Compulsory licences for oncology drugs: good, bad or ugly?

As our oncology themed month continues, Blair Hesp explores compulsory licences for oncology drugs.

Compulsory licence provisions have long been incorporated into intellectual property laws in countries around the globe on the basis that patents should not prevent access to an invention in times of exceptional need. In general, compulsory licences were envisioned as a last resort in emergencies, for example, if a patent owner was incapable of meeting demand for their invention and unwilling to increase supply by increasing capacity or reaching a commercial licensing agreement with a third party.

In theory, this principle could be applied to the pharmaceutical industry in the case of an epidemic wherein a manufacturer has invested in developing an antibiotic or vaccine, but is unable to manufacture enough product to meet demand. In this situation, governments would be compelled to issue a compulsory licence to generic manufacturers to ensure an adequate supply for the population at large. In more recent times, intellectual property laws have been adjusted to address the demands of an evolving world, with the issuance of compulsory licences to cope with the HIV epidemic in the Third World setting a precedent for the pharmaceutical industry. However, the use of compulsory licences has recently spread from treatments for chronic infectious diseases to the realm of oncology, largely on the basis of cost and the right to access treatment.

The good: Reduced cost equals increased treatment accessibility

Many oncology drugs are extremely expensive. Even in high-income countries treatment with patented oncology drugs is often limited by their expense. Therefore, it is no surprise that low-income countries, with growing and increasingly long-lived populations, are turning to compulsory licences to help reduce the price of oncology drugs. Accordingly, issuing compulsory licences for oncology drugs should increase access to potentially life-saving therapies, improve patient outcomes and reduce healthcare costs, and a quick glance at the success of compulsory licences for antiretroviral therapies in the field of HIV clearly supports the potential value of compulsory licences for oncology drugs.

Theoretically, this is not all bad for the patent owner either, as while a compulsory licence has been issued, it is still a licence, and royalties are still paid. However, any royalty payments are likely be set by the government that issued the licence, and represent a significantly lower return compared with the usual market price.

"While issuing compulsory licences might seem like an easy method of reducing the cost of oncology therapy, there are a number of factors that are easily overlooked in this situation..."

The bad: It's not quite that simple

While issuing compulsory licences might seem like an easy method of reducing the cost of oncology therapy, there are a number of factors that are easily overlooked in this situation, including:

• The list price for oncology drugs is very rarely the price paid. Various schemes that result in lower costs are usually negotiated between drug manufacturers and purchasers. However, the details of these agreements are usually confidential, making the true savings from compulsory licencing unclear, as the relative cost savings are difficult to deduce.

• Prices for oncology drugs manufactured under a compulsory licence may be lower, but are they as low as they could be? Compulsory licences are often issued to a single generic manufacturer. Therefore, the same arguments about monopoly pricing and an appropriate return on investment made against multinational manufacturers could be levelled at generic manufacturers.

• Compulsory licences in oncology are generally limited to small molecules. It is relatively easy to reverse engineer chemical processes to produce small molecule drugs compared with the investment required to develop replicate biological therapies, which are becoming increasingly prevalent in oncology.

"Prices for oncology drugs manufactured under a compulsory licence may be lower, but are they as low as they could be?"

The ugly: Are compulsory licences being driven by commercial, not patient, interests?

A somewhat controversial question to ask on this matter is whether compulsory licences are issued solely to improve patient access to treatment. These licences tend to be issued by countries with significant generic pharmaceutical industries that are likely to directly benefit from the issuance of compulsory licences. Of course, this can be contrasted with countries with significant interests in pharmaceutical research and development that rarely issue compulsory licences. So it must be asked: are decisions regarding the issuance of compulsory licences being in the field of oncology being made on the basis of unfulfilled patient need or commercial grounds?

How do you find balance?

The concept of balance relies on equality on both sides of the scale. On this basis, perhaps balance is best obtained by the rights of patent owners and generic manufacturers being equally catered to. In other words, if compulsory licences are to be issued they should be open to all generic manufacturers within the relevant jurisdiction, but this should be balanced by strict enforcement of other intellectual property rights. For example, pharmaceutical counterfeiting is extremely damaging to both society and the pharmaceutical industry, yet this receives a fraction of the attention given to other intellectual property rights.

Overall, balance will be best achieved when all parties focus on the patients, and this should not be forgotten.

About the author:

Blair Hesp is a Director of Kainic Medical Communications Ltd., a New Zealand-based medical communications agency that specialises in providing on-demand, overnight medical communications resource to overseas agencies and pharmaceutical companies. Blair has a PhD in Pharmacology from the University of Otago and a New Zealand Diploma in Business. In addition to several years' experience working in the Global and European medical communications industry in the United Kingdom, he has also spent several years working in the international intellectual property industry.

Are compulsory licences issued solely to improve patient access to treatment?