LW 556Intellectual Property Law

2001/2002

The Role of Compulsory Licensing in Improving Access

to Essential Medicines in Developing Countries

Jaakko Sulanderjas6@ukc.ac.uk

Word Count: 4,720

Abstract

Infectious diseases kill more than 14 million people every year. A thousand children in

the world die of dysentery alone every day. Many of these deaths could easily be

prevented. However, patients in the developing countries do not have access to drugs

they need either because they cannot afford them or because the necessary drugs do

not exist at all. The issue of effectively improving access to essential medicines in

developing countries is therefore naturally of immense importance.

This paper describes one strategy which is being considered to bring down the price of

drug therapies and consequently improving access to essential medicines in developing

countries. Namely, the use of compulsory licensing. In short, compulsory licensing

permits the manufacture and use of generic drugs without the agreement of the patent

holder and therefore significantly reduces the cost of drugs and increases the availability

of them where they are most needed.

Compulsory licensing, a feature of the new TRIPS Agreement, can be used by countries

to serve the greater good of society by restricting the monopoly rights of patent holders.

However, despite a public health crisis of enormous proportions for HIV/AIDS,

apparently no African country has issued a compulsory license for any medicine. This

problem will be addressed in this essay and it will be argued that by using compulsory

licenses governments in developing countries would have in their hands tools for

carrying out essential public health policies by facilitating access to medicines through

the prevention of abuse of rights, promotion of domestic capacities for manufacturing

pharmaceuticals and in any cases of national emergency or other extremely urgent

circumstances, or of public non-commercial use.

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Introduction

Millions of people are dying every year because they do not have access to drugs they

need either because those drugs are far too expensive or they do not exist at all. In the

poorest parts of Africa and Asia, more than 50 % of the population lacks access to even

the most vital drugs.1 The HIV/AIDS pandemic illustrates the magnitude of the problem;

26 of the estimated 33 million people infected with HIV globally live in sub-Saharan

Africa and have virtually no access to antiretrovirals.2 One year’s treatment for HIV

infection costs an equivalent of 30 years’ income in developing countries whereas in

developed countries the same treatment would cost approximately four to six months’

salary.3 The disproportionally high cost of essential medicines puts them out of reach to

all but a small fraction of people in Africa. The situation is similar is South East Asia. In

Bangkok’s Bamrasnaradura hospital only 20 patients out of 2000 who seek treatment

each month can afford the triple drug cocktails that have become standard of care for

HIV in developed countries.4

Medicines for tuberculosis, malaria, meningitis and other life-threatening diseases are

equally out of reach to millions of people living in the developing world. For example, in

the case of tuberculosis most of the 100,000 people in developing countries suffering

from multidrug resistant strains are unable to afford the new standard combination

treatment, which is priced at approximately $15,000 per course.5

1 Myhr K : Comparing Prices of Essential Drugs Between Four Countries in East Africa and with International Prices, 1 June 2000, p2.http://www.accessmed-msf.org/prod/publications.asp?scntid=3920012349208&contenttype=PARA&2 Ford N, Berman D, AIDS and Essential Medicines and Compulsory Licensing, Summary of the March 25-27, 1999 Geneva Meeting . http://www.accessmed-msf.org/prod/publications.asp?scntid=392001830123&contenttype=PARA& 3 Myhr, K, op cit, p34 Ford N, Berman D, op cit5 ibid.

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It will be argued in this essay that by using compulsory licensing of pharmaceutical

patents governments of developing countries would have in their hands a significant tool

to drastically improve access to essential medicines in developing countries and

consequently prevent thousands of people from dying. People, who could have easily

been saved, had affordable drugs been available.

The meaning of compulsory licensing and reasons for its use

In short, compulsory licensing means that a government can license to a company,

government agency or other party the right to use a patent without the consent of the

patent holder. Normally, it is expected that patent owners provide access of their

patented medicines to the market. However, in some circumstances, governments may

deem it necessary to grant compulsory licenses to allow third parties to produce the

medicine, in order to ensure that it will be more readily available, or more affordable to

the general public. A compulsory license must be granted by a competent authority to a

designated person, who should generally compensate the title-holder through payment

of remuneration. Moreover, compulsory licenses do not, in any way, deny patent holders

the right to act against non-licensed parties.6

To illustrate the current situation and how compulsory licensing would prove to be a very

useful way in improving access to medicines in developing countries where the rights of

patent holders are protected, let us use the following example: a thousand children die of

dysentry alone every day.7 Uganda and Kenya are neighbours and similarly poor

6 See e.g. Correa C: Integrating Public Health Concerns into Patent Litigation in Developing Countries, http://www.southcentre.org/publications/publichealth/toc.htm, and TRIPS: Council discussion on access to medicines: Developing country group’s paper, 20 June 2001, http://www.wto.org/english/tratop_e/trips_e/paper_develop_w296_e.htm

