Using compulsory licence for affordable medicines

Malaysia has been facing pressure from pharmaceutical companies and their political allies ever since it took this public health action in September 2017.

There has also been a documented timeline of this intimidation or pressure on Malaysia by the US industry and government over the issuance of CL since 2017.

International medical humanitarian organisation Médecins Sans Frontières (MSF) or Doctors Without Borders on February 11, 2019 through an open letter has expressed solidarity and support for the Malaysian government and has urged it to continue rejecting any pressure to reverse the government use license Malaysia has invoked.

Is CL for government use a legitimate way to enhance access to essential medicines like Sofosbuvir in developing countries like Malaysia?

Here are three things to know about CL:

This is a legitimate process where governments are given the leeway as provided in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement — an agreement on intellectual property under the World Trade Organization (WTO).

In contemporary public discourse, CL is often associated with the pharmaceutical industry but it could also be applicable to patents in other fields.

2. The use of compulsory licensing must adhere to conditions albeit has its exceptions

Compulsory licensing cannot be simply invoked as it has to adhere to a set of conditions outlined in the TRIPS Agreement. This is to protect the legitimate interests of the patent holder.

However, exceptions are made under certain circumstances such as “national emergencies” or “other circumstances of extreme urgency” or “public non-commercial use” (often known as “government use”) or anticompetitive practices.

There is no limit to the circumstances as long as these are set out in a country’s national patent law.

In Malaysia’s Patents Act, a government-use license can be issued “where there is national emergency or where the public interest, in particular, national security, nutrition, health or the development of other vital sectors of the national economy as determined by the Government, so requires.”

The Ministry of Health tried to negotiate affordable prices with the company that owns the Sofosbuvir patents, but after two years, the offered price was still too high to enable free treatment in public hospitals.

Since the government is committed to provide this treatment that can cure Hepatitis C, a decision was made to invoke a CL for government use.

Meanwhile the Sofosbuvir patent holder had granted Voluntary Licenses to 11 generic manufacturers in India so that they can supply generic versions of several Hepatitis C medicines.

However, Malaysia was excluded from the list of countries meaning that those Indian companies could not supply to Malaysia.

When the Malaysian Cabinet decision was known, the patent holder added Malaysia to the country list in its Voluntary Licenses.

Since decisions by the Indian license holders to enter the Malaysian market and the registration of the medicines would take time, the CL was implemented to provide treatment as soon as possible – this started in March 2018.

3. Important cost-containment measure which has been used in other developed countries such as Canada and USA

In matters related to public interest especially in developed countries such as Canada and USA, compulsory licenses and government use provisions have been used to bring about competitive supply sources.

There is no competition for a product that is patented as the market monopoly created by a patent prevents competitive bidding to reduce the prices. Compulsory licensing would serve as an important cost-containment measure in that situation.

This would open up competition by holders of compulsory licenses which would eventually bring the price of a product down, including the patent holder’s price.

Despite that, commercial exploitation of the patent would still be possible for patent holders. They would also receive payment (generally in the form of a royalty) from the compulsory licensee(s).

Meanwhile, here is what you need to know about Voluntary Licensing. Voluntary licensing is issued voluntarily or at their own accord by patent holders to other parties on an exclusive or non-exclusive basis, the right to manufacture, import and/or distribute a pharmaceutical product.

According to World Health Organization (WHO), “Depending on the terms of the license, the licensee may act entirely or effectively as an agent of the patent holder; or the licensee may be free to set the terms of sale and distribution within a prescribed market or markets, contingent on payment of a royalty.

“Either option, or arrangements in between, may allow for substantial price reductions. However, terms in a voluntary licence may set price ranges, or include other terms, that maintain prices at or near the same level as those offered by the patent holder.

“Or terms may limit how many patients or which categories of patients are eligible to benefit from the lower prices provided by the licensee. Again, such matters turn on the terms of the license contract.”

Usually, voluntary licensing arrangements which are made at the discretion of the patent holder are intended for strategic reasons, such as to gain market entry rather than as price gestures and they may not entail any price reduction at all.

While waiting for the voluntary license holders of Sofosbuvir to get their medicines registered in Malaysia, and for their prices to be announced, Malaysia proceeded with the implementation of the CL.

This has enabled treatment at RM1,000 to RM1,200 for 12 weeks, compared to RM300,000 which was the cost of treatment with the patented version.