[Ip-health] USTR Nat. Trade Barriers Report on Thai compulsory licenses

[B.Baker@neu.edu]

I think there are four interest facets of the U.S. statement in the Thai
NTB report (reprinted below).

"Thailand's Ministry of Public Health has issued compulsory licenses on
certain patented drugs. The United States acknowledges Thailand's
ability to issue compulsory licenses to address public health
emergencies, subject to Thailand's domestic and international legal
obligations as a WTO Member. At the same time, the United States has
expressed concern regarding a lack of transparency in the process and
about the potentially expansive use of compulsory licenses. The United
States has urged Thailand to address judiciously the complexities of the
relationship between health and intellectual property policy and to do
so in ways that recognize the role of intellectual property in the
development of new drugs."

1.  The U.S. continues to misinterpret the circumstances where compulsory
licenses can be issued, suggesting that they are appropriate only to
respond to public health emergencies.

2.  The U.S. continues to suggest that the licenses were issued in a
non-transparent manner, thereby failing to acknowledge the protracted
negotiations that preceded the 2006-07 licenses on efavirenz, clopidrogel,
and lopinavir/ritonavir and the even more intensive consultations that
preceded the issuance of the four cancer CLs in 2008.

3.  The U.S. adds a new concern, namely that the use of compulsory licenses
will become "potentially pervasive."  Of course, Thailand has been careful
to set up a stringent screening process, has established strict needs-based
standards, and has issued CLs on only a tiny portion of the medicines
patented in Thailand.

4.  Finally, the U.S. has used relatively muted language and has not in any
sense "signalled" an intention to identify Thailand as a Priority Watch
Country, despite earlier publicity about this possibility.

Jamie Love has previously suggested that Thailand (and perhaps other
middle-income countries) could address the stated U.S. concern about
"contributing to the development of new drugs" by revising upwards the
royalty rate on its compulsory licenses (currently ranging from .5%-5% on
the generic price).  Although international compulsory licensing practice
and commercial practice support royalty rates in this range, it is
important to note that commercial royalty rates are ordinarily based on
sales at monopoly prices, resulting in much higher absolute payments per
pill.

Even though it is by no means required to do so, Thailand could gain
credibility with U.S. Congressional leaders and undermine USTR/PhRMA
attacks, by offering an additional, and perhaps targeted R&D royalty.  One
idea would be to target the royalty to type-I and type-II (neglected)
diseases affecting the Thai population.  If the affected drug company were
willing to accept the additional royalty on this basis, the R&D could be
done anywhere.  However, an even better alternative would be that the
targeted research be conducted in Thailand in universities, research
institutes (if any), or even in the GPO.  Agreements would need to be
reached in advance about the eventual co-ownership/marketing of innovative
products, but this kind of targeted research could entail technology
transfer, building of research capacity, and perhaps even expansion of
pharmaceutical capacity in Thailand.

There are risks in such a proposal, including that the standard royalty
rate will be higher and that fewer patients will be treated from the same
health budget, but there may be political advantages from indicating a
willingness to pay a little more for innovative R&D as long as it focuses
on developing country needs.

Brook

Professor Brook K. Baker, Health GAP
Northeastern U. School of Law
Program on Human Rights and the Global Economy
400 Huntington Ave.
Boston, MA 02115
617-373-3217 (office)
617-259-0760 (cell)