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

[mko]

I agree that middle-income countries should explore higher royalty rates on
generically-priced drugs sold under a CL.  Doing so wouldn't harm access
much; indeed if the higher royalty reduced opposition from USTR & IFPMA,
then access could be dramatically improved.  I've tried to model these CL
royalties or patent buy-outs from the opportunity cost in R&D from the
foregone revenues:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=873402

Kevin Outterson
Boston University


On 4/1/08 9:54 AM, "B.Baker@neu.edu" <B.Baker@neu.edu> wrote:

> 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)
>
>
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