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TWN Info Service on Intellectual Property Issues (Jul11/01)
25 July 2011
Third World Network


Dear All, 

On 12 July 2011, MPP and Unitaid announced on 12 July, a voluntary license agreement between MPP and Gilead Sciences for the production of tenofovir, emtricitabine, cobicistat and elvitegravir, as well as a combination of these products called "Quad" for the treatment of HIV/AIDS. Tenofovir is also licensed for use to treat Hepatitis B, common among the poor in many developing countries. 

Please find below an analysis of the terms and conditions of the licenses. 

An earlier version of this article was first published in SUNS #7195 on 21 July 2011.

Regards

Sangeeta Shashikant
Third World Network


Gilead grants license to medicines pool, devil is in details

Published in SUNS #7195 Thursday 21 July 2011

London/New Delhi, 20 Jul (Sangeeta Shashikant and K. M. Gopakumar) -- There are mixed reactions to the first licensing agreement between Gilead Sciences, one of the world's largest pharmaceutical companies, and the Medicines Patent Pool (MPP), a Swiss foundation, for the production of some HIV/AIDS medicines.

The Medicines Patent Pool and UNITAID (an international drug purchasing facility to provide medicines to the poor for HIV/AIDS, malaria and tuberculosis) announced on 12 July, a voluntary license agreement between MPP and Gilead Sciences for the production of tenofovir, emtricitabine, cobicistat and elvitegravir, as well as a combination of these products called "Quad" for the treatment of HIV/AIDS. Tenofovir is also licensed for use to treat Hepatitis B, common among the poor in many developing countries.

Ellen t'Hoen, Executive Director of the Medicines Patent Pool, marked the agreement as a "milestone in managing patents for public health", while Stephen O'Brien, Minister of International Development for the United Kingdom, welcomed the agreement and noted that the UK would continue to support the Pool as an important contribution to ensuring that the largest number of people living with HIV get access to the treatments they need.

However, concerns were also voiced by others involved in seeking better access to affordable medicines, as they pointed to the shortcomings of the agreement reached. Medecins sans Frontieres (MSF) noted in its press release that "the agreement falls significantly short of what is needed to fully meet the public health needs for HIV/AIDS".

The MPP is an independent Swiss foundation based in Geneva and funded by UNITAID under a five-year Memorandum of Understanding. It focuses on negotiating with patent holders to interest them in licensing their intellectual property to other producers to facilitate the production of generic medicines initially for the treatment of HIV/AIDS.

[In 2006, Brazil, Chile, France, Norway and the United Kingdom decided to create UNITAID, an international drug purchasing facility financed with resources that would be both sustainable and predictable. A tax on airline tickets was chosen as the most appropriate means of providing sustainable funding. There are 29 countries supporting UNITAID today and the three diseases covered are HIV/AIDS, malaria and tuberculosis.]

In July 2008, the UNITAID board decided to explore the possibility of establishing a voluntary patent pool for medicines, and in December 2009, agreed to create the MPP as a separate entity, which would focus on increasing access to HIV medicines in developing countries.

Unsurprisingly, many developed countries have trumpeted their support for the MPP, as it advocates the use of voluntary measures to facilitate access to medicines.

[Developed countries such as the US and the EU have a long history of criticizing and threatening retaliatory measures against developing countries that use compulsory licenses to make treatments available to their local populations.]

The approach taken by the MPP has given rise to concerns that while "Big Pharma" gains publicity by participating in the pool, such a "voluntary" mechanism is likely to further undermine the use of flexibilities (e. g. compulsory licence) under the WTO agreement on intellectual property rights to facilitate access to medicines. There are also concerns that the MPP may undermine support and resources for patent oppositions in India, legitimize "evergreening" practices, as well as segment developing-country markets.

["Evergreening" is a strategy often used by patent holders to lengthen the period of monopoly that they have over a particular product. For example, new patents for another 20 years are obtained for changes to a product whose patent term is expiring, and such changes are subject to a low standard of "inventiveness" to justify a new patent, thus extending the product's monopoly in the market. Many of the legal and technical steps taken to do this have been widely criticized by public health advocates over the past two decades. For example, patents are granted over fixed dose combinations as well as over new uses or formulation of known products.]

