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Let’s Talk Compulsory Licensing, Not Murder

Issued: February 20 2018

Despite its lofty public mission, compulsory licensing has been the centre of intellectual property and innovation debates.

The name Apotex has once again bubbled to the top of news pages, this time because of the mysterious death of the generic pharmaceuticals maker’s founder, Bernard Sherman. The Canadian Broadcasting Corporation reported in January that private investigators believe that Sherman and his wife, Honey, were murdered by multiple people two days before their bodies were discovered in their Toronto mansion on December 15, 2017.

Sherman made many of his reported US$3.2 billion at the helm of Apotex, a role in which he had a not-somysterious (but equally controversial) on the intellectual property community.

Apotex was the first and only Canadian company to make use of the country’s Access to Medicines Regime (CAMR) to export medicines manufactured in Canada under compulsory license to developing countries. CAMR is a national initiative for public health that Canada drew up in response to the August 2003 decision, a decision among World Trade Organization member states to implement Paragraph 6 of the Doha Declaration on the Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement to allow for exporting of drugs under compulsory license using a waiver. The waiver applies to Article 31(f) under the TRIPS agreement, which states that a compulsory licensing scheme in a member country “shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use,” effectively barring the export of medicines from developed states to countries with neither the financial and technical resources to produce generic drugs.

Since the August 2003 decision, developed countries with a compulsory licensing scheme are at the discretion to issue the license within their country and leverage the waiver to export generic drugs to a least developed or developing WTO member state. The decision also conditions the waiver upon the importing state having insufficient or no manufacturing capacity, and requiring the generic drugs be clearly identified through special packaging, posting of shipment information online, and reasonably tracked to ensure they will not flow outside of the intended market to cause a significant impact of the patented drug price.

However, it wasn’t until two years later when WTO members approved changes to the TRIPS Agreement to make permanent the decision, and another 12 years later, in January 2017, when the amendment was formally built into the agreement after two-thirds of the WTO’s members accepted the protocol for amendment.

In the meantime, Canada became one of the first countries to pass domestic legislation to implement the decision: in May 2004, Canada passed An Act to amend the Patent Act and the Food and Drugs Act, also known as the Jean Chretien Pledge to Africa Act, to “facilitate access to pharmaceutical products to address public health problems affecting man developing and least-developed countries.” In May 2005, CAMR was implemented under the WTO waiver framework with additional restrictions. For example, CAMR requires the generic to clear all health and safety reviews as required for drugs sold in Canada, and for the manufacturer to request a voluntary license from the patent holder(s) prior to applying for a compulsory license. There is also a two-year limit on the duration of the compulsory license, as well as specification of the conditions under which patent holders may take legal action against the generic manufacturer.

Months after the Jean Chretien Pledge was passed, Apotex announced in December 2004 that it would develop a new anti-retroviral drug called Apo-TriAvir that combined patented medicines from GSK, Shire and Boehringer Ingelheim. When Apo-TriAvir was included in Schedule 1 of the Patent Act as a drug eligible for compulsory licensing in September 2005, the year-long process for Health Canada, the country’s regulatory authority, to review the drug’s safety finally commenced.

With Health Canada’s blessings, negotiations between Apotex and the three patent holders began in July 2007, and several months later Apotex filed an application under CAMR to export Apo-TriAvir, claiming voluntary licensing discussions had stalled. Finally, in May 2008, eight months after a public tender was opened in Rwanda as required by national law in the case of drug importation, Apotex announced its winning of the tender and prepared two shipments of over 6 million tablets each between 2008 and 2009. Almost four years had gone by since the first prototype of Apo-TriAvir was released from the lab when it reached its first patients.

“We invested millions in the research and development of the product, legal costs in negotiating with the brand companies and made no profits in this process. We did it because it was the right thing to do. But in its current form it’s not workable for us and, it appears, it doesn’t work easily for developing countries,” Jack Kay, then-president of Apotex, was quoted as saying about CAMR in 2009. The company has since announced it will no longer make use of CAMR, and has engaged in other forms of drug access programmes, such as making donations to the Mully Children’s Family near Nairobi, Kenya. 

While criticism has risen over the alleged complexity and administrative burden imposed by CAMR, Noel Courage, a partner at Bereskin & Parr in Toronto who specializes in biotechnological inventions, points out that CAMR’s lack of use didn’t come as a surprise from its inception. “A large generic company can typically manufacture and donate or sell drugs for poor third world countries from some supply source other than Canada, and these alternate sources are cheaper for drug manufacturing. So, the Canadian patent does not come into play at all, and there is no need for a Canadian compulsory patent license.”

In fact, others argued that Rwanda could have imported the same combination treatment at comparable price from India, whose pharmaceutical companies were approved by the US government and the World Health Organization to export generic versions of the fixed-dose medication. Such was the course of action Médecins Sans Frontières (Doctors without Borders) took when it was unable to secure the export of TriAvir from Canada, sourcing the drug from India for its projects instead.

And despite its lofty public mission, compulsory licensing has been the centre of intellectual property and innovation debates. It is often argued that compulsory licensing undermines hard-earned patent rights and disincentivizes innovation in an industry that requires great upfront investment and risk-taking. The rise of companies like Apotex has also been frowned upon by those who see generic producers as copycats who freeride on original inventions under an altruistic aura.

“Apotex became very successful, in part due to exploiting Canada’s compulsory licensing laws after the company was founded in 1974. There used to be very liberal pharmaceutical patent compulsory licensing laws in Canada, but they were discontinued over two decades ago,” says Noel of the early days of Canada’s now-largest pharmaceutical company.

“Canada decided that instead of continuing with compulsory pharmaceutical licensing, it would strengthen pharma patent rights and try to encourage R&D spending in Canada, in order to try to grow the innovative pharmaceutical industry. This is the position of most modern, progressive patent systems. Now compulsory licensing is available only in event of abuse of patent rights and other limited and infrequent exceptions.”

As such, international and domestic regimes on the subject are in a constant tug of war against IP rights advocates and those who believe in the market forces of innovation, and now the pendulum just might be swinging further the other way for Apotex.


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