Compulsory licensing for expensive drugs – new report published in Belgium | Allen & Overy LLP

The Report was commissioned by the Committee on Health and Equal Opportunity of the Federal House of Representatives as part of its review of a Belgian legislative project proposal facilitate the granting of compulsory licenses in the interest of public health. However, its importance goes beyond Belgium. The European Commission announcement earlier this year that he would favor compulsory licensing of patents as one of the potential tools to expand the production of vaccines and treatments for Covid-19. The report assesses the feasibility and effectiveness of compulsory licensing for excessively priced medicines and treatments and highlights the legal and practical challenges that arise. Ultimately, the report offers a series of cautious policy recommendations.

The starting point of the report is that there are global concerns about the availability and affordability of medicines and that these concerns will only grow in the future, given the increasing personalization of medicines, the complementarity of diagnoses and treatments and the complexity of new medicines, including biological ones.

To tackle the problem of excessive drug prices, the KCE has recommended in the past that a transparent, robust and coherent drug pricing and reimbursement policy be developed and coordinated with other EU countries.

Compulsory licensing allows the government, in certain circumstances, to allow a third party to make a product or use a method covered by a patent without the consent of the patent owner (for example, due to a national emergency, anti-competitive behavior of the patentee, etc.). In effect, a generic manufacturer can then imitate a drug under patent in order to make it available at a lower price. The patent holder receives compensation for this.

Compulsory licensing by governments is often seen as a potential legal instrument to bring expensive drugs to market at a lower price. However, the KCE study finds that compulsory licenses have certain limitations. First, there are other mechanisms (in addition to the patent regime) that protect drugs from market competition, such as data and market exclusivity – compulsory licensing should take this into account. Second, patents are intended to encourage innovation – intervening in this system by allowing compulsory licensing is therefore likely to negatively affect investment in research and development. Third, defining what constitutes an excessive price for medicines and what constitutes a reasonable remuneration for the patent holder remains a challenge.

In light of these observations, the report makes the following policy recommendations:

  • Compulsory licensing should be seen as one of the tools to ensure the affordability of medicines and should be used in exceptional circumstances. The procedure for the effective use of compulsory licenses in Belgium needs to be refined.

  • EU Member States should collaborate and coordinate initiatives to impose compulsory licenses in specific cases. This seems particularly logical in the context of unitary patents, where a unitary patent title will provide uniform protection in all participating EU member states, but compulsory licenses will still be granted at the national level.

  • Careful consideration should be given to whether European rules on data and market exclusivity should provide for exceptions/waivers to these regulatory exclusivities in cases where compulsory licenses are granted. This should include exploring alternative regimes to counter competitive advantage in medical data (e.g. regimes providing for mandatory disclosure and usability of data in exceptional circumstances, subject to reasonable compensation for the investment made and the generation of data). There should be more cooperation and exchange of expertise between charging and reimbursement authorities in Belgium and, for example, the Belgian Competition Authority.

  • Creating a more robust, transparent and consistent pricing and reimbursement policy across the EU would be beneficial. Initiatives can be taken at European level, inter alia, by exchanging information on price negotiations and agreements with the pharmaceutical industry, and by improving the coordination and harmonization of health policies in the Member States of the EU. Collaborations between EU Member States (such as in the framework of the BeNeLuxA) can help to improve procedures, which can be particularly useful when dealing with expensive drugs.

  • In national law, the patent exemption for pharmacists should be optimized. In this way, the availability and affordability of expensive life-saving drugs can be guaranteed. However, it is recognized that due to practical and legal constraints, lower cost pharmacy production of drugs is only possible for certain drugs (e.g. those that are not too complicated to prepare), under special circumstances. (non-industrial production) and depends on the availability of raw materials.

  • Universities and public research institutes should be encouraged to impose “socially responsible licensing conditions” when licensing inventions and research results to pharmaceutical companies for drug development. This may include ensuring that the price of the final product does not compromise its accessibility.

  • Collaborative patent licensing models, such as patent pools and clearinghouses, should be encouraged, as they can be an attractive alternative to proprietary production. The role these models may play in excessive pricing cases should therefore be further explored. In addition, other initiatives at the international level, such as public-private partnerships to negotiate public health-focused joint licensing with patent holders, may be more sustainable than compulsory licensing.

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