Thailand's Compulsory Drug Licenses Open Up a New Debate

Should a developing country with a public health emergency such as AIDS be allowed to suspend the patents on patented drugs and manufacture generic versions under a compulsory license, as authorized by trade treaties? That issue is now facing a serious test in Thailand, which has defied Big Pharma and claimed compulsory licenses for two AIDS drugs — efavirenz (Stocrin) and lopinavir+ritonavir (Kaletra) — and the heart disease drug clopidogrel (Plavix) — with the goal of providing them to all Thai citizens who need them. Thai government expenditures on antiretrovirals have soared ten-fold since 2001, to over $100 million this year, but even this sum will treat only 82,000 of the 500,000 Thai citizens infected with HIV.

Needless to say, the property rights crowd is crying bloody murder. The idea that drug patents might have to bend to serve public needs is repugnant to them. But even though the Thai market is relatively small, the case is attracting a great deal of attention because of the precedent it may set. The pharmaceutical industry just doesn’t like the idea that a small country might snub its nose at it with impunity. More generally, multinational corporations are worried that developing nations might look to compulsory licenses as a broad remedy for lack of access to software, energy-efficient cars, medicines and medical devices.

A lot of the debate is bogged down in the legalisms of international trade law, which means that you almost have to rely on proxies to follow it. The pharmaceutical industry and its ideological allies like The Wall Street Journal claim that the TRIPS treaty — governing “trade-related intellectual property” — has only a narrowly crafted provision authorizing compulsory licenses. They complain that the Thai government is abusing the provision (there is no public health emergency; the rules don’t authorize compulsory licenses here), and that it failed to consult with pharmaceutical companies in advance to negotiate a deal.

Big Pharma’s standard line is that patents provide the necessary incentive for drug makers to develop innovative medical treatments that will help poor people everywhere. That’s why strong property rights are in the public interest. “Thailand’s actions raise the risks and the costs for drug suppliers, who may be reluctant to introduce ‘essential’ drugs into a market where intellectual property rights aren’t guaranteed,” complained Dr. Harvey E. Bale, Jr., Director General of the International Federation of Pharmaceutical Manufacturers and Associations. Indeed, Abbott Laboratories has decided not to market any new medicines in Thailand — essentially a get-tough tactic that is surely meant to bring Thailand back in line.

But this tactic may be of limited effectiveness. Drug makers are already boycotting developing countries, in the sense that their R&D is targeted at more lucrative European and American markets. There’s far more money to be made developing “lifestyle” drugs for baldness and impotence than developing treatments for pervasive diseases in poor countries. In short, the patent system does not really work for them; it doesn’t generally develop the drugs they need, at a price they can afford.

In any case, public health advocates point out that the Thai licenses are entirely legal under international law — TRIPS, the “Doha” agreement on development, and the WTO rules — and that there is a serious health emergency that the Thailand government is addressing. Knowledge Ecology International Director James Love defended the compulsory licenses:

Unless the Thailand government uses the flexibility in the TRIPS to issue compulsory licenses on patents, the people who live in Thailand will suffer from limited access to medicines. More than five years after the 2001 Doha Declaration on TRIPS and Public Health called upon WTO members to implement the TRIPS “in a manner supportive of WTO members’ right to protect public health and, in particular, to promote access to medicines for all,” Thailand is doing just that. Every country that applauded the landmark 2001 Doha Declaration should applaud actions that turn words into actions, and actions that expand access to medicines.

Love notes that United States has itself issued compulsory licenses on patents five times since June 2006, including cases involving patents on set-top boxes for satellite television (DirectTV), automatic transmissions (Toyota), software (Digital Rights Management patents used by Microsoft), medical devices (patents used by Johnson and Johnson), and computer memory chips (the FTC Rambus case). When competition or public need require it, even the U.S. Government is willing to issue a compulsory license.

The tool has certainly proven effective for the Thai Government so far. For two years, it couldn?t make any progress in its price negotiations with pharmaceutical companies. Then, after issuing three compulsory licenses in January 2007, it was suddenly besieged by drug companies offering lower prices. One company offered Thailand a “buy-one-get-nine-free” deal. (See a KEI document, “Q&A Session on Thai White Paper (Facts and Evidences on the 10 Burning Issues Related to the Government Use of Patents on Three Patented Essential Drugs in Thailand)”). Merck announced a global price reduction from $1.35 per pill to 72 cents a pill for efavirenz (while claiming the reduction had nothing to do with the Thai licenses). This is the kind of stuff that sends shivers down the spines of the Wall Street Journal editorial writers.

The World Trade Organization and other globalization advocates have long given lip service to the development and public health needs of developing countries. But now that the Thai Government has shown some real leadership in helping hundreds of thousands of AIDS patients, it is criticized for not being sufficiently deferential to the divine rights of property owners. Memo to the WSJ: this struggle is only beginning.