Revision of Compulsory Patent Licensing Regime to Give Less Developed Countries Greater Access to Cheap Drugs

Governments are able to grant compulsory licences to allow the manufacture of patented products without the consent of the patent owner. Such compulsory licences may only be granted if certain conditions are met. Article 31(f) of TRIPS provides that production under such compulsory licensing must be predominantly for the domestic market. This does not help those poorer countries that do not have a manufacturing base since the Article does not appear to allow export to them.

This issue was addressed at the WTO Ministerial Conference in November 2001, but no agreement was reached. However, the resulting Doha Declaration required the WTO General Council to find a solution by the end of 2002. No solution could be agreed. The deadlock was finally broken on 30 August this year by a decision reached by the WTO General Council. The decision would allow the export and import of pharmaceutical products made under compulsory licences, provided certain conditions are met.

The General Council’s decision acts as waiver of Article 31(f) of TRIPS in respect of pharmaceutical products only. It provides for a system under which member countries may import pharmaceutical products made under compulsory licences. A "pharmaceutical product" is defined as a patented product, which addresses "public health problems". The waiver acts only in respect of importation into an "eligible importing country".

Eligible importing countries include "least developed members". A least developed member is a country that has insufficient or no manufacturing capacity in the pharmaceutical sector.

Other eligible importing members are those countries that have notified the General Council of their intention to be an importer of pharmaceuticals, rather than a manufacturer. However, they may only give such notification in emergencies or in cases of public non-commercial use. 23 countries including the US and all EU countries opted out from exercising this provision.

There are certain conditions that must be met before the system may be used. The eligible importing member must first notify the General Council of the name and quantities of the pharmaceutical product needed. It must also confirm it does not have sufficient manufacturing capacity and that it will grant a compulsory licence to enable the importation. The exporting member must also grant a compulsory licence with a condition that it will only allow the making of the amount of product necessary to meet the needs of the importing member and that the entirety of that production will be exported to that member country. Products made under such a compulsory licence should be suitably identified.

Other conditions are that the exporting member should notify the General Council of the grant of the compulsory licence and the conditions attached to it. Additionally the importing member should take reasonable measures to prevent diversion of the products to other countries.

The spirit behind the decision is to address the public health problems affecting many developing and under-developed countries. The worry for pharmaceutical manufacturers is the diversion of reduced price products.

To help alleviate these concerns an accompanying statement from the Chairperson of the General Council makes it quite clear that the system should only be used in good faith, to protect public health and should not be used to pursue commercial objectives.

The Chairperson’s statement also refers to "Best practices" that could be followed to help avoid diversion of products. The best practices referred to are procedures already adopted by companies to prevent diversion of products. For example, Novartis uses different trade mark names, one for developed countries and the other for developing countries. Novartis also uses different distinctive packaging. Other companies such as Pfizer have used different colours and shapes for pills supplied to developing countries.

It remains to be seen how the decision will work in practice. The decision has tried to strike a balance but no doubt many will be of the view that it does not go far enough for developing countries while others will be concerned that it will be open to abuse.

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