The topic of Compulsory Licensing was a trending topic that gained a great deal of attention during the COVID-19 pandemic that swept through the world in 2019. Ashwini Pereira (Program Manager) and Yasara Kodagoda (Events Manager – Internal) from the Moot Court Bench International Trade Law Program interviews Prof. Naazima Kamardeen, from the Department of Commercial Law, Faculty of Law, University of Colombo, to discuss what changes took place in the area of compulsory licensing during the pandemic. Prof. Kamardeen is a lecturer at the University of Colombo, teaching international investment, intellectual property and tax law for undergraduates and international trade and intellectual property for post-graduates. She is a Fulbright Scholar, a member of the Law Commission of Sri Lanka and the Ethics Review Committee of the Sri Lanka Medical Association and has authored two books.
Compiled by Senuri Vidanapathirana
Q: To begin, would you be able to provide an understanding as to what “compulsory licensing” is?
A: Today, one of the main ways in which anyone protects a new invention in the field of science is by the way of a patent. When you get a patent, you also get the exclusive rights to make the product or use the process that is protected by the patent or to give someone else a license to do that work for you. Many patents are available today for technological products, agricultural products, and pharmaceuticals.
What needs to be understood about patents is that they are a monopoly. In the modern marketplace, monopolies can lead to people abusing their powerful positions, the state also gets the opportunity to regulate patents for the greater good of society. One way this could be done is through the mechanism called compulsory licensing, which is found in both the Paris Convention on Industrial Property and the TRIPS (Trade-Related aspects of Intellectual Property Rights) Agreement in the WTO. This compulsory licensing mechanism allows the state to take over the inventor’s right to issue the license and authorizes another party to work the patent. Since the other party will price the product based only on the cost of production and not research and development, the price is usually much lower than that of the original. This is the advantage to consumers.
Q: What is the role of compulsory licensing in promoting access to health?
A: Access to health is an aspect of one’s “right to health” which is a right of everyone. And this right is even affirmed by many international instruments like the Universal Declaration on Human Rights, the International Covenant on Economic, Social and Cultural Rights and the UN Commissioner on Human Rights. When drugs are so expensive that they are unaffordable for ordinary people, it denies them the right and therefore, their access to health as they cannot buy the medicines that are needed for them to be healthy and free of diseases. While we must acknowledge that the costs of research and development need to be covered and it is often said to be the reason why branded drugs are so expensive compared to their generic counterparts, the reality is that if the drug is priced to be beyond the reach of the ordinary patient, there is no point in the drug being available at all. If the government can issue compulsory licensing, then, it also gets the capacity to get these lifesaving drugs at affordable rates for the patients who need them but cannot afford them. For example, the HIV/AIDs Pandemic prompted South Africa in the 1990s to include compulsory licensing provisions in their Medicines Act. That provision would have enabled antiretrovirals for HIV/AIDs to be manufactured and sold for as little as USD 2 per tablet whereas, at the time, the branded drug was priced at over USD 100.
Q: How is compulsory licensing provided for in the current international legal system?
A: Article 31 of the TRIPS Agreement contains compulsory licensing provisions. It is titled as “other use without authorization of the right holder.” From the title itself, it is cautioning us that what is being done is ordinarily out of the scope of the rights of the holder of the patent.
As mentioned earlier, this is given only as a tool to be used only in states of extreme urgency or when there is a problematic situation for the government where it needs to balance the rights of the patent holders with the needs of society. Because we find that it is the government, in most cases, that must perform this regulatory function. So, when allowing a government to take a patent holders formula and without his authorization, to give it to someone else and permit them to work this license and to, in essence, breach a fundamental aspect of the patent, there must necessarily be a lot of safeguards, or it could lead to abuse, and it could lead to the rights of the patent holder being completely taken away. So, in every instance, this authorization needs to be considered in its individual merits. Simply because you have issued a compulsory license in a particular field, it does not necessarily mean that you should start issuing compulsory licenses in that field for other products. Additionally, subsection (b) of Article 31 says that you must try to obtain authorization from the right holder on reasonable commercial terms and conditions so that the first requirement before you take the step to issue a compulsory license is that you must try to negotiate with the original right holder in good faith and try to offer him something that is reasonable to get this product made and sold at a lesser price than it is currently being done. This requirement can be waived only if there is something called a national emergency or a state of extreme urgency or for public noncommercial use, which means that the government is stepping in and it is not seeking to profit because there is something like a pandemic or a serious health emergency in place. Even if that is done, the government must inform the right holder about what the entire process is so that the requirement to keep the right holder informed is also there and the use of this should be non-exclusive.
