Profit v losses

As an elusive covid-19 vaccine draws closer, big pharma is licking its lips at the monetary potential of what could be a virtually limitless ongoing global demand. But governments may use compulsory licensing regulation to tilt the scale towards affordability as the death toll escalates. Never before have intellectual property rights been so starkly weighed up against massive human loss. Freny Patel reports

When India’s Bharatiya Janata Party declared a “free covid-19 vaccine” for the people in its manifesto for the recent Bihar state election, it landed the ruling political party in the soup, as the opposition questioned the morality behind such a promise.

The promise of free vaccine would also have given pharmaceutical companies the world over the shivers as they anticipate making megabucks, given the global potential customer base.

Pharma companies across the globe are racing to develop a much-needed vaccine as the death toll from the pandemic has already spiralled past the 1 million mark. However, with the outbreak having been declared a global emergency by the World Health Organization (WHO), multinational pharma players are bound to take a hit as governments choose to strengthen laws and interfere in the pricing of any treatment or vaccine in the public interest.

One such way is the use of compulsory licensing. As many governments beef up legislation to ensure affordable access to appropriate drugs and vaccines that combat the virus, public health will supersede the protection of intellectual property (IP) rights.

Compulsory licensing is one of the flexibilities in the field of patent protection that enables a government to allow a third party to produce a patented product without seeking the consent of the patent holder.

India is among the first few countries to have invoked compulsory licensing, back in March 2012, when it permitted NATCO Pharma, a domestic company, to manufacture and sell the generic version of Bayer’s patented and protected anti-cancer drug, Sorafenib Tosyalte. This landmark judgment saw multinational pharma companies raise a hue and cry as they feared the loss of their exclusivity rights in India. But what it really did was ensure that drugs sold by international pharma companies in India were affordable, and, more importantly, that “supply met demand”.

It may be rash to make any assumptions given the current situation, and that quite a few governments across the globe have initiated legislation to issue compulsory licensing in the eventuality that patentees fail to make the vaccine accessible. Governments in Chile and Ecuador have done so, while other developed nations like Canada, France and Germany are preparing the necessary groundwork to facilitate the issuance of compulsory licensing if warranted.

Back in Asia, the Indonesian government has the power to exercise compulsory licensing under its existing patent laws, and a new regulation came into force on 8 July expanding its ability to use patents for the public interest.

Compulsory licences enable governments the right to intervene in cases of national emergency and extreme urgency, even after granting of a patent. “However, to exercise the said powers, circumstances such as national emergency or extreme urgency are required to be established,” says Ajay Bhargava, a senior partner at Khaitan & Co based in New Delhi. Bhargava is a senior member of the dispute resolution team with expertise in intellectual property and pharma.

This could have a negative bearing for pharmaceutical companies, which usually profit from their R&D spend thanks to the 15-20 year exclusivity period under most patent regimes. With the threat of compulsory licensing hanging over their heads, they will need to think twice before deciding on their pricing strategy for a covid-19 vaccine.