[Ip-health] Velasquez and von Schoen-Angerer: Unfair attack to developing countries’ efforts to use compulsory licenses

Thiru Balasubramaniam thiru at keionline.org
Fri Mar 6 23:29:44 PST 2015

This piece Velásquez and von Schoen-Angerer is a response to an article by Reed
F. Beall, Randall Kuhn and Amir Attaran entitled,  “Compulsory licensing
often did not produce  lower prices for antiretrovirals compared to
international procurement”, in Health Affaires Heath  Affaires, Drug
pricing, March 2015 34 :


Unfair attack to developing countries’ efforts to use compulsory licenses.1

By Germán Velásquez and Tido von Schoen‐Angerer

Based  on  a  flawed  methodology  and  misleading  analysis,  a  recent
 article  2 questions the usefulness of compulsory licenses, to improve
access to lifesaving  medicines  in  developing  countries.  The  authors
 state that “in the  past  decade,  using  compulsory  licensing tactics
 generally  resulted  in  drug  prices that  were  higher  than  the
 prices  achieved  by  peer  countries  buying  from  international
 procurement markets tracked by the WHO or Global Fund”

Compulsory licences and government use

Compulsory licensing is one of the important ‘flexibilities’ recognized
under article  31  of  the  Agreement  on  Trade­ related  Aspects  of
 Intellectual  Property  Rights  (the  TRIPS Agreement).

A compulsory licence allows a government to license the use of a patented
invention  to  itself  or  a  third  party,  without  the  consent  of  the
 patent-­holder.  A  compulsory  licence authorising the government itself
to use a patented invention is also known as  a  government  use
 authorisation. In  the  public  health  context,  compulsory  licensing
 can be used to enable domestic production and/or importation of generic
medicines by  both private and public sectors, as means of overcoming
patent barriers to access to  affordable medicines.

“Since  January  1995—the  general  date  of  entry  into  force  of  the
 TRIPS  Agreement—at  least  12  developing  and  Least  Developed
 Countries  (LDCs)  have  granted compulsory licenses (CLs) or decided the
public non­commercial use (known  as  ‘government use’) of patents. The
great majority of CLs/ government use involved  drugs for HIV/AIDS.  Only
 a few related  to  drugs for  other  communicable  or  noncommunicable
diseases:  cancer  (Thailand  and  India)  cardiovascular  disorders
 (Thailand) and avian flu (Taiwan).”3

A  good  example  of  this situation  is  provided  by  the  price
reductions for  two  antiretrovirals that the Brazilian government could
secure after indicating that CLs could  otherwise  be  granted. The
Ministry  of Health made HIV/AIDS medicines  available  free of charge to
all citizens under the National STD/AIDS Programme. In 2001 the  Ministry
 was  able  to  obtain  price  reductions  of  40  to  70%  for  Nelfinavir
 and  Efavirenz  on  which  Roche  and  Merck,  respectively,  held
 patents.  Other  important  price reductions due to the use of CL, are
widely documented in the last 10 years, in  countries like Thailand,
Malaysia, India, Indonesia, among others.4

A flawed methodology

The  paper  is  flawed  due  to  a  basic  misunderstanding  about  the
 difference  of  compulsory  license  as  legal  mechanism  to  override
 patents  and  drug  procurement.  The  study  is  comparing  apples  with
 pears.  An  international,  competitive  market  of  generic  and  brand
 name  products  is  a  precondition  for  lower prices – a country where
patents for a certain drug are in force can only  access  a  competitively
 priced  product,  if  it  overcomes  the  patent  barriers  (through
compulsory licenses or otherwise).  Price reductions from CL must be
 compared with the existing patented drug available  in a particular

The  authors,  however,  wrongly  compare  the  prices  eventually
 obtained  by  compulsory  licenses  (apples)  and  those  obtained
 through  “international  procurement”  (pears)  as  if  they  were  two
 equally  available  and  alternative  procurement  options.

