Public Non-Commercial Use’ Compulsory Licensing for Pharmaceutical Drugs in Government Health Care Programs

Suppose a relatively prosperous nation with universal public health coverage faces an HIV/AIDS crisis. It refuses to negotiate with the patent-holding manufacturers of the best antiretrovirals (ARVs) available, instead issuing compulsory licenses. Compulsory licenses permit the generic drug manufacturers designated in the compulsory licenses to make, use, import, and sell the patented ARVs without the permission of the patent owners, increasing competition and lowering prices. Realizing that drugs are much cheaper without patents, the nation decides to issue another round of compulsory licenses for an extensive list of patented drugs for its universal health care program. While improving public access to these drugs, the compulsory licenses also reduce the market exclusivity that patent holders depend on, decreasing the patent holders’ anticipated return on their research and development (R&D) investments. Whether governments may legally act in this manner under the current Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) has profound consequences for public access to pharmaceuticals and for public and private contributions to pharmaceutical R&D, especially as health care purchasing power continues to consolidate in the hands of government programs. The TRIPS Agreement forms one of the three pillars of the World Trade Organization (WTO), formally linking intellectual property (IP) protection with trade. In order to harmonize IP protection at a global level, TRIPS aims to “reduce distortions and impediments to international trade” from an IP perspective. Thus, TRIPS obligates all WTO Member states to implement a minimum regime of IP rights to provide security and predictability, and to ensure that IP protection contributes “to the mutual advantage of producers and users of technological knowledge.” For many countries, the minimum TRIPS standards required that they take pharmaceutical drugs out of the public domain.