Thailand Issues Compulsory Licence For Patented AIDS Drug

13 December 2006

Thailand's military-backed government on 29 November issued a compulsory licence for Merck's HIV/AIDS drug efavirenz, in an attempt to cut growing healthcare costs by encouraging the production and import of generic versions of the patented medicine.

The Thai ministry of public health authorised the Government Pharmaceutical Organisation to manufacture generic versions of the drug until 2011, and to import generics from India until domestic production comes on line. It specified that the medicines were to be used for the country's widely-praised national HIV/AIDS treatment programme. Bangkok stressed that the decision was in accordance with WTO rules on access to medicine, specifically citing the 2001 Doha Declaration on the TRIPS Agreement and Public Health, which permits compulsory licensing for "emergency cases and public uses."

While other developing countries such as Zambia and Indonesia have issued compulsory licences for HIV/AIDS drugs in the past, the Thai move is significant for its longer duration and the fact that it opens the door to competitive imports of generics from India. Both steps will mean increased downward pressure on drug prices, according to public health advocates, who praised the government's decision.

US-based global pharmaceutical giant Merck, which owns the patent on efavirenz and markets it under the name Stocrin, was less enthusiastic. The company's local subsidiary, MSD Thailand, complained in a statement that the Thai government did not approach it to discuss the compulsory licence decision prior to the announcement itself. According to a report in the Financial Times, Merck found out about the decision two days prior to the announcement, although it had expected a 90-day consultation period. MSD Thailand added that it was already providing efavirenz, a 'second-generation' antiretroviral drug, to Thailand "at one of the lowest prices available in the world."

The Thai government counters that while Merck's Stocrin treatment currently costs 1,500 bahts or USD 41 a month in Thailand, Indian generic efavirenz would cost roughly half as much, or 800 bahts (USD 22). The compulsory licence would thus help rein in the ballooning cost of providing efavirenz to patients through the country's universal HIV/AIDS treatment scheme. According to Médecins sans Frontières, at least 12,000 HIV/AIDS patients in Thailand currently require the drug due to an intolerance to one of the components in the generic triple drug cocktail provided by the government. That number is expected to rise sharply as patients now treated with generics already off-patent will start requiring second-line medicines such as efavirenz to survive.

As per the terms of the licence, it will be limited to the provision of efavirenz to no more than 200,000 people a year, and the Government Pharmaceutical Organisation will pay Merck a royalty fee of 0.5 percent of the total sale value of the imported or locally-produced generic.

In language even more critical than that used by Merck, Pharmaceutical Research and Manufacturers of America (PhRMA) President and CEO Billy Tauzin said the announcement to issue a compulsory license "without any attempt to negotiate with the patent owner [was] of grave concern" and appeared "to be inconsistent with the procedures in Thailand's own patent statute."

Compulsory licence appears to be WTO consistent

Pharmaceutical companies may be focusing on Thai domestic legislation because they have "no case under the TRIPS Agreement, or otherwise under WTO rules," says Frederick Abbott, a professor of international law at Florida State University. Bangkok's decision appears to be in full compliance with the requirements for compulsory licences set out in WTO law.

The WTO Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), in Article 31(b), explicitly states that governments do not need to consult with patent holders when issuing a compulsory licence for national emergencies or public non-commercial use. Abbott pointed out that Bangkok has stressed that it is seeking to address a public health emergency, and that the efavirenz produced or imported under the licence will be used for the government's non-commercial public treatment programme. Notably, US law does not require prior negotiations before the government may use a patent without the consent of the patent holder.

Nor does it appear that Thailand or India would have to make use of a 2003 agreement, the so-called '30 August 2003 decision,' that spelled out the complex conditions under which WTO Members are allowed to export drugs produced under compulsory licence.

According to published reports, efavirenz is not patented in India, since New Delhi only started granting patents to pharmaceutical products in early 2005, when it came into full compliance with the TRIPS Agreement (see BRIDGES Weekly, 23 March 2005). The Indian government would thus not have to issue a compulsory licence for the export of the drug.

Following Bangkok's announcement, Merck said that it might seek to negotiate with the Thai government to agree on a 'voluntary licence' for the generic production of efavirenz, or offer it a lower price for drug.

The American Chamber of Commerce in Thailand said that Bangkok's decision to authorise the production of generic copies of Merck's patented drug would send a 'negative signal' to foreign investors.

Sources report that Deputy US Trade Representative Karan Bhatia contacted the Thai ambassador in Washington to criticise the compulsory licence decision.

Médecins sans Frontières, on the other hand, urged Bangkok to go further. "Thailand is demonstrating that the lives of patients have to come before the patents of drug companies, and this policy needs to be expanded to essential drugs that are expensive and in short supply, such as the AIDS drug lopinavir/ritonavir, which currently costs over 7,000 baht a month (USD 194) and is far too expensive for Thailand," said David Wilson, a doctor with the organisation.

ICTSD reporting; "Thailand breaks Aids patent to cut costs," 30 November 2006; "Merck to cut Aids drug price in Thailand," FINANCIAL TIMES, 1 December 2006; "Thai drug move sends 'negative' signal to investors," REUTERS, 1 December 2006.


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