Compulsory Licensing Often Did Not Produce Lower Prices For Antiretrovirals Compared To International Procurement

Abstract

Compulsory licensing has been widely suggested as a legal mechanism for bypassing patents to introduce lower-cost generic antiretrovirals for HIV/AIDS in developing countries. Previous studies found that compulsory licensing can reduce procurement prices for drugs, but it is unknown how the resulting prices compare to procurements through the Global Fund to Fight AIDS, Tuberculosis, and Malaria; UNICEF; and other international channels. For this study we systematically constructed a case-study database of compulsory licensing activity for antiretrovirals and compared compulsory license prices to those in the World Health Organization's (WHO's) Global Price Reporting Mechanism and the Global Fund's Price and Quality Reporting Tool. Thirty compulsory license cases were analyzed with 673 comparable procurements from WHO and Global Fund data. Compulsory license prices exceeded the median international procurement prices in nineteen of the thirty case studies, often with a price gap of more than 25 percent. Compulsory licensing often delivered suboptimal value when compared to the alternative of international procurement, especially when used by low-income countries to manufacture medicines locally. There is an ongoing need for multilateral and charitable actors to work collectively with governments and medicine suppliers on policy options.

Addressing the challenge of high-priced prescription drugs in the era of precision medicine: A systematic review of drug life cycles, therapeutic drug markets and regulatory frameworks

“…[ 1 ; 6 ; 78 ; 79 ] Others use a utilitarian stance to argue that pharmaceutical companies are for-profit entities,[ 40 ; 73 ] and without patents these companies would not be incentivized to develop drugs. [ 1 ] This difference in viewpoint is illustrated by the litigation surrounding patents and compulsory licensing (see paragraph 4.2.7) in LMIC[ 73 ; 80 ; 81 ].…”

“…[ 79 ; 198 ] This means that the authorities recognize the drug patents, but are allowed to have local generic manufacturers produce the same drugs, without fearing claims of patent infringement, or they can import the drug from another generic manufacturer. [ 7 ; 56 ; 79 ; 81 ] This reduces the costs of a new drug dramatically,[ 171 ] though other options like international procurement seem to offer a better discount. Unfortunately, this approach is also administratively cumbersome, since in general, it applies to one drug at a time,[ 56 ] and could result in other innovators withdrawing their drug from the market.…”

“…Unfortunately, this approach is also administratively cumbersome, since in general, it applies to one drug at a time,[ 56 ] and could result in other innovators withdrawing their drug from the market. [ 199 ] However, compulsory licensing can be used successfully as part of a strategy to reduce prices offered by the originator[ 56 ; 79 ; 81 ; 199 ].…”

“…This approach leads to lower prices and more accessibility than compulsory licensing. [ 81 ] Lower prices can be achieved through voluntary out-licensing,[ 73 ] wherein the originator allows a generic manufacturer to produce the drug at reduced costs in exchange for a royalty. One example is the out-licensing of Harvoni ® (containing sofosbuvir and ledipasvir), which Gilead Sciences gave to an Indian manufacturer to produce for 91 LMIC, against a royalty of 7%[ 81 ].…”

Patents for Sharing

“…270 However, an empirical study shows otherwise; the prices set by compulsory licenses are often lower than the price resulting from international procurement, which is the current alternative. 271 Moreover, U.S. patent owners are suspicious about the risk of bias because non-U.S. judges decide the price and compensation. No such risk is involved under the compulsory license system that this article proposes because U.S. judges would decide the reasonable compensation in a manner similar to the ongoing royalty adopted in cases since eBay.…”