Several of these concerns appear to be justified in view of the terms and conditions contained in the licenses agreed to by MPP and Gilead, leading certain non-governmental groups to question whether "voluntary measures" work to promote access to medicines.

Health Gap, in its press statement, noted that the patent pool licenses are "demonstrating the inherent limitations of voluntary measures to address the needs of affordable medicines".

The licenses agreed to between MPP and Gilead Sciences are in three documents. The first is the primary licensing agreement signed by the Pool and Gilead, the second is an "amended and restated" sub-license agreement for existing Gilead sub-licensees, while the third document is a sub-license agreement for new sub-licensees. This third license agreement is a tripartite agreement among Gilead Sciences, MPP and the potential licensee (in this case, Indian generic companies).

The licenses cover tenofovir (TDF), cobicistat (COBI), elvitegravir (EVG) and the Quad (a fixed-dose combination of TDF-COBI-EVG-emtricitabine).

[TDF is a medicine used in combination with other antiretroviral (ARV) medicines in first and second line regimens for treating HIV, as well as for Hepatitis B. TDF is recommended by the WHO to replace stavudine, a widely used HIV treatment in the developing world that is less preferred due to the adverse side effects. Emtricitabine is an ARV medicine used in first and second line treatment for adults. COBI and EVG are medical products that are in development and yet to be approved for use in HIV treatment.]

In its press release, the MPP highlighted the key features of the licenses. These include: licensing of products still in clinical development that ensure speedier availability of such medicines in developing countries; key flexibilities in intellectual property have been preserved; payment of royalties between 3-5% of generic sales with royalties waived for any new pediatric formulations; an increase in the geographical scope of the licenses.

The licenses allow for the supply of TDF and emtricitabine in 111 countries, for cobicistat in 102 countries and for EVG and the Quad in 99 countries; contain agreement to make publicly available the text of the licenses; and termination clauses that allow the licensees to terminate the license for one medicine, while retaining the license to produce the others.

Despite these claims in the press release, the actual terms and conditions of the licenses raise a variety of issues and concerns.

A major critique of the licenses is that products produced under the licenses are only for supply to a specific list of countries (listed in Appendices to the licenses) and as such exclude from the scope of the licenses many developing countries, including countries with significant populations of people living with HIV. Hence, the licensee (i. e. Indian generic companies) cannot supply many developing countries that are excluded from the scope of the license. For example, except for Bolivia, Cuba, Ecuador and El Salvador, no other South and Central American countries are included in the licenses.

Act-Up Paris, another organization, in its press release, noted: "In total 5 million people living with HIV will be excluded from the Patent Pool. Moreover, the agreement will exclude countries with important generic manufacturing capacity, and limit the production of medicines to Indian generic firms, thus restricting competition that lower the price of drugs. Gilead has placed limits in excess of WTO rules to prohibit local production in poor countries".

The exclusion of all these countries in the first deal between a drug company and the Patent Pool constitutes a dangerous precedent that risks limiting the scope of the programme," it stressed.

As a result, the MPP/Gilead licenses segment developing-country markets between those that can be supplied under the licenses and those that are not covered by the licenses.

[The list of countries excluded from the Patent Pool/Gilead deal for Gilead's drugs already on the market -- in Asia: Malaysia, North Korea, China, and the Philippines; in Latin America: Argentina, Brazil, Chile, Colombia, Paraguay, Peru, Uruguay, and Venezuela; in Central America: Costa Rica, Mexico, and Panama; in Middle East: Iran, Iraq, Lebanon, and Jordan; in Eastern Europe and the Baltics: Albania, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Rep, Estonia, Hungary, Latvia, Lithuania, Montenegro, Poland, Republic of Kosovo, Republic of Macedonia, Romania, Russia, Serbia, Slovak Rep, Turkey, and Ukraine; in Africa: Algeria, Egypt, Morocco, Tunisia, and Libya; in Island Nations: Marshall Islands, and Micronesia. -- Source: Act-Up Paris news release dated 18 July 2011.]