7 MacKenzie D: Unaffordable Drugs – Protection Racket, Special Report, New Scientist, 21 July 2001, p18

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countries. Yet a child getting dysentry in Uganda has a much better chance of surviving

than a child getting dysentry in Kenya. The reason is that Ciprofloxacin, an antibiotic that

kills the Shigella bacteria that causes dysentry, sells for just seven US cents per tablet in

Uganda whereas in Kenya the same drug is priced US$2.42 making this necessary

lifesaver far beyond the means of the parents of most of the children getting dysentry.8

The simple reason for this vast price difference is that Kenya has laws respecting

patents and Uganda has not.

Let us take another example; an antibiotic used to treat respiratory and sexually

transmitted infections (Azythromicin), which are among the most highly prevalent

diseases in developing countries, costs US$ 2.70 per 250mg capsule in Kenya9 where it

is patented by the pharmaceutical company Pfizer and marketed under the trade name

Zithromax ®. Whereas in India, where pharmaceutical products are not covered by

patents, many generic manufacturers market Azythromicin and because of this

competition, the Indian retail price for Pfizer’s Zithromax ® is over three times cheaper

than the trade price in Kenya (US$0.84).10 Hence, if the Kenyan government issued a

compulsory license for Azythromicin, generic versions of the drug could be imported

from India, where retail generic prices range from US$0.39 to US$0.54 and Kenya could

therefore then treat five to seven times more patients on the same budget.11 Moreover, a

leading Indian manufacturer of generic drugs believes that it can sell the same current

state of the art combination of AIDS anti-viral drugs that sells in the United States for

8 ibid. And see Boulet P, Patent Protection of Medicines in Kenya and Uganda, MSF, April 2000. http://www.accessmed-msf.org/prod/publications.asp?scntid=39200154362&contenttype=PARA&9 October 200110 March 200111 Médecins Sans Frontières: A Matter of Life and Death: The Role of Patents in Access to Essential Medicines, MSF, 13 November 2001. http://www.accessmed-msf.org/upload/ReportsandPublications/291020011614133/DOHACOL.PDF

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approximately $10,000 a year, for $350 a year and this would still be profitable for the

manufacturer.12

In attempting to justify their position and role in hindering access to essential medicines,

pharmaceutical companies continue to claim that lower prices for drug therapies in

developing countries would be a serious threat to their research and development

funding. This is, however, a very weak argument since, although the majority of the

world’s population live in developing countries, these countries represent only a small

proportion of the global pharmaceutical market. Africa, for example accounts for only 1.3

percent of that market.13

Despite of all this, no developing WTO member country has granted compulsory

licenses for patented essential medicines.14 This must change as lives and health of

millions of people depend on access to these medicines. This paper will now turn into

examining how compulsory licensing could be used by developing countries under the

TRIPS Agreement. The purpose is to show that the TRIPS Agreement is indeed fairly

permissive in this regard and it will therefore be of extreme importance to address the

reasons why these provisions have not been used.

Use of compulsory licences under the TRIPS Agreement

The TRIPS Agreement requires countries to grant patent protection to pharmaceutical

products for a minimum period of 20 years. All WTO member countries have to comply

with these standards. However, the TRIPS Agreement leaves countries certain amount 12 Baker D: A Free Market in Prescription Drugs? – Dollars and Sense, May 2001, p2. And see also Duckett M: Compulsory Licensing and Parallel Importing – What Do They Mean? Will They Improve Access to Essential Drugs For People Living with HIV/AIDS?, Background Paper, International Council of AIDS Service Organizations, July 1999, p413 See Duckett, p5 and see also Ford and Berman, op cit.14 Ford and Berman, op cit. See also Correa C, Intellectual Property Rights and the Use of Compulsory Licenses: Options for Developing Countries. http://www.southcentre.org/publications/complicence/toc.htm

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of freedom by allowing them to issue compulsory licences against the will of the patent

holder, subject to certain conditions. Compulsory licensing finds its legal basis in Article

