In recent years steps have increasingly been taken to improve access to medicine in developing countries.
Medicines are unlike most other products in that they require years of research and development, subsequent testing and authorisation before they can be sold for public consumption. This, coupled with the fact that very few potential medicines synthetised in laboratories ever see the light of day, makes it incredibly expensive to successfully bring a new medicine to market.
Pharmaceutical companies rely on effective intellectual property right protection (particularly patent protection) in respect of the new medicines they develop. These exclusive rights allow the innovating pharmaceutical company to protect its invention and set prices to recover the high research and development costs incurred.
However, these prices, necessary to drive the next cycle of innovation, are often unaffordable for many in the developing world.
While intellectual property rights are territorial in nature, their value is also recognised on an international level. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 1994, is one of the most comprehensive international agreement on intellectual property to date, implementing a system of minimum standards.
Article 31 of TRIPS, as amended pursuant to the Doha Declaration, permits governments to license the use of patented inventions to a government agency or contractor without the consent of the patent-holder. In order to grant such a compulsory licence, a number of conditions must be met, including participating in unsuccessful negotiations for a voluntary licence beforehand and providing adequate remuneration to the patent holder. However, where compulsory licences are granted to address a national emergency or other circumstances of extreme urgency, the requirement for prior voluntary licence negotiations are waived.
In the last few years pharmaceutical companies have increasingly utilised voluntary licensing via an external broker. Take, for example, the Medicine Patent Pool (“MPP”), which was conceived in 2010 with the view of providing access to medicine for the treatment of HIV/AIDS in developing countries. Pharmaceutical companies grant licences to the MPP forming the ‘pool’. Then sub-licenses are granted to generic manufacturers who produce lower cost drugs for less economically developed nations. This form of licensing often includes access-friendly terms, such as the ability to manufacture and source active ingredients from licensees anywhere in the world and to supply where patents are not in force.
While voluntary and compulsory licensing assists developing nations with access to existing medicines, it is not of much use where treatments to diseases have not yet been invented. Historically, pharmaceutical research and development has concentrated on a relatively small number of diseases.
Pharmaceutical companies are now being incentivised to invest in research and development of tropical diseases. Perhaps, the most well known direct incentive is the “priority review voucher” offered by the US Food and Drug Administration (FDA) to any company that obtains approval for a treatment for one of the FDA-specified neglected tropical diseases. The transferable voucher can be applied to speed up FDA review for authorisation on any other medicine in development, or even sold to other companies. Ultimately, the value of these vouchers will vary depending on the therapeutic area and competitive conditions acting on the product the voucher is used against.
Pharmaceutical companies have to navigate through a complex political, legal and economic landscape in order to make medicinal products available in less developed nations at affordable prices. As growth opportunities and demand continue to rise in the developing world, pharmaceutical companies and governments alike will be no doubt be looking harder than ever to extend access of medicines throughout these countries.
Hiroshi Sheraton is a partner, Keo Shaw is an associate and Racheal Sanni is a trainee at Baker & McKenzie
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