The  authors’  research  question,  "is  CL  or  international  procurement
is more efficient?"  reveals that they are confused about this basic
 concept.  The  authors’  use  of  the  term  "alternative  international
 procurement"  is  confusing and inconsistent: often, it serves as a proxy
for something like "lowest  available  price"  but  at  other  times  seems
 to  refer  to  specific  procurement  sources (i.e. WORLD HEALTH
REPORTING  TOOL). One  can  get  very  low  prices  through competitive
tenders at a purely domestic level provided that there are  no  patent
 barriers  (see  South  Africa’s  recent  ARV  tenders),  and  one  can
 get  extremely high prices on "internationally" funded ARVs in countries
where there  is  patent  protection  and  no  generic  alternatives
 available,  as  illustrated,  for  instance by data on Global Fund‐funded
purchases of darunavir in some middle  income countries.

Unsupported findings

The findings by the authors that “compulsory licensing tactics generally
resulted  in  drug  prices  that  were  higher  than  the  prices  achieved
 by  peer  countries  buying from international procurement markets tracked
by the WHO or Global  Fund”  ”  is  based  on  an  artifact:  for
 “alternative  international  procurement”  authors  quote international
 median price in “peer  countries” while the  quoted  “CL price” is
typically based on one supplier.

Some countries issue CL’s to only allow for national production. This may
be less  efficient than relying on an international generic market of scale
(due to volumes  of  scale  and  other  efficiencies),  but  may  be  part
 of  policies  aimed  at  reducing  dependency  on  imports  or  enhancing
 the  manufacturing  capacity  in  pharmaceuticals.  The  study  simply
 confirmed  that  prices  of  locally  produced  medicines  may  be  higher
than those  obtained through  international tendering  this effect for the
concerned countries.

The authors did not specify whether the “peer countries” (controls) had
patents  in place for the concerned drugs or had used a government use
license. There is a  great diversity in the patent status of various ARVs
in various countries. The fact  that the authors did not consider the
patent status to compare prices is another  fundamental  flaw  of  this
 paper,  particularly  in  view  of  publicly  available  data  bases  on
ARVs’  patent  status,  such  as the  Medicines  Patent  Pool  patent
 status  database.

The  authors  also  do  not  specify  if they  considered  government  use
(a  specific  type of compulsory license) in peer countries. In fact, many
developing countries  purchasing trough UNICEF or IDA or other
international procurement agencies  have issued a government use license
(which often have not been made public).

In their  conclusions  the  authors  imply  that  international
 procurement  rather  than  CL  is  better  to  deal  with  the  new/future
 context  of  newer  drugs  being  patented  in  all  key  generic
 producing  countries.  This  is  wrong,  because  “international
procurement” is only efficient when there is a competitive market,  that
 is,  where  blocking  patents  are  not  in  force  in  the  country
 seeking  to  purchase a drug (recipient) or in the countries with
manufacturing capacity, or  in  situations  where  the  manufacturing  ant
 the  recipient  countries  use  compulsory  licenses  or  resort  to
 government  use  provisions  to  allow  for  the  purchase  of  generic
 products.  The  source  of  low  price,  quality‐assured  drugs  through
 generic  competition  ‐  or  what  the  authors  call  “international
 procurement”  –  is  today  under  threat  given  that  the  new
 medicines  are  extensively patented, including in India, a country with a
 major manufacturing  capacity….. “the pharmacy of the  world”.

One of the authors of the Health Affairs article,  Amir Attaran,  already
published,  in October 2001, an article5 , concluding  that: “patents and
patent law were not a  major barrier to treatment access in Africa”, this
article has been used on  many  occasions  to  undermine  developing
 countries’  efforts  to  improve  access  to  medicines.

Charitable action or justice and human rights

The  conclusions  by the  authors that “there  is  an  ongoing need for
multilateral  and  charitable  actors  to  work  collectively  with
 governments  and  medicines  suppliers  on policy  options”  clearly
 shows that the  authors do not understand  that  a  sustainable  access to
medicines in developing  countries is  a matter  of  justice and human
rights, and that it cannot be  simply achieved through calls to
 international charity.

1  Forthcoming article in the South Centre Bulletin.

2  Reed F. Beall, Randall Kuhn and Amir Attaran,  “Compulsory licensing
often did not produce  lower prices for antiretrovirals compared to
international procurement”, in Health Affaires Heath  Affaires, Drug
pricing, March 2015 34 :

3 Carlos M. Correa “The Use of Compulsory Licenses in Latin America”, ALAI,
América Latina en  Movimiento, 2013­04­15. 4  op. cit.

4  op. cit

5  “Do patents for antiretroviral drugs constrain access to AIDS treatment
in Africa ?, JAMA Vol.  286, No. 15.

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