Thailand Continues Its Compulsory Licensing Practices

    By Kevin E. Noonan --

Any hopes that Thailand would amend or overrule its policy of ignoring drug patent rights were dashed when the Thai government announced that it intended to maintain its extension of its compulsory licensing policy to four anti-cancer drugs:  Novartis' Imatinib® and Letrozole®, Sanofi-Aventis' Docetaxel®, and Roche's Erlotinib®.  The motivation is clear -- these compulsory licenses are estimated to save Thailand more than 3 billion baht ($100 million) over the next five years.

These actions are consistent with previous compulsory licenses granted on anti-AIDS drugs, including Abbott's Aluvia®, a heat-stable formulation of Kaletra® (see "Pharma Sanity Lacks Global Reach"), as well as Novartis' anti-leukemia drug Glivec®; ironically, the compulsory license on Glivec® was cancelled when Novartis agreed to supply the drug free to Thai patients.  These activities have been met with strong condemnation from the U.S., which placed Thailand on its "priority watch list" in its Special Section 301 Report last May (see "Worldwide Drug Pricing Regime in Chaos"), and the European Union, where Trade Commissioner Peter Mandelson demanded Thailand stop its compulsory licensing program (see "EU Trade Commissioner Sends Warning Letter to Thailand").

All this is occurring against a backdrop of political turmoil in the Thailand government's regulatory ranks.  Last week, Chatree Banchuen, only recently appointed the head of Thailand's Food and Drug Administration, resigned over the issue.  His predecessor, Siriwat Thiptharadon, was the architect of the latest scheme to grant compulsory licenses on the four drugs, and has charged that his demotion to an inactive government post was caused by his anti-patent stance.  The new Thai Public Health Minister, Chaiya Sasomsup, affirmed that compulsory licenses would be maintained unless Thailand was successful in negotiating an "affordable price" for the drugs.  And these actions seems to validate comments from the Thai Public Health Minister, Mongkol Na Songkhla, that indicate that Thailand will further expand this category for all "essential" drugs needed to support the government's universal health care plan.

The opposition (such as it is) within the Thai government is based in part on apprehension that the U.S. or EU would impose trade sanctions on Thailand in response to compulsory licensing.  However, the provisions of the Doha Declaration have made the success (and legality) of such sanctions less likely.

Of course, some in the Thai government say the drug companies only have themselves to blame.  Suwit Wibulpolprasert (at left), a senior adviser on disease control at the Thai Ministry of Public Health, alleges that Western drug companies refused to negotiate with the Thai government until they were threatened with compulsory licenses.

The abiding irony is that the very international agreements intended to increase intellectual property rights in countries like Thailand have instead provided such countries with all the promised protections for their own industries while permitting these countries to violate patent protection for a wide range of pharmaceuticals.  Prudence suggests that Western drug companies and their governments come up with a strategy that will accommodate the companies' legitimate interest in protecting their intellectual property and investment in these drugs while at the same time recognizing the political and economic pressures on countries like Thailand to take advantage of the provisions of GATT and the WTO that make these drugs affordable.  That has not happened yet, and with the tide turning towards more countries using these treaty provisions (notably, the Doha Declaration) to grant compulsory licenses and parallel importing for more drugs for treating more diseases, it can't come soon enough.

For information regarding this and other related topics, please see:

• "Neocolonialism in the Current Global Drug Pricing Regime?" August 19, 2007
• "More on the Global Drug Patenting Crisis," August 14, 2007
• "EU Trade Commissioner Sends Warning Letter to Thailand," August 13, 2007
• "Trying to Find a Solution to the Global Drug Pricing Crisis," July 16, 2007
• "Pharma Sanity Lacks Global Reach," July 13, 2007
• "Brasil Prevails in Dispute with Abbott over AIDS Drug Pricing," July 9, 2007
• "Africa (Still) Depending on the Kindness of Strangers in Anti-AIDS Drug Pricing," May 29, 2007
• "U.S. Trade Policy Becoming Less Pharma-Friendly," May 18, 2007
• "The "Unfairness" of World Intellectual Property Protection According to The New Yorker," May 17, 2007
• "Worldwide Drug Pricing Regime in Chaos," May 9, 2007
• "Not Getting It about Patented Drug Prices at The Wall Street Journal," May 6, 2007
• "A Modest Proposal Regarding Drug Pricing in Developing Countries," May 2, 2007
• "The Law of Unintended Consequences Arises in Applying TRIPS to Patented Drug Protection in Developing Countries," May 1, 2007
• "Abbott Agrees to Offer AIDS Drug at Reduced Price," April 12, 2007
• "No New Abbott Medicines for Thailand," March 14, 2007
• "More Compulsory Licensing in Thailand," February 1, 2007

Comments

[anoymousAgent]

What is bully Uncle Sam complaining about???