31 of the TRIPS agreement which provides that Member States may "use the subject of

a patent without the authorisation of the right holder, including use by the government or

third parties authorised by the government" when justified by the public interest. The

TRIPS accord is actually fairly permissive in terms of what is allowed in terms of

government decisions to authorize third parties to use patents without the permission of

the patent owners. Five kinds of use are expressly permitted under Article 31. These

are: licences for public non-commercial use by the government; licenses granted to third

parties authorised by the government for public non-commercial use; licences granted to

remedy a practice which has been determined after administrative or judicial process to

be anti-competitive; and licences arising from a dependent patent. The TRIPS

Agreement does not, however, limit the grounds to these five and the countries are

therefore left with a very broad scope of action in regard to the grounds on which they

can grant compulsory licences.15 Moreover, the TRIPS also allows countries granting the

compulsory licences to make virtually all of its decisions on these issues, including those

regarding compensation or appeals, through administrative processes. It is also

important to note that the TRIPS specifically does not require governments to grant

injunctive relief to patent holders16 in cases where government authorisations of patent

use satisfy the Article 31 framework.17 It would therefore be entirely permissible under

the TRIPS Agreement for a Government of a country with high HIV seroprevalence to

grant a compulsory licence based on public interest to manufacture the appropriate

drugs locally in order to make them available at a cheaper price. However, many 15 Velasquez G, Boulet P: Globalization and Access to Drugs, WHO-OMS 1998, 1 January 1999, p35. http://www.who.int/medicines/library/dap/who-dap-98-9-rev/who-dap-98-9.htm 16 Art 44(2)17 See Love J: Compulsory Licensing: Models for State Practice in Developing Countries, Access to Medicine and Compliance with the WTO TRIPS Accord, 21 January 2001. http://www.cptech.org/ip/health/cl/recommendedstatepractice.html

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developing countries are under strong pressure to adopt domestic legislation that

provides a higher level of patent protection than what is required under the TRIPS

Agreement. Furthermore, there also remains an important issue with respect to the

degree to which countries can tailor their laws to specific concerns regarding access to

medicines, due to the Article 27.1 restrictions on discrimination of patent rights by field of

technology.18

It must be kept in mind that while Article 31 does not restrict the grounds for granting

compulsory licenses, it contains a detailed set of conditions which must be satisfied.

These include the need to grant them on a case-to-case-basis, the requirement that the

licenses must be non-exclusive, the need (in some cases) of a prior request to the

patent holder on reasonable commercial terms and the obligation to pay adequate

compensation. The need to request a voluntary licence is not applicable in cases of

emergency and public non-commercial use. A serious threat on the effective use of

compulsory licensing is posed by Article 31(g) because, as Correa points out, “it opens

up the possibility that a compulsory licence be terminated as soon as the circumstances

which led to its granted have ceased to exist” and could this could thus discourage

applications for compulsory licences in some cases.19 However, this threat is unlikely to

play a major part in cases of applications for compulsory licenses of patent protected

essential medicines.

It is argued in this paper that the use of compulsory licences is a relatively easy and a

very effective method of improving access to essential medicines in developing

18 ibid.19 Correa C: Intellectual Property Rights and the Use of Compulsory Licenses: Options for Developing Countries, op cit, Ch III.2

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countries. It is therefore crucial that the reasons why compulsory licensing has so far not

been used by any developing country are identified and dealt with.

One of the most important reasons is the pressure exercised by the United States, and

to a much lesser degree also by the European Union. One worrying example was the

pressure exercised by the United States on Thailand in early 2000, when the Thai

government attempted to issue a compulsory license for the formulation patent of the

AIDS drug didanosine (ddI). The US responded by threatening Thailand with trade

sanctions. The Thai government consequently ended up rejecting activists’ calls for a

compulsory license because it was afraid of potentially serious adverse consequences

for its economy as this threat came at a time when the Thai economy was reeling from

the widespread South East Asian financial crisis.20 DdI was invented by the US

government and is licensed on an exclusive basis to the US drug manufacturer Bristol-

Myers Squibb who currently markets ddI at a monthly cost of $166. Since July 1997 the

daily minimum wage in Thailand has been frozen at $4.50. Moreover, the US has also

stimulated a Thai legislative bill, which is expected to be signed into law soon, that

severely restricts the use of compulsory licenses.21

Other reasons why compulsory licensing has not been used by developing countries

include the fear some governments may have that potential foreign direct investors will

react negatively if the country was to grant compulsory licences, and that in many

countries no internal administrative procedures for issuing compulsory have been

20 Médecins Sans Frontières: A Matter of Life and Death: The Role of Patents in Access to Essential Medicines, op cit21 Ford and Berman, op cit

