By Tove Iren S. Gerhardsen
After Thailand issued a compulsory license for government production of an HIV/AIDS drug, the patent holder of the product, Merck Sharp & Dohme, has proposed reducing the price by almost two-thirds, local sources said. But Thailand said it wants to see it in writing.

“We requested [Merck] to re-propose [it] to us in an official letter” a Thai official told Intellectual Property Watch, referring to a meeting with the company.

An industry source told Intellectual Property Watch that the Thai government should have talked to the company before issuing the compulsory license, noting that Thailand had not declared an emergency before announcing the license.

But others argue that this is not required under international trade law. They point to rules that require consultation first but allow such actions without consultation for emergencies or for “cases of public non-commercial use” – as deemed by the government.

A source close to the case confirmed for Intellectual Property Watch shortly after the issuance of the license that Thailand had not talked to the pharmaceutical company Merck before issuing the license, and that the Office of the United States Trade Representative (USTR) had started pressuring Thailand to withdraw it.

But a spokesperson from USTR told Intellectual Property Watch that it had “not provided specific advice” to the Thai authorities in this case.

The spokesperson said that the USTR does not question that World Trade Organization (WTO) rules allow for compulsory licenses, but said it expects Thailand, as a WTO member, to “follow certain steps,” and that it would have been appropriate to engage all parties first.

Merck was not available for comment for this story.

Thailand’s Point of View

On 29 November, the Thai government announced that it would issue a compulsory license to the Government Pharmaceutical Organization of Thailand, according to the announcement.

This meant that the government-owned company could produce the HIV/AIDS product, efavirenz (Stocrin), despite it still being under patent by Merck. The Thai government said it was allowed to do this under international trade and IP law, as well as Thai law.

In the announcement, the government said that under the Doha Declaration (agreed to at a WTO ministerial in Doha, Qatar in 2001), and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), “member countries have a right to issue a safeguard measure to protect public health, especially for universal access to essential medicines using compulsory licensing on the patent of pharmaceutical products.”

It also referred to the Thai Patent Act, saying that the government had the right to use any patent rights “for non-commercial public uses.”

As for the need to issue the license, the government said that efavirenz was a “highly effective and safe” HIV/AIDS medicine, but that the price was too high for the government to cover the costs for all patients needing it. Other cheaper HIV/AIDS medicines were more toxic, it said.

The Thai official told Intellectual Property Watch, “We met with MSD [Merck Sharp and Dohme] in a very constructive and friendly atmosphere. MSD proposed to reduce the price to 550 Baht/m, [from] 1,400 previously. Our GPO [Government Pharmaceutical Organization] can provide at 560/m.”

The official maintained, however, that the compulsory license is “already in place for five years.” In the 29 November notification letter, Thailand wrote that, “The use of the above patent rights is effective from today to the 31 December 2011.”

What Does the Law Say?

A source familiar with the TRIPS agreement said that TRIPS when taken together with the Doha Declaration on TRIPS and Public Health, does not say that a government has to declare a national or health emergency before issuing a compulsory license. A national emergency can be an implicit reason, but this does not have to be stated, the source said. This is covered in TRIPS Article 31.

Article 5(b) of the Doha Declaration on the TRIPS Agreement and Public Health, adopted on 14 November 2001, states: “Each member has the right to grant compulsory licenses and the freedom to determine the grounds upon which such licenses are granted.”

Separately, in Article 5( c), it is stated that, “Each member has the right to determine what constitutes a national emergency.” But the Thai government would still be “covered” under the TRIPS clause on public, non-commercial use, the source said.

In fact, the source said, Article 31 of the TRIPS agreement states that not only the government, but also a contractor, can produce under a compulsory license: “Where the law of a member allows for other use of the subject matter of a patent without the authorisation of the right holder, including use by the government or third parties authorised by the government …”

Separately, the US-based nongovernmental organisation, the Consumer Project on Technology, on 12 December sent a letter to USTR Susan Schwab, stating that: “We ask that the United States government not interfere with the Thai government decision to issue a government-use license on patents covering the AIDS drug efavirenz.”

It continues: “There is a concern the USTR may have suggested to the Thai government that the WTO TRIPS agreement requires prior negotiations with patent owners before a compulsory license is issued. If so, the assertion is wrong.”

“Article 31 of the TRIPS does not require prior negotiation before authorising non-voluntary use of a patent, in any of the following cases: a national emergency or other circumstances of extreme urgency, cases of public non-commercial use, or, where such use is permitted to remedy a practice determined after judicial or administrative process to be anti-competitive.”

It also notes that there is no requirement for prior negotiation in any bilateral agreements the US has entered. The USTR said that the US has not continued negotiating a bilateral deal with Thailand after its government crisis, and would wait to do so until democracy had been restored.

On 21 December more than 140 organisations and individuals sent a sign-on letter to US Secretary of State Condoleezza Rice, and USTR Susan Schwab, asking the US to stop any interference with the Thai efforts after it was revealed that the US embassy in Bangkok and the USTR offices in Washington had asked the Thai government to enter into negotiations with Merck before they execute a compulsory license on the AIDS drug, a nongovernmental organisation source said.

Tove Iren S. Gerhardsen may be reached at tgerhardsen@ip-watch.ch.