ON THE IMPLICATIONS OF THE GILEAD/MEDICINES PATENT POOL LICENCE
This page provides answers to some of the frequently asked technical questions the Medicines Patent Pool has received with regard to the recent agreement with Gilead. For further information on the licences, see: the Gilead & Patent Pool Agreement Q&A here, also available in Spanish and French.
This information can also be downloaded in PDF form here.
1. Why are licences needed on patents?
Patents are territorial rights and are granted by national governments. Neither the Patent Pool nor UNITAID play any role in granting patents on HIV medicines.
When patents on HIV medicines exist in a country, they can enable monopoly pricing by blocking competition; this can lead to unaffordable prices and limits on access to medicines.
Obtaining licences on those patents from the patent-holders is one way to ensure that those patents do not stand in the way of access and that more people have access to lower-cost generic antiretrovirals. Licences are authorizations to make, sell, import or export a patented product under a set of agreed-upon terms and conditions.
The mandate of the Patent Pool is to try and ensure that existing patents do not stand in the way of access by negotiating licences with the patent holders.
2. Does the licence between the Pool and Gilead give Gilead a monopoly in countries where Gilead does not have patents?
No, it does not. However, by owning a patent in India, a drug company can obtain a de facto monopoly in certain other countries where there are no patents. That is because India has become “the pharmacy of the developing world”: many countries depend on imports from India for access to generic medicines. If a drug company has a patent in India, it can stop generic manufacturing in India, meaning it can stop generic access in all the countries that rely on generic imports from India.
It is this dependency of other countries on India and a few other producing countries that can give drug companies, via patents in India and some other key producing countries, an indirect monopoly in countries where there are no patents.
The Pool’s mission is precisely to overcome patent monopolies in key producing countries and in other developing countries that may benefit from importing those medicines.
The Pool/Gilead enables manufacturing of the medicines by generic companies in India for the supply to 100-112 countries.
3. Does the licence require the payment of royalties in countries without patents?
As a general principle, a licence is required when there are patents in the country of manufacture of a product or in the country of sale that prevent a generic from being made available. The licence with Gilead is based on the fact that Gilead has certain patents (or pending patent applications) in India, where most of the generic manufacturers that supply ARVs to developing countries are based.
Royalties are due because of the patents in the country of manufacture (i.e. India). If there were no patents in India that prevent a generic from being made, then generic manufacturers could make the products without needing the licence and would not pay royalties.
The licences with Gilead are terminable at any time, without penalty, by the licensees on a product-by-product basis. This means that, if in the future the patents on drug X get rejected in India, then the Indian licensees will no longer need the licence for the purpose of manufacturing in India. Licensees will be free to terminate the licence with Gilead, and to stop paying royalties to Gilead for that product, but have the option of keeping the licences for the other products. Likewise, if an Indian generic manufacturer finds a way to bypass Gilead’s patents, and no longer needs the licence in order to manufacture, then it may terminate the licence, and stop paying royalties for a licence it no longer needs.
This termination option has already been used by one Pool licensee for the drug tenofovir. In India, Gilead does not have a patent on the tenofovir molecule itself, but has a patent on a process to manufacture tenofovir. Indian generic companies that find a different process to manufacture tenofovir other than the one patented by Gilead will no longer need Gilead’s licence. They may terminate the tenofovir section of the Gilead/Pool licence, and stop paying royalties on tenofovir sales. Once a licensee terminates, it is free to sell tenofovir anywhere there is no patent, which includes many developing countries (see the Pool Patent Database for further details).
It is important to note that even if there are patents in both countries (the country of manufacturing and the country of sale) royalties are due only once.
In addition, in the Gilead/Pool licence, there are no royalties for paediatric products, regardless of whether the product is patented in the country of sale or the country of manufacture.
There are also no royalties due on the sale of active pharmaceutical ingredient (API)
4. Does the licence include a Gilead patent on the use of tenofovir against hepatitis B (a patent on a new use of a known product)?
No, it does not. Among the patents on tenofovir that Gilead has licensed to the Pool, none are patents on the use of tenofovir against hepatitis B. Expanding the licence’s “field of use” from only HIV, so that tenofovir may also be sold by licensees for the treatment of hepatitis B is positive for public health. It allows people living with hepatitis B to have access to more affordable products, and expands potential economies of scale for generic producers, thus lowering the price for everyone.
The tenofovir part of the Gilead/Pool licence allows Indian generic companies to manufacture tenofovir using the Gilead process. Second, the licence authorises Indian manufacturers to market these tenofovir drugs for use against HIV. Third, the licence expands this ‘field of use’ in the licensing agreement, so as to include not only HIV, but also hepatitis B. This is called an extension in the ‘field of use’ section of the licensing agreement. In legal terms, this is different from taking a licence on a ‘new use’ patent.