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established or if such administrative procedures exist they may often be overly

bureaucratic and far too difficult, time-consuming or expensive to be used in practice.22

The situation regarding the pressure exercised by the United States is the most difficult

one to address. The U.S. government representatives to the TRIPS Council continue to

exert pressures against constructive interpretation of the TRIPS Agreement, and as

illustrated above the U.S. government exercise of economic pressure in the interest of

U.S. pharmaceutical producers is a serious problem for developing countries. As Brook

K. Baker points out: “the U.S. seems to have forgotten that lives - millions of lives,

13,000 lives everyday with respect to AIDS, TB, and malaria – hang in the balance.”23

The other main reasons are more easily solved. Regarding the fear that foreign direct

investors might become more reluctant to invest in the countries in which compulsory

licenses are granted, it should be evident that these investors recognize the risks which

are caused by public health threats such as the HIV/AIDS pandemic, and it seems highly

unlikely that they would perceive a compulsory license granted by the government to

redress such a crisis as evidence of a risk to general commercial investment.24

The third problem identified, namely the obstacles in the administrative procedures can

be solved if the governments in developing countries work to adopt legislation that

makes the granting of a compulsory license to address public health crises fast and

inexpensive. Various international organisations and developed countries can play an

22 Abbott F.M: The Trips Agreement, Access to Medicines and the WTO Doha Ministerial Conference, Quaker United Nations Office –Geneva, 19 September 2001, pp11-12. http://www.accessmed-msf.org/upload/ReportsandPublications/19920011223306/Fred%20Abbott%20paper%20on%20TRIPS.pdf23 Baker B.K: U.S. Post-Doha Conditions Can Kill, ip-health@lists.essential.org 12 March 2002 24 Investors in the automobile and mining sectors in South Africa, for example, have expressed increasing concern regarding the future of their employee base as a consequence of the HIV/AIDS pandemic. Abbott F.M., op cit, pp11-12

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important role in solving this obstacle by giving advice and making suggestions on these

matters.

Furthermore, another major issue that must be dealt with results from the fact that once

a compulsory licence is granted there may be significant costs associated with

establishing a local manufacturing capacity in order to be able to manufacture the

medicines the compulsory licence relates to. Some developing countries, for example,

Thailand, Brazil and India, have the capacity to produce high quality generic drugs. In

Thailand, the local manufacture of fluconazole, a medicine used to treat AIDS-related

meningitis which affects up to 25 % of AIDS patients in certain countries, has led to 95%

cuts in the price of this essential drug.25 However, it is clear that not all the developing or

least developed countries have capacity to manufacture drugs under compulsory

licence. It is also clear that developing countries will require a variety of medicines and in

order to effectively improve access to essential medicines production of different

medicines could be allocated among different countries. Moreover, as Abbot points out,

it may well be that certain developed countries will wish to aid developing and least

developed countries by producing under compulsory license to satisfy import

requirements.26 It is therefore important to note that there is nothing in the TRIPS

Agreement which would preclude the holder of a compulsory license from meeting

demand by importation from other countries. It is thus perfectly possible for a developing

country to grant a compulsory license to a manufacturer in another country who already

has an established place of production and who would then export the medicines to that

developing country. In fact, this may, for example in cases where the size of the local

25 Médecins Sans Frontières: A Matter of Life and Death: The Role of Patents in Access to Essential Medicines, op cit26 Abbott, op cit, p13

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market does not justify local manufacturing or where there is a need to promptly address

and emergency situation, be the only viable way to execute a compulsory licence.27

However, there are some major problems regarding the exportation of medicines

manufactured under a compulsory licence and these important issues will be addressed

in the next section of this essay.

The possibility to grant compulsory licences for export under the TRIPS

Agreement

I will now then turn into discussing in more detail the legal issues that are raised under

the TRIPS Agreement when a WTO member country wishes to grant compulsory

licences for export in order to improve access to essential medicines in countries in

which they are needed.

