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    Compulsory Licences Positive For The South, With Conditions, Study Finds

    Published on 31 May 2012 @ 8:07 pm

    By , Intellectual Property Watch

    Compulsory licences can provide an efficient way to decrease prices of drugs in developing countries but the conditions of issuance of a licence influence the benefits countries can derive from them, particularly if the countries have a technology gap, according to an economic model presented this week at the World Intellectual Property Organization.

    Eric Bond and Kamal Saggi of the Vanderbilt University (US) Department of Economics published a paper in April 2012 on compulsory licensing, price controls, and access to patented foreign products, analysing the role of price controls and compulsory licensing on access to a patented northern product for southern countries.

    Saggi presented the findings of the paper and explained the model leading to those findings on 29 May in the context of the WIPO seminar series on the economics of intellectual property.

    Saggi said the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), which requires enforcement of intellectual property rights, has had the most effect on developing countries. This is particularly the case with pharmaceutical products, he said, as most developed countries already had strong IP rights enforcement, and patent enforcement has the potential to eliminate cheap local suppliers of necessary medicines.

    The TRIPS Agreement [pdf] contains a set of flexibilities that can be used by developing countries. Article 31 on “Other use without authorisation of the right holder” gives a list of situations in which developing countries can preclude IP rights but under a set of conditions. Among these is that those countries should try to obtain authorisation from the right holder, and that the right holder should get “adequate remuneration.”

    Although compulsory licences are not effectively mentioned in TRIPS, he said, this is one of the flexibilities that developing countries can use to lower prices of essential medicines, such as HIV/AIDS treatments. The threat of a compulsory licence has also been known to lead the patent holder to lower its price, Saggi said.

    Compulsory licences often occur in an environment where the price itself is controlled by the local government, according to Saggi. Price controls and compulsory licences are thus closely linked, he said. Compulsory licences encourage direct entry of the patented drug while price controls encourage voluntary licences, Saggi said.

    Quality Issues with Local Products

    Not all developing countries have the ability to produce a quality product locally, Saggi said. He cited the case of Thailand, (IPW, Public Health, 12 March 2007) which has used a compulsory licence on the HIV/AIDS drug Kaletra. The quality of the drug produced by the Thai government pharmaceutical organisation (GPO-vir) proved to be substandard, he said. The Global Fund to Fight HIV-AIDS, Malaria and Tuberculosis granted the GPO-vir US$ 133 million in 2003 so that it could upgrade its plant to meet international quality standards. The fund withdrew its support in 2006, according to Saggi, since the Thailand GPO had failed to meet the World Health Organization quality standards. Saggi said he did not know if the issue had been resolved by the Thai government since then.

    Saggi also cited Brazil, which issued a compulsory licence in 2007 on the HIV/AIDS medicine Efavirenz, after failing to negotiate a price with Merck. However, Farmanguinhos, the Brazilian government laboratory, was unable to immediately manufacture the drug due to its lack of technological know-how, he said. It took Farmanguinhos two years to be able to supply the drug to the local market, he said, but for a much lower price than the one of the branded product. In the meantime, Brazil imported the drug from India, he added.

    A member of the audience asked about the definition of “quality” in the context of the study. Saggy answered that in the model, quality was defined as the willingness of the consumer to pay for the drug. “If at the same price the consumer prefers the patented good to the one produced by the local manufacturer, I have a quality difference,” he said.

    Nevertheless, although developing countries may not be able to do as good a job of producing the medicine as the patent holder, “the use of compulsory licences makes the South better off,” Saggi said, in part because the threat of a compulsory licence induces entry of the drugs on the local market and lowers the fee at which voluntary licencing occurs.

    Members of the audience also asked about compulsory licences being issued by northern countries, which were not taken into account in the study.

    The paper [pdf] can be found on the WIPO website, as well as the video of the presentation.

    Catherine Saez may be reached at info@ip-watch.ch.

     


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    We welcome your participation in article and blog comment threads, and other discussion forums, where we encourage you to analyse and react to the content available on the Intellectual Property Watch website. By participating in discussions or reader forums, or by submitting opinion pieces or comments to articles, blogs, reviews or multimedia features, you are consenting to these rules.

    We welcome your participation in article and blog comment threads, and other discussion forums, where we encourage you to analyse and react to the content available on the Intellectual Property Watch website.

    By participating in discussions or reader forums, or by submitting opinion pieces or comments to articles, blogs, reviews or multimedia features, you are consenting to these rules.

    1. You agree that you are fully responsible for the content that you post. You will not knowingly post content that violates the copyright, trademark, patent or other intellectual property right of any third party or which you know is under a confidentiality obligation preventing its publication and that you will request removal of the same should you discover that you have violated this provision. Likewise, you may not post content that is libelous, defamatory, obscene, abusive, that violates a third party's right to privacy, that otherwise violates any applicable local, state, national or international law, that amounts to spamming or that is otherwise inappropriate. You may not post content that degrades others on the basis of gender, race, class, ethnicity, national origin, religion, sexual preference, disability or other classification. Epithets and other language intended to intimidate or to incite violence are also prohibited. Furthermore, you may not impersonate others.

    2. You understand and agree that Intellectual Property Watch is not responsible for any content posted by you or third parties. You further understand that IP Watch does not monitor the content posted. Nevertheless, IP Watch may monitor the any user-generated content as it chooses and reserves the right to remove, edit or otherwise alter content that it deems inappropriate for any reason whatever without consent nor notice. We further reserve the right, in our sole discretion, to remove a user's privilege to post content on our site. IP Watch is not in any manner endorsing the content of the discussion forums and cannot and will not vouch for its reliability or otherwise accept liability for it.

    3. By submitting any contribution to IP Watch, you warrant that your contribution is your own original work and that you have the right to make it available to IP Watch for all purposes and you agree to indemnify IP Watch, its directors, employees and agents against all damages, legal fees and others expenses that may be incurred by IP Watch as a result of your breach of warranty or of these terms.

    4. You further agree not to publish any personal information about yourself or anyone else (for example telephone number or home address). If you add a comment to a blog, be aware that your email address will be apparent.

    5. IP Watch will not be liable for any loss including but not limited to the following (whether such losses are foreseen, known or otherwise): loss of data, loss of revenue or anticipated profit, loss of business, loss of opportunity, loss of goodwill or injury to reputation, losses suffered by third parties, any indirect, consequential or exemplary damages.

    6. You understand and agree that the discussion forums are to be used only for non-commercial purposes. You may not solicit funds, promote commercial entities or otherwise engage in commercial activity in our discussion forums.

    7. You acknowledge and agree that you use and/or rely on any information obtained through the discussion forums at your own risk.

    8. For any content that you post, you hereby grant to IP Watch the royalty-free, irrevocable, perpetual, exclusive and fully sub-licensable license to use, reproduce, modify, adapt, publish, translate, create derivative works from, distribute, perform and display such content in whole or in part, world-wide and to incorporate it in other works, in any form, media or technology now known or later developed.

    9. These terms and your posts and contributions shall be governed and interpreted in accordance with the laws of Switzerland (without giving effect to conflict of laws principles thereof) and any dispute exclusively settled by the Courts of the Canton of Geneva.

     

     
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