E-DRUG: Ecuador's compulsory licensing policy: Corrections to media reports
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Dear friends,
You will recall last Monday, Ecuadorean President Rafael Correa
announced a bold new national access to medicines policy through
decree no. 118, declaring access to priority medicines a matter of
public interest, and establishing procedures for issuing compulsory
licenses. Such licenses would authorize price-lowering competition
with expensive patented drugs.
Many news articles, in Spanish, English and French, reported on the
decree, as well as on subsequent comments and analyses by the patent
office, national and international pharmaceutical companies, and
observers. Unfortunately, several inaccuracies circled the globe
through some of these reports. We would like to take the opportunity
to correct a few of the most common inaccuracies now.
First, compulsory licenses do not eliminate or break patents. They
simply authorize use of a patented technology. Under compulsory
licenses, patent holders retain their patents and a variety of
related rights, including the right to be adequately compensated
through royalty payments and any rights reserved through restrictions
set out in the license. For example, sometimes compulsory licenses
are limited to public, non-commercial use. In this case the patent
holder would retain exclusive rights in the private market (i.e., the
right to be the exclusive seller to private pharmacies and
insurers). Ecuador will issue compulsory licenses, which is
qualitatively different from annulling patents.
Second, Ecuador has not predetermined the number of licenses it
intends to issue, nor will it license all medicines en masse.
Ecuador's patent office (IEPI) will consider compulsory license
requests on a case-by-case basis. IEPI will consult with the
Ministry of Public Health and take into account the public interest
that licensing a particular medicine would serve. Some news articles
reported Ecuador would "license 2,214 medicines" or "eliminate over
2,000 medical patents." 2,214 is actually the total number of
granted and/or requested patents for pharmaceuticals in Ecuador.
Often, multiple patents apply to a single medicine. Therefore, it is
not even theoretically possible for Ecuador to issue compulsory
licenses for 2,214 medicines, as there are not that many patented
drugs. IEPI will proceed more methodically and deliberately than
reported, considering license requests for priority medicines case-by-
case.
Third, much speculation has surrounded the issue of royalties. IEPI
has not predetermined the royalty rates it will require licensees to
pay to patent holders. IEPI will instead determine royalties
according to the unique circumstances of each case. IEPI is
currently studying international best practices in setting royalty
rates, including models and equations used in other countries.
Royalty rates established by IEPI are therefore likely to correspond
to international precedent.
Finally, some reports have suggested the WTO's TRIPS Agreement
requires Ecuador to negotiate with pharmaceutical companies before
issuing compulsory licenses, because Ecuador has not declared a
public health emergency. But under WTO rules, licenses issued for
public, non-commercial use are also exempt from the prior negotiation
requirement. Ecuador has not announced whether licenses would be
issued for public use, but if so, Ecuador would not be required to
negotiate first. In cases where negotiation is required, the
government need only offer reasonable terms and conditions. If the
patent holder fails to reply, or refuses reasonable conditions, the
government can then proceed and issue a compulsory license. In other
words, pharmaceutical companies cannot hold up the government for
whatever royalty rates they want. In that case the license would no
longer be compulsory at all, but voluntary, and the WTO rules would
cease to make sense.
Please see below for Essential Action's Backgrounder on "Ecuador's
Presidential Declaration on Access to Medicines and Compulsory
Licensing." You can also download a PDF at: http://
www.essentialaction.org/access/
President Correa's decree is available online, in Spanish, at: http://
www.sigob.gov.ec/decretos/. We hope to make an English translation
of President Correa's declaration available in short order.
Thank you, and please feel free to contact me with any questions. -
Peter Maybarduk, Attorney, Essential Action,
peter.maybarduk@essentialinformation.org
Ecuador’s Presidential Declaration on
Access to Medicines and Compulsory Licensing
– Backgrounder –
Quito, Ecuador, October 26, 2009 – Today, Ecuador’s President Rafael
Correa declared access to priority medicines affecting the health of
the Ecuadorean population to be a matter of public interest. Under
Andean Community law, the declaration opens the door to competition
of generic medicines with patented brand-name drugs, through use of
an internationally recognized legal mechanism called compulsory
licensing. The declaration should lead to government policies that
expand access to medicines.
