Compulsory licensing of Patented Drugs and Access to Medicine

“Cancer Drug Is For Rich Westerners, NOT Poor Indians. We did not develop this medicine for Indians we developed it for western patients who can afford it” Marijn Dekkers, Bayer CEO

Compulsory licensing of Patented Drugs and access to Medicine have been debated globally on various occasions and  the above-mentioned statement was given by Bayer, a German pharmaceutical company which holds the rights of patent for a cancer drug “Nexavar” in response to the issuance of compulsory license by Indian government for the drug to a generic pharma company Natco Pharma Ltd. This statement contradicts the very notion which has always been put forward by these pharmaceutical majors which pretend to be the saviors of the global healthcare. This excessive focus on profit reflects that diseases that cannot yield business are neglected, and patients who cannot afford the price are thrown out of the picture. The tool which is in the hands of these pharmaceutical majors is rights of Patent holders, which is a monopoly right to the inventor of any drug in terms of determining the mandates in which the drug is to be exploited. The statement was above given by the holder of patents of a cancer drug clearly shows that the only factor of which they are concerned in terms of exploitation is monetary profit. Is such a case government is the only hope for all those who cannot afford to have access to medicines because of the cost is so enormous that it becomes beyond the reach of the common man in developing nations, so the government under exceptional circumstances may use a tool of compulsory licensing for the benefit of the people at large and may order manufacturing of the patented drug to any domestic generic company to make it available at affordable price. The first instance in which it is done in the case of Bayer pharmaceuticals drug, which led to a hue and cries in the Intellectual property regime at international level, irrespective of the fact of India being in terms of international norms of TRIPs Agreement and The Paris Convention for the Protection of Industrial Property of 1884. So in this paper, I will be explaining the global norms of issuance of compulsory licensing and the needs and impact of such provision in national laws, particularly in that of developing nations.

1.  Introduction

Compulsory licensing is one of the public interest provisions in the intellectual property laws which was able to manage its space in every intellectual property legislation in domestic laws and also at international level, we have compulsory licensing provisions in copyright laws, protection of plant verities laws and plant breeders laws, designs law, geographical indication laws and similarly in patent legislation also. It is also a mechanism allowed in TRIPs Agreement for involuntary exploitation of patents, before TRIPs Agreement Article 5[I] of The Paris Convention for the Protection of Industrial Property allows member states to grant compulsory licenses to for involuntary exploitation, this international acceptance of the norm of compulsory licensing conveys an expression that this is an unavoidable provision for any nation-state, but these provisions have unable to maintain their spaces with much importance in the domestic laws of United States of America and in some countries of Europe, irrespective of the global acceptance of the rule of compulsory licensing as it has been given importance in the domestic legislation of developing Nations but still difference of opinion always exists in terms of having or not having these public interest provisions.

A justification for Compulsory licensing of Patented Drugs

Limit on the private rights regime, as when the larger public interest is in question some limits on the private rights can be justified, so compulsory licensing is the most significant example of any such justification Article 7 of TRIPs Agreement which is the Grundnorm of the Intellectual property rights at global level prescribes ‘property rights should be granted in the manner conducive to the social and economic welfare’. Compulsory licensing is the effort to make a balance between the exclusive right of exploitation of the innovation in the market on one hand and assuring that these innovations will be available for public exploitation and use in the market.

“A better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering for life and death”.[II]

TRIPs Agreement Article 8 lays emphasis on the protection of public health and nutrition, broad availability of medicine at an affordable rate is a factor which is helpful in fulfilling the above mentioned objective in TRIPs Agreement, the threat of spreading of the infectious disease at a global level also advocates for the broader availability of the medicines for public at large

In economic concerns, the developing countries with less manufacturing ability this provision helps them access to the medicines at less cost, countries which cannot afford to invest in research and development are not to be left on their own, just for the sake of monetary benefits attached to the patent holder. Even if the patent holder is devoid of full exploitation in his own terms, then also a portion of consideration is always given to the patent holder as royalty for exploitation of patents.

Justification against Compulsory licensing of Patented Drugs:

The main argument which has always been put forward against compulsory licensing is that it contradicts the basic purpose of the patent law, which is to incentivize the research and leads to innovation. In order to recoup the cost of Research and Development patents are the major legal protection for exploitation at their own terms. Facts reveal that Europe invests more than E27 billion and the United States invests more than $38 billion annually in pharmaceutical research.[III]

Patents do more than only compensating the costs of investment, they incentivize the industry ad a profitable venture and promotes more and more research by that, allowing circumvention of the patent with measures like compulsory licensing research advancement will be slow down. Allowing others to use the research backed by efforts, will be demoralizing for the innovators. The main justification is to make the innovation to the public at large will be stroked down such provisions, as they lead to a decrease in the research and innovation.

