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2016 | OriginalPaper | Chapter

Antitrust and Compulsory Licensing in BRICS and Developing Countries

Author : Rafael Pinho de Morais

Published in: Competition Law Enforcement in the BRICS and in Developing Countries

Publisher: Springer International Publishing

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Abstract

Compulsory licensing is a powerful tool for broadening access to inventions protected by intellectual property rights without the rights owner consent, and is highly disciplined by International Law and individual countries legislation. Although compatible with the WTO rules, compulsory licensing has rarely been used despite being an available competition policy instrument (i.e. antitrust remedy) in most jurisdictions. It can in particular be a powerful policy tool—as concerns pharmaceuticals—to address the well-known health burden held by the population in the poorer nations.

While compulsory licensing unambiguously improves access to (existent) health treatments and to protected technologies in general, its impact on profits and innovation rates is a more controversial issue. The economic literature has minimized the arguments against the use of the instrument, but competition policy has been too shy in using such a powerful tool, in particular in BRICS and other developing countries.

This chapter overviews the lag between the possible and the actual use of compulsory licensing as an antitrust sanction and of mandatory licensing as a condition for merger approval, in particular in the BRICS and other developing countries.

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previous chapter Public Enforcement of Antitrust Law in China: Perspective of Procedural Fairness

next chapter Procurement Procedures and Bid-Rigging in Brazil

Although throughout this chapter we seem to focus on medicines, the claims are the same for all sectors. It is just more striking when speaking of the pharmaceutical market and access to drugs.

Throughout this chapter, by compulsory licensing we mean any of the possibilities for non-authorized use (article 31 of the TRIPs Agreement) focused on public health: national emergency, public non-commercial use or stricto sensu compulsory license for on-patent generic production.

WTO (2014) reviews the procedures and overviews the issues in spreading the use of the system.

See for example Alavi (2008).

Compulsory licensing is only relevant during patent validity. After patent expiry, production of generic versions can be authorized, a much simpler, cheaper and less controversial procedure. For an analysis of regulation in the off-patent pharmaceutical market, check Morais (2006).

Patents are definitely not the only reason behind the non-access in poor countries: distributional channels deficiencies and corruption being commonly cited. These motivated Stavropolou and Valletti (2015) to explicitly endogenize coverage of the southern population when modeling compulsory licensing. Our focus though is on patent barriers—or cost-based availability limitations—and we further assume that the patent documents perfectly describe the production procedure, in such a way that reverse engineering costs (and lags), once the compulsory license is issued, are negligible.

Beall and Kuhn (2012) created a database of compulsory licensing use ranging from the WTO and TRIPs creation in 1995 to mid 2011. They found 24 compulsory licenses issued in 17 countries (see Fig. 1), almost all for HIV/Aids drugs and almost all in upper-middle-income countries. Most took place between 2003 and 2005—showing actually a decreasing trend from 2006 on.

Rwanda filed submission IP/N/9/RWA/1 dated 19 July 2007, concerning the importation of 260,000 packs of TriAvir—a fixed-dose combination product against Aids, whose original patent belongs to GlaxoSmithKline—to be manufactured in Canada for exportation to Rwanda by Apotex Inc., the then largest Canadian drug firm. According to WHO, WIPO, WTO (2013) “it took three years before the shipments in question proceeded”, which took place in September 2008, according to the Indian government statement in WTO (2014).

Kommerskollegium (2008) is a comprehensive study reviewing the adoption process of the paragraph 6 system and the difficulties in having it implemented. The authors agree that the system can be effective without being effectively used, through increasing the bargaining power for obtaining discounts, but claim it is extremely hard to check if it is indeed the case. We all doubt it is.

KEI (2007) review thoroughly the legislation changes around the world as concerns compulsory licensing as well as the threat of use and effective use. The disparity between rich countries and BRICS and other developing countries as concerns use in antitrust is abyssal.

MSF, Red Cross and WHO websites have plenty of information on neglected diseases. For example: http://www.who.int/neglected_diseases/diseases/en/

It also claims that: “Exception should be made for truly unexpected emergencies—but this is so no matter if it is for a neglected disease or not, or developed or developing country, as allowed by TRIPs. By this we mean the cases in which any country (developed or not) could reasonably issue a compulsory license, such as the USA during the 2001 Anthrax crisis. These emergency exceptions should be punctual, motivated and short in both time and geographic extent, in a way not to undermine incentives to innovation.”

