Patent pools for medical products, the way forward?
(IPRinfo1/2012)
Andrea Faeh (Dr.iur.)
Postdoctoral Researcher, Faculty of Law, University of Copenhagen (DK) funded by a scholarship of the Carlsberg Foundation (DK)
Dhanay Cadillo Chandler
Doctoral Candidate, Commercial Law, Hanken School of Economics (FI)
The quest for affordable medication in developing countries is a challenging task, yet recent developments indicate improvements in the current search.
The Licensing Agreement between Medicines Patent Pool (herein MPP) and Gilead Science (herein Gilead) and the subsequent licensee agreements with MedChem in July 2011 and Aurobindo in October 2011, can be classified as a successful development towards improving access to affordable medicines.
MPP is funded by UNITAID and was created to ”improve the health of people living in low and middle income countries by increasing access to quality, safe, efficacious, more appropriate and affordable medicines, focusing on HIV/AIDS”.
We highlight the benefit(s) of the initiative in the quest to enhance access to medicines and portray some provisions which constitute major drawbacks to this otherwise ambitious project.
Licensing Arrangements Achieved
Gilead owns the patents for four different products (tenofovir (TDF), cobicistat (COBI) and elvitagravir (EVG) and Quad (a fixed-dose combination of TDF-EVG-COBI-emtricitabine) for the treatment of HIV/AIDS. The license agreement between Gilead and MPP grants a non-exclusive license for these products to MPP whose sole purpose is to conclude further licensee-agreements with generic companies in India to which Gilead becomes a contracting party.
Two such license-agreements (with MedChem and Arobindo) have been concluded. They cover patent licenses to make, use, sell, have sold, offer for sale, export from India and import the four products. Trademarks of Gilead (and all related logo, expression etc.) may not be used by the Licensee and a 3-5 percent royalty is paid to Gilead of which 5 percent is a commission for MPP with an annual cap of 1 Million USD per calendar year for the latter. Within this licensing arrangement MPP’s position is of an intermediary nature.
Although these negotiations are a remarkable achievement in facilitating access to affordable treatment, the agreements comprise contradictions. We have chosen the provisions on geographical scope and paediatric use to depict deficiencies and suggest improvements that could and should be made to the agreements.
Geographical Scope is restricted
The Gilead/MPP-agreement outlines a territorial restriction on both the production and supply. In other words, a license agreement can only be signed by an Indian generic manufacturer and it defines for each product to which low and middle-income countries supply is permitted. Although the number of the supply-countries is not negligible, the fact that other countries with a significant disease burden are excluded as beneficiaries represents a severe weakness of this agreement.
The restrictions can naturally be bypassed by a Compulsory Licence (CL). Thus, exporting the products in the non-listed countries is only valid under the agreement if Gilead and the Licensee are in agreement as to the existence, scope and content of such a CL (Section 10.3 (d)). Otherwise Gilead can terminate the license agreement.
In view of the existing framework and the restrictive geographical approach of the licensing arrangement, it is questionable how the pool will evolve once new parties enter into negotiation with MPP. A new patent holder will most likely not join the existing Gilead agreement but rather enter into separate negotiations with MPP to reach an agreement with their own terms and conditions.
This is per se not problematic as flexibility in this process might increase the attractiveness of the pool. Still, this institutional setting could lead to a stronger segmentation of the market. Should a new agreement be less restrictive in terms of the domicile of the generic producers, those outside India can only sign the new license agreement but will not gain access to Gilead products in the pool.
The pool is then divided into several small pools with severe access restrictions, especially when fixed-dose combinations cannot be produced because the different patent holders have negotiated rival territorial provisions. Hence, inside the ’umbrella pool’ set up by the MPP, several independent pools will exist (see fig.1) with their own set of rules creating restrictions to the end goal of MPP: to achieve a ’robust market competition’ of generics to ensure lower prices.
Admittedly, this is a pessimistic, while probable scenario, if MPP cannot convince the actual and future Licensors to agree on more liberal terms in order to exhaust the full potential of the idea of the pool.
Improvements by the Licensee
In general terms, the license agreement is not designed to foster any improvements of the licensed products. However, an exception is provided in Section 6.2 (e) where paediatric formulations in liquid form or dispersible tablets – a new delivery method – for use by children under the age of 12 years old are allowed. The same Section also provides the possibility to waive royalties on the concerned formulations, provided that they have received regulatory approval.
Questions regarding the paediatric formulation arise in terms of the improvement and dosage alternation clauses. On the one hand, this provision encourages the manufacturing of a liquid form or dispersible tablet in dosages lower than 300mg, and on the other, regulatory approval for these may be in jeopardy given that safety and efficacy in patients under 18 years old has not been proven. Although U.S. Food and Drug Administration (FDA) approved tenofovir (TDF) for paediatric use, it is questionable whether a lower dosage, which does not prove to be safe or efficacious, will be granted regulatory approval in a foreign jurisdiction.
A new delivery system could also be regarded as a product improvement. Hence, Section 2.3 ensures that the Licensee grants non-exclusive, royalty free and sub-licensable rights for all improvements related to API or API products to the Licensor.
Paediatric formulations can only be distributed in the territory of the agreement, since distribution beyond that territory requires the Licensee to grant a license to Gilead. Additionally, Gilead retains the right to pursue regulatory approval of new formulations outside the Licensee’s territory or where the Licensee has not made the product available.
There is little incentive for a Licensee to embark upon new paediatric formulations as the investments might exceed the actual benefits, since the accessible territory is limited due to the licensee agreement.
A start to share patents
The analysed agreements present several advantages for the management of intellectual property rights within the public health field, especially when looking into the issues of earlier access through licensing of pipeline medicine, more transparency, lower royalties and no royalties for paediatric use and so on. MPP provides a service which effectively leads to a similar win-win-situation as achieved through (traditional) patent pools, and could attract other patent holders who wish to facilitate access to their patents.
The pool is certainly a good initiative, with its attempt to combine different interests of stakeholders to achieve a broader access to patented HIV/AIDS treatment at an affordable price. However, as the above analysis shows, many issues are not resolved in a satisfactory way. This may lead to considerable disadvantages for the millions of HIV/AIDS patients that the pool was initially intended to aid. The geographical scope, the rules on paediatric use as well as the restrictions on the Licensee being acknowledged for any improvement made, demonstrate that the agreement was the result of a conflict of interests.
MPP is aware that the agreement has some shortcomings. However, the framework to share patents has been established through this initiative and it remains to be seen if and how other pharmaceutical companies respond to this platform.
