by Matthew Royle, Taylor Wessing
Rwanda has recently become the first country to make use of the new compulsory licensing provisions that are proposed to form Article 31bis of TRIPs.
Canadian company Apotex Inc. has been awarded a compulsory export licence under the provisions to supply a combination AIDS drug to satisfy Rwanda’s health needs.
Previously, countries have awarded compulsory licences internally and relied either upon a domestic manufacturer or manufacturers from countries where no patent protection exists.
So, will this case lead to more countries using these provisions to obtain cheap supplies of its required drugs, or have the delays experienced by Rwanda and Apotex demonstrated the problems that exist with the provisions as they stand?
Article 31 of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs) sets out provisions that apply to the use of the subject-matter of a patent without the authorisation of the patent holder. In particular, Article 31(f ) provides that ‘any such use shall be authorised predominantly for the supply of the domestic market of the Member authorising such use’.
Whilst least developed countries (listed by the UN) are not obliged to implement section 5 of Part II of TRIPs, which includes Article 31, until 1 January 2016, under the WTO Decision of 27 June 2002, if they are unable to manufacture themselves, a country could not import the drug as a result of this Article. Article 31(f ), therefore, effectively prevents the supply of patented medicines to countries that do not have the capability to manufacture them.
Paragraph 6 of the Doha Agreement, which was adopted on 14 November 2001, recognises that ‘WTO Members with insufficient or no manufacturing capacities in the pharmaceutical sector could face difficulties in making effective use of compulsory licensing under the TRIPs Agreement’. The Council were instructed to find an expeditious solution, which it did by its decisions of 30 August 2003 and 6 December 2005, which allowed compulsory export licences to be granted in certain circumstances. Applicants must have made efforts to obtain authorisation directly from the rights holder and the export licences granted must, inter alia, be non-assignable, specify the amount of product to be manufactured and the duration of the licence, limit export to only the countries specified, and provide for remuneration to the patentee.
The Decision of 6 December 2005 will permanently add Article 31bis to the text of the TRIPs Agreement when it is ratified by two thirds of the members of the WTO.
The provisions have, however, been implemented in a number of countries. In the EU, Regulation 816/2006 was adopted on 17 May 2006 so the provisions apply in the United Kingdom.
In Canada, the provisions have been implemented by Canada’s Access to Medicines Regime (CAMR).
Rwanda’s Notification and Apotex’s Compulsory Licence
On 19 July 2007, Rwanda notified the WTO that, based on its public health needs, Rwanda expected to import 260,000 packs of TriAvir (a combination of Zidovudine, Lamivudine and Nevirapine used to treat HIV/AIDS) over two years. The manufacturer was named in the notification as the Canadian company, Apotex, Inc.
Apotex was unable to agree a licence with the patentees, GlaxoSmithKline, Shire and Boehringer Ingelheim. It therefore made an application under CAMR for an export licence. On 20 September 2007, The Federal Commissioner of Patents granted a compulsory licence to Apotex to supply TriAvir to Rwanda.
Apotex was critical of the ‘unnecessarily complex’ system and claimed that it did not ‘adequately represent the interests of those who require treatment’. GSK and Shire did not oppose the application but did not grant a voluntary licence, forcing Apotex to make an application. Despite ApoTriAvir being approved by Health Canada in August 2006, there was significant delay in the granting of the compulsory licence.
Why did Rwanda Need to Notify?
Rwanda is included on the UN’s list of least developed countries. So, according to at least one commentator, it does not technically need to notify the WTO of its desire to be an eligible importing member under paragraph 1(b) of the Annex to the TRIPs Agreement, because least developed countries are included as of right. The reason behind the notification, however, is more likely to be from the point of view of Apotex, the exporter.
Article 31bis of TRIPs states that Article 31 will not apply if the export is to an eligible importing member in accordance with the terms of paragraph 2 of the annex. Paragraph 2(a) requires the eligible importing member (including a least developed member) to have made a notification to the Council. So, whilst a least developed member does not need to comply with Article 31 or 31bis itself, if it wants to be supplied by an exporting member, it appears that it is necessary to notify the Council, so Rwanda’s actions were necessary.
Other Recently Granted Compulsory Licences On 29 November 2006, Thailand issued a compulsory licence, also for an HIV/AIDS drug. The government issued the compulsory licence to import Merck’s drug efavirenz from India to supply 200,000 people a year for five years (until 2011). Merck will receive 0.5 per cent of the total sale value of the generic product. There has been criticism of Thailand for not negotiating with the patentee prior to granting the compulsory licence.
The government stressed, however, that it is seeking to address a public health emergency and the material imported will be used for a non-commercial public treatment programme. In these circumstances, there is no obligation to negotiate with the patentee under Article 31(b). The obligation is to inform the patent holder of the licence as soon as is practicable. Moreover, Thailand referred to paragraph 6 of the Doha Declaration which recognises the difficulties facing WTO members with insufficient or no manufacturing capacities.
Similarly, Brazil awarded a compulsory licence to import efavirenz from India on 4 May 2007. Brazil only took this step after two years’ negotiations with the patentee, Merck.
In neither case was there a need to use the provisions under Article 31bis because there is no patent protection for efavirennz in India, so no exporting licence was necessary.
Zambia granted a compulsory licence to a Zambian national company on 21 September 2004 for a triple combination AIDS therapy containing lamivudine, stavudine and nevirapine. The compulsory licence was to last until the state of emergency, which was declared on 3 September 2004, was over. The patentees receive a 2.5 per cent royalty.
Indonesia granted a compulsory licence to its government on 5 October 2004 in respect of nevirapine and lamivudine. The royalty to be paid to the patentees was 0.5 per cent.
There have been at lease five compulsory licences granted under TRIPs in the past three years. Does this represent a new precedent for the approach to compulsory licences by less developed countries? The majority of compulsory licences have been granted for domestic manufacture and use only and so rely on a supply from homegrown manufacturers or from non-patented countries. The threat to patentees is real, though, and an increased willingness to grant compulsory licences might provoke the patentees into greater discounts. Only time will tell whether this will be the case.
Only one of these compulsory licences has been granted under the Article 31bis provisions and, following the criticisms of the procedure from Apotex, it seems unlikely that the provisions will be used regularly. The burden on the foreign manufacturers, who are already agreeing to supply the drug for little or no profit, is great, so they must be committed to want to make the application. There is little likelihood that the provisions will be simplified, not least because there would clearly be great opposition from the innovator patentees. Unless generic companies begin to act more altruistically, news of this compulsory licence is unlikely to open the floodgates for use of the Article 31bis procedures.
Originally published in BioScience Law Review, published by Lawtext Publishing Ltd.