Other mechanisms than the patent system can potentially be even better in generating private incentives for R&D on neglected diseases, such as patent buy-outs or prizes (tournaments), or the public funding of such R&D, but all these are beyond the scope of this chapter, which focuses on the patent system, the most used mechanism for generating those R&D incentives in our time.

https://www.wto.org/english/tratop_e/trips_e/gc_stat_30aug03_e.htm (accessed 09/10/2015).

Alavi, A. (2008). Special and differential treatments provisions in the trips negotiations. Journal of Intellectual Property Law and Practice, 3(1), 55–58. Available at SSRN: http://ssrn.com/abstract=1086057.CrossRef

Beall, R., & Kuhn, R. (2012). Trends in compulsory licensing of pharmaceuticals since the Doha declaration: A database analysis. PLoS Medicine, 9(1), e1001154. doi:10.1371/journal.pmed.1001154.CrossRef

Chien, C. (2003). Cheap drugs at what price to innovation: Does the compulsory licensing of pharmaceuticals hurt innovation? Berkeley Technology Law Journal, 18, 1–57.

Danzon, P., & Towse, A. (2003). Differential pricing for pharmaceuticals: Reconciling access, R&D and patents. International Journal of Health Care Finance and Economics, 3, 183–205.CrossRef

Grossman, G., & Lai, E. (2008). Parallel imports and price controls. RAND Journal of Economics, 39(2), 378–402.CrossRef

Knowledge Ecology International (KEI). (2007). Recent examples of the use of compulsory licenses on patents. KEI Research Note, 2007, 2.

Kommerskollegium. (2008). The WTO decision on compulsory licensing: Does it enable import of medicines for developing countries with grave public health problems? Report of the Swedish National Board of Trade.

Kyle, M. (2009). Parallel trade in pharmaceuticals: Firm responses and competition policy. In International Antitrust Law & Policy. Fordham Competition Law Institute.

Médecins Sans Frontières. (2004, May). Access to medicines at risk across the globe: What to watch out for in free trade agreements with the United States. MSF Briefing Note.

Morais, R. (2004). TRIPs under no enforcement of the National Treatment Commitment Rule (Working paper).

Morais, R. (2006). Regulation of pharmaceuticals after generic entry (Working paper).

Morais, R. (2015). Compulsory licensing of pharmaceuticals by the developing South (Working paper).

Reichman, J. (2009). Comment: Compulsory licensing of patented pharmaceutical inventions: Evaluating the options. Journal of Law, Medicines and Ethics, 37(2), 247–263.CrossRef

Reik, R. (1946). Compulsory licensing of patents. American Economic Review, 36(5), 813–832.

Stavropoulou, C., & Valletti, T. (2015). Compulsory licensing and access to drugs. European Journal of Health Economics, 16(1), 83–94.CrossRef

Steinbrook, R. (2007). Thailand and the compulsory licensing of efavirenz. New England Journal of Medicine, 356(6), 544–546.CrossRef

Tandon, P. (1982). Optimal patents with compulsory licensing. Journal of Political Economy, 90(3), 470–486.CrossRef

WHO, WIPO, WTO. (2013). Promoting access to medical technologies and innovation: Intersections between public health, intellectual property and trade.

WHO. (2014). Increasing access to HIV treatment in middle-income countries: Key data on prices, regulatory status, tariffs and the intellectual property situation.

WIPO. (2011). Survey on compulsory licenses granted by WIPO member states to address anti-competitive uses of intellectual property rights.

WTO. (2014). Annual review of the decision on the implementation of paragraph 6 of the Doha declaration on the TRIPs agreement and public health: Report to the General Council.

WTO. (2015). Trade policy review: Report by the Secretariat—India.

Title: Antitrust and Compulsory Licensing in BRICS and Developing Countries
Author: Rafael Pinho de Morais
Publisher: Springer International Publishing
Book: Competition Law Enforcement in the BRICS and in Developing Countries
Print ISBN: 978-3-319-30947-7

Electronic ISBN: 978-3-319-30948-4

Copyright Year: 2016
DOI: https://doi.org/10.1007/978-3-319-30948-4_5