The licence does not include any Gilead patent on the use of tenofovir against hepatitis B. In fact, the licence does not include any new use patents at all, for any of the five products covered in the Gilead/Pool licence.
New use patents can adversely affect the affordability of medicines by extending the patent term on a known medicine. It is up to national governments to decide whether or not to grant patents on new uses. The Pool does not have the authority to set patentability criteria. If a country chooses to allow for new use patents, and if this country’s patent office does grant patents on new uses, then these patents can become a barrier to access. When this happens, these barriers must be overcome to access generic versions of the drug.
5. Does the licence include patents on new forms and formulations of a known medicine?
Yes. The Gilead/Pool licence does include patents on new forms and formulations (note that this is not the same as ‘new use’ patents).
Patents on new drug forms and formulations can adversely impact the affordability of medicines by extending the patent term on a known medicine.
The reason for inclusion of formulation patents in Pool licences is to remove barriers to competitive generic manufacture and procurement of these drugs.
It is up to national governments to decide whether or not to grant patents on new forms or new formulations. The Pool does not have the authority to set patentability criteria. However, when such patents exist, they can pose a barrier to access.
The Gilead/Pool licence allows for licensees to (a) only take licences on products for which there are patents that they feel they cannot work around, and (b) to challenge any patents that they think the Patent Office should not have granted in the first place.
The Gilead/Pool licence does not affect the legal ability of companies or third parties (e.g. civil society organizations) to oppose any decision by a Patent Office to grant a formulation patent, or any other patent.
The Gilead/Pool licence also allows for licensees to terminate the licence for any Gilead product, from the moment that the licensee no longer needs the licence. Several things may happen that mean licensees no longer need the licence. For example, the main product (compound) patent may expire, or the licensee may find a technique to bypass the patent.
The Gilead/Pool licence does not require royalties (or other obligations) to be paid after there ceases to be any legal ground for them. When the reason to take a licence ceases to exist, the licensees may terminate the licence on a product-by-product basis.
6. Does the licence give Gilead the power to decide whether a generic company can supply a country that issues a compulsory licence?
Licences on patents generally come attached with a list of countries covered, called “the licensed territory”. The principle of a voluntary licence is that the licensor authorizes the licensees to use the IP (i.e. to make/market the product) solely in the agreed territory.
Typically, a voluntary licence provides no circumstance where a licensee may be authorized to market the product outside the agreed territory and doing so would be considered a breach of the agreement.
This is different in the case of the Gilead/Pool licence. Here, the licence agreement DOES provide, explicitly, for circumstances where the licensee will be allowed to supply outside the agreed territory. Crucially, one of those circumstances is the issuance of a compulsory licence (CL).
If a CL is issued in country X (outside the territory of the Gilead/Pool licence), and if a licensee would like to supply this country X, then the licensee needs simply to notify Gilead that the CL exists. Once notified of the CL, Gilead will confirm that supplying country X does fall under the CL provision of the licensing agreement.
The Gilead/Pool agreement prohibits Gilead from unreasonably withholding this confirmation. The trigger for the confirmation is not Gilead’s acceptance of the compulsory licence. The trigger is the CL’s existence itself, regardless of Gilead’s views about it.
7. Does the licence limit manufacturing to Indian companies?
What the licence does is enable the production of the licensed products in India. Manufacturing in other countries will depend on whether there are patents for the product in those countries.
It was important to Gilead that the licence only enables manufacturing within India. This remains unchanged from previous Gilead licences.
The Pool clearly stated in its own announcement about the agreement with Gilead that this restriction is unfortunate, and that it constitutes an important area for improvement in Gilead’s licence.
Nevertheless, it should be noted that India currently supplies between 80%-90% of the ARVs sold in developing countries, so enabling this market to manufacture is a significant benefit.
Under the terms of the Gilead/Pool licence, an unlimited number of Indian suppliers will be able to compete. This preserves robust generic competition, leading to the lowest sustainable prices.
Concerning countries outside India where no patent exists, the Gilead/Pool agreement does not block domestic manufacture of generic versions of the Gilead drugs.
The provisions on compulsory licensing and on unilateral termination enable licensees to supply API to producers in countries outside India, provided this country has issued a compulsory licence, or that the licensee has determined that it no longer needs the Gilead/Pool licence for India and has terminated it.
8. Does the licence limit the sale of active pharmaceutical ingredient (API) to licensees?
This is correct. Gilead would only allow the sale of API to licensees. This remains unchanged from previous Gilead licences.
The Pool stated in its own announcement about the agreement with Gilead, that this is unfortunate, and that this constitutes an important area for improvement in the licence.
This restriction does not, however, create a monopoly on generic versions of Gilead’s products. Indeed, an unlimited number of Indian API makers will be able to enter the market, and an unlimited number of Indian generic manufacturers will be able to buy the API in order to manufacture finished tablets. This unlimited number of competitors facilitates robust competition; it does not create a monopoly.
