Balancing public health and IP rights: compulsory licensing and evergreening practices

Monday 29 April 2024

Durgesh Mukharya

K&S Partners, Bangalore


Ramya Rao

K&S Partners, Bangalore


Amrish Tiwari

K&S Partners, Haryana



The technological world is broadly divided into ‘innovators’ and ‘followers’. While the latter forms the majority, they cannot exist without the former, which is a small mass putting in billions of dollars, years of effort and partaking in hundreds of trials before revealing a medical marvel the world has been waiting for. The difficulties which innovators go through before launching a product are not always understood. Innovation does not only mean an active pharmaceutical ingredient (API) or a first-generation product, but also, the process is not a ‘start-stop switch’ which turns off as soon as this ‘first’ is achieved.

Biology and medical science together form a complicated system which requires scientists constantly to churn out ideas to improve it every day, and this does not mean a new API every time. It could be a new pharmaceutical mixture, a new form of a drug, tweaking the chemistry, associated delivery system, easier or different route of administration, dosage form, or just a different treatment regime. While all of these can make a significant difference to this system, a differing viewpoint finds these as reasons for the ‘innovators’ to make more money and block competition. These secondary innovations are not considered as ‘real’ innovations and instead termed as ‘evergreening’ – a loosely used metaphor having a negative connotation that is used to describe ways and means by which ‘innovators’ extend their patent monopoly on an API or a first-generation product beyond the original 20-year term.

The usual concerns associated with such claims of ‘evergreening’ revolve around the lack of actual increase in therapeutic efficacy, lack of availability of affordable drugs to the public at large, creation of an anti-competitive landscape and the continued reign of the ‘innovators’.

But the point which often gets missed, is that if these innovations were not so innovative, what prevents anyone from coming up with them and even patenting them, themselves? Why do the questions about the quality of innovation or what it adds to the API or first-generation product only arise, when these secondary innovations are publicised through patent filings.

It must be understood that a patent cannot be granted in intellectual property (IP) aware jurisdictions unless there is an advantage or technical merit associated with an invention, as inventive step continues to be the cornerstone of most IP systems worldwide. Most sophisticated IP offices also understand that the inventive step is about technical advancement, surprising results, and unexpected effects, rather than mere non-obviousness concerning previous work. Therefore, when data in a patent filing shows such benefits over a previous work, it must be given due regard.

Another aspect to bear in mind is that today’s consumers and medical practitioners are not naïve to succumb to mere marketing gimmicks and accept subsequent-generation products unless it has real value. In most cases, patents on secondary innovations do not necessarily prevent the ability of ‘followers’ to come up with generic versions of the first one. For instance, a generic version of the first-generation Product A can be made available as soon as the respective patent expires, regardless of any further innovation/secondary patent on an improvement of Product A (A1). As mentioned above, the disclosure of A1 will have to continue to cross the threshold of patentability for it to be granted a patent, and unless there is real innovation, it will not be able to do so. Furthermore, regardless of its inventive merit, A1 will only be commercially successful if in the eyes of the medical fraternity, it is effective. If not, nothing prevents them from continuing to prescribe Product A or its generic versions as such.

Critics argue that ‘innovators’ use their resources to market secondary innovations and influence preference over first-generation products. However, the medical community, especially in developing nations, should prioritise technical data and effect associated with such secondary innovations, over marketing tactics. Moreover, regulatory bodies should also ensure that marketing focuses only on the advantages associated specifically with the secondary innovation for informed decision-making.

While the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement aimed to provide a level playing field, lobbying and excessive exploitation of the flexibility provided by the agreement in the name of public health have created artificial barriers preventing the patenting of these secondary innovations. What is often forgotten is that these secondary innovations have gone through a similar, if not identical, rigor of time, money and effort, as the ‘first’ innovation.

Countries such as Argentina, Bolivia, Colombia, Ecuador, India, Peru and Venezuela have framed provisions on these lines which seem unfair to ‘innovators’, as all of their innovations are put through additional scrutiny, over and above the regular threshold of patentability which is required by rest of the world. This vehemently discourages research, innovation, and improvement of any kind. An ‘innovator’ does not go to a lab to come out with a new API and move to another. It takes years of research, and continued science to work on an API, followed by plugging in that experience into further improvements. A system cannot evolve or become self-sustainable with a model where only ‘followers’ are encouraged, without any incentive for ‘innovators’ and even ‘improvers’.

However, having said the above, the question of public health, affordability and availability continues to be important, but making patent systems skewed in favour of one side of the spectrum is not the answer. The answer lies in a closely followed provision of law that is more commonly adopted by countries worldwide.

Compulsory licensing is when a government or other legal authority such as a court allows a third party to use the subject matter of a patent without the authorisation of the patent owner. The practice of compulsory licensing was defined in many countries’ patent laws before being codified by the World Trade Organization (WTO) in Article 31 of the landmark TRIPS agreement of 1994. TRIPS established uniform standards for IP protection while simultaneously affirming member states’ flexibility to grant compulsory licences on a case‐by‐case basis. While the WTO did not delineate specific instances in which compulsory licensing might be appropriate, it recommended that certain requirements for granting a compulsory licence be waived ‘in the case of a national emergency or other circumstances of extreme urgency.’