The use must be non-assignable, which means that if you choose someone to grant the compulsory licenses, they cannot then transfer it to other people. Originally Article 31 said that this should be predominantly used for the supply of the domestic market, that is, that the person holding the compulsory licenses cannot manufacture excess stocks and say that the domestic supply is now complete and then take steps to export the product to other countries because then they would be making a profit out of this experience. The article further states that the rights holder should be paid adequate remuneration considering the economic value of that authorization which means that the compulsory licenses process is not intended to make the compulsory license holder profit from the experience because they were not the original holder of the patent. They have been asked to work on the patent because there is some problem, but they cannot profit from it. So, in case they can sell and make a profit, then, the original rights holder also has the right to be remunerated from those profits. So, when you look at the combined effects of most of these provisions, we will see that Article 31 was trying to protect the original rights holder to the maximum level by inserting safeguards that make sure that compulsory licenses were not used to take away the original patent holder’s rights. However, what led to it being amended and bringing in of Article 31 is subsequently, in practical reality, that some of these provisions that were aimed at protecting the original right holder were causing a lot of delays and roadblocks in getting the license issued. And in the field of pharmaceuticals, it was not a suitable option to have delays of even three to four months because, in the context of a pandemic, every day is especially important.
Q: Could you provide more details to the South African HIV/AIDs pandemic in the context of compulsory licensing?
A: After the WTO, the TRIPS Agreement and its provisions on compulsory licensing came into place, in 1997, South Africa, which was bearing the brunt of the HIV pandemic, passed a new Medicines Act into which it added the compulsory licensing provision. This would have enabled it to authorize the production of generics at a fraction of the cost of the branded drugs. Since this was the early days of the production of antiretrovirals. The branded drugs were very expensive, and they were beyond the reach of ordinary patients in the country. However, 39 drug companies filed action against the South African government alleging that the decision to allow compulsory licenses would impact their rights. This led to a huge public outcry against these companies and the boycotting of their products on the basis that they were not willing to be sympathetic to the suffering of patients. The bad publicity this caused eventually led to the companies withdrawing the case but it served the WTO membership as an example that the provisions of Article 31 needed further interpretation and that was what was taken up in the Doha Ministerial Conference.
Q: How did the TRIPS membership overcome the problems with Article 31?
A: Since the problems with the Article had been flagged in paragraph 6 of the Doha Declaration, the main purpose of Article 31bis was to help the membership to overcome those problems. Particularly those in Article 31 (f) and (h). The combined effect of these two would allow the exporting country to export the drugs without being hampered by the requirement to only produce for the domestic market which was a real problem, as seen in Article 31 and also Article 31bis. This helped to release the importing country from having to pay adequate remuneration to the patent holder because in most cases, this could not be practically done in importing countries. Apart from these provisions, the third paragraph of this amendment waives Article 31 (f) in situations where one producing member is part of a regional trade agreement and is producing the drug for other trading partners in which case, it would be easier for them to do this. The fourth paragraph places this amendment outside the purview of non-violation complaints so that there is little less pressure on countries who are engaging in this activity, and they do not have to be frightened of being called in for a dispute settlement mechanism as a result of doing this. So, all these measures have helped to a certain extent in enabling developing nations to get access to more affordable drugs
Q: What is Sri Lanka’s overall outlook on compulsory licensing and how does Sri Lanka undertake tasks relating to it?
A: Sri Lanka has incorporated provisions on both compulsory licensing and parallel imports into local legislation which is the Intellectual Property Act No. 36 of 2003 as amended. We can find compulsory licensing provisions in Section 86, so the ability to issue compulsory licensing and conduct parallel importation is legally currently available through our legislation. But, we still have not issued any compulsory licenses. Some reasons for this may be because our market is relatively very small, it may mean that drugs are not being patented in our country and the fact that we do have fairly strong generic manufacturing processes and are capable of importing generics from India may be some of the reasons that we have not optimized the use of compulsory licensing. But, it is useful to have these provisions because if there is a real need to do it, then, we would be able to operationalize it.
Q: When talking about the current IP regime, have we facilitated the right to help people in developing nations and promote global inequity?
A: This is an extremely important question. What we see is that the current IP regime has helped to a certain extent in enabling developing countries to get access to more affordable drugs. But, when you look at the practical examples of how it happened, we find that there are still a lot of roadblocks that have prevented compulsory licensing from being used properly. There are few examples of the system working successfully and even they have been time-consuming; sometimes, defeating the purpose of access to medicines. One example is when Rwanda used the compulsory licensing provisions to get pharmaceuticals from Canada. Because the Canadian patent regime was quite strict, despite compulsory licensing being available, there were a lot of procedures to follow. As a result, the entire exercise took about four years to complete and was seen by experts as not quite a failure but at least an example of a very great delay and completely unsuitable for a real health emergency.