Article 28 of the TRIPS Agreement provides patent holders with the enumerated rights

regarding the making, selling, using and importing of products. Although a manufacturer

for export will clearly be “making” a product prior to exporting it might be argued that a

compulsory licence solely for purposes of export would not interfere with the rights of

patent holders, since the right to export is not an enumerated right. This, however,

seems not be a rather weak argument because of the fact that a product is clearly made

before it is exported,28 and it is therefore very highly unlikely that Article 28 would be

27 Correa C, Integrating Public Health Concerns into Patent Legislation in Developing Countries, op cit, p10128 It could, however, be argued that the term ‘make’ is flexible so that intermediate components of a patented product may be made and exported without contravening Article 28. In Deepsouth Packing v. Laitram, 406 U.S. 518 (1972), The U.S. Supreme Court interpreted the U.S. Patent Act not to preclude a manufacturer in the United States from exporting component parts of a patented product for assembly abroad, though this holding was later substantially reversed by an amendment to the Patent Act. See

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interpreted to allow production for export. Hence, I will discuss next whether such

production could then be authorized by granting compulsory licences under Article 31.

Article 31(f) provides that where the law of a Member allows for use without

authorisation of the right holder other than that allowed under Article 30. A compulsory

licence shall be granted “predominantly for the supply of the domestic market of the

Member authorizing such use.” The effect of this provision on compulsory licensing is

two-fold.29 Firstly, it is clear that medicines manufactured under a compulsory licence

can be exported as long as they are predominantly for the supply of the domestic

market. But suppose then that a developed WTO Member country wishes to create

regional supply facilities and grant compulsory licences in relation to essential medicines

and then allow export for humanitarian reasons, while at the same time continuing to

provide protection to the patent holder for its domestic market. It seems that the

provision ‘predominantly for the supply of the domestic market’ in Article 31(f) prohibits

this. However, the Article 31(f) limitation may not apply in cases where a compulsory

licence has been granted to remedy anticompetitive conduct.30 This provision that the

compulsory licence must be predominantly for the supply of the domestic market clearly

imposes a major legal obstacle which needs to be resolved since there are many

developing countries without local manufacturing capacity for the medicines they need.

It is submitted that in order to overcome the legal obstacle created by Article 31(f), the

TRIPS Agreement should be interpreted to allow one WTO Member to recognize and

give effect to a compulsory licence issued by another WTO Member, and to authorize

Abbott, op cit, pp 13-1429 See Abbott, op cit, p1330 Article 31(k). See Correa, Integrating Public Health Concerns into Patent Legislation in Developing Countries, op cit, p102

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local production for export to that other Member.31 Abbot points out that “the recognition

by one Member of another Member’s compulsory license should be voluntary in order to

avoid potential problems raised by Article 4bis (independence of patents) of the Paris

Convention.”32 The concept of ‘comity’ could be argued to provide a legal base for

voluntary recognition of compulsory licences.33 Under this concept, a country may

choose to give effect to the decision of authorities of another country if that decision

does not conflict with a strong public policy of the country where the decision is to be

given effect.

This, however, may not be very helpful since the recognition by the Member country

giving effect to the compulsory licence would still potentially conflict with the rights of the

patent holder in its territory. Hence a valid legal basis for authorizing the making and

exporting of patented medicine by a compulsory licensee would still need to be found. It

has been argued that Article 30 of the TRIPS Agreement could possibly provide a basis

for allowing local production and export of patented pharmaceuticals, as long as such

production and export is limited, not unreasonably conflicting with the normal exploitation

of the patent, and not unreasonably prejudicing the interests of the patent holder. The

legitimate interests of third parties must also be taken into account.34

31 Abbott, op cit, at pp 14-15 and see the communication from the European Communities and their Member States, The Relationship Between the Provisions of the TRIPS Agreement and Access to Medicines, IP/C/W/280, 12 June 2001. 32 Abbott, op cit, p14. Note also that although the language of the Paris Convention rule on independence of patents is ambiguous, it is at least arguable that a rule of automatic recognition by one country of another country’s decision to grant a compulsory license may be in conflict with that rule. Generally, under the rule of independence, determinations by the patent authorities in one country regarding the validity of a patent are not binding as to the validity of the patent in another country33 ibid. On the definition of comity: “Comity, in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other. But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience and to the rights of its own citizens or of other persons who are under the protection of its laws.” Hilton v. Guyot, 159 U.S. 113, 163-64, 16 S.Ct. 139, 143, 40 L.Ed. 95 (1895).”34 See Article 30 TRIPS and Abbott, op cit, pp 14-15

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A WTO member country invoking only Article 31 of the TRIPS Agreement as the basis

for granting a compulsory license for export of medicines would then potentially find itself

in conflict with the express text of Article 31(f). This would lead to a situation where those

member countries that are able to take advantage of the compulsory licensing provisions

of the TRIPS Agreement to supply essential medicines are those countries that have the

capacity to manufacture medicines under patent, whereas many countries most in need

of essential medicines would be excluded from taking advantage of compulsory

licensing.

