Case Overview, Compulsory Licensing for AIDS-related Pharmaceuticals in Africa / Tax Credit for AIDS Vaccine Research and Development

This document provides background information and summarizes the debate over Compulsory Licensing for AIDS-related Pharmaceuticals in Africa and the Tax Credit for AIDS Vaccine Research and Development. The links to the left will lead you to public documents that we have found.

           Although no cure has yet been found for the AIDS virus, there has been substantial progress in the development of drugs that slow down its progress and ameliorate its symptoms. Consequently AIDS victims in the industrialized countries of the world can be treated with a potent "cocktail" of AIDS drugs that helps extend and improve the quality of their lives. The drug AZT, for example, is effective in working against the transmission of AIDS from mother to fetus. As heartening as this progress has been, AIDS continues to devastate some poor and developing countries of the world. A number of African countries have epidemic-levels of AIDS incidence. Getting AIDS drugs to AIDS victims in Africa is no small problem and policymakers in Washington have struggled to find a way to get expensive drugs to people who have no way of paying for them.
          One of the vehicles for addressing this issue was the Africa Growth and Opportunity Act in the 106th Congress. A provision was introduced in Congress that forbid the United States Trade Representative from protecting patents on AIDS drugs in the countries of sub-Saharan Africa. In other words, a manufacturer could make a generic version of patented AIDS drugs and sell them in Africa without having to pay a licensing fee. The original manufacturers argued that they had incurred the research and development costs of bringing the original drugs to market and could not afford to just give away their products for a nominal return. As one drug lobbyist told us, "Basically, they said that if you don't provide your AIDS drugs at low cost, we'll confiscate your patents."
          Not surprisingly, then, the drug companies fought the inclusion of the compulsory licensing provision in the legislation. According to the drug companies, their concerns about this provision extended beyond the abrogation of property rights to the pragmatic realities of fighting AIDS with drugs in Africa. The lack of a public health infrastructure was cited as a fatal problem. It's difficult for a drug regimen to work in a developing country unless there is a means of educating people about dosage, side effects, and safety.
          Given the political difficulties of enacting compulsory licensing and the substantial obstacles to actually implementing effective programs in the field, some in advocates believed a different approach was needed. For any society a vaccine is far preferable than ongoing drug treatment, but this is especially true for developing countries. Yet there is no vaccine for AIDS. Although there is a substantial market for such a vaccine in the industrialized world, and thus incentive for drug companies to discover such a prophylactic, market incentives are weak for the development of vaccines for diseases such as malaria that are largely confined to countries in the developing world-countries which have little in the way of resources to pay for such drugs. Thus, some advocates promoted a research and development tax credit for work by drug companies trying to develop such vaccines. Some advocates supported the tax credit as an alternative to the compulsory licensing provision, whereas others viewed both the tax credit and compulsory licensing as important to address the problem of AIDS in the developing world.
          Neither approach proved viable in the 106th Congress. Although the Senate included compulsory licensing for AIDS drugs in a tax bill, the House voted it down. When the provision was stripped from the conference report, President Clinton issued an executive order implementing compulsory licensing. Presidents don't have a general power to implement policies Congress fails to agree upon, but an existing statute enabling the president to bypass drug patents in the case of an emergency gave him the legal standing to do this.