2.  International Legal Standards for Compulsory licensing of Patented Drugs

International norms, regulated by treaties and convention have been effective in establishing international legal standards. Such has been with the legal standard related to compulsory licensing; TRIPs agreement, the Doha Declaration and the Paris Convention of 1884 are prominent among them.

The Paris Convention for the Protection of Industrial Property, 1883

This is one of the Initial phase agreements on protection of intellectual property to provide protection on the intellectual property of the foreign nationals. It was further revised in 1967, and again it is administered under the authority of the World Intellectual property organisation (WIPO). Article 5A (2)[IV] empowers the member states to grant the issuance of the compulsory license on the ground of abuse of the exclusivity granted by the patent. Article 5A (4)[V] of the convention empowers the member state to issue the compulsory license only if the patent holder has failed to exploit the invention in the domestic market. However, it restricts the issuance on two grounds if:

  1. Fewer than three years have passed from the date of granting of the patent
  2. If there are legitimate reasons for the failure of the exercise of patents

Indian patents Act 2005, section 84 contains the limitation of 3 years as it is mentioned in the Paris convention.

Compulsory Licensing Provision under TRIPs Agreement

Agreement on Trade-related Aspect’s of Intellectual Property Rights or generally attributed as TRIPs Agreement, which is promulgated and monitored by WTO, is one of the most significant international agreements on intellectual property. This agreement was finalized by ten years of negation between developed and developing nations. This agreement contains provisions which are related to compulsory licensing in terms of intellectual property.

Under article 27(1) of TRIPs Agreement patents are to be given to “new, involve an inventive step and are capable of industrial application”. TRIPs Agreement does not define any of these terms and hence grants a great flexibility for making use of these provisions

Article 27(2)[VI] specially states that member states can exclude inventions from patentability if it is necessary to protect public health.

Article 31 of the TRIPs Agreement deals specifically with the provisions related to compulsory licensing and these provisions, though it does not specifically use the term “compulsory license” instead it uses the term “use without the authorisation of the right holder” and includes use by the third parties and use by the government. There are many provisions in this article but the most important is 31(b)[VII] which explains the mechanisms and situations in which a compulsory license can be issued without seeking the consent of the patent holder. This article can be invoked in situations of national emergency, non-commercial public use, abuse of patent or anti-competitive conduct.

Doha Declaration;

Doha declaration enlarged the scope of compulsory licensing. Under the TRIPs Agreement, a member state can grant a compulsory license to meet the needs of public health within the boundaries of the country. After TRIPs Agreement some stakeholders come forward with the opinion that TRIPs Agreement is not effective enough to address the healthcare needs of the developing nations. The Doha Declaration 2001 was to address the issues of exports of the generic drugs manufactured for the domestic market. It lay down that TRIPs Agreement is to be interpreted in such a manner so it supported the healthcare needs of developing countries and access to medicine for all, paragraph 6 is the impotent mandate in such term. Paragraph 6 recognizes that developing countries with low or manufacturing capacities will not be able to use the benefit of compulsory licensing for public good under TRIPS AGREEMENT, so it instructed council for TRIPs to come up with a solution for that. The in 2003 WTO comes up with a solution of waiving the mandate of Article 31(f)[VIII] for ‘domestic market’ restriction under certain circumstances. It allows the member states to issue compulsory licenses to produce generic drugs for exports to least developed countries when they are successful in establishing that they have no sufficient capacity to manufacture the same.

3.  India’s Issuance of the first compulsory license ever:

On March 9, 2012, the controller of patents issued the first ever compulsory license in India for a cancer treatment drug Nexavar to an Indian generic drug making company Natco Pharma Ltd. Patented by Bayer Corporation of German at 6 percent royalty as a compensation. The compulsory license was sought under section 84(1) of The Indian Patents Act on the 3 grounds

  • The drug was not sufficiently available for the public at large:

Bayer was able to provide the drug to only 2% of the people who are in need of that drug as estimated in 2011, it was held by the controller that Bayer has failed to import and provide sufficient quantity of drugs, and it was available only is some prominent hospitals and with a very high price tag. Controller also affirmed that Bayer’s importation of the drug has been negligible quantities following the years of patent

  • It was sold at an exorbitantly high price:

Bayer contended that they had invested a lot in the Research and Development of the drug, but this was not accepted by the patent controller and said that this is not a reasonably affordable price of a drug to be sold in India, The cost of one month treatment with Bayer’s drug is 2,800,000 and the same cost in the generic version of Natco is 8,800.

  • Bayer didn’t work the patent in India

Controller relied on the Article 5A (2) of the Paris Convention which is related to abuse of the rights by the patent Holder, in this case, the controller said that ‘worked in India’ in section 84 (1)(c) means manufacturing in India, not merely importing in India. Considering that Bayer has a manufacturing Unit in India, and they manufacture cancer drug also. So in this case not manufacturing the drug, and even not intending to manufacture the drug within 4 years of the patent grant Implies that the drug is not worked in India.

