Share:
Compulsory licensing (CL) is a legal conduit that allows a government to authorize a designated third party to manufacture a patented product under exceptional circumstances without authorization from the patent holder. This seems to be in direct conflict with the idea of patent holders having the right to decide on the usage of their inventions.
While CL may be applied to patents in any field, historically, it has most frequently been used in the pharmaceutical field. A WIPO report suggests that CL in the pharmaceutical field has often led to a lowering in the prices of affected drugs and better dissemination of treatment. This has been one of the prime drivers behind the implementation of CL.
But it’s not all positive. The practice raises many complex issues like the ambiguity in the laws themselves, the economic impact on innovation, market distortions and fair compensation, international trade and political pressures, and the question of innovation in medicine.
Let’s take a closer look at CL as a vital public health tool that poses significant risks to innovation and the economy. We’ll attempt to see how we can find balance between these conflicting needs and ideologies.
A solution for a Public Health crisis gone awry
| Country | Year | Drug | Min Price Reduction after CL (%) |
Type |
|---|---|---|---|---|
| Brazil | 2003 | Atazanavir sulfate | 150 mg | − 76.45 | Imported from India |
| Zimbabwe | 2003 | Lamivudine + Zidovudine | 150 mg + 300 mg | − 16.95 | Locally produced |
| Ecuador | 2012 | Abacavir + Lamivudine | 600 mg + 300 mg | − 74.98 | Locally produced |
| Indonesia | 2004 | Lamivudine + Nevirapine + Zidovudine | 150 mg + 200 mg + 300 mg |
− 98.00 | Locally produced |
| Malaysia | 2003 | Didanosine | 25 mg | − 86.49 | Imported from India |
| Rwanda | 2008 | Lamivudine + Nevirapine + Zidovudine | 150 mg + 200 mg + 300 mg |
− 50.00 | Imported from Canada |
| Thailand | 2006 | Efavirenz | 200 mg | − 64.68 | Imported from India |
The table above shows select examples of the effect of CL on the prices of HIV/AIDS drugs. It shows that irrespective of the time, the geopolitical location, and the drug in question, CL has worked towards making these drugs more affordable for people. The price reduction, often, is above 50%, going up to 98% in some cases. This makes essential drugs available to individuals, both in the case of crises and for continued treatment as well. However, despite this massive upside, there are certain drawbacks of CL related to the infringement on the rights of patent holders.
The World Trade Organization’s (WTO) TRIPS Agreement aims to balance patent holders’ rights with public health needs by allowing for CL under specific conditions. While CL is primarily intended for domestic use, the TRIPS Agreement, through Article 31bis, allows for the export of medicines produced under CL to eligible countries lacking manufacturing capacity.
The TRIPS Agreement also stipulates that a voluntary license must be negotiated first with the patent holder on ‘reasonable commercial’ terms, who will receive ‘adequate’ remuneration decided by relevant authorities in the ‘country concerned’, with the ‘economic value’ of the patent considered. The specific procedures and conditions vary for domestic and export use, with the final decision resting with the individual WTO member country based on their national laws and circumstances. But despite the presence of these guidelines, problems do arise.
Potential threats to innovation
While CL benefits public access to essential treatments, it raises many controversial issues, particularly for patent holders. These include reduced incentives for R&D, a negative impact on the investment climate, determining fair compensation, and the unpredictability of future production and sales of patented products.
Thailand’s HIV crisis as a case study provides a good example. When the Thai government issued CL for certain drugs to aid over 600,000 patients, it created a divide between supporters and opponents. NGOs like the AIDS Access Foundation, Oxfam, and Médecins Sans Frontières argued that CL benefits many people and sets a precedent for social welfare. However, R&D-based companies in developed countries felt threatened and announced that they would stop licensing new drugs to Thailand in response.
This shows that such tensions can deter pharmaceutical companies from investing in drug development in both developing and developed countries. For least developed countries, it also poses the risk of hampering foreign direct investments in pharmaceuticals since investors might find it economically dangerous when the drugs, they invest in can simply be sold at low rates if the domestic government deems so. This may also have drastic effects on their national economy.
Therefore, we need solutions to balance the scales, such as ensuring better consultation with patent holders, refining the definitions within TRIPS, and conducting more comprehensive research to inform policy decisions. Patent analysis tools like Patent Monitoring, AI Patent Search, and Patent Landscape Analysis can help governments and organizations make more informed decisions regarding CL.
Alternatives
Many countries are working on balancing this intricate relationship between public health and innovation by developing various alternatives to CL. Those collaborative models are all about increasing access to medicines, protection of IPR, and ensuring that R&D remains sustainable.
- Partnerships among different stakeholders in healthcare lead to improvements in access to healthcare and the development of new treatments. During the COVID-19 pandemic, partnerships facilitated by IP are what have driven the rapid development and global deployment of vaccines, treatments, and diagnostics.
- Voluntary licensing agreements have also enabled sharing of knowledge and innovation by the product patent holders when they agree to dole out licenses. This cooperative mode has worked successfully in sub-Saharan Africa and contributed dramatically to mass production of HIV/AIDS.
- Donations of drugs and differential pricing programs by patent owners or pharmaceutical companies to provide medicines free or at subsidized rates to certain populations is another way. For instance, more than 14 billion new treatments have been donated by biopharmaceutical industry between 2011 and 2020 for the treatment of nine neglected tropical diseases.
- Non-assert declarations are voluntary legal agreements where patent holders refrain from enforcing certain patents under specific conditions, providing an alternative to CL.
Compulsory licensing is a critical tool of public health, aiding in the availability of necessary medicines and that too at a reasonable price during health crises. It also introduces a set of risks for such innovation and investment due to decreases in patent holders’ incentives. Not every common interest is addressed by the one-fits-all remedy, the TRIPs Agreement. These conflicting interests are therefore best arbitrated by flexible yet stringent regulations, where organizations like the WTO and the WIPO can secure the benefits of public health without compromising the rights accorded to the patent holders.
PatSeer, a leading AI-powered patent intelligence platform, empowers stakeholders to navigate the intricate landscape of patents. PatSeer provides comprehensive and actionable insights into global patent data, emerging trends, and potential collaboration opportunities. Whether conducting in-depth patentability searches, identifying relevant prior art, or assessing the competitive landscape, PatSeer streamlines the patent research process, enabling informed decision-making at every stage of the patenting journey.