 [The list of countries excluded from the Patent Pool for Gilead drugs still in trials

-- in Asia: Malaysia, North Korea, China, the Philippines, Kazakhstan, Sri Lanka, Thailand, Turkmenistan, and Indonesia; in Latin America: Argentina, Brazil, Chile, Colombia, Paraguay, Peru, Uruguay, Venezuela, Ecuador, and El Salvador; in Central America: Costa Rica, Mexico, and Panama; in Middle East: Iran, Iraq, Lebanon, and Jordan; in Eastern Europe and Baltics: Albania, Azerbaijan, Belarus, Bulgaria, Croatia, Czech Rep, Estonia, Hungary, Latvia, Lithuania, Montenegro, Poland, Republic of Kosovo, Republic of Macedonia, Romania, Russia, Serbia, Slovak Rep, Turkey, and Ukraine; in Africa: Algeria, Egypt, Morocco, Tunisia, Libya, Botswana, and Namibia; in Island Nations: Marshall Islands, and Micronesia. -- Source: Act-Up Paris news release dated 18 July 2011.]

It could be argued that Section 10.3(d) of the licenses could reduce the adverse effect of not being included in the scope of the license, as it allows export to countries (outside the scope of the license) that have issued compulsory license (CL) over the products concerned. However, that flexibility is subject to several restrictions, in particular that the licensee and Gilead Science must be in agreement with regard to the existence, scope and content of such CL issued in the importing country (with Gilead not unreasonably withholding its agreement) and/or the government of India has issued a CL for the export of the product to a country (outside the scope of the license), but the importing country must have also issued a CL if a valid patent exists in its territory.

Section 10.3(d) seems to suggest that even if there is no valid patent in a country (outside the scope of the license), such a country cannot be supplied under the voluntary licence granted unless India issues a compulsory license to supply that country. This would then require operationalising Section 92A of the Indian Patents Act which pertains to mandatory compulsory license "to any country having insufficient or no manufacturing capacity in the pharmaceutical sector for the concerned product to address public health problems".

Section 92A was incorporated to implement the 30 August 2003 WTO General Council decision (that has been criticized for containing cumbersome procedures) to facilitate exportation of patented medicines produced under a compulsory license. The requirement of compulsory license would act as a disincentive for generic companies to supply individual countries excluded from the license.

Further, the licenses are limited to Indian generic manufacturers. Other generic manufacturers from developing countries that have capacity to produce, such as in Thailand and in Brazil, have been excluded from the scope of the license.

The MPP/Gilead licenses also require that the active pharmaceutical ingredients (API) for the products licensed are to be supplied only by those licensed by Gilead to produce those API or are produced by the licensee under the license.

In addition, one of the licence features highlighted is that the termination clauses allow the licensees to terminate the license for one medicine, while retaining the license to produce the others. However it should be noted that termination clauses are linked to restrictions.

Even though the license provides the option to terminate any of the license for API such termination would also result in the termination of the license to produce the product using the terminated API. For instance, the license states that “ any termination by Licensee of its license to TDF pursuant to this Section 10.5 shall in turn terminate the license and rights granted to licensee hereunder with respect TDF product and TDF Combination product, and any other product containing TDF”.

This suggest that the API license is bundled with the product and as such a generic manufacturer would be unable to produce a TDF product under the license using API produced by entities not licensed by Gilead.

Further, the licenses impose restrictive conditions on the supply of APIs and products to a country outside the scope of the licenses. Section 10.3 ( c) suggests that even when patents containing a valid claim have been held invalid beyond the possibility of any further appeal in India and in the country outside the scope of the licences, the licensee is only able to supply such API or products after the licensee reaches agreement with Gilead that no valid patents exist and that the licensee has been able to obtain applicable regulatory approval in such country.

This suggests that supply to countries outside the scope of the license by the licensee even after the patents are held to be invalid would need to be agreeable to Gilead Sciences.

