An earlier version of this comment was published in Barron’s on 21 July 2023. A Spanish translation of it is also available from El Confidencial here.
The European Commission has invited feed back on its proposal for a EU-wide compulsory licensing mechanism, which indicates there is room for improvement of the proposed legislation. We have responded to this invitation and made some proposals for change. One key proposal we made is to ensure that the mechanism can be used to protect public health in all situations, not only in health emergencies.
If government-granted monopolies in the form of patents cannot be lifted when the public interest requires it, abuse is around the corner. Newly proposed legislation in the European Union has the potential to counter such abuse but is currently limited to crisis situations. To truly protect public health, it must go further.
The Covid-19 pandemic has rekindled interest in compulsory licensing of patents of health technologies. Compulsory licensing is a mechanism a government can deploy to authorise the use of a patented product or process without the consent of the patent holder. The World Trade Organization Ministerial Conference in 2001 adopted a declaration that clarified that this flexibility of patent law is consistent with global trade rules and can be used to the fullest to protect public health. Compulsory licensing became popular in global health in the early 2000s to ensure low-priced HIV medicines could circulate in global trade.
Since 2020, initiatives for compulsory licensing of Covid-19 therapeutics have been taken in nine countries leading to six granted compulsory licences. Several countries updated their patent laws to enable swift compulsory licensing during the pandemic. For example, in March 2020, Germany adopted legislation that empowered the minister of health to direct the compulsory licensing for government use of patents for a range of products needed during the pandemic. The U.S. authorised the use of patents without the consent of the patent owner to accelerate research and development of pandemic countermeasures. Research group Knowledge Ecology International reported 62 Covid-19 pandemic-related government contracts that authorised the use of patented inventions to ensure that patent litigation would not hold up the development of Covid-19 vaccines. These actions were seen—rightly—as essential to protect the public at a moment when timely access to pandemic countermeasures was a matter of life or death.
Unfortunately, it is neither easy nor straightforward to deploy these tools in the face of public need. The European Commission recently identified a number of problems with the current EU system for compulsory licensing. They include: the lack of coherence between national compulsory licences in the EU, the limited territorial effect of these licences, the burdensome and lengthy administrative procedures, and the lack of a Single Market for products subject to compulsory licensing. Further, compulsory licensing generally applies to patents and “supplementary protection certificates,” which extend patent protection to account for long regulatory approval times. But with the exception of Spanish law, compulsory licensing rules in the EU do not provide for the transfer of trade secrets, test data, or know-how that may be required to be able to produce the product.
Intellectual property protection is increasingly harmonised in the EU, but the mechanisms to protect the public interest—part and parcel of any balanced IP system—are not. For example, a new unitary patent system recently went into effect across much of the EU, but it does not provide for compulsory licences. Such licences remain governed by the laws of the participating member states. To quote the Commission’s report on the subject: “purely national compulsory licensing systems and their resulting divergences would conflict with the increasing European integration of patent law.”
This situation further strengthens the market position of pharmaceutical companies. It is no secret how companies leverage that market power. A white paper published in 2020 by the European generics industry titled “Anatomy of a Failure to Launch” offers a sobering overview of a wide range of monopoly-extending tactics the pharmaceutical industry deploys to keep competitors at bay for as long as possible, no matter the cost to public health.
Further barriers to the effective use of compulsory licensing in the EU can be found in the Union’s medicines regulation, which offers data and market exclusivities for medicines registered in the EU. These non patent-related market monopolies seriously hamper the effective use of compulsory licensing. To register and then sell a generic medicine in the EU, manufacturers must show that the product is equivalent to the originator product already registered. Data exclusivity delays generic entry by restricting generic manufacturer access to clinical trial information to be able to demonstrate equivalency.
There is no equivalent to a compulsory licence for monopolies granted through the medicines regulatory system. In the EU, data and market exclusivity cannot be waived. As a result, compulsory licensing becomes a mute measure because the generic product to be produced or imported under the compulsory licence cannot be registered and thus cannot enter the market.
This is not a hypothetical issue: Data exclusivity was one of the main barriers in 2015 when Romania considered issuing a compulsory licence for the importation of generic sofosbuvir, an antiviral for the treatment of hepatitis C.
Even in case of a public health emergency, the regulatory exclusivities cannot be lawfully lifted. This became apparent for the first time in 2006. The European Generic Medicines Association (since then renamed Medicines for Europe) sought clarification on whether data exclusivity would apply in case of an emergency compulsory licence for the flu medicine oseltamivir (sold by Roche under the brand name Tamiflu) within the European Union. Because of the H5N1 bird flu outbreak, countries had built stockpiles of oseltamivir, leading to shortages of the product. Nevertheless, the European Commission informed the generic companies that the body of European Community law on pharmaceuticals “does not currently contain any provision allowing a waiver of the rules on data exclusivity and marketing protection periods.”
Seventeen years and another pandemic later, this is finally set to change. The European Commission is proposing new legislation for an EU-wide compulsory licensing mechanism and for data and market exclusivity waivers.
The Commission proposed a regulation on compulsory licensing for crisis management that, if adopted, will establish a single procedure to grant a Union compulsory licence that covers the entire EU and can be granted by filing a single application. The Union compulsory licence will be available for “crisis-relevant products and processes.” The Union compulsory licence may be applied to granted patents, published patent applications for national and European patents, and supplementary protection certificates. The newly proposed pharmaceutical directive provides for the suspension of data exclusivity and market protection in the case of a compulsory licence to address a public health emergency.
These are sensible and overdue proposals, but the catch is that they are limited to crisis situations. This is shortsighted.
For example, a compulsory licence may be needed to ensure access to technology to prevent a crisis from happening. Compulsory licensing should also be an effective remedy to anti-competitive practices at the EU level. Further, developing the European Health Union will require more robust means to address the high prices of novel treatments. Today, member states have great difficulty in achieving good results in price negotiation with monopoly-holding pharmaceutical companies, leading to delays in access to medicines and inequitable access to novel medicines in the EU. The European Commission has committed to supporting member states in addressing high medicine prices. An effective compulsory licensing mechanism would provide such support by bolstering the position of governments in price negotiations.
Once in a while, a government should be able to bang a fist on the table, but that is hard to do without sacrificing patients’ health if the pharmaceutical monopoly can never be lifted.
It is important to expand the EU-wide compulsory licensing mechanism beyond crisis situations so it can also be deployed on other public interest grounds when needed. To ensure the effective use of the compulsory licensing, data- and market exclusivity waivers should be available in all situations the Commission or a member state issues a compulsory licence related to a medical product. The new rules should also provide for the possibility to include an obligation on the patent holder to transfer know-how to the beneficiary of a compulsory licence.
