EU forces Big Pharma to license drugs to 'countries in need'

The Council of Ministers adopted a Regulation on Friday that will oblige pharmaceutical giants to license their patents to generic drug makers to meet demand in poor developing countries in times of a public health emergency, such as avian flu.

Cooperation between the Council of Ministers and the European Parliament has allowed the rapid amendment and adoption of the Commission's proposal. The Regulation will be directly applicable in all Member States from the 20th day after its publication in the Official Journal of the EU, expected imminently.

The text of the Regulation makes clear that the compulsory licensing system set up by this Regulation is intended to address public health problems and therefore it should not be used by countries to pursue industrial or commercial policy objectives.

The Regulation imposes conditions upon the licensee as regards the acts covered by the licence, the identification of the pharmaceutical products manufactured under the licence and the countries to which the products will be exported.

Background

The Regulation fulfils a World Trade Organisation Agreement of December 2005 under which national authorities can grant compulsory licences for such production if certain conditions are fulfilled.

The WTO Members agreed to amend the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to make permanent a provisional decision on compulsory licensing originally adopted in August 2003.

The existing rules on intellectual property provide that compulsory licences can only be authorised predominantly for the supply of the domestic market. The amendment will allow any WTO Member to export pharmaceutical products made under compulsory licence for the purpose of supplying developing countries with no or insufficient manufacturing capacities in the pharmaceutical sector. The new rules will be formally incorporated into the TRIPS Agreement.

Under the new Regulation, companies in the EU can apply for a licence to manufacture, without the authorisation of the patent holder, pharmaceutical products for export to countries in need of medicines and facing public health problems. There is no specific restriction on the pharmaceutical products covered, although there is acknowledgement that they are required to address public health problems since that is the context of the WTO Decision of August 2003.

The Regulation represents an instrument that will allow the compulsory licensing procedure of the WTO decision to fit within the context of Member States’ national patent law and their compulsory licensing procedures. This is to give transparency and clarity for those companies operating within the EU’s internal market and wishing to apply for compulsory licences for export to countries in need.

Provided countries in need notify to the WTO the medicines they need, it would be up to generic companies to decide to apply for licences to manufacture them.

Once export takes place, the Regulation prohibits re-importation into the EU and provides for customs authorities to take action against goods being re-imported. The patent holder can use existing national procedures to enforce its rights against re-imported goods if they do enter the EU, and the licence can be terminated.

The Regulation also foresees a role for non-governmental and international organisations as being potentially involved in any purchasing procedures and able to make requests on behalf of an importing country with that country’s approval.

Safety and efficacy of medicines for export can be certified through the EU’s scientific opinion procedure, or equivalent national procedures. The EU felt this was a necessary complement to the licensing mechanism in order to assist importing countries.

Comment

Trade Commissioner Peter Mandelson said: "This is an important EU contribution to the fight against killer diseases in developing countries. It shows that the EU is committed to the WTO process, and to ensuring that the WTO system can respond to the public health concerns of poor countries in need of affordable medicines."

Chris Martin, an intellectual property specialist with Pinsent Masons, the law firm behind OUT-LAW.COM, said the intention behind the Regulation is laudable. But Martin expects some industry observers to question the implementation.

"The UK pharmaceutical industry is on record as stating that patent protection is not the main barrier to the availability of key drugs to the developing world," he said. "It follows that they will not regard the compulsory licensing of patents in favour of the manufacturers of 'generic' drugs an appropriate solution."

Despite the Regulation's safeguards against re-importation, Martin says the unlawful parallel importation of patented drugs into the EU and other parts of the developed world seems inevitable.

"Big Pharma will instruct its IP enforcement departments to monitor closely the grant of compulsory licences under the Regulation and to vigorously enforce patent rights against any generic manufacturers who work the patent rights beyond the scope of the compulsory licence," he said. "Patent rights holders should also begin to consider whether it would be better to do upfront commercial deals with generic drug manufacturers, rather than subject themselves to the vagaries of the compulsory licensing system under which the issue of compensation will be outside their control."

The practical relevance or otherwise of the Regulation will depend on the number of generic manufacturers who decide to apply for licences. "It will be interesting to see whether more licences are applied for and granted under the Regulations than has historically been the case under the somewhat infrequently used compulsory licensing provisions currently available at law in the UK," concluded Martin.