[e-drug] Ecuador Grants a Compulsory Licence for ritonavir

Peter_Maybarduk · April 22, 2010, 6:13pm

E-DRUG: Ecuador Grants a Compulsory Licence for ritonavir
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http://www.ip-watch.org/weblog/2010/04/22/ecuador-grants-first-
compulsory-licence-for-hivaids-drug/

Ecuador Grants First Compulsory Licence, For HIV/AIDS Drug
By Catherine Saez on 22 April 2010 @ 6:24 pm

Ecuador this month granted its first compulsory licence for a
patented pharmaceutical since declaring last year that it would
utilise international rules allowing it to do so.

The move has already brought the country substantial savings due to
new competition, according to the Ecuadorean intellectual property
office. Other Latin American countries might be drawn to the prospect
of reduced drug prices, according to advocates. The rights owner said
it is disappointed with the decision.

The compulsory licence was granted for ritonavir, an antiretroviral
drug, on 14 April to Eskegroup SA, the local distributor for Cipla,
an Indian generic pharmaceutical producer, according to Andrés Ycaza
Mantilla, head of the Ecuadorean intellectual property office (IEPI).

The owner of the patent is Abbott Laboratories, a US pharmaceutical
manufacturer. Eskegroup will pay royalties to Abbott for using the
licence under the term of the compulsory licence. The compulsory
licence has been granted for the time that was left on the patent,
until 30 November 2014.

In October 2009, Ecuadorian President Rafael Correa signed a decree
allowing compulsory licences in Ecuador. Correa declared access to
essential medicines of public interest to the Ecuadorean population
and based his decision on Article 31 of the World Trade Organization
(WTO) Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Agreement, the Ecuadorean Constitution, and the WTO Doha Declaration
on TRIPS and Public Health (IPW, Public Health, 23 November 2009 [1]).

On 5 January, Eskegroup, headquartered in Guayaquil, asked for a
compulsory licence on the active ingredient ritonavir, according to
the compulsory licence document [2] [pdf, in Spanish].

On 15 January, the Ecuadorean Intellectual Property Institute issued
instructions [3] [pdf, in Spanish] about pharmaceutical compulsory
licences.

On 19 February, Eskegroup presented the necessary documents and
Abbott Laboratories was notified of the possible compulsory licence
on its patented drug.

Calculation of Royalties to Rights Owner

In accordance with the TRIPS agreement, Article 31(h), Eskegroup will
pay royalties to Abbott Laboratories, according to the compulsory
licence document.

TRIPS Article 31(h) says “the right holder shall be paid adequate
remuneration in the circumstances of each case, taking into account
the economic value of the authorization.”

The method used to calculate the amount of royalties to be paid to
Abbott is referred to as “Tiered Royalty Method,” (TRM). This method
appears in a document [4] titled, “Remuneration guidelines for non-
voluntary use of a patent on medical technologies,” published by the
United Nations Development Programme and the World Health
Organization’s Technical Cooperation for Essential Drugs and
Traditional Medicine. The document, published in 2005, was authored
by James Love, then of the Consumer Project on Technology.

According to the Tiered Royalty Method, the “royalty rate is not
based upon the price of the generic product. Instead the royalty is
based upon the price of the patented product in the high-income
country. The base royalty is 4 percent of the high-income country
price, which is then adjusted to account for relative income per
capita or, for countries facing a particular high burden of disease,
relative income per person with the disease.”

According to the remuneration guidelines, the TRM “provides a more
rational framework for sharing the costs of research and development
and may be more sustainable for some middle- or high-income countries
that are sensitive to global norms concerning the sharing of R&D costs.”

Ritonavir is often compounded with lopinavir, an ingredient that is
not patented in Ecuador. According to the calculation method,
Eskegroup should pay $0.041 in royalties to Abbott for each capsule
of ritonavir 100 mg, $0.02 for lopinuine (ritonavir and lopinavir
combination).

The compulsory licence already has yielded savings to the government.
According to Ycaza Mantilla, the Ecuadorean Ministry of Health
already made a purchase of lopinavir and ritonavir, which could see a
US$150,000 discount on the original offer.

Second CL on the Way?

According to intellectual property lawyer Peter Maybarduk, access to
medicine programme director at Public Citizen, a US advocacy group,
another compulsory licence could be issued shortly in Ecuador.
Another Indian company, Matrix, has requested a compulsory licence
for ritonavir as well. This additional competitor could bring the
prices even lower and Matrix offers several advantages such as being
prequalified by WHO.

Matrix has agreed to a maximum price in a number of countries
including Ecuador. The maximum price would be approximately half of
Abbott’s current market price, according to Maybarduk. Maybarduk is
providing technical assistance to the Ecuador government, including
the IEPI.

