As part of our continuing series on healthcare, here is an explainer on Compulsory Licensing, its pros and cons, what other countries are doing and where we are at now.
With the ongoing public health emergency in India - the COVID-19 pandemic, overcrowded hospitals, a shortage of medical equipment and an ever-rising case count - any feasible measures that may ease the burdens of the people must be considered.
No drug has been specifically identified as being able to treat COVID-19, but various existing drugs have been seen to alleviate symptoms and may, possibly, save lives in some cases. However, many of these drugs are owned by foriegn companies, who have exclusive rights for the manufacture of these drugs under patent laws.
Given the prevailing public health emergency, there is a need for these drugs to be produced in larger quantities by many organisations based in India. So far, this has been accomplished through what are known as ‘Voluntary Licences’ (IP or ‘Intellectual Property’ holders voluntarily granting licenses to their patents or other IP). An example is the voluntary license given by the US based Gilead Pharmaceuticals for the drug Remedisivir, that has been shown to alleviate severe symptoms.
But there are concerns about whether such an arrangement is ideal for ensuring the availability and affordability of Remedisivir, as well as future drugs.
It’s the time to take a more serious look at the system of Compulsory Licensing (when a government allows someone else to produce a patented product or process without the consent of the patent owner or plans to use the patent-protected invention itself) instead.
How Does Compulsory Licensing Work, Exactly?
- Prior to the mid 1990s, finished pharmaceutical products were excluded from patentability by a number of countries. In India and Brazil, process patents (where the patent is granted for a particular manufacturing process, and not for the product itself and any other person can produce the same product through some other process, modifying the various parameters) were the norm rather than product patents (an exclusive right given to the original inventor of a product and no other manufacturer can provide the same product through the same or any other process). This allowed domestic firms to reverse-engineer and, essentially, produce equivalent drugs.
- In 1994, The Agreement on Trade-Related Aspects of Intellectual Property Rights, or the TRIPS agreement was signed amongst members of the World Trade Organization (WTO), according to which members were required to guarantee product patents.
- However, the Doha Declaration on the TRIPS Agreement and Public Health highlighted that countries mentioned in Article 31 of the agreement were given the power to grant Compulsory Licenses.
- Such licenses allowed for the use of patented drugs without the authorization of the patent holder. A government was allowed to either locally manufacture, or import, ‘generic’ versions of the drug without the consent of the patent holder.
- There were, however, a number of requirements that had to be complied with. The government would have to first negotiate with the patent holder, and the scope and duration of such a license would have to be limited to the emergency because of which it was granted. In cases of public health emergencies or any such similar situation, these practices could be ignored. The current COVID-19 crisis is, doubtless, an example of such an emergency.
Then, Why Aren’t We Resorting to Compulsory Licensing? Is There A Debate Here?
There has been an ongoing debate on compulsory licensing, well before the emergence of COVID-19, especially regarding its use in developing countries.
The Case For Compulsory Licensing
1) With compulsory licenses, the pricing of drugs can be brought down to a more affordable level for the citizens of the country in question - especially citizens of developing nations - who wouldn’t have access to such medicines otherwise. Access to health for all is described as a human right by international instruments such as the United Nations’ Universal Declaration of Human Rights (UDHR). And so, such medicines are seen as a necessity.
2) The local industries which produce these drugs locally will employ a large number of local workers, thereby reducing unemployment and improving productivity in the economy— once again, especially beneficial to developing countries affected by the current global economic downturn.
3) Most of the patents operating in developing countries are owned by citizens from developed countries. The progress of such nations would thus proceed more easily through the use of such licenses, as they are not always in a position to produce such patents of their own.
The Case Against Compulsory Licensing
1) Such licenses are an interference on the legal rights of the patentee. Consequent to such licenses, the incentive to innovate and invest in research and development of new drugs may be gone, thereby hurting medical innovation. If companies are unable to recover the costs sunk into the R&D (Research and Development) of such drugs, they would have no reason for manufacturing them.