To answer the second part of the question, global health inequity is a burning issue in the modern context which has been highlighted by the pandemic. Of course, it exists, and it is caused by many reasons because access to healthcare is such a resource-dependent right. If we say that there is a right to access health it should not require people to spend a lot of money and should have a lot of facilities dedicated to that purpose. But the IP regime and its compulsory licensing provisions and their delays are just one of the reasons for the global health inequity that we can see today.
Q: What is the connection between the COVID-19 pandemic and compulsory licensing and how exactly has this affected access to medicine or rather vaccines.
A: The COVID-19 pandemic is different to other pandemics in the past, in terms of how rapidly it spread across the globe and even developed countries were severely affected by it. Compared to other pandemics like SARS and Ebola, there is more of a global spread. And the rate of response was seen to be practically very slow, even in developed countries. The real problem with COVID and compulsory licensing as a possible remedy is that the treatments are not patented as yet. Only a few components are patented, and there is a huge problem with the compulsory licensing regime as well because a patent cannot be compulsory licensed until at least three years have passed since its approval for use. This means that even if a COVID-19 remedy is patented today, we still have to wait 3 years before a government can issue a compulsory license and that is too long a wait.
Another point to note is that the patents that have been used for the treatment of COVID are mostly by companies belonging to what we called “developed nations” or “the global north” while countries of the “global south” have said that they will not seek to patent these treatments formulated mostly by their research centres. We have seen how developed nations were able to purchase large stocks of vaccines and inoculate their populations faster than developing nations, enabling them to open their economy much faster than these developing nations.
Q: What are the possible economic impacts of the inability to access vaccines in a timelier manner?
A: This is an important point. We have seen in the very recent past how developed nations were able to access medicine quickly, purchase large stocks, vaccinate their population in a relatively short space of time and get people back to the economy and kids back to school. This has all helped them to stage an economic recovery much faster than any of the developing nations that have been dependent on other nations for vaccines that have to be bought from outside. When you are able to provide vaccines for your society and you are able to guarantee them a safe environment in which to get back to work or to get back to do things they are supposed to do, you enable the entire economy to start functioning effectively. What is disadvantageous when you only have certain parts of the economy that are working or working only at half of its strength, is that you cannot have an economy in good shape. Today’s interdependent global village really depends on so many inputs coming in at a certain time just to produce one product. Therefore, even if one of these inputs gets delayed because a particular sector is not working, it will affect efficiency as a whole and as a result of that, you cannot expect that the economy will take off and you will see economic growth. From that perspective, there is an enormous economic necessity to make sure that there is timely and proper access to healthcare and in this instance, access to COVID-19 vaccines.
Q: How has the WTO achieved the task of offering at least some sort of respite to member countries in relation to compulsory licensing?
A: The WTO itself has done its best under the circumstances. The bringing in of Article 31bis, we see now, is a very timely move considering how the COVID-19 pandemic swept through the world a few years after it was brought in. But, the problems in implementation make the compulsory licensing process complex and time-consuming. I do not think it is within the mandate of the WTO to completely relax patent rules in just this one area as that probably would be unfair to patent holders in pharmaceuticals. But since this is an area that directly impacts people at their most vulnerable when they are sick and need medicine, I believe that the WTO could help strengthen technical cooperation between countries so that compulsory licensing could happen more smoothly. Also, if members can agree to put this aspect outside the purview of dispute resolution altogether and not just for non-violation complaints, it may encourage nations to use it with more confidence.
Q: What impact did the vaccine relay have on Sri Lanka?
A: We saw the impact of the vaccine relay in Sri Lanka. As we did not conduct innovative production in this area, we were dependent on COVID-19 vaccines from other nations like India and the COVAX program. This led to a delay in vaccinations, prompting the third wave of the virus. It is estimated that over 91% of fatalities due to COVID in Sri Lanka were among unvaccinated people. The delay in vaccines, therefore, prompted lockdowns and additional hospitalizations which was a burden on the state and this ultimately impacted the economy. It has prevented people from getting back to work and the economic impacts of them are being felt now, but there may be other non-economic factors such as social or psychological impacts which also do affect people in addition to those we have not seen yet, and which we might see in the future.
The views and opinions expressed by experts in the In-Discussion Series of the Comparative Advantage Blog are those of the experts and do not necessarily reflect the views of the Moot Court Bench.