Compulsory licensing for expensive medicines – new report published in Belgium

The Report was commissioned by the Committee for Health and Equal Opportunities of the federal Chamber of Representatives in the context of its review of a Belgian legislative proposal to facilitate the granting of compulsory licences in the interest of public health. However, its importance reaches beyond Belgium. The European Commission announced earlier this year that it would favour the compulsory licensing of patents as one of the potential tools to expand the production of Covid-19 vaccines and treatment. The Report assesses the feasibility and effectiveness of compulsory licences for medicines and treatments sold at excessive prices and highlights the related legal and practical challenges. Ultimately, the Report puts forward a set of cautious policy recommendations. 

The Report’s starting point is that there are worldwide concerns about the availability and affordability of medicines and that these concerns will only increase in the future, given the growing personalisation of medicines, the complementarity of diagnostics and treatments, and the complexity of new medicines, including biologics.

To tackle the problem of excessively priced medicines, the KCE has recommended in the past that a transparent, robust and coherent policy on prices and reimbursement of medicines should be developed and coordinated with other EU countries.

Compulsory licences allow the government, in certain circumstances, to authorise a third party to manufacture a product or use a method covered by a patent without the consent of the patent holder (e.g. due to a national emergency, anti-competitive behaviour of the patent holder, etc.). In effect, a generic company can then imitate a medicine under patent in order to make it available at a lower price. The patent holder receives compensation for this.

The granting of compulsory licences by governments is often referred to as a potential legal instrument to bring expensive medicines onto the market at a lower price. However, the KCE’s study finds that compulsory licences present certain limitations. First, other mechanisms exist (in addition to the patenting regime) that protect medicines from market competition, such as data and market exclusivity – compulsory licensing would need to take these into account. Second, patents are intended to encourage innovation – intervening in that system by allowing compulsory licences, hence, runs the risk of negatively affecting investment in research and development. Third, defining what constitutes an excessive price for medicines and what is a reasonable remuneration for the patent holder remains challenging. 

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

• Compulsory licensing should be seen as one of the tools to guarantee the affordability of medicines and should be used in exceptional circumstances. The procedure for the actual use of compulsory licences in Belgium must be fine-tuned. 

• EU Member States should collaborate and coordinate initiatives to impose compulsory licences in specific cases. This appears particularly logical in the context of unitary patents, where a unitary patent title will provide uniform protection across all participating EU Member States, but where compulsory licences 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 of these regulatory exclusivities in cases where compulsory licences are granted. This should include the study of alternative regimes to counter the competitive advantage with regard to medical data (e.g. schemes providing for the compulsory disclosure and usability of data under exceptional circumstances, subject to reasonable compensation for the investment made and data generation). There should be more cooperation and exchange of expertise between pricing and reimbursement authorities in Belgium and, for example, the Belgian Competition Authority.

• The creation of a more robust, transparent and coherent pricing and reimbursement policy in the EU would be beneficial. Initiatives can be taken at the European level, amongst others, by exchanging information about price negotiations and agreements with the pharmaceutical industry, and by better coordinating and harmonising health policies across EU Member States. Collaborations between EU Member States (such as in the context of BeNeLuxA) can help to improve procedures – which can be particularly valuable when dealing with expensive medicines. 

• In national law, the patent exemption for pharmacists should be optimised. In this way, the availability and affordability of lifesaving expensive medicines can be guaranteed. However, it is acknowledged that, due to practical and legal constraints, the production of medicines in pharmacies at a lower price is only possible for certain drugs (e.g. those that are not too complicated to prepare), in specific circumstances (non-industrial production) and depends on the availability of raw materials.

• Universities and public research institutions should be encouraged to impose “socially responsible licensing conditions”, when licensing inventions and results of research to pharmaceutical companies for drug development. This could include ensuring that the pricing of the end product does not jeopardise its accessibility.

• Collaborative models for patent licensing, such as patent pools and clearinghouses, should be encouraged, as they can constitute an interesting alternative to exclusive production. The role that such models can play in excessive pricing cases should, therefore, be studied further. In addition, other initiatives at the international level, such as public-private partnerships to negotiate with patent holders about joint public health-oriented licences, could be more sustainable than compulsory licensing.