According to Ycaza Mantilla, The IEPI is waiting for Matrix to
complete their submission before granting them a compulsory licence.

Ecuador’s granting of compulsory licences might prompt other
countries to follow the same road. “We certainly hope so,” said
Maybarduk. “Compulsory licences are an integral component of
intellectual property rules, and are key today to promoting global
access to medicine,” Compulsory licences are important, they could
help countries meet the United Nations Millennium Development Goals.
“We are hopeful” the Ecuadorean’s initiative “will have implications
for the region,” he said.

During a meeting of the South American Union of Nations (UNASUR) in
November 2009, UNASUR health ministers strongly supported the
Ecuador’s decision on compulsory licence to improve access to
medicines, according to a story posted on the IEPI’s website [5].

In the past, developing countries using the TRIPS flexibility of
compulsory licences have come under intense pressure from developed
nation brand-name producers and their governments. Small countries
have been particularly nervous about drawing the ire of the largest
economies despite their right to use the flexibility.

Ecuador’s initiative was mentioned in the Office of the United States
Trade Representative’s 2010 National Trade Estimate Report on Foreign
Trade Barriers, and Ecuador was listed on the US watchlist in the
2009 Special 301 report. The 2010 Special 301 report is due out soon.

The Trade Estimate report on trade barriers [6] said that “in 2009
President Correa signed two presidential decrees regarding compulsory
licenses, one for patented pharmaceutical products, and the other for
agriculture chemical products. No compulsory licenses had been issued
by the Ecuadorian government as of December 2009. The US government
will continue to monitor developments in this area.”

Abbott Laboratories Disappointed by Ecuador’s Decision

In October, a local pharmaceutical industry group issued a statement
that it accepted the decision of the Ecuadorean government to issue
compulsory licences but said that they were not included in the
process leading to the decision.

Contacted by Intellectual Property Watch, Abbott US said it was
“disappointed to receive notification of a compulsory licence for our
HIV medicine ritonavir in Ecuador.”

“Abbott developed the first test for HIV more than 25 years ago and
has continued to invest in the development of new treatments, tests
and clinical protocols for HIV since then. Abbott’s lopinavir/
ritonavir is the most broadly available anti-retroviral treatment in
the world and forms the cornerstone of second-line treatment in
developing countries – where the majority of people with HIV live. We
have also invested in sufficient manufacturing capacity and have
consistently made our medicine available at prices that are
competitive with those of generic manufacturers. Our HIV medicines
are affordable and sold at prices that are competitive with those of
generic producers,” Abbott said.

According to Abbott, compulsory licences “undermine the patent system
and are a disincentive for research-based companies to invest in new
treatments. The way to sustain patient access is to ensure
affordability while preserving the system that enables the discovery
of new medicines.”

“We believe that granting a compulsory license for ritonavir is not
in the best interest of HIV patients in Ecuador,” the company said,
adding, “Abbott has been supplying lopinavir/ritonavir in Ecuador
since 2003, and we remain committed to ensuring that patients in
Ecuador, and around the world, have access to high-quality HIV
medicines.”

According to sources, there was communication with Abbott before the
licence was granted. Abbott warned IEPI about the quality of the
generic product, he said, but IEPI reminded the company that quality
is not the IP office’s responsibility but rather the Ministry of
Health’s, which is responsible for giving commercial authorisation,
after all tests have been carried out.

Francisco Rossi, from the IFARMA Foundation [7], a Colombia-based
research institute working on access to quality medicine with a
special focus on Latin America, said that the foundation was happy
about Ecuador’s issuance of its first compulsory licence as this
decision has been awaited by civil society since the announcement of
President Correa to issue compulsory licences for essential medicines.

Another reason to rejoice, according to Rossi, is that the compulsory
license has been granted on the same drug for which civil society in
Colombia had asked for an open licence usable by any interested party.

“Ecuador shows the difference when there is a political will, where
public health is more important than trade agreements or the
intention to attract foreign investment at any cost,” Rossi said.

Topic		Replies	Views
[e-drug] Ecuador's compulsory licensing policy: Corrections to media reports e-drug	0	13	November 2, 2009
[e-drug] Ecuador's 2nd compulsory license: abacavir+lamivudine e-drug	0	15	November 27, 2012
[e-drug] Compulsory licenses in Ecuador will lower the price of medicines e-drug	0	11	April 26, 2010
[e-drug] Ecuador President on Access to Medicines & Compulsory Licensing e-drug	0	10	October 26, 2009
[e-drug] List of countries with compulsory licenses e-drug	7	23	March 17, 2008

[e-drug] Ecuador Grants a Compulsory Licence for ritonavir

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