Compulsory licensing

Second, WTO rules authorize governments to use compulsory licenses for pharmaceutical products. Thus, the expected benefits of the patent right to the patentee are reduced, and this maybe of particular importance in the case of neglected diseases. This does not mean that the use of compulsory licenses is inappropriate, but there can be no question that it may reduce the potential profits of patentees, and hence harms their incentives to undertake research on neglected diseases. 

Royalty rates for compulsory licenses should be modest when the intended recipients are very poor. Canada has proposed royalty rates ranging from 4 per cent down to 0.02 per cent depending upon the importing country s level of poverty. While Canada s law raises many questions (Outterson 2005a), it is clearly a step in the direction of fair following. Canada recognizes that pharmaceutical patent rent extraction is largely inappropriate from low-income populations. 

The U.S. has consistently opposed compulsory licensing by other countries. In January 2001, the U.S. requested a WTO panel against Brazil to prevent Brazilian "local manufacture" of AIDS drugs (WTO 2001). Under international pressure, the U.S. withdrew the panel request in the months leading up to the Fourth WTO Ministerial Conference in Doha (Thomas 2001 t Hoen 2002). More recently, U.S. groups attacked Brazil in July 2005 over a proposed compulsory license of Kaletra (lopinavir and ritonavir), an AIDS fixed-dose combination drug. The patent owner, Abbott Laboratories, reached a voluntary price reduction agreement with Brazil which made the formal compulsory license unnecessary, another demonstration of the power of compulsory licenses to improve access (Benson 2005). 

Furthermore, a condition of importing generic medicines, manufactured in another country, under paragraph 6 (WTO 2003) requires that the importing country issue a compulsory license for that medicine. A compulsory license can only, in effect, be issued by a nation that grants patents on that medicine. There are two problems inherent in this. First, many of the poorest countries cannot afford a patent system and thus cannot grant pharmaceutical patents. Second, many companies do not expend... 

TRIPS-plus provisions in FTAs regularly include limits on compulsory licensing prohibitions on parallel imports limiting market approval for generic drugs data exclusivity extended patent terms and evergreening" provisions. Since the U.S. often... 

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