Compulsory Licensing of Biopharmaceutical Inventions

Very few topics in international intellectual property have been as controversial as compulsory licenses. While the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) sets minimum standards for intellectual property protection, Article 31 of TRIPS sets conditions for a country to issue a compulsory license. Under a compulsory license, an individual or drug company is granted the right to use someone else’s intellectual property without the specific consent of the owner. TRIPS however does not specifically list the reasons a country might use to issue such a license. While an attempt to obtain a voluntary license is usually required before a compulsory license may be issued, under Article 31b of TRIPS, this requirement may be waived under a “national emergency or other circumstances of extreme urgency or in cases of public non-commercial use.” And, the separate Doha Agreement makes clear that each country is free to determine its own grounds for issuing a compulsory license.

The first decade or so, after the institution of TRIPS, saw a prevalence of compulsory licenses for HIV/AIDS drugs, with compulsory licenses issued in, for example, Zambia, Eritrea, Ghana, Malaysia, Indonesia, and Brazil.[1] Indeed, prior to 2011, two-thirds of compulsory license episodes were for HIV/AIDS drugs.[2] These compulsory license episodes included five separate episodes in Brazil with five different HIV/AIDS pharmaceuticals.[3] Out of these, all five lead to a discounted price, and one also led to a compulsory license.[4] As was seen in Brazil, the threat of a compulsory license is often used to obtain an outcome other than a compulsory license, for example, a heavily discounted product. When threatened with a compulsory license, large pharmaceutical companies are often willing to offer a discount on the price of the pharmaceutical in question to avoid a compulsory license. For example, under threat of a compulsory license, Roche slashed the price of the HIV/AIDS drug Nelfinar (Viracept) in Brazil to 30% of the price in the U.S.[5]

More recently, compulsory licenses have been issued more prevalently for cancer drugs, heart disease medications and second-line HIV drugs.[6] In particular, due to their high prices, an increasing number of oncology drugs are being threatened with compulsory licenses in countries such as India, Nepal, Thailand, South Korea and Columbia.[7]

The use of compulsory licenses has not been entirely without controversy however. For example, in 2012, India issued its first compulsory license, for the drug Sorafenib tosylate, which is used to treat kidney and liver cancer.[8] Following the grant of this compulsory license, the Indian government received a great deal of negative feedback from large pharmaceutical companies who accused them of favoring local drug manufacturers in the issuance of the license. The Indian government has not issued a compulsory license since, and at least three separate compulsory license attempts have been disallowed by the Indian Controller- two for anti-cancer drugs, and one for a diabetes drug.[9]

Compulsory licenses are an important tool that countries can use to ensure their citizens have access to life-saving drugs at affordable prices. However, relatively few compulsory licenses have been issued due to competing factors including both the willingness of pharmaceutical companies to offer discounts when compulsory licenses are threatened, as well as push-back from companies alleging that countries that issue compulsory licenses are unfairly favoring local drug companies. The paucity of compulsory licenses may also be due to the lack of guidance provided by either TRIPS or the Doha Agreement about circumstances when compulsory licenses should be issued, and highlights the need for a further clarification of the parameters for compulsory licenses.