[Ip-health] MPP Response to ITPC-I-MAK Briefing Paper on Gilead and MPP Licenses

Tahir Amin tahir at i-mak.org
Sun Aug 14 18:53:38 PDT 2011

Below is the text of the MPP's letter responding to the ITPC-I-MAK Briefing
Paper (available here http://tinyurl.com/42xdsvv), which we noted had not
been posted here.

A PDF version of the MPP's letter can be downloaded here:

Tahir Amin
Co-Founder and Director of IP
Initiative for Medicines, Access & Knowledge (I-MAK)
Email: tahir at i-mak.org

    Geneva, 27 July 2011

To the Boards of Directors of the International Treatment Preparedness
Coalition (ITPC) and Initiative for Medicines, Access and Knowledge (I-MAK):

Earlier this week, we became aware of the joint briefing paper issued by
ITPC and I-MAK on the recent licence agreement between Gilead Sciences and
the Medicines Patent Pool. We very much welcome analysis and comments from

various stakeholders, as this helps to improve our work. However, we cannot
let the factual inaccuracies and misleading statements in the paper go
unchallenged. It is important that analysis of this agreement be firmly
grounded in facts. In our view, the licences are a significant improvement
upon the status quo, but also have important shortcomings. The Pool is
committed to working to improve the terms and conditions in future licences,
and relies upon the support of all stakeholders to make this happen.
(Further details are available in the Q&A that was issued when the licence
was first announced, and available here [1]). A general response to the
various commentaries issued on the licences has also

been widely circulated and is annexed to this letter.

Because of the serious inaccuracies and misinterpretations of the licence
presented in the ITPC/I-MAK briefing paper, we feel obligated to respond to
a number of the points.

*Field of use and second use patents*


The licence does not restrict sale of TDF for HIV only (as in previous TDF
voluntary licences), but rather expands the field of use for TDF into
hepatitis B (HBV). This is positive for access to medicines and public
health. The field of use that is defined under a patent licence agreement is
a completely separate issue from that of new use patents. It is incorrect to
suggest that limiting the field of use to HIV would somehow make the
manufacture and sale of the same medicine for treatment of HBV royalty-free.
If a patent licence for a compound that has known therapeutic benefit for
both HIV and HBV limited the field of use only to HIV, that would mean that
it would be a contractual violation for a generic company to market that
medicine for the treatment for HBV. This would mean that generic companies
would be prohibited from supplying the same drug to the

millions of people who are living with HBV, and also reduce the scope for
greater economies of scale that is created by a larger potential market for
that drug. There are no patents for new uses covered under the licence
agreement. Expanding the field of use in a licence agreement does not in any
way validate patents on new uses, which many jurisdictions do not allow,
consistent with flexibilities contained in the TRIPS Agreement.

*Severability of the licences*


An important feature of the agreement is that it is severable on a
product-by product basis (the licence is not “bundled”). This feature was
specifically negotiated into the licence by the Patent Pool, particularly in
light of the patent situation of TDF in India and elsewhere. This means that
a generic company that has developed a non-infringing process to make TDF in
India can opt-out of the TDF portion of the licence and be free of any
obligation to pay royalties for its sale of TDF. Based on the information
that has been made publicly available on our website in the Patents Status
Database for Selected HIV Medicines, it would appear that opting out of the
TDF licence would mean that licensees are free to supply TDF to a number of
countries outside the licensed territory where Gilead does not hold a
patent, including Argentina, Brazil, Chile, Colombia, Malaysia, Peru, the
Philippines, the Ukraine and Uruguay (and possibly others). Moreover,
because the licences are severable on a product-by-product basis, the
licensee is free to terminate the licence on a product upon the expiration
of what it deems to be the strongest patent (e.g., a patent covering the
active compound) without any further obligation to pay royalties on what it
deems to be weak patents or those that it can design-around. The licensee is
also free to challenge the validity of any of the patents under applicable
national law. The licences negotiated through the Patent Pool expressly
allows for both things to happen. It is, therefore, inaccurate to claim that
these licences somehow introduce a "global patent system" or allow royalties
to be paid "in perpetuity."

*Right of licensee to supply in the event of a compulsory licence*

The Medicines Patent Pool supports the use of TRIPS flexibilities by
countries, and is mandated under its Statutes to ensure that the licence
agreements that it negotiates are consistent with the use of such
flexibilities. As such, the licence agreement expressly allows for a
licensee to supply a country outside the territory in the event of a
compulsory licence. Further, as Professor Brook Baker's analysis [2]
explains, Indian law relating to compulsory licensing for export can
potentially be interpreted and implemented in a manner that overcomes many
of the difficulties with the use of the WTO 30 August decision.

*Transfer of know-how*

The Medicines Patent Pool has consulted extensively with generic companies
regarding a number of issues, including the necessity and desirability of a
knowhow transfer in a patent licence agreement. Although some companies
declared it unnecessary, others felt that it could potentially be of use.
Therefore, the Medicines Patent Pool agreed to a know-how transfer, but
ensured that no further obligations independent of the patent licences came
with the transfer of knowhow. Under the previous Gilead licences, a licensee
could potentially be obligated to pay royalties on a product even after some
or all of the patents on a product were declared invalid as a result of the
know-how transfer. The licensees are now free to terminate the licence for
any reason with 30 days notice.