The Indian licensees will also be free to terminate the agreement for any of Gilead’s products, from the moment that they determine the licence is no longer needed. Such termination will then remove the restriction against selling or buying the API outside of India. Such termination is likely to happen, for example, for tenofovir.
Licensees will also be free to supply API outside India where a CL has been issued, thus allowing for local production of the finished product outside of India.
9. Does the licence include all low- and middle-income countries?
No. The Gilead/Pool licences include the highest number of countries of any licence agreement to date. However, many middle-income countries unfortunately were not included in the list of countries that will benefit directly from the licence. The licences still benefit 100% of people living in low-income countries, 96.1 – 92.8% of people living in lower middle-income countries (depending on the medicine) and 67 – 75.8% of people living in upper middle-income countries (depending on the medicine), according to World Bank definitions.
This represents 75%-82% of PLHIV living in middle-income countries, and 82.7%-87.6% of people living with HIV in low and middle-income countries.
This is one of the most difficult issues in negotiations with patent holders and the Pool will continue to strive to get all low- and middle-income countries into the licences it negotiates.
For countries that are not included in the agreement, however, the Pool has ensured that they can benefit from a key provision. As discussed above, the licence allows licensees to supply any country that issues a CL. This is a key feature of the licence that is generally not available under other licence agreements.
The fact that licensees can terminate the agreement on a product-by-product basis also provides for some flexibility. For example, licensees could terminate the tenofovir part of the licence (as explained above) and supply a large number of additional countries where tenofovir is not patented.
10. What are the dispute resolution procedures provided for in the licence?
The Pool has sought feedback from generic companies regarding the dispute resolution procedure provided for in the Gilead/MPP licensing agreement. A number of generic firms have expressed that they consider this dispute resolution procedure to be adequately balanced.
The MoU that the Pool entered into with UNITAID required the Pool to include alternative dispute resolution procedures (this means, alternative to full blown legal procedures in court) in the licences, in order to ensure that any conflicts that may arise can be solved in a speedy and inexpensive manner.
In order to comply with this requirement in the MoU, the Gilead/Pool licence includes reference to the most widely used alternative dispute resolution procedure.
This most-common system is the one administered by the International Chamber of Commerce.
11. Does the broker’s fee that the Pool will receive through the licences constitute a conflict of interest?
The MoU with UNITAID required the Pool to explore paths for self-sustainability, including the inclusion of a broker’s fee, in the form of a share of the royalties.
The MPP’s fee is capped at a maximum of 0.25% of the generic price of the products sold under the licence.
Among the 4 molecules covered in the licence, any fees that would be generated are likely to come from cobicistat and elvitegravir. The scale of fees depends on a number of variables, including approval by a stringent regulatory authority (presently projected for late 2012), WHO recommendation, adoption by national treatment programs and subsequent uptake in developing countries. As for tenofovir, this part of the Gilead licence is likely to be terminated if Indian manufacturers work around the process patent, or otherwise determine that the patent does not block manufacture. As for emtricitabine, no royalties are payable under the licence for emtricitabine.
According to the Pool’s calculations, the revenue generated by the portion of royalties is likely to be too small to constitute a conflict of interest. At an estimate of about USD 10,000 total over the next four years, it represents less than 1% of the Pool’s operating budget.
The Pool’s statutes (available here [pdf]) have clear rules to avoid conflicts of interest, or the appearance of conflict of interest.
While the Pool does not consider the fee to comprise a conflict of interest, it is open to waiving this fee if a wide range of stakeholders find that it creates the appearance of conflict of interest, following further discussion with UNITAID on long-term sustainability plans.
12. Has civil society participated in the Pool’s activities?
The involvement of civil society organisations has been significant in the development of the Pool by UNITAID. The UNITAID NGO and Communities delegations played a major role in the two-year discussions within the UNITAID Board that led to the establishment and definition of the mode of operation of the Pool.
Inputs from civil society were also essential in understanding the types of terms and conditions licences must have to be of greatest value in increasing access to medicines.
The Medicines Patent Pool frequently interacts with civil society groups. Since July 2010, it is estimated that the Pool has had calls/briefings/consultations/meetings with over 140 civil society institutions from all over the world. The Pool has an open door policy and is available to discuss with any civil society institution that approaches it.
The Pool acknowledges, however, the need to enhance and formalise its consultative processes to enable input from a wider range of civil society stakeholders. While the UNITAID civil society delegations will continue to be a key counterpart, given UNITAID’s role as funder of the Pool, it is important that more systematic consultative processes be developed with civil society institutions around the globe.
The Pool will therefore engage with various civil society organizations and networks to develop a process that is appropriate to its size and mandate.
The Pool will also expand its Expert Advisory Group to include more people from the communities of persons living with HIV.
The Pool will increase transparency with respect to the Board’s decision-making process and assessment framework for taking decisions concerning any licences negotiated by the Pool.