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Compulsory licensing threat in Europe requires vigilance from pharma patent owners

The Netherlands’ new Health Minister has hit out at “absurd” drug prices, suggesting that the use of compulsory patent licensing might be one solution. This comes shortly after Germany’s highest court upheld a landmark decision forcing a life sciences innovator to license a key patent to a competitor.

Raising the spectre of greater interference in IP rights, recent developments in Europe underscore the threats faced by life sciences rights owners, and further demonstrate the need to engage in the public debates that will shape future patent law in key markets.

The Dutch minister, Bruno Bruins, made his comments in late November, less than a month after assuming his position. He promised to “change the rules of the game” and to “extensively explore” the possibility of using compulsory licensing to lower medicine prices. His remarks echo recent recommendations made by a government advisory body, which suggested changing the legal framework within which licensing deals are done to ensure a “socially acceptable price” for drugs.

A cross-party consensus seems to be forming, with three Dutch opposition parties recently presenting a report entitled Big Farma: Niet Gezond! (Big Pharma: Not Healthy!), which also advocates the expansion of compulsory licensing.

This comes just months after the German Federal Court of Justice made a landmark ruling, upholding a decision by the country’s patent court to force Shionogi to license a key drug patent to Merck - only the second compulsory licence granted by the court, and the first that involved a preliminary injunction. According to Munich-based IP litigator Johann Pitz the decision could lead to more compulsory licensing in Germany.

Of course, many international IP agreements – such as the Convention on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the Paris Convention for the Protection of Industrial Property – already contemplate compulsory licensing. Many individual European countries have legislation which provides for it, too, when this is deemed in the public interest.

However, the use – and the threat - of compulsory licensing has so far largely been confined to developing economies, such as India, Thailand and Brazil. The recent developments in the Netherlands and Germany, though, raise the prospect of the practice becoming more widely used in key developed-world markets.

Should this happen, it could potentially deprive life sciences innovators of market exclusivity for commercially-important products in lucrative European jurisdictions, thereby making it more difficult to recoup substantial R&D outlays and keep shareholders happy. It may also have the knock-on effect of creating more expensive and prolonged disputes around the granting of compulsory licences.

So, with the political and legal arguments for expanded compulsory licensing hinging on perceptions of the public interest, events in Europe highlight how important it is for pharma innovators to continue to draw attention to the benefits that arise from a strong IP system.

It also reinforces the arguments made by former Novartis IP chief Paul Fehlner suggested that innovative pharma entities might remedy negative perceptions and forestall adverse political shifts by voluntarily licensing some of their secondary patents.


#compulsorylicensing #TRIPS

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