It has been argued that Article 30, standing alone,35 could be used to provide an

exception for a compulsory license for export that is not permitted by the express text of

Article 31(f).36. It is difficult to predict whether a compulsory licence for export would

indeed constitute a valid exception. However, suppose that a WTO Member were to

adopt legislation allowing it to recognize and give effect to compulsory licenses for

export in reliance on Article 30 as opposed to Article 31. It would then presumably have

to make sure that it takes into account the limited nature of the exception. This could be

done, for example, by taking into account public health and nutrition needs as identified

in Article 8(1) of the TRIPS Agreement.37 Hence, it is arguable that if a compulsory

35 The EU Commission, Compulsory Licensing and Data Protection, Legal Issues related to CompulsoryLicensing under the TRIPS Agreement paper (referenced in para. 13 of Communication to TRIPS Council) states that: “It is important to note that the footnote to Article 31 (‘other use refers to use other than that allowed under Article 30’) indicates that Articles 31 and 30 are mutually exclusive: a WTO Member can not invoke both Article 31 and Article 30 to justify the same practice.” 35 The panel said: “Articles 30 and 31 are linked together by the opening words of Article 31 which define the scope of Article 31 in terms of exceptions not covered by Article 30.” Footnote 429 states: “Article 31 is titled ‘Other Use Without Authorization of the Rights Holder’, and footnote 7 to Article 31 defines ‘other use’ as ‘use’ (derogations from exclusive patent rights) other than that allowed by Article 3036 Abbott, op cit, pp 15-1637 ibid p15

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license for export is not permitted under Article 31, then an exception for export may

constitute a valid limited exception under Article 30, without reliance on Article 31. It has

been argued that Article 30 solution would be superior to Article 31 solution because of

the numerous procedural and practical obstacles, which would inevitably cause delays in

implementation of production for export, could be avoided.38 However, the way in which

the TRIPS Agreement prescribes the conditions for the grant of compulsory licenses and

regulate the form of exceptions, could be argued to specifically disapprove the use of

compulsory licensing predominantly for export, and because of the relationship of Article

30 and Article 31 it is possible that Article 30 would not be allowed to be used to avoid

the obstacles created by Article 31(f) to achieve what in essence would be a compulsory

licence for the purposes of export.39

So, it is clear that compulsory licences may legitimately be granted for importation, as

well as the manufacture, of essential medicines under the TRIPS Agreement. However,

if a developing country does not have adequate local manufacturing capacity and no

manufacturer in other WTO member countries, to whom a compulsory licence is granted

or could be granted, is able to import drugs to the country in need due to the fact that

compulsory licences must be granted predominantly for the supply of the domestic

market, this developing country is then effectively precluded from protecting the life and

well-being of its people. In these circumstances, the purpose of WTO Members states

being allowed to grant compulsory for essential medicines is clearly frustrated, since

they will not be able to elevate vital public interests over private interests when it is

necessary. This is therefore an issue of immense importance which needs to be

addressed and resolved as soon as possible.

38 Baker B.K. U.S. Post-Doha Conditions Can Kill, op cit.39 See Abbott, op cit, p16

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One suggested way of solving this would be to interpret the TRIPS Agreement to allow

compulsory licences granted in one Member country to be recognised in other Member

countries, and to interpret Article 30 in a way which would permit an exception to the

patent holder’s right in the country of export under these circumstances.40 Another

solution could be to expressly recognise that the scope of limited exceptions under

Article 30 is not constrained by the terms of Article 31.41

As mentioned above, the purpose of allowing WTO members to grant compulsory

licences for essential medicines may in some cases be frustrated due to the restriction in

Article 31(f). Hence, if the purposes of Article 31 would be frustrated by the fact that

those who require essential medicines are effectively denied access to them, Article

31(f) could in these limited circumstances be interpreted to allow a predominant portion

of products made under compulsory license to be exported.42 Moreover, International

human rights law would certainly provide support for interpreting Article 31 in a way

which gives meaningful effect to the right to grant compulsory licenses to meet public

health needs.