2) The safety of these drugs, when produced as a result of compulsory licensing, cannot be ensured. The generics that are made in place of the original drugs may contain impurities that would dilute the effectiveness of the drugs and even render them dangerous in some cases.
3) Many diseases that run rampant in developing countries are not present in developed ones. Often, these developing countries lack the capacity to create drugs for these illnesses, and their only option is if they are developed by other nations. Compulsory licenses will thus disincentivize research into these illnesses, therefore making developing nations worse off in the long run.
4) Compulsory licensing can also cause trade friction with more developed nations who hold drug patents, thereby reducing levels of foriegn investment in the developing country concerned, thereby hurting its economy and - by extension - its public health system.
You can read this paper - ‘The Pros and Cons of Compulsory Licensing: An Analysis of Arguments’ by Muhammad Zaheer Abbas - for more on the pros and cons.
So What have People and Countries been Doing So Far? What has Past Experience been Like?
- In the past compulsory licensing has been used primarily in the area of AIDS/HIV treatment, as well as when the country in question felt as though it was in a national health emergency.
- In the mid 2000s, both Brazil and Thailand had significant success using compulsory licenses to reduce the cost of antiretroviral therapy (or ART, the treatment for HIV), making this much more accessible to their citizens.
- In Thailand, two antiretroviral drugs - Efavirenz and Lopinavir/Ritonavir - were offered at prices of $ 500 and $ 2200 per person per year (or PPPY) by international pharmaceutical companies. Rejecting these offers and issuing compulsory licenses in 2006 and 2007, the Thai government was able to procure the drugs from India at $ 224 and $ 676 PPPY respectively. They therefore managed to save $ 276 and $ 1524 PPPY for Efavirenz and Lopinavir/Ritonavir respectively.
- Even the threat of issuing a compulsory license has been seen to serve as incentive for a company to drastically reduce the price of a drug. Brazil’s threat to issue one of these for Lopinavir/Ritonavir resulted in a price drop from $ 3241 PPPY to $ 1380 and $ 1510 PPPY (for two different versions of the drug).
Let’s Come Back to the Present. How are Countries approaching Compulsory Licensing for COVID-19? What About India?
- Several countries began to consider the necessity of compulsory licensing, in light of COVID-19, early on. On March 24, 2020, Israel issued a compulsory license to import generic versions of lopinavir/ritonavir. This measure was not taken in response to high pricing, rather because the patent holder was unable to supply adequate amounts of the drug.
- Canada, Chile and Germany have also laid legal groundwork in order to issue compulsory licenses for Covid Drugs.
- India already has a framework for working with compulsory drug licenses. This framework is laid out in The Indian Patent Act, 1970. According to Section 84 (pg 65) anyone can request the Controller General to grant a three year compulsory license on the fulfillment of any of the “following grounds:
That the reasonable requirements of the public with respect to the patented invention have not been satisfied, or
That the patented invention is not available to the public at a reasonably affordable price, or
That the patented invention is not worked in the territory of India.”
- So far, the Indian government has not issued a compulsory license for any drug being used to treat COVID-19. Do remember, as we have stated before, that it was a voluntary license agreement with Gilead, through which the company agreed to license the drug Remdesivir free of any royalties until the pandemic is declared over by the WHO (World Health Organisation). This may make you feel that voluntary licenses and other forms of public-private partnership can be effectively relied on. Do also remember that there is no legal compulsion for other companies to do the same with different drugs, and an assurance must be provided to citizens that they will be granted access to such drugs and, later, a vaccine, without any hurdles arising from licensing problems.
- Regardless of whether future drugs will be compulsorily licensed in India or not, it is likely that the domain of patents and intellectual property will see key changes. Increased government facilitated voluntary licensing could occur, allowing the public sector to play a greater role in private health practices. Public-Private partnerships can be used to overcome funding, legal and logistical challenges. And the offering of new, different kinds of property rights could become commonplace. The pandemic has already sparked numerous conversations on the state of public health, and such systems may look vastly different in a post-pandemic world.
For more on Compulsory Licensing in these times, do read ‘The case for compulsory licensing during COVID-19’ by Hillary Wong.