*Grant-back obligations*


The licence agreement grants Gilead a non-exclusive, royalty-free licence
back to Gilead for any improvements developed by the licensee. TRIPS,
Article 40 allows countries to take measures against licensing practices
that are deemed to be

anticompetitive, such as exclusive grant-back provisions. The type of
nonexclusive grant back provision included in the Gilead licences, however,
are not considered to be controversial under competition law. Finally, we
disagree with the ITPC/I-MAK briefing paper that this obligation will
prevent the Indian generic industry from remaining far more competitive than
originators in manufacturing quality medicines in high volumes at low cost.
This is demonstrated in MSF's Untangling the Web data for TDF [3], which
shows that several Indian companies are selling TDF for less than half of
Gilead's reported

at-cost price, and at five times less then when the first generic version of
TDF was introduced.

*Expert Advisory Group*


The Medicines Patent Pool's Governance Board is in the process of formally
convening an Expert Advisory Group (EAG). As specified in the Patent Pool's
Statutes, the members of the EAG shall have a broad range of expertise,
including IP expertise and public health in developing countries. The list
of EAG members will be made public when the EAG is formally convened. For
the Gilead licence, an ad hoc group of experts was consulted, which
presented its recommendations for final decision by the Patent Pool Board.

*Administrative fee*


UNITAID has mandated that the Pool assess paths to self-sustainability,
including the possibility of charging a commission to licensees for services
rendered through the standard licensing agreements. The Statutes of the
Medicines Patent Pool, which are publicly available on the Patent Pool
website, expressly contemplate the possibility of the Patent Pool receiving
a portion of royalty payments, where it states, "At all times, the majority
of the Foundation's funding from third parties (excluding royalty payments,
if any) shall come from sources of public and/or non-profit nature." The
Statutes also mandate that, "The revenues that may be realised by the
Foundation shall be used exclusively in furtherance of the Foundation's
public utility aim." The proportion of royalties payable to the Patent Pool
under the Gilead licence is 5% of the 3-5% royalty that Gilead itself
receives -- in other words, the commission is 0.15% to 0.25% of the generic
price. (The ITPC/I-MAK briefing paper is incorrect in asserting this as 5%
of the generic price). Based on the market size and growth projections, the
Pool has estimated the total revenue to the Pool from this royalty stream as
ranging from $1,500 to $30,000 in 2011-2012, an amount that comprises less
than 1% of the Pool’s annual operating costs. These amounts do not increase
the royalty level (3-5%) or total amounts payable by generic firms to
Gilead; rather, they are a portion of the royalty stream.

We reject the assertion that these amounts create “a serious conflict of
interest” and reaffirm the commitment of the Pool to the mission for which
it was created, to improve access to medicines and public health in low- and




A key point that needs to be highlighted is the unprecedented transparency
of the licences issued by the Pool. This is in stark contrast to the common
practice in the pharmaceutical field, where voluntary licences, including
those issued or

obtained by public research organisations on HIV medicines, have been kept
confidential. This may be why voluntary licences between companies and
generic manufacturers have not received the same level of public attention,
despite being

significantly more restrictive than the licences negotiated by the Pool.
Gilead and other companies that enter into the Pool know the licences will
be made public and that as a result will face greater scrutiny due to the
public nature of the licence. We hope that this process will become the
accepted norm as we believe such transparency leads to stronger public
health protections in the licences. We also hope that misleading comments
and inaccurate criticisms such as those found in parts of the briefing paper
will not discourage others from taking this route.

As ITPC/I-MAK noted, Gilead negotiated “semi-exclusive” licences with four
Indian generic firms and also negotiated a licence with the Pool. The terms
and conditions of the semi-exclusive licences have not been publicly
disclosed; therefore, it is not possible to assess their contents since they
are kept confidential. As noted above, the Pool licences are publicly
available, open to scrutiny, and contain a number of public health
safeguards. Very concretely, the Pool license will enable increased
production capacity, more robust competition and security of supply -- all
needed to put 15 million people on ART by 2015.

Since the licence was announced, ITPC and members of the World Community
Advisory Board convened by ITPC have been briefed on the licence and
discussions were held with members of the Pool several times over the last
weeks including proactive invitations from the Pool to provide briefings.
Discussions included extensive dialogue on the licence, on the terms and
conditions and on the implications for access to the products. Immediately
prior to the announcement, various members of ITPC and of WCAB were briefed
on the workings of the Pool in various settings. At no time during all such
meetings were most of the concerns raised in the briefing paper, factual or
otherwise, presented so that any misunderstandings could be cleared up. We
remain available and indeed invite continued dialogue so that going forward
we can continue to work together to support our common goal of access to
safe and affordable medicines for all and more access-friendly licensing of
HIV medicines.


*Ellen 't Hoen Charles Clift*

*Executive Director Chair of the Board*










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