[According to the definition section, reference to "Patents" includes not only patents listed in the Appendix of the licenses but also to any other patents and patent applications (and resulting patents therefrom) owned by Gilead or exclusively licensed by Gilead from Japan Tobacco Agreement covering APIs of products mentioned in the license. This broad definition of "Patents" thus covers any patent or patent application (existing and future applications) containing the APIs of TDF, FTC, EVF, and COBI within the scope of license].

As such, the final disposal of patents in the license means the disposal of not only the patents listed but also any other patents or patent applications pertaining to the licensed molecules. This provision can easily be used to evergreen the license agreement.

Another important issue is with regard to TDF's inclusion in the scope of the license. Presently, there is no product patent protection for TDF in India. The patent application filed by Gilead Sciences was successfully opposed in 2009 by generic companies such as Cipla and civil society organisations working on access to HIV/AIDS medicines using the pre-grant opposition system in India. Gilead has filed an appeal against that decision but the appeal has yet to be heard.

Appendix 2 to the licenses lists eight patent applications in India related to TDF products and processes. Of these applications, at least three applications, which include a product patent application, have been rejected at the pre-grant opposition stage, while three more such applications are facing patent opposition before the Indian patent office.

As such, it appears that the license granted is not for patents that have been granted but on patent applications with questionable patent claims, which are likely to be rejected during the opposition proceedings.

Moreover, apart from India and Indonesia, Appendix 2 of the license agreement does not cite any other foreign patent application with regard to TDF. This suggests that there is no valid patent or pending patent applications in the other countries listed in Appendix 2 and as such, Gilead is seeking royalty from Indian generic companies for supplying to countries that have no patent for TDF.

On the issue of royalty, according to the terms of the licenses (Section 4.9), royalties will have to be paid until the expiration or the date of expiration of the last to expire “Patent containing a valid claim covering the manufacture, use, import, offer for sale or sale of API or the Product in India”.

In addition the section adds that royalties do not have to be paid if “all Patents containing a valid claim” are "held invalid or unenforceable beyond the possibility of any further appeal" in India and in the importing country.

According to the definition section, reference to "Patents" includes not only patents listed in the Appendix of the licenses but also to any other patents and patent applications (and resulting patents therefrom) owned by Gilead or exclusively licensed by Gilead from Japan Tobacco Agreement covering APIs of products mentioned in the license. This broad definition of "Patents" thus covers any patent or patent application (existing and future applications) containing the APIs of TDF, FTC, EVF, and COBI within the scope of license.

As such, the final disposal of patents in the license means the disposal of not only the patents listed but also any other patents or patent applications (that have been filed or have yet to be filed) pertaining to the licensed molecules.

This means that royalties will have to be paid until expiration or determination of validity on all patents and patent applications containing a valid claim covering the manufacture, use, import, offer for sale of the API or the Product. This could take many years and during these years Gilead will be allowed to claim royalties over questionable patent claims. 

It also suggests that royalties would be paid while a patent application is pending examination as well as in the interim period (i. e. after the decision of the pre-grant opposition) before the final appeal is heard, which could also take many years. Usually, during these periods, generic manufacturers are free to produce generic versions without payment of any royalties.

[Cipla's opposition to the TDF patent application in India succeeded in 2009 and although pending appeal, Cipla continues to produce generic versions without any payment of royalties. Other major generic manufacturers produce TDF under a voluntary license from Gilead Sciences.]

Another concern with regard to the licenses is that it extends to fixed-dose combinations, pediatric formulations, as well as new uses such as the use of TDF for treatment of hepatitis B, thus implicitly legitimizing the practice of "evergreening". The licenses also encourage such practice with its provision for mandatory grant back by the licensee (i. e. the generic manufacturer) to Gilead Sciences of improvements made on the licensed products.

