To
the Boards of Directors of the International Treatment Preparedness Coalition
(ITPC) and Initiative for Medicines, Access and Knowledge (I-MAK):
Earlier
this week, we became aware of the joint briefing paper issued by ITPC and I-MAK
