Intellectual Property Rights & Compulsory Licensing: The Case of Pharmaceuticals in Emerging Markets

Abstract

On 9 March 2012, India's Controller General of Patents, Designs and Trademarks granted a non-exclusive and non-assignable compulsory license to NatcoPharma to manufacture and sell a generic version of Bayer's cancer drug Nexavar at a discount of 97% on the innovator price. The ruling revives a drawn-out debate on the use and abuse of intellectual property rights in international commerce. The inclusion of the agreement of trade-related aspects of intellectual property rights (TRIPS) in WTO rules in 1994 committed member countries to honour patent rights and to apply common compulsory licensing standards when seeking market relief. Lately, however, the criteria for such interventions seem to have been slipping. Applying the 'public non-commercial use' rationale to non-emergency, non-infectious diseases, Thailand converted compulsory licensing into an effectively unconstrained method of pure cost containment. Widespread use of that model would require the developed world to shoulder a disproportionate share of the necessary R&D expenditures while simultaneously presenting it with an attractive option to shed that burden. The decision taken by India's Controller General of Patents, Designs and Trademarks in the case of Nexavar may present a first step into that direction. The US Hatch-Waxman Act provides a means for India Inc. to sustain its generic business model in a TRIPS-compliant fashion. Advancing from here requires the country or any other emerging economy to refocus R&D efforts on product technology and, for their own benefit, to insist on a nation-blind enforcement of intellectual property rights. Compulsory licensing is not an alternative to this. Neither is it a substitute for indigenous technology, nor does it provide a solid foundation for upgrading a country's pharmaceutical sector. It is legitimate in a range of circumstances, but standards and implementation principles must be clear to avoid stifling the benefits of technological progress and global commerce. Going forward there is a need to recall some of the principal differences between corporate and political responsibility in attaining socially preferred outcomes, to clarify the role of WTO rules as constituting global trade, and to promote genuine national debates on healthcare and funding.