This is considered to be one of the landmark precedents in terms of compulsory licensing for drugs are concerned. This was the first time the abuse of the patent has been curtailed by a public interest provision. This decision was challenged in the court but was upheld by the courts and other appellate authorities. This decision of the patent controller has a huge impact on the prospects of access to medicine, a Swiss major Roche Holding AG collaborated with one Indian Pharma to repack and sell their cancer drug at a lower price. But on the other hand, after this decision is made, India is thoroughly criticised on the global level in terms of protection of Intellectual property rights.

Conclusion:

After Indian issued first compulsory licensing in March 2012, a global outcry from multinational pharmaceutical corporations, and other interested groups, including the United States government has arisen. They continue to put forward the notion that Compulsory licensing of Patented Drugs can be issued only in the case of Heath emergencies and only in certain diseases and in no other circumstances. The US has recently started putting up pressure on India in support of Pharmaceutical Industries Complaints. The United States Trade representative has again placed India in priority watch list in its special 301 Report, not only this, the US also announced an OCR (Out of Cycle Review) on India’s IP regime which can be followed by trade sanctions. The global intellectual property chamber of US Chamber of Commerce issued a report as “India: International Outlier on IP” and hold an event tagging India as an “Anti-IP” stance and focus should be given ion providing better IP protection to the products in India. The actions which were taken by India was in Full compliance with the TRIPs Agreement but still the voice which raises all over the globe tagging India as an ANTI-IP nation resembles that the battle of patent protection on one hand and Having public interest provisions in patent laws like Compulsory licensing, on the other hand, is no more a legal battle. The political economy behind the protection of the patent regime on a global level and neglecting the public interest at large is to be understood by looking outside the preview of the law. Overemphasizing on the strict interpretation of the international instruments related to compulsory licensing by the Pharmaceuticals Majors and liberal Interpretation by developing nations on the other is now the very cause of debate in the present patent protection regime.

Indian patent law under Patent Act 2005, provide for various public interest provisions but now the prima facie issue is that how much we will succeed in the negotiation of protecting these provisions form a global pressure. In the present era of globalization, when rights are global and duties are local, a new jurisprudence of Access to justice is to be established to protect the rights of those who do not have a say in making of these new global norms in this global debate between private interest and public welfare.

EndNotes

[I] Paris Convention for the Protection of Industrial Property Art 5(A)(2), 20 March 1883 21 UST 1583, 828 UNTS 305 (revised at Stockholm Revision Conference 14 July 1967).

[II] R Michael Gadbaw and Timothy J Richards Intellectual Property Rights: Global Consensus, Global Conflict? (Westview Press Boulder, CO 1988) 186.

[III] Amiti Sen ‘US Protests Patent Issuance to Natco to Sell Copied Versions of Nexaver’ The Economic Times, 27 March 2012. Available at http://articles.economictimes.indiatimes.com/2012-03-7/news/31245102_1_compulsory-licence-patent-owner-indian-patent-office (accessed 27 January 2015).

[IV]Article 5A (2) “Each country of the Union shall have the right to take legislative measures providing for the grant of compulsory licenses to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work.”

Accessed on: http://www.wipo.int/treaties/en/text.jsp?file_id=288514#P123_15283.

[V] Article 5A(4) “A compulsory license may not be applied for on the ground of failure to work or insufficient working before the expiration of a period of four years from the date of filing of the patent application or three years from the date of the grant of the patent, whichever period expires last; it shall be refused if the patentee justifies his inaction by legitimate reasons. Such a compulsory license shall be non-exclusive and shall not be transferable, even in the form of the grant of a sub-license, except with that part of the enterprise or goodwill which exploits such license.” Accessed on: http://www.wipo.int/treaties/en/text.jsp?file_id=288514#P123_15283

[VI] Article 27(2) “Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect public order or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.” Available at : http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5

[VII] Article 31(b) “ such use may only be permitted if, prior to such use, the proposed user has made efforts to obtain authorization from the right holder on reasonable commercial terms and conditions and that such efforts have not been successful within a reasonable period of time. This requirement may be waived by a Member in the case of national emergency or other circumstances of extreme urgency or in cases of public non-commercial use. In situations of national emergency or other circumstances of extreme urgency, the right holder shall, nevertheless, be notified as soon as reasonably practicable. In the case of public non-commercial use, where the government or contractor, without making a patent search, knows or has demonstrable grounds to know that a valid patent is or will be used by or for the government, the right holder shall be informed promptly.” Available at : http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5

[VIII] Article 31(f) “any such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use.” Available at : http://www.wto.org/english/tratop_e/trips_e/t_agm3c_e.htm#5

 

Divyesh Pratap

About Divyesh Pratap

Divyesh did his Masters in Law in Access to Justice from TISS Mumbai and Graduation in law from Banaras Hindu University, He is currently researching about impacts of Strengthening TPM's on protection of Intellectual Property Rights in digital medium.

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