Compulsory Licenses

We encourage governments to fully exercise their right to suspend patent protection, when it threatens access to medicines

Background

Once patents are granted, a strategy to make medicines more affordable is ‘compulsory’ and ‘government use’ licensing. These terms are explained below.

According to the TRIPS agreement, patents are granted by governments to reward innovators. However, the government retains the right to suspend patent protection when needed. The government can give itself, or a third party, the right to manufacture generic medicines to protect the health of its citizens. This procedure is called a compulsory license. Following discussions between the patent holder and the government, the company that holds the patent is remunerated in exchange. However, in cases of emergency and where the government wishes to acquire drugs for non-commercial use, there are exceptions, where it is not necessary to have any prior discussions or agreement with the patent holder.

Compulsory licensing remains one of the most effective strategies to reduce the price of patented medicines.

‘Government use’ refers to this last case of compulsory licensing when the government itself wishes to use or authorize a third party, to manufacture a patented drug to address the needs of the government, for example to supply medicines in public funded hospitals and through programs.

There is a common misperception, promoted by the pharmaceutical industry, that compulsory licensing is limited to “emergencies.” This is not the case. TRIPS does not limit the grounds on which states may grant compulsory licenses. States may use compulsory licenses to circumvent anti-competitive behavior and encourage the transfer of technology, or simply to address excessive pricing of medicines.

Compulsory licensing remains one of the most effective strategies to reduce the price of patented medicines, and has been deployed with particular success in the context of antiretroviral (ARV) drugs. As TRIPS came to be implemented, and the HIV pandemic exploded, a growing number of developing countries have successfully used the strategy to lower the price of ARVs and other medicines.

Among developing countries, Thailand has made the most energetic use of compulsory licensing. Between 2005 and 2006, the Thai government exercised its right to issue multiple compulsory licenses. Two of the licenses covered two ARVs (efavirenz, marketed as Stocrin by Merck, and lopinavir/ritonavir, marketed as Kaletra by Abbott). These licenses resulted in substantial reductions in the prices and significant improvements in accessibility of these two drugs. More recently, in April 2010, the Ecuadorean intellectual property office granted its first compulsory licence, also for the ARV combination lopinavir/ritonavir. This license also led to substantial price savings.

What we do

We document the impact of patents on pricing of, and access to, medicines. When it is clear the impact of patents is detrimental to public health and access to essential medicines, we develop strategies to encourage and support governments to use their right to issue compulsory licences.

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