There is, however, a key obstacle in the way of all these suggested methods of

interpretation. This the fact that the United States continues to exercise strong pressure

in order to make sure that the exceptions in the TRIPS Agreement are interpreted as

narrowly as possible.43

40 ibid. 41 This could be argued to be permissible because it does not contravene any express terms of the TRIPS Agreement, but rather clarifies that footnote 7 to Article 31 is not inteded to create a situation of mutual exclusivity.42 Abbott, op cit, p1643 See e.g. Baker B.K, op cit

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Having demonstrated the important role compulsory licences can have in improving

access to essential medicines and having discussed the legal rules and the problems

relating to their application, I will now briefly discuss three important issues that have

been raised, namely, how will compulsory licensing affect the quality of drugs; and how

are the duration of a compulsory licence and the remuneration to the patent holder

determined.

Will compulsory licensing affect the quality of medicines?

Some people might argue that compulsory licensing will lead to cheaper but poorly

performing drugs. As Duckett states: “they point out that with patented products,

pharmaceutical manufactures allocate significant resources to developing trustworthy

sources of raw materials; building manufacturing facilities that can be counted on for

consistent and high quality products; using and maintaining distribution systems that

allow every government or individual buying the drug access to products upon demand;

and refining products to remove substances that cause side effects.”44

However, it is important to understand that while these issues around drug quality are

extremely important, they are not related to compulsory licensing or the production of

generic drugs per se. Sub-standard, expired and counterfeit medicines are found in

international and local markets with or without compulsory licensing.45 All countries

should therefore be committed to ensure that every aspect of national drug policy,

including quality control of available drugs, receives increased attention.46

44 Duckett M, op cit, p645 ibid46 This is indeed the aim of the Revised Drug Strategy adopted by the 52nd World Health Assembly

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The duration of a compulsory licence and the amount of remuneration paid to the

patent holder

Both of these are important issues. It is a general practice that compulsory licences are

granted for the remaining term of the patent.47 In any case, developing countries should

make sure that the term is not too short so that they will be able to effectively address

their vital public interests. Regarding the determination of the remuneration paid to the

patent holder, Carlos Correa states it could, for example, be based on a percentage of

net sales or be a ‘reasonable’ royalty which could be the same as what a third party

would pay for a voluntary licence.48 In India, the applicable policy guidelines normally

limit royalty payments to a maximum of 4% of net sales, while royalties of up to 8% have

also been reported.49

Conclusion

Compulsory licensing can have a very important role in ensuring access to essential

medicines in developing countries. Its effective use must therefore be encouraged.

Millions of lives are lost because people in developing countries do not have access to

essential medicines. We must not acquiesce to this fact.

Developing countries should press for a formal recognition that compulsory licences can

be granted when they are needed in order to improve access to essential medicines. As

demonstrated in this essay, the provisions relating to the use of compulsory licences in 47 Correa, Integrating Public Health Concerns into Patent Legislation in Developing Countries, op cit, p10748 ibid. pp 106 and 10849 ibid at p108

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the TRIPS Agreement are permissive. Developing countries must ensure that their

national legislation has provisions which will make sure that compulsory licences can be

used effectively and that the procedures for obtaining such licences are efficient and

expeditious.50

In order to ensure that all developing countries have the possibility to use compulsory

licences effectively, the Article 31(f) limitation that a compulsory licence must be granted

predominantly for the supply of the domestic market must be liberalised. This issue

could be addressed even more effectively if the use Article 30 would be allowed, for

example, in circumstances where the purpose of granting compulsory licences for

essential medicines would otherwise be frustrated. Nothing in the TRIPS Agreement

should prevent Member countries to grant compulsory licenses of essential medicines to

supply foreign markets where the medicines are needed.51

50 See e.g. Timmermans K, Hutadjulu T: The TRIPS Agreement and Pharmaceuticals, Report of an Asean Workshop on the TRIPS Agreement and its Impact on Pharmaceuticals, Jakarta2-4 May 2000, p33 on how effective provisions in national law would also encourage patent owners to behave correctly. http://www.who.int/medicines/library/dap/aseantripsagreement.pdf51 See e.g. TRIPS: Council Discussion on Access to Medicines - Developing Country Group’s Paper, 20 June 2001, IP/C/W/296, http://www.wto.org/english/tratop_e/trips_e/paper_develop_w296_e.htm

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