"The march of invention has clothed mankind with powers of which a century ago the boldest imagination could not have dreamt." George, Henry American economist (1839–1897)
On May 3, just three months after Thailand's unilateral seizure of patent rights to Bristol Myer Squibb's anti-clotting drug Plavix, Brazil followed suit in the first post-WTO/TRIPS Agreement decree of compulsory patent license in Latin America, by granting a compulsory license for efavirenz, Merck's reverse transcriptase inhibitor that is the standard-of-care in HIV treatment. Article 31 of the Agreement on Trade Related Aspects of International Property Rights, or TRIPS, administered by the World Trade Organization (WTO), sets forth the circumstances under which countries may grant compulsory licenses to pharmaceutical patents, and strives to balance the urgent medical and social needs of poor and developing nations with preservation of the financial incentives of drug innovation by prohibiting outright nationalization or expropriation of patent rights and ensuring adequate remuneration to IP owners. All WTO members are obligated to adhere to the TRIPS provisions in exchange for participation in that organizations trade access and trade protections.
Of all the property rights conferred by grant of patent, none has engendered the vitriolic political rhetoric and public derision, or loud demands for patent overhaul or dismantling of the patent system in favor of establishment of a public commons, than has the "right to exclude" as applied to inventions in the pharmaceutical arts. Indeed, when applied to life-extending or life-saving drugs, the "right to exclude" is viewed by some as tantamount to a right to deny hope or even life. A patented "drug" is particularly vulnerable to attack because it embodies perhaps the greatest ratio between the cost of the inventive effort and the cost of the invented product, making it an extraordinarily abstract form of patented intellectual property. The pill taken to lower cholesterol or to bolster the immune system against AIDS is very cheap to manufacture in a compounding sense. But the price tag to the consumer reflects decades of basic drug development research, efficacy and safety screening of thousands of potential agents,clinical testing trials on scores of the best prospects to determine optimal and safe formulations, dosages, and routes of administration, marketing and promotion of the single drug product that emerges from the regulatory scheme, and insurance costs against the likelihood that some undiscovered safety concern will emerge with mass consumption. Hence, a drug such as efavirenz, which costs only pennies per tablet to manufacture in India, costs about $17 dollars per tablet to a U.S. patient, or about $6,000 for a one year supply. The contrived illusion of high profiteering makes compulsory licensing an easy sell for governments wishing to decrease expenditures for medical care to consumers desperate for the health benefits.
TRIPS, negotiated at the close of the GATT treaty in 1994, requires ratification for easy access to the international trade opened by the WTO and is therefore seen as the single most important tool for globalization of intellectual property laws. TRIPS was sponsored and heavily promoted by developed countries such as the US, Japan and the EP. The later-issued Doha Declaration, clarifies that TRIPS should not be construed against poor and developing nations with urgent health needs and that a central goal of TRIPS is universal access to medical care. Article 31(b) permits issuance of a compulsory patent license only have a country has "made efforts to obtain authorization from the right holder on reasonable commercial terms." A nation may waive the negotiation requirement only in three express instances: national emergency, extreme urgency, and public non-commercial use. Under 31(c) the scope of the license must be limited to the purpose for which the license is authorized, and 31(g) stipulates that the license terminates when the circumstances leading to issuance cease to exist and are unlikely to recur. Significantly, under 31(h), regardless of whether negotiation has been waived under 31(b), the issuing nation must pay "adequate remuneration…taking into account the economic value of the authorization."
Late in 2006, Thailand, waived the negotiation requirement on the basis of public non-commercial use and unilaterally decreed a compulsory license for efavirenz. Although Merck strenuously objected on the grounds that it already made efavirenz available to developing nations for substantially reduced prices and that the royalty of .5% was far below a fair royalty, many religious, humanitarian and health organizations pointed to Thailand's high incidence of HIV and AIDS and the governments expenditure of nearly 15% of the national budget on health care as evincing an urgent social need that arguably justified implication of the negotiation exception. At that point, Thailand merely became another of several developing countries, including Malaysia and Indonesia, to issue compulsory licenses to HIV drugs.However, in February of this year, Thailand's decree of a compulsory license for Plavix appeared less justifiable and raised concerns world-wide that 31(b) was being arbitrarily invoked in the absence of social urgency, simply to reduce health care costs in favor of increasing military expenditures by Thailand's new military regime. Plavix is indicated for the prevention and treatment of cardiac events typically related to obesity, over-consumption of rich foods and sedentary lifestyles, hardly the conditions urgent to the world's poor. Thailand admits that most of the drug likely will be dispensed to Thailand's middle and upper classes.International condemnation ensued and developed nations are insisting upon disciplinary measures and clarification that Article 31(b) does not apply to these circumstances. The pharmaceutical industry contends that permitting such a broad and arbitrary scope amounts to near abrogation of the protections intended to be afforded by TRIPS.
In May, after turning down Merck's offer of a 30% price reduction, Brazil issued a compulsory license for efavirenz, claiming that it would settle for nothing less than the un-negotiated costreductionto Thailand. In a politically disingenuous and inflammatory statement from the world's 12th largest economy, Brazil announced that any price difference is ethically grotesque, "as though a sick Brazilian is inferior."Merck issued a statement that the pharmaceutical industry cannot sustain a situation in which the developed countries alone are expected to bear the cost for essential drugs, "we believe it is essential to price our medicines according to a countries level of development and HIV burden, thereby ensuring equitable access as well as our ability to invest in future innovative medicines."
Ramifications are still evolving. There is growing concern as Thailand asserts that it is poised to issue compulsory licenses for at least 11 more patented drugs.Brazil is beginning to see its work to attract investment in innovative industries that rely on IP reduced to fallout rubble, as the US and EP both have condemned the expropriation as outside the intent of 31(b) and as setting unmanageable precedent among emerging economies, and as other research and development based industries become wary. The pharmaceutical industry insists that Brazil come back to the table with Merck and negotiate fairly. And, yet, perhaps the most negatively impacted party and the party allegedly at the heart of TRIPS concerns, has no genuine voice in this debate. If compulsory licensing under the rationales of Thailand and Brazil is allowed to continue and undoubtedly spiral with acquiescence, the world's poor will undoubtedly suffer by reduced financial incentives for drug design and development, as those drugs developed at the greatest cost and having the greatest potential for ameliorating human suffering are also those most likely to be subject to these questionable compulsory license decrees.