The Doha Declaration of 2001 further emphasised the importance of compulsory licensing, especially in relation to access to essential medicines in developing countries. On similar lines, Article 5(2) of the Paris Convention for the Protection of Industrial Property states that a country of the Union may provide for compulsory licences ‘to prevent the abuses which might result from the exercise of the exclusive rights conferred by the patent, for example, failure to work’.

In the realm of pharmaceuticals, the issuing of compulsory licence allows preparation of affordable versions of an original-but-essential ‘innovator’ product to meet public requirement in a location.

Although conventionally, compulsory licensing has been debated in relation to developing countries, trends indicate a growing use of compulsory licensing by developed countries as well. An example of compulsory licence being employed as an effective tool by a developed nation includes the United States negotiating a deal with the German manufacturer, Bayer on Ciprofloxacin, an anthrax antibiotic, following the 9/11 attacks. This allowed the US an ability to stockpile enough antibiotics at a substantially discounted rate to deal with any eventuality.

On the other hand, it has been observed that developing nations may not want to gain from the benefits arising from compulsory licensing provisions due to political reasons. An example of this is the global backlash received by India when it issued its first, and only compulsory licence on a Bayer drug, Nexavar. Clubbed with its provision of Section 3(d), which acts as an additional barrier to the patentability of secondary innovations, the issuing of compulsory licences was perceived as indifference towards the protection of IP rights.

Nevertheless, developing nations must take the initiative themselves to protect their own interests. Using compulsory licensing when necessary, appears to be a more balanced approach than blocking innovative advancements under the guise of ‘evergreening’. It seems a little unfair to create an environment favourable for restricting the scope of patent rights in the larger interests of public health, and issuing compulsory licences, simultaneously.

A fitting example of adapting this need-based approach was seen in 2007 when Rwanda became the first country to notify the WTO that it planned to import HIV drugs under Paragraph 6 of the Doha Declaration on the TRIPS Agreement. Subsequently, Canada notified the WTO that it had authorised the production of a generic version of patented anti-viral drugs for export to Rwanda. Specifically, Canada gave Apotex, Inc, its largest pharmaceutical company, the authority to produce an anti-viral medication called Apo-TriAvir, a generic combination of three patented HIV drugs. The notification from Canada was the first of its kind from any government authorising a company to make a generic version of a patented medicine for export under special WTO provisions.

It should be noted that issuing of a compulsory licence comes at a high price in the world of pharmaceutical products and this needs to be at the forefront of decision-making on compulsory licensing.

First and foremost, if compulsory licences are too easily obtainable in the absence of the threat of an acute health crisis, innovation funding may diminish. It is the monopoly power pharmaceutical companies can obtain over their patented products that induces innovation, as they can recover enough money to stay in business and finance subsequent R&D projects. Therefore, future investment in pharmaceuticals will be viewed as a risk without this monopoly power. Secondly, the indiscriminate issuing of compulsory licences would cause a decline in global health as pharmaceutical companies would be hesitant to introduce new medications into developing nations that may need them most. Additionally, lack of guidance or strict adherence to standards of manufacturing followed by a generic manufacturer could often be a cause of concern for the ‘innovator’, thereby putting the credibility of the named brand drug and public health at stake. Lastly, in the absence of strong intellectual property protections, foreign investment in developing nations will decline, causing devastating economic effects.

In this regard, Thailand’s practice serves as a reminder of how the issuance of compulsory licences over any type of drug available on the market can be detrimental. During 2006-07, Thailand issued three compulsory licences pursuant to the TRIPS Agreement, within a three-month period. First, Thailand issued a licence over Merck’s Efavirenz which is an HIV/AIDS medication. Subsequently, two more compulsory licences were issued over patented prescription drugs, Kaletra, again for HIV/AIDS, and Plavix which treats heart disease. The issuing of a compulsory licence over Plavix represents the first time a compulsory licence was authorised for a chronic disease medication, as opposed to infectious disease medication.

However, despite its pitfalls, for an ecosystem to flourish, compulsory licensing seems like a fairer tool to use in case of a real need, urgency, and public health emergency, rather than scrutinising every pharmaceutical patent through a common and coloured lens of ‘evergreening’.

The main objective of pharmaceutical companies should remain to make a better world with innovative, accessible, and affordable medicines which are safe and effective for patients. Similarly, companies seeking compulsory licences should be of a certain level of credibility, follow Good Manufacturing Practices (GMP) and be held accountable for quality, safety, and adverse side effects. Moreover, appropriate mechanisms should be in place to prevent the misuse of compulsory licences merely for commercial exports and unjust gains. While both, compulsory licensing and evergreening, are highly debatable provisions of patent systems globally, when employed judiciously, they can help maintain a healthy balance between public welfare and a country’s financial ecosystem.