Globally, competition has consistently proven the most effective
method to reduce medicine prices, and ensure prices continue to fall
over time. Over the last ten years, generic competition has produced
a revolution in HIV/AIDS treatment, reducing prices for first-line
antiretrovirals from around $10,000 to around $100 per year, and
enabling over four million people worldwide to access treatment.
By issuing a compulsory license, a government can authorize
competition with patented products, including the importation,
domestic production, distribution and/or sale of generic medicines.
In exchange, licensees pay reasonable royalties to the patent holder,
set by the government according to the circumstances of each case.
Compulsory licenses do not “eliminate” or “override” patents.
Instead, they authorize the use of patented technology under
enumerated conditions.
Countries’ right to issue compulsory licenses “on grounds of their
choosing” is enshrined in the World Trade Organization’s TRIPS
Agreement (1995) and unanimous Doha Declaration (2001) on
intellectual property and public health. The WTO’s Doha Declaration
also states, “the [TRIPS] Agreement can and should be interpreted and
implemented in a manner supportive of WTO Members' right to protect
public health and, in particular, to promote access to medicines for
all.”
Ecuador’s Presidential declaration does not on its own issue a
compulsory license. Rather, it authorizes procedures by which the
government can subsequently decide, case-by-case, to issue compulsory
licenses for priority medicines (as determined by the Ministry of
Public Health), based in public interests such as reducing treatment
costs and enabling greater access to treatment. The declaration
follows public pronouncements by President Correa articulating a
vision of intellectual property as “a mechanism for development for
the people,” and is an important step toward access to medicines for
all.
Many countries have used compulsory licenses to promote public
interests and remedy anti-competitive practices in a variety of
sectors. Today, the United States is perhaps the most frequent user
of compulsory licensing; including the government use of defense
technologies, and judicially-issued licenses to remedy anti-
competitive practices in information technology and biotechnology,
among others. Canada routinely issued compulsory licenses during the
1960s and 70s to develop its national pharmaceutical industry. In
recent years, a number of countries have issued compulsory licenses
to improve access to medicines, including Thailand, Malaysia,
Eritrea, Mozambique and Indonesia, among others.
In 2007, Brazil issued a compulsory license for the HIV/AIDS medicine
efavirenz. Brazil has provided treatment to hundreds of thousands of
people living with HIV/AIDS and saved well over US$1 billion through
its combined medicines strategy of domestic production, importation,
negotiation and compulsory licensing.
President Correa signed the declaration Friday, but his office
released it today. The declaration enables Ecuador’s government
officials to consider introducing generic competition with some of
the country’s expensive patented drugs, including second-line HIV/
AIDS treatments that cost more than double the current competitive
price, and lifesaving cancer treatments that exceed $35,000 per
person, per year, and which some hospitals cannot afford. The UNAIDS
2008 report estimated 42% of Ecuadoreans needing antiretroviral
therapy received it. Resource constraints in Ecuador limit
availability of treatment.
Ecuador’s declaration cites Constitutional principles as well as
provisions of the National Development Plan and international
agreements, including the WTO TRIPS Agreement and the World Health
Assembly Global Strategy and Plan of Action on Public Health,
Innovation and Intellectual Property. The declaration charges the
Intellectual Property Institute of Ecuador (IEPI) with establishing
royalties and the terms of licenses, in compliance with all
applicable national legislation and international rules. The
Presidential declaration incorporates requirements of the WTO’s TRIPS
Agreement and Andean Community legislation, including excerpting some
passages word-for-word. IEPI has published an administrative guide to
compulsory licensing for the use of Ecuador’s government agencies.
For more information, contact:
Peter Maybarduk
Attorney
Essential Action
Access to Medicines Project
peter.maybarduk@essentialinformation.org