Trade, TRIPS, and pharmaceuticalsIntroductionGlobal pharmaceutical marketPatents, trade, and pharmaceuticalsImplementation of TRIPS-plusTrade and the pharmaceutical market in MalaysiaConclusionAcknowledgmentsReferencesSeries684 www.thelancet.com Vol 373 February 21, 2009Trade and Health 5Trade, TRIPS, and pharmaceuticalsRichard D Smith, Carlos Correa, Cecilia OhThe World Trade Organization’s Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) set global minimum standards for the protection of intellectual property, substantially increasing and expanding intellectual-property rights, and generated clear gains for the pharmaceutical industry and the developed world. The question of whether TRIPS generates gains for developing countries, in the form of increased exports, is addressed in this paper through consideration of the importance of pharmaceuticals in health-care trade, outlining the essential requirements, implications, and issues related to TRIPS, and TRIPS-plus, in which increased restrictions are imposed as part of bilateral free-trade agreements. TRIPS has not generated substantial gains for developing countries, but has further increased pharmaceutical trade in developed countries. The unequal trade between developed and developing countries (ie, exporting and importing high-value patented drugs, respectively) raises the issue of access to medicines, which is exacerbated by TRIPS-plus provisions, although many countries have not even enacted provision for TRIPS fl exibilities. Therefore this paper focuses on options that are available to the health community for negotiation to their advantage under TRIPS, and within the presence of TRIPS-plus.IntroductionThe eff ect of stringent intellectual-property protection in the pharmaceutical market is contentious, focused in recent years on the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In January, 1995, the TRIPS agreement established global minimum standards for the protection of intellectual property, including a minimum 20 years’ patent protection on pharmaceuticals. Compliance was postponed until 2005 for developing countries and 2016 for least developed countries. The agreement greatly expanded intellectual-property rights, including rules on the protection of test data for the eff ectiveness and safety of drugs. This change in intellectual-property rights generated clear gains for industry and the developed world, but the crucial question is whether it generated gains for developing countries in the form of increased exports.This question is addressed in this paper by consideration of the importance of pharmaceuticals in health-care trade, and then the essential elements, implications and issues related to TRIPS, and the new emerging issue of TRIPS-plus (in which increased restrictions are imposed as part of bilateral free-trade agreements) are outlined, concentrating on options open to the health community in negotiating to their advantage under TRIPS, and within the presence of TRIPS-plus. The experience in Malaysia in dealing with these issues is discussed, providing an example from which lessons might be learnt and extrapolated to low-income and middle-income countries.Global pharmaceutical marketPharmaceuticals are the most important health-related products that are traded, accounting for 55% of all health-related trade (the share of the next most substantially traded health-related goods—small devices and equipment—is 19%1). In 2006, the global pharmaceutical market was valued at US$650 billion, of which the generic market contributed less than 10% ($60 billion), growing at a compound yearly growth rate of 10% between 1999 and 2006, and forecast to grow to $900 billion by 2011, equivalent to a compound yearly growth of 7% over the next 5 years. This reduction is mainly the result of increased competition from generic products and the eff ects of cost-containment measures across major markets, although there are expectations of strong growth in the ten European markets that joined the European Union in 2004 and continued double-digit market growth in China, which will become the seventh largest sales market by 2010.The global market is highly polarised, with North America, Europe, and Japan accounting for around 75% of sales.2 A clear divide exists within the global market between developed countries, producing and exporting high-value patented pharmaceuticals, and developing countries importing these products and involved in the production of low-value generic or alternative medicines. This diff erence leads to many developing countries having a trade defi cit in modern medicines, which often results in an overall health-sector defi cit. There is little evidence that this pattern has reversed through adoption of improved intellectual-property rights. For instance, Thailand over the past decade has increased dependency on pharmaceutical imports despite strengthened intellectual-property rights, market exclusivity, and diff erential pricing.3 The promise of increased foreign direct investment seems elusive and the comparative advantage of adoption of stronger intellectual-property rights tends to last only as long as the next developing country does not adopt them; once these rights are harmonised globally, no advantage accrues to one country compared with another.The pharmaceutical market is also characterised by substantial concentration within a few very large Lancet 2009; 373: 684–91Published OnlineJanuary 22, 2009DOI:10.1016/S0140-6736(08)61779-1See Comment Lancet 2009; 373: 273See Comment Lancet 2009; 373: 363This is the fi fth in a Series of six papers on trade and healthHealth Policy Unit, Department of Public Health and Policy, London School of Hygiene and Tropical Medicine, London, UK (Prof R D Smith PhD); Centre for Interdisciplinary Studies on Industrial Property and Economics Law, University of Buenos Aires, Buenos Aires, Argentina (Prof C Correa PhD); and UNDP Regional Centre, Colombo, Sri Lanka (C Oh PhD)Correspondence to:Prof Richard D Smith, Health Policy Unit, Department of Public Health and Policy, London School of Hygiene and Tropical Medicine, Keppel Street, London WC1E 7HT, [email protected] Vol 373 February 21, 2009 685transnational corporations; the ten largest account for nearly 50% of the total market (table 1). This market consists of the