and interests represented. 

However, we did not make any judgments about the appropriateness of 

any particular committee’s composition. In addition, to better understand 

the selection and appointment process for the public health 

representatives on the IP and chemicals industry advisory committees, we 

interviewed USTR, Commerce, and HHS officials and reviewed 

documentation related to the representatives’ appointments. We also 

spoke with the primary NGO involved in the initial request for public 

health representation on the industry advisory committees, as well as 

several other NGO and academic members of the public health

community, about their views on the public health representative 

appointments. Moreover, we interviewed selected members of the trade 

and environment committee, to obtain perspectives on the advisory 

process and public health input provided to USTR through it. 

Furthermore, we reviewed records of USTR’s public hearings on FTAs, 

Page 62 GAO-07-1198 Intellectual Property
Appendix I: Scope and Methodology 

Federal Register notice comments, and congressional and private sector 

correspondence with USTR on the FTAs and the issues of IP rights and 

public health. We also spoke with several NGOs about public health input

they provided to USTR through meetings and phone calls. 

Page 63 GAO-07-1198 Intellectual Property
Appendix II: Technical Assistance on IP

Appendix II: Technical Assistance on IP Rights and Public Health 

Rights and Public Health 

Technical assistance on IP rights and public health to FTA partner and 

nonpartner governments has been limited and provided mostly upon host

country request. According to USTR officials, U.S. negotiators review each

FTA provision in the text with the signatories, at which time they may also

ask for technical assistance. Also, FTA partner countries always have the 

option of requesting trade-capacity building assistance from the United 

States at the conclusion of negotiations. However, USTR has never had a 

request for TCB on the Doha Declaration, and only on IP matters related to 

enforcement. USTR does not initiate technical assistance on FTA 

provisions and the use of TRIPS flexibilities, but responds to country 

requests, which it forwards to the appropriate agency. U.S. agencies tend

to provide technical advice to FTA partner governments on regulatory 

issues, rather than public health issues. For example, the FDA has 

provided technical assistance to partner countries in developing 

implementing regulatory measures. Similarly, technical assistance 

activities conducted by USAID and PTO include conferences, workshops, 

capacity-building cooperation agreements, and patent program certificate 

programs on topics such as international IP standards in TRIPS, drafting 

trade reform legislation, and enforcement of IP rights. Specific IP issues 

discussed include data exclusivity, patent extensions, and implications of

FTA IP rights commitments. 

According to USAID officials, USAID can provide technical assistance if 

the host country has requested assistance in a particular area. Although 

FTAs have helped promote training in the area of intellectual property and 

public health, the agency has not done much work on those topics. USAID 

officials said that most training occurs during FTA negotiations, but FTA 

partner countries often receive the training from WTO or another third 

party in order to gain a more objective training or perspective than they

believe they would receive from the United States. Similarly, according to

PTO officials, most requested PTO training is with respect to FTA 

agreements and primarily focuses on the implementation and enforcement 

of FTA provisions, and the audience is generally patent examiners 

conducting enforcement activities. The PTO Global IP Academy, 

established in 2005, is another example of PTO’s technical assistance on IP

matters to other countries, whereby PTO trains foreign officials on IP 

enforcement. The agency also advises countries on drafting implementing 

legislation and the development of compliance regulations. 

Agencies also provide general technical assistance to countries on TRIPS 

obligations. For example, Commerce’s Commercial Law Development 

Program, which receives some funding from USAID, has provided training

to Pakistan on TRIPS and the role of U.S. agencies in domestic patent and

Page 64 GAO-07-1198 Intellectual Property
Appendix II: Technical Assistance on IP

Rights and Public Health 

data protection. However, according to USTR, most requests related to 

TRIPS IP issues fall in nonpharmaceutical IP areas, such as trademark 

registration, enhancing patent processing, or enforcement capacity. PTO 

officials stated that they offered a course on biotechnology that covered 

all aspects of patent, copyright, and trademark WTO provisions. The State 

Department has also provides a standard training on IP rights to U.S. 

Foreign Service Officers through the Foreign Service Institute (FSI), which 

includes basic information on patents, data protection, and other U.S. and

TRIPS IP provisions. The training also provides an overview of the Doha 

Declaration and TRIPS flexibilities, including the use of compulsory 

licenses, as well as a summary of the U.S. government’s objectives for 

access to medicines. 

While there has been no proactive agency effort to assist countries in using 

the Doha Declaration TRIPS flexibilities, agencies have developed and 

provided some information upon request. USAID has worked closely with 

USTR to develop such U.S.-sponsored training that is TRIPS compliant and 

has recently added discussion about the Doha Declaration and the 

implementation of compulsory licensing into training on the use of TRIPS 

flexibilities. For instance, USAID funded a presentation in Lebanon on 

TRIPS implementation in response to requests for assistance with its WTO 

accession. In addition, USAID technical assistance projects were 

implemented in Egypt related to IP rights and public health, including a 

conference on IP and pharmaceuticals that covered TRIPS, the Doha 

Declaration, compulsory licensing, and data exclusivity, under the 

auspices of the prime minister and minister of health. Similarly, USAID 

presented in Uganda a workshop on Developments at Doha, including 

TRIPS and public health, as part of assistance taking place in December 

2001 and January - February 2002. USTR stated that Honduras also 

conferred with the United States about how to use the paragraph six 

waiver to issue a compulsory license, but the drug was not under patent 

and training was ultimately not necessary. PTO has also conducted 

training on relevant IP provisions, including on U.S. laws and regulations 

related to data exclusivity and patent linkage, in response to country 

requests. PTO officials emphasized, however, that it is not PTO’s role to 

ensure that these countries implement the provisions in the same manner 

as the United States. In fact, PTO makes an effort to understand the 

country’s legal context and capacity so that its advice is appropriate to its 

circumstances. 

In addition, U.S. agencies offer some assistance related to technology 

transfer, which is referred to in paragraph seven of the Doha Declaration 

on TRIPS and Public Health. For example, HHS provides significant 

Page 65 GAO-07-1198 Intellectual Property
Appendix II: Technical Assistance on IP

Rights and Public Health 

assistance to developing countries though its technology transfer 

activities. The National Institutes of Health (NIH) has developed 

innovative programs to improve how technologies are transferred to 

developing countries, particularly by identifying those biomedical research 

companies and institutions that have the interest and capacity to receive

and develop new biomedical products. According to HHS officials, NIH 

has one of the largest biomedical technology transfer offices in the world. 

NIH’s Office of Technology Transfer (OTT) has successfully transferred 

technologies, mostly for infectious disease diagnosis, treatment and 

prevention, to institutions in developing countries such as India, Mexico, 

Brazil, China, Egypt, and South Africa and currently is working with 

institutions in other developing countries. NIH OTT has also initiated a 

limited international technology transfer capacity building program to 

train scientists and managers from institutions in developing countries 

about intellectual property management and other technology transferrelated matters. Similarly, USAID is involved in some technology transfer 

assistance. According to agency officials, USAID recently established a 

technology transfer program in Columbia to assist the local generic 

industry. 

Page 66 GAO-07-1198 Intellectual Property
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 67 GAO-07-1198 

Appendix III: GAO Contact and Staff 

Acknowledgments 

Loren Yager (202) 512-4128 

Kim Frankena, Assistant Director; Nina Pfeiffer; Diana Blumenfeld; 

Suneeti Shah; Yesook Merrill; and Grace Lui made significant 

contributions to this report. Martin De Alteriis, Karen Deans, and Etana 

Finkler also provided assistance. 

GAO Contact 

Staff 

Acknowledgments 

(320464) Intellectual Property
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