If you can have compulsive licensing to line billionare Meg Whitman's pockets in the United States, you can CERTAINLY have compulsive licensing for life-saving drugs for poor Thais.

The Thais were just following a "balanced" policy of patent "fairness."

Anyhow, the patents were probably obvious anyhow - the molecules were probably a combination of Carbons, Nitrogens, Oxygens, Hydrogens - any mathematician will DEFINITELY tell you that you can only combine these elements in a "finite" number of combinations (both formulae and structure) - seems obvious to me (I'm not a chemist but I took some chem courses in college so it seems obvious to me).

What's good for the goose is good for the sauce !!!!

We should all applaude Thailand's anti-troll policy.

[Kevin E. Noonan]

Dear Anon:

We agree with you that it is politically (and perhaps morally) untenable for large Western pharma companies to expect that poor countries like Thailand will (or should) pay the same prices for lifesaving drugs as wealthy Americans. And you are probably correct that there is enough fat in corporate America that the "losses" suffered by Thailand's actions will not drive any of them out of business any time soon.

But it seems logical that, having spent all the time and effort to produce a global IP regime (under GATT/TRIPS/WTO), Western governments should encourage their innovator drug companies to proactively address the pricing issue, rather than letting the whole global drug pricing structure devolve into chaos.

And as much as I admire your spunk in thinking some college chemistry courses make you qualified to decide what's "obvious," the facts are that it takes hundreds of millions of dollars to develop a new drug, and without some return on investment people will put their money in the mortgage market or iPods. Try using that next time you get sick.

Thanks for the comment.

[Bob]

Anon,

Article 31 of TRIPS provides an appropriate fair and balanced approach for Thailand to follow in declaring compulsory licenses. Under the TRIPS scheme, Thailand would pay a royalty rate that would be calculated based on internal market-driven factors, which are calculable using the Georgia Pacific factors as a guide. If the drugs are primarily going to the poor (e.g., retrovirals), then the royalty rate would be low. If, on the other hand, the drugs are going to Thailand's sizeable middle class and upper class, then the royalty rate would be higher.

Under TRIPS, Thailand has agreed to pay a fair royalty rate that is measured by objective economic factors and not by political fiat. Thus far, the royalty rates suggested by the Thai government are far below what TRIPS would provide.

Besides, most of these drugs (except for retrovirals) are probably going to middle-class and upper-class consumers in Thailand, whose ability to pay is no less than that of similarly situated consumers in other countries.

Further, your comments about "Uncle Sam" are overly broad. These confiscatory practices also affect innovator companies based outside of the US (e.g., Aventis, Roche, Novartis, GSK, Takeda, Bayer, etc.)

And in the background stands a Thai government that was installed by military force that desperately needs to buy off the loyalties of wealthier Thais.

[anoymousAgent]

Kevin,
I think you missed my sarcasm - I was NOT defending the Thai gov't.

I was noting that it is hypocritical of the United States to simultaneously:
a) weaken its OWN patent system; and
b) demand that trading partners (i.e. with a lower standard of living and an economic incentive to employ a "copy" business model rather than an "innovate" business model)enforce a strong patent system.

As for (a) - it is well known that the US patent system has been weakened over the past few years, and that there is a trend towards further weakening - i.e. the Ebay case which overturned 80 years of precedent and introduced Compulsory Licensing into the US, proposed patent 'reform' legislation which probably enjoys a majority in the Senate (though less than 60), the constant drumbeat we hear from the business press and American academia about how patents are 'out of control.' This all of course filters down to the 'reject reject reject' approach of the current USPTO administration. This also seems to filter down to many court decisions (alas, I'm just a humble US agent living overseas, but I think this is safe to say). This attitude also shows up in amicus briefs from non-scientist law professors.

The US cannot expect anyone else to be 'more catholic than the pope.'

The US cannot expect to weaken its own patent system without international reprecussions.

SORRY ABOUT THE LONG POST ! (which is not spelled-checked)

PS You have a GREAT blog - keep up the good work. My practice is mostly in EE/Computer Science (with some medical devices), and I enjoy your blog both as a general patent blog, and as a 'window' into the Bio/Pharm perspective of things.