Interrelation between TRIPS Agreement and Compulsory Licensing

THE TRIPS AGREEMENT & COMPULSORY LICENSING

The TRIPS Agreement, signed parallel to the establishment of the World Trade Organization (WTO) in 1994, tried to create an international intellectual property rights regime that would harmonize legislative standards among WTO member countries. Before the TRIPS Agreement, many countries did not allow pharmaceutical products to be patented to make medicine affordable. For instance, before this agreement, India and Brazil only allowed process patents but not product patents. This enabled local generic pharmaceutical companies to reverse-engineer and develop bioequivalent drugs.

WTO member states must ensure product patents and exclusive marketing rights to inventors under a TRIPS-compliant patent system. These extended patent rights allow pharmaceutical corporations to charge exorbitant prices, which help companies recoup R&D expenditures but often keep medications out of reach for the poor. As a result, former World Bank Chief Economist Joseph Stiglitz called the TRIPS Agreement “a death certificate for thousands of individuals in the world’s poorest countries”.

But the TRIPS Agreement nonetheless leaves countries with considerable scope to regulate patents for socially useful products such as medicines. The Doha Declaration17 on the TRIPS Agreement and Public Health, adopted in November 2001, emphasizes and clarifies an essential flexibility conceded to governments in Article 31 of the TRIPS agreement: the right to issue compulsory licences.

The use of a patent without the permission of the patent holder is known as compulsory licencing. Issuing a compulsory licence for a pharmaceutical treatment, for example, permits a government to manufacture or import generic copies of the therapy without the approval of the patent owners.

Clause 5 of the Doha Declaration underlined that “each WTO member has the power to award compulsory licences and the freedom to define the conditions on which such licences are given”. Furthermore, in “national crises” and “other instances of great urgency,” governments might grant compulsory licences without the usual formalities, such as consulting with the patent holders. Clause 5(c) added that “public health crises, including those relating to HIV/AIDS, TB, malaria, and other epidemics,” might constitute “a national emergency or other conditions of exceptional urgency.” There is little question that the COVID-19 epidemic constitutes a public health disaster under article 5(c), which justifies the use of mandatory licensing.

Several countries have already effectively utilized compulsory licensing to provide affordable medications to their populations during past public health emergencies. The following is a summary of their experiences.

EXPERIENCES IN THE PAST: COMPULSORY LICENSES FOR ANTIRETROVIRAL

TREATMENTS

Since the creation of the WTO, more than twenty countries have either issued or publicly considered granting a compulsory licence for one or more pharmaceutical products. Governments failed to supply required licenses under a few conditions. A mere public statement or discussion of the possibility of granting a compulsory licence for a medicine has occasionally prompted the patent holder to offer a discount or a license for the drug.

Until now, forced licencing — whether it results in real issuance or a reduced negotiated medicine price – has been largely used for HIV/AIDS treatments. Brazil, Ecuador, Ghana, Indonesia, Malaysia, Mozambique, Thailand, Rwanda, Zambia, and Zimbabwe all received obligatory licences for one or more antiretroviral medicines in the 2000s in response to the misery of their HIV-infected population who could not afford antiretroviral therapy. While most countries granted licenses for one patented drug, Ghana and Zimbabwe slapped blanket compulsory licences for all anti-retroviral drugs.

Thailand and Brazil were two countries that made significant strides in reducing antiretroviral medicine prices in the mid-2000s. Both countries provided free antiretroviral drugs to all residents living with HIV/AIDS, encouraging them to seek low-cost antiretroviral sources. Both sought to obtain and distribute efavirenz (sold by Merck under the brand name Sustiva) and lopinavir/ritonavir (marketed by AbbVie, formerly Abbott Laboratories) to their patients.

Merck offered efavirenz at $500 per patient per year (PPPY) in initial pricing negotiations with Thailand, whereas Abbott sold lopinavir/ritonavir for $2200 PPPY. The Due to the exorbitant prices, the Thai government rejected both of these proposals and granted mandatory licences for both drugs in late 2006 and early 2007. These licences allowed the Thai government to import generic versions of antiretroviral medications from India at much Cheaper prices – generic efavirenz US$224 and generic lopinavir/ritonavir at US$676.

In 2007, Brazil, like Thailand, issued an efavirenz required licence. Merck first proposed efavirenz to Brazil for US$760. Brazil was allowed to generically import efavirenz at a cost of US$170 per patient/year after issuing a compulsory licence for the drug. However, unlike Thailand, Brazil does not need lopinavir/ritonavir licencing. Abbott Laboratories finally lowered the price of lopinavir/ritonavir in Brazil from US$3241 to US$1380 for an earlier version and US$1518 for a heat-stable version after Brazil’s repeated price discussions and grave risk of using a compulsory licence. Notably, the reduced cost of Abbott’s Lopinavir/Ritonavir in Brazil remained more than twice as expensive as Thailand’s generic lopinavir/ritonavir purchased via forced licencing and import from India.

Though the ability to lower drug prices, many poor countries are still cautious about using mandatory licencing for drug products. To ensure that, some countries are limited by limits in bilateral interactions, such as free-trade agreements that limit the use of mandatory licensing. Many governments, however, are not legally prohibited from instituting mandatory licensing but hold back because of fears of trade retaliation and the complicated of enforcing compulsory licences. These difficulties are formidable but not insurmountable.

In the case of Thailand, national and global public support helped cushion the punitive responses of Western governments as well as pharmaceutical corporations that threatened to remove new drugs from the Thai market. Thai authorities meticulously schooled themselves on the TRIPS Agreement and the Doha Declaration to negotiate the difficult nature of enforcing compulsory licences. Conferences with the WHO and non-governmental groups such as Médecins Sans Frontières and Knowledge Ecology International, in particular, helped strengthening the capacity of Thai authorities to implement compulsory licences and TRIPS flexibilities.

The lessons learned from the HIV/AIDS pandemic should be applied to the fight against growing number of communicable diseases as the climate change is facilitating greater number of disease. Nations that have used compulsory licencing in the past to provide cheap antiretroviral medications to their citizens should do so again if required. Developing nations That have not previously implemented compulsory licencing should learn from the experiences of those that have. The WHO, WTO and legal organisations such as the Advisory Centre on World Trade Organization Law (ACWL) can facilitate information exchange between public health officials and government lawyers in developing countries. Whether through virtual seminars or other collaborative online platforms, now is the time to help poor countries in establishing the legal and logistical ability to deploy compulsory licensing in the face of onslaught of Pademics and endemic being spread across the globe.

Author: Devansh Tiwari, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

REFERENCES

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