TWN Info Service on Health Issues No. 4

More countries use compulsory license, but new problems emerge

By Sangeeta Shashikant
Geneva, 19 May 2005

A number of developing countries have made use of compulsory licensing or government use orders to enable the supply of more affordable generic drugs in recent years.  However, access to medicines is being affected by new developments such as bilateral free trade agreements and the coming into force of India's new patent laws in 2005.

These points emerged at a briefing session titled "Current Intellectual Property Trends and Implications for Access to Medicines" organized at the World Health Assembly by the Third World Network and Oxfam.

Mogha Kamal Smith of Oxfam said that the WTO's agreement on TRIPS contained flexibilities allowing countries to take measures to supply generic versions of patented drugs. However, the space given to developing countries was being taken away by bilateral and regional free trade agreements (FTAs) with developed countries, especially the United States.

The FTAs require developing countries to undertake commitments beyond those in TRIPS. For example, some FTAs require that countries not make use of "parallel imports" while others restrict the grounds for compulsory license. Many of the FTAs also impose "data exclusivity" clauses which restrict the use of the patent holder's test data as the basis for granting safety approval of the generic versions of the same drug.

Smith said these tactics were used by the branded-drug companies to prevent or delay competition from generic drugs, which adversely affected the patients' access to medicines. She called on governments not to have any more intellectual property provisions in FTAs. She also called on the drug companies to live up to their social responsibility and stop pushing for higher intellectual property standards in FTAs.

Ellen T'Hoen, Policy Director of Medicins Sans Frontieres, expressed concerns that the main source of affordable generic versions of new medicines may dry up in future as India allows for patents on medicines from 2005 to comply with its TRIPS obligations.

Although the new Indian patent law may not stop generic drugs that have been in production until the law was passed, there was concern that there would not be generic drugs to compete with new patented medicines.

If this were to happen, it would raise the cost of treatment as old drugs are phased out (due to microbial resistance) and new drugs have to be used. The jump in costs could be seen when MSF moved from giving patients first-line drug treatment to second-line treatment with new drugs.

In June 2004, the cost of HIV/AIDS treatment per patient per year in Malawi was $288 for first-line drugs and $1,875 for second-line drugs. The figures for other countries were: Kenya ($292 and $1,594); Cameroon ($277 to $4,763) and Thailand ($352 to $3,500).

She concluded that governments should act when patents and high prices form a barrier to access to medicines, and that urgent international action is needed to ensure availability of affordable versions of new medicines in a post-2005 world, adding that the affordability of second-generation AIDS medicines would be a real test of the value of the WTO's Doha Declaration.

She also called on WHO to explore the possibility of automatic licenses and patent pools as well as alternative frameworks to address research and development needs for neglected diseases.

Martin Khor of the Third World Network said that with the clarification of the rights of WTO members to compulsory licenses and other flexibilities, it is now up to the developing countries to make use of these measures at national level.

He gave a number of examples of developing countries that had recently taken steps to make use of compulsory licensing and government-use orders.

For example, Malaysia had issued a "government use order" and in February 2004 it gave a contract to a local firm to import three HIV/AIDS drugs (didanosine, zidovudine, lamivudine and zidovudine combination) from an Indian firm, Cipla, for supply to government hospitals.

According to Ministry of Health data, the average cost of government treatment per month per patient dropped from $315 to $58, equivalent to about an 81% reduction, when generic drugs were used.

The number of patients who could be treated in government hospitals and clinics increased from 1,500 to 4,000, and the Health Ministry is now targeting treatment for 10,000. As a result of the exercise of the right of government use, the patent holders have also dropped their own prices.

The government also offered the companies holding the patents a compensation of 4% of the value of stocks of the generic drugs actually delivered.

In the case of Zimbabwe, the government had declared a health emergency with regard to HIV/AIDS. An emergency is one of the grounds under which compulsory license can be issued in Zimbabwe patent law.

Subsequently the government issued compulsory licenses to three local companies to either import or produce four varieties of antiretroviral drugs for treating HIV/AIDS. According to the Health Ministry, the prices of the generic drugs are about a third of the branded patented products.

Khor also gave the case of Indonesia, the second Asian country in the post-Doha Declaration period to issue a government use authorization. On 5 October 2004 a Presidential Decree on exploitation of patent by the government on antiretroviral drugs was issued in light of "the urgent need of community in the effort to control HIV/AIDS epidemic".

Under the decree, the Minister of Health could appoint a pharmaceutical factory as the patent exploiter on behalf of the Government, to produce two ARVs: Nevirapine (for 7 years) and Lamivudine (for 8 years).

An Indonesian Health Ministry official who was present at the session explained that Indonesia had made use of the flexibilities available in the TRIPS agreement and in the Doha declaration to issue the Presidential decree. She said the patent holder was offered half a percent of the generic drug revenue as remuneration.

The ARV drugs were freely distributed through government hospitals. After the government use order was issued, the cost of treatment had gone down significantly, said the official.

Jamie Love, director of Consumer Project on Technology, presented data on the rate of remuneration payable to companies holding patents when some developing country governments issued compulsory licenses or government use orders recently.

The remuneration rates (as percent of the prices of the generic drugs) was 2% in the case of Mozambique, 2.5% Zambia, 0.5% Indonesia and 4% Malaysia. The patent holders in South Africa agreed to 5% remuneration in their licenses with local firms.

Love said that according to guidelines of the Japanese patent office in 1998, the compensation was in the range of 0 to 6 per cent, while the recommended payment mentioned in the UNDP's Human Development Report 2001 was 2 to 6 percent.

In the recent Canada law enabling generic drug companies to export their drugs to developing countries, under the Doha Declaration, the guidelines for compensating the patent holders ranged from 0 to 4 per cent, in accordance with the human development index of the countries to which the exports go.

For example, the compensation payable would be 2.4% in the case of exports to Brazil, 1.9% for China, 1.2% for India, 2.3% for Thailand, 1.06% for Ghana, 0.68% for Kenya, 0.61% for Nigeria and 0.29% for Malawi.

During the discussion, the Minister of Health for Guyana remarked that until 2001 the cost of treatment for HIV/AIDS was prohibitive in his country, but after the introduction of generic drugs the cost of therapy had gone down significantly, thus increasing access to medicines.