In Thailand there are no regulations dealing with transfer of technology transactions, and there is no anti-trust law as a means of preventing restrictive business practices. The Thai Government has used a liberal licensing policy and does not intervene in the technology market. The parties are free to conclude terms and conditions of the agreements according to the rule of freedom of contract.

The only measure that has been passed which indirectly deals with international licensing agreements is a requirement for Central Bank approval before the technology payments can be remitted abroad. However, the bank has no authority to screen the licensing contracts.¹⁰² In practice, once an application is submitted to the bank; the remittance is approved almost automatically.¹⁰³ Clearly, the measure aimed at regulating foreign exchange remittances is ineffective at minimising the negative effects of the onerous terms and conditions in licensing contracts and of the transfer-pricing practices aforementioned.

APPRAISAL

Compared with other countries, Thailand lacks a functional technological base and this makes the country industrially and technologically dependent on foreign interests. It constantly loses trade balance in the pharmaceutical sector to its trading partners. Thailand has only acted as a host for foreign pharmaceutical companies. Those companies have entered the country to operate the final stage of medicine production solely for the purpose of penetrating the locally protected market. The perceived role of patents in Thailand's industrial and economic development should be markedly different to that portrayed in technologically advanced countries like the United States. It would be illogical for Thailand to adopt the high standards of IP protection. While a stringent patent regime as enshrined under the proposed FTA may be designed to foster research, the high degree of patent protection in Thailand would promote R&D and protect research results developed elsewhere. The inherent monopoly privileges will hinder local R&D and impede inflow of technology. Patents will continue to be used by foreign drug companies as a mechanism for overpricing, transfer pricing and insertion of restrictive clauses in technology transfer agreements.

On medicine prices, Thailand explicitly recognised its problems of access to vital medicines. As a response to high prices, in 2001 it jointly proposed a draft text for a ministerial declaration on IP rights and public health.¹⁰⁴ The collective effort of Thailand and other developing countries led to the adoption of the Doha Declaration on the TRIPS Agreement and Public Health, which reinforces the importance of access to medicines and re-affirms the right of WTO Members to use the flexibilities available under TRIPS to increase the affordability of medicines.¹⁰⁵ Thailand has currently switched its policy direction to bilateral trade negotiations and given very little attention to its negotiating positions in the WTO. It would be a sad irony then for Thailand to adopt the new IP rules that may further restrict its accessibility to essential products.

The FTA provisions will have a tremendous impact on prices. The new patent rules that are intended to broaden the scope and prolong the period of monopoly (i.e. data exclusivity, extension of patent term, extending the scope of patentability, etc.) will enhance the ability of the patent holders to maintain high prices.

Granting exclusive rights over test data will reduce generic competition. Thai generic manufacturers would have to conduct their own clinical trials, which they do not have the capacity to do. Since the trial process is too costly and time consuming, the only option for the local companies would be to wait until the exclusivity period expired, which would delay the entry of generic medicines into the market. Consumers would then be forced to pay monopoly prices for the branded drugs for an extra 10 years. Data exclusivity will allow multinational pharmaceutical companies to dominate the market even if there is no patent on the medicines they sell. When a patent is granted for the medicine, Thailand would have little or no chance to grant a compulsory license or allow government use to make the patented drug available. This is because the medicine produced under the government licence would still be unable to secure market approval during the exclusivity period due to the lack of the clinical test data required for registration.

The USTR text that links drug registration and the patent status of a drug will unnecessarily restrain the entry of generic medicines. The provisions require the national drug regulatory body, before approving registration for a generic version, to ensure that the manufacturing, importing and selling of the generic medicine will not infringe the original company's patent rights. The practice of linking patent status to registration is not easy to implement in view of the fact that the national drug regulatory body in Thailand has no patent expertise to determine whether the generic medicine sought for registration is the same or different from the medicine that another company has patented. This would cause considerable delays to the introduction of the generic product.

The FTA provisions that require an extension of patent term would threaten the existence of the Thai generic companies by preventing them from making use of patented technology for the duration of the extended period. This would effectively increase the patent life for a pharmaceutical, thus blocking the introduction of generic products. The patent holder can then maintain a longer monopoly position and charge high prices for its medicines.

Considering the significance of this for the well-being of society, the extended term of pharmaceutical patents proposed by the United States is too long. No matter how much investment involving drug development is claimed by the pharmaceutical companies, it would still be imprudent for Thailand and other developing countries to offer protection periods for longer than 20 years. The logic is that pharmaceuticals generate a high rate of turnover, and therefore maximum profits need to be recouped to their owners by selling drugs at high prices around the world. Due to the urgent need for technological acquisition, the developing country will be denying itself the benefits from newly developed modern technology by granting an unnecessarily lengthy protection period which will discourage competitive innovation. Modern scientific innovation has continued to yield evermore rapid technological change, and therefore new products are developed rapidly. No technology, no matter how beneficial it is, should be accorded more than a 20-year term for protection as required by TRIPS.

The provisions that require Thailand to extend the scope of patentability to new uses and new formulations of the known drugs will allow multinational companies to claim exclusive rights over formulations that do not generate a truly new and inventive product. A great many drugs, although therapeutically effective, have other far from perfect properties and potential side-effects. Companies that hold a drug patent can come up with secondary improvements that can then also be patented.¹⁰⁶ This would protect the original patent holder against generic competition.

As regards technological capability, the new IP rules will drastically curtail the ability of the Thai Government to enforce transfer of technology, reduce the effectiveness of compulsory licensing as a means of ensuring access to medicines and inhibit the capacity of the Thai generic drugs industry to expand its market.

Footnotes

102. J. Kuanpoth, "Technology Transfer in Thailand" in Christopher Heath (ed.), Legal Rules of Technology Transfer in Asia (Kluwer Publisher International, London, 2002), pp.171-192.

103. ibid.

104. See the Submission by the African Group, Barbados, Bolivia, Brazil, Cuba, Dominican Republic, Ecuador, Honduras, India, Indonesia, Jamaica, Pakistan, Paraguay, Philippines, Peru, Sri Lanka, Thailand and Venezuela (IPR/C/W/296).

105. Declaration on the TRIPS Agreement and Public Health, adopted on November 14, 2001, WT/MIN(01)/DEC/2.

106. M. Hutchins, "Extending the Monopoly--How 'Secondary Patents' can be Used to Delay or Prevent Generic Competition upon Expiry of the Basic Product Patent", Journal of Generic Medicines, Vol.1, No.1, 2003, pp.57-71.