In principle, patents are granted on condition that the holder must work the patented invention or license it within a certain period of time from the date of granting the patent.¹⁰⁷ Thailand incorporates several measures into its law so as to bolster the local working of patents. The current patent law contains not only compulsory licensing, but also a system of forfeiture and revocation of patents. The provisions on compulsory licensing will limit flexibilities that Thailand can issue, such as non-voluntary licenses to ensure the health of its citizens and to enable development of local industries. It will also prevent Thailand from exporting compulsorily licensed drugs to countries that have insufficient or no medicine production capacity. The Thai Government also will not be able to force the patent holder to disclose the know-how needed to manufacture the medicine.

The USTR text prohibits Thailand from adopting pre-grant oppositions. This straightforward administrative procedure is necessary for Thailand because it allows local generic companies to challenge the validity of a patent at relatively low cost, prior to an infringement action. Generic producers that work in the same field are often in a position to challenge patents before they are granted. This system reduces excessive burdens on the courts and contributes to speedy proceedings of patent invalidation. The prohibition of the pre-grant opposition will allow multinational companies to block challenges on invalid patents, increase prices and prevent local medicine manufacture.

The FTA provisions that link IP and investment, if adopted by Thailand, will have an adverse impact on technology transfer and on the development of the country's pharmaceutical industry. For example, the USTR text specifies that when a compulsory license is issued in compliance with the FTA provisions (which are generally more restrictive than the TRIPS Agreement), it does not violate the investment chapter's limitation on expropriation. However, if the issuance of the compulsory license does not comply with the FTA IP chapter (even though it is in compliance with TRIPS), the patent holder can directly sue the host government in a special trade tribunal for compensation. The patent holder can claim much higher compensation than reasonable royalties in cases of compulsory licensing under TRIPS, as the investment chapter under the proposed FTA requires compensation to be the full market value of a patent. The prospect of paying high compensation to the patent holder will undoubtedly discourage the Thai Government from issuing compulsory licenses to protect public health, or from taking measures that facilitate transfer of technology and development of the local pharmaceutical industry.

As discussed earlier, the new trade mark rule under the proposed FTA would allow the pharmaceutical companies, to create "brand loyalty" by using intense advertisement and sophisticated marketing techniques. It will create indefinite commercial and marketing strength for the company even after the expiration of the patent. It will also limit the possibility for the Thai Government to control the use of trade marks for the promotion of medicines.

CONCLUSION AND FEASIBLE OPTIONS

Product competition and promotion can be reduced by the increasing use of generic name and the government control of drug advertisement. Creation of a competition market will make the medicine prices more competitive as competition from other companies forces the dominant firm to reduce price. Generic firms can play a significant role in the competition. Since the large number of off-patent medicines are now available in the world markets, Thailand and other developing countries should consider implementing the policy of encouraging generic substitution.

Developing countries may introduce the required use of generic names on pharmaceuticals along with trademarks. The drugs then will be identified and marketed under their generic names. This, when accomplished, will reduce the proliferation of branded drugs in the market. In addition, the government ought to start a re-education programme for doctors with the aims of ensuring the exclusive use of generic names and dispensing the cheapest available version of drugs.

The government should formulate a major policy aimed at controlling drug promotion. This may be done by requiring drug manufacturers to submit all advertising materials of medicine for official approval to guarantee the accuracy and sufficiency of information before they can be circulated to doctors, drug-sellers and the public. Further, the distribution of samples and gifts, as well as the provision of other financial advantages, to physicians should be regarded as a criminal offence. When the regulation is enacted, the government must ensure that the law is rigorously and seriously implemented.

An adoption of a direct price control always leads to a substantial reduction of the medicine prices in the market. Lowering the price of medicines will not only save consumers and public money, but enhance competitiveness of the local generic industry. The government of developing countries should initiate a policy of drug price control which can appear in various forms. One possibility would be an appointment of medicine price review board to monitor pharmaceutical prices.

The establishment of the board may be of significance in checking high drug prices, but it seems unlikely to be effective in checking the complexity of transfer pricing and over-invoicing of pharmaceuticals, which are usually standard practices in intra-firm transactions among pharmaceutical TNCs. To curtail such abuses, it may be possible to suggest that financial services laws which require business enterprises to disclose their financial information to a government agency should be promulgated to complement the patent law in this regard.

For the attainment of the goal of industrial and economic development, self-sufficiency in pharmaceutical production is necessary in order to facilitate a strong and healthy labour force without co-operation of foreign interests. However, in practice, self sufficiency is rare. Few developing countries can claim to be self sufficient in drug supply (e.g. China, India and Brazil). Most developing countries, including those that provide the final formulations or packaging, require significant imports of pharmaceuticals and intermediates. In order achieve the goal of accessibility to medicines, a developing country must adopt and implement appropriate policies relating to technology, health and IP rights to ensure effective, safe and affordable medicines. The following options may be taken: (i) increasing financial support for industrial R&D to public research institutes and private enterprises; (ii) improving national education in the long term and developing the personal skill of scientists and engineers in the short term; (iii) fostering production and commercialisation of research results; (iv) encouraging efficient co-operation among researchers in universities and the industries, supporting technological co-operation among domestic firms, etc.

Footnotes

107. See Paris Convention, art.5.