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In an ideal world, patent rights would lead to the best possible advancements, when we need them, at prices we can afford. Unfortunately, it doesn’t always work like that. Sometimes people need things that they can’t afford, so alternative methods have been developed to make sure that those who need to use a technology can do so legally.

One such method is compulsory licensing. A country’s right to grant compulsory licences for patents is provided in the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to strike a balance between promoting access to existing technologies and securing research and development. Tis is aimed at pharmaceutical technology, but climate change has opened up the possibility of using compulsory licensing for clean technologies too.

It was oſten thought that compulsory licensing could be used only in cases of public emergency, such as an outbreak of a particular virulent disease requiring a country to obtain a large amount of drugs quickly. But the TRIPS provisions for compulsory licensing do not limit things so severely. In 2001, the World Trade Organization (WTO) said countries have the right to grant compulsory licences, and the freedom to decide how.

Pravin Anand, managing partner of Anand and Anand, says that the patent office handles compulsory licensing applications in India. Applications can be made on the grounds that: (i) the reasonable requirements of the public with respect to the patented invention have not been satisfied; (ii) the patented invention is not available to the public at a reasonably affordable price; and (iii) the patented invention is not worked in the specific territory.

Te Indian central government can also step in if “in its opinion, it is necessary so to do”, says Anand. Te central government would exercise this right in cases of national emergency or extreme urgency, or for public non-commercial use of drugs relating to certain illnesses.


Cost of compulsory licensing

Te WTO has had to work to clarify the applicability and scope of compulsory licensing, but consensus on whether the benefits outweigh the threats has not been reached.

In a policy statement, pharmaceutical giant GlaxoSmithKline outlines its position on this subject: “Systematic use of [compulsory licences] weakens the intellectual property system. Te IP system underpins the ability of the private sector to undertake the R&D that is essential if we are to see advances in treatments and vaccines for diseases of the developed and developing world. Te more the IP system is weakened, the less R&D is likely. Widespread use of [compulsory licences] may, therefore, contribute to a reduction in R&D.”

Te threat to investment in R&D is a worry, although there are those who argue that this is a hand that is oſten overplayed. Tahir Amin, director of IP and co-founder of non-profit health advocacy group I-MAK, cites generic pharmaceutical company NATCO’s compulsory licence application for a patent in India as a case that may challenge the pharmaceutical industry’s long-held view that compulsory licensing threatens investment in R&D.

NATCO applied for a compulsory licence for pharmaceutical company Bayer’s patent, which covers the kidney cancer drug Nexavar, on the grounds that it is too expensive and Bayer has not supplied the Indian market with sufficient quantities of the drug. At an initial hearing in January, Bayer said that it could not sell the drug at a lower price in India as it would not be able to recoup its R&D costs.

Amin says the fact that Bayer was ordered to submit cost data, including details of the expenditure on R&D for Nexavar, so it could justify the drug’s high cost, is a step in the right direction. “I think for the first time that really might help us to get some transparency on this standard line we hear from industry about R&D for every drug costing $800-$1 billion or other significant amounts of money. Te R&D cost for each drug needs to be measured in the face of the profits these companies make on them to really assess whether the costs are significant,” he adds

Remfry & Sagar partner Ranjna Mehta-Dutt says that the enormous difference between the cost of NATCO’s drug (approximately INR 8800 [$178] for a month’s supply) and Nexavar (approximately INR 290,000 [$6000]), along with NATCO’s claim that Bayer has imported only small quantities of the drug, despite significant demand, may force the hand of PH Kurian, controller general of Patents Designs and Trademarks.

“Kurian may be of the opinion that the patented drug is not available to the public at a reasonably affordable price [and that the quantity of Nexavar that is available in India] is insufficient to meet market demand,” she says. Given NATCO’s pending application, Kurian declined to comment on the case.

Bayer did not respond to requests for comment, but the Biotechnology Industry Organization (BIO) recently raised the issue of NATCO’s compulsory licence application in a submission to the Office of the US Trade Representative. BIO is unsatisfied that Kurian has decided to focus on the price of Nexavar. It said that TRIPS outlines procedures for compulsory licensing that “focuses the inquiry on the use of this mechanism for exceptional circumstances”. However, Kurian’s focus on the cost of the drug and whether or not someone can make it cheaper, rather than a TRIPS-focused analysis of exceptional circumstances, are “not consistent with the letter or spirit of the TRIPS Agreement”.

World Intellectual Property Review January/February 2012 17

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