The agreements contained in the Final Act of the Uruguay Round will have a significant impact on the global production and marketing of goods and services. The effects will, however, vary according to the type of change introduced and the sector concerned. The production and marketing of drugs and health services may be affected at different levels and to a varying degree.
Firstly, the Uruguay Round included negotiations, mainly among OECD countries, on tariff reductions applicable to pharmaceutical products. Although it is difficult to estimate the effects of the Uruguay Round negotiations, in view of the typical cost structure in the pharmaceutical sector and the current methods of price fixing (with or without State control) it does not seem likely that they will have any significant impact on the price paid by consumers for drugs. In particular, no impact can be expected in developing countries. Provisions have also been adopted to avoid non-tariff restrictions such as those that may arise from technical standards and registration criteria1 applicable to drugs2.
1 In this connection, the Agreement on the Application of Sanitary and Phytosanitary Measures is relevant because it contains measures adopted to protect human health. Among the conditions laid down are that such measures must be adopted on the basis of analysis and assessment of objective scientific data.
2 The «Agreement on Technical Barriers to Trade» is, in this context, relevant.
Secondly, for the first time in the history of GATT, the results of the Uruguay Round include agreements on the liberalization of trade in services. The special feature of health services is, however, that they are not internationally tradeable to any significant extent because of the virtually indispensable need for a physician-patient relationship3 and the regulations on professional practice4.
3 «Telemedicine» could, however, extend the supply of diagnostic services across borders or could make them available in countries or regions without the necessary infrastructure. The future of robot-assisted «telesurgery» is more questionable.
4 In some countries with a federal system, for example, physicians are not allowed to practice outside their authorized area. On the other hand, restrictions on direct foreign investment in health services do not appear to be more severe.
Thirdly, although the Final Act of the Uruguay Round includes several restrictions on the granting of subsidies, these will not have any noticeable effect on the sums received by the pharmaceutical Industry in a number of countries for research and development5. The Agreement on Subsidies and Countervailing Measures allows Member countries to grant subsidies for R&D carried out or commissioned by companies, one of the conditions being that the amount should not exceed 75 per cent of the costs for industrial research or 50 per cent for precompetition development research [Article 8.2.a)]
5 See Office of Technology Assessment (OTA, 1993) for an analysis of R&D incentives in the United States.
Lastly, the Uruguay Round provided the framework for the negotiation of a comprehensive Agreement on intellectual property rights (Agreement on Trade-Related Aspects of Intellectual Property Rights)6. It is this component of the Final Act of the Uruguay Round that may have the greatest implications for the production of and access to drugs, especially in developing countries.
6 Hereinafter referred to as the «TRIPs Agreement».
The negotiations and the results obtained in the area of intellectual property underline the all-encompassing nature of the Uruguay Round. Unlike the previous Rounds, it not only involved discussion of trade barriers at the border but also moved towards the harmonization of domestic policies («beyond the border»), blurring the distinction between trade policy and other economic policies. In practice, the Uruguay Round has affected the series of policies which define a country's competitive environment (TUSSIE, 1994).
The section on patents will have the greatest effect in the drugs sector. It is the most detailed chapter and contains the most explicit obligations for Member countries. These include the obligation to grant patent protection in all fields of technology, thus eliminating the division between countries which grant patents to the pharmaceutical Industry and those which do not. The pharmaceutical Industry, like other industries, will have to confront a new international legal environment in which imitation will be more difficult and there will be increased opportunities to earn profits from inventions through the exercise of exclusive rights at the global level.
The TRIPs Agreement also includes for the first time in an international convention rules on restrictive practices in licensing agreements, as well as a multilateral system for protection of trade secrets that extends to information given to government authorities in order to obtain approval of pharmaceutical products. The Agreement also contains provisions on trademarks, which may have implications for the Pharmaceutical Industry7.
7 One of these provisions is the obligation to protect colours as a trademark, which may affect competition between products with a trademark and generic products in certain markets.
The aim of this study is to examine the possible effects of the TRIPs Agreement on the development, production and marketing of drugs, as well as access to them. Section 2 contains a brief summary of the content of the TRIPs Agreement relevant to patents. Section 3 reviews the main provisions on «confidential information» (trade secrets). Although the Agreement deals with other areas of intellectual property, these are the most relevant to the pharmaceutical sector. Section 4 concerns transitional periods and section 5 deals with the mechanism for the settlement of disputes and enforcement. Section 6 reviews the possible implications of the Agreement for innovation, direct foreign investment and the price of drugs. The analysis focuses on the effect of the new intellectual property rules in developing countries. Finally, the last section sets out the conclusions drawn.