India enacted a specific provision in its patent law, commonly referred to as "Section 3(d)", to combat such a practice. Section 3(d), in combination with provisions on pre-grant opposition in the Indian patent law has been used on numerous occasions by generic companies as well as civil society organisations to challenge and nullify patent applications that claim such bad patents. As a result, many key medicines such as imatinib mesylate, tenofovir, and nevirapine hemihydrate are currently not covered by patents in India, giving Indian manufacturers the freedom to manufacture the generic versions of such products.

In some cases, a pre-grant opposition challenge has resulted either in withdrawals of applications such as the one for Lamivudine/zidovudine combination or changes in patent claims.

Following the success in India, groups in Thailand and Brazil have also pursued a similar strategy to safeguard their access to generic medicines.

However, the patent pool licenses could undermine the use of patent oppositions, as it is likely to lead to much fewer such legal challenges to bad patenting practices, particularly as Indian generic manufacturers may simply opt for a voluntary license instead of engaging in an opposition against multinational pharmaceutical companies such as Gilead Sciences. This is likely to result not only in bad patents continuing to remain valid, but also even more aggressive use of "evergreening" practices by pharmaceutical manufacturers.

Several conditions in the licenses would restrict use of critical TRIPS flexibilities, such as parallel importation.

[Parallel import is the import and resale in a country without the consent of the patent holder of a patented product when that product has been legitimately put in the market of the exporting country under a parallel patent.]

The licenses explicitly require the licensee to guarantee that there will be no diversion of API or other chemical entities generated during the process of manufacturing of API or the products outside of India except as expressly permitted by Gilead Sciences.

Further, third party resellers would also need to enter into agreement with the licensee to ensure that the terms of the licenses (signed between the licensee and Gilead) are also abided by such resellers. The agreement between the licensee and the resellers would have to be notified to Gilead in writing, with copies provided to Gilead for its review. Gilead has the right to terminate the right of the licensee to sell to such reseller.

Effectively, the terms of the licenses are quite stringent, presumably to ensure that flexibilities such as parallel importation are not used by countries to import products that are produced under the license.

The terms of the licenses also require that the licensee produces API and products consistently with applicable Indian manufacturing standards, standards of the importing country and additional standards either set by the WHO pre-qualification or European Medicines Agency or the US Food and Drug Administration. This requirement effectively is likely to limit the use of the licenses to more advanced Indian generic companies, while excluding the small and medium sized industry that produce quality generic medicines.

THREATS TO ACCESS TO MEDICINES CONTINUE

In June 2011, at a UN meeting in New York, the international community committed that at latest 15 million people will be on antiretroviral therapies by 2015.

However, it is difficult to hope that this target would be achieved, as the war against generics continues and actions of multinational pharmaceutical companies continue to deny treatment to large segments of populations living with HIV.

Act-Up Paris noted in its press release of 18 July that: "... the European Commission ... have been pushing trade policies (including free trade and so-called anti-counterfeiting agreements) that aim to block the fabrication and the export of generic drugs. Without low-cost medicine, global commitments to achieve Universal Access to treatment will not be reachable". It further noted that Gilead's announcement cannot hide the war against generic medicines, pointing out that the MPP/Gilead agreement excludes many countries.

MSF, in a press release on its report on HIV drug pricing (on 18 July), noted: "Several pharmaceutical companies have abandoned HIV drug discount programmes in middle-income countries".

It further said that "Tibotec/Johnson & Johnson exclude all countries classified as ‘middle-income' from their price reductions; Abbott excludes low-income and lower middle-income countries from discounts for one of its drugs; and ViiV (Pfizer and GlaxoSmithKline) no longer offers reduced prices to middle-income countries, even when programmes are fully funded by the Global Fund to Fight AIDS, TB and Malaria or the US government's PEPFAR programme."

MSF also noted Merck's announcement that it will no longer issue price discounts for 49 middle-income countries for its new drug raltegravir. Today, Brazil is paying $5,870 per patient per year (ppy) for just this one HIV drug; in least-developed countries, Merck charges $675 ppy for the drug, which is already four times the price of the recommended triple first-line combination (TDF/3TC/EFV).

"This development comes on the heels of a number of developing countries being excluded from (the July) agreement between drug company Gilead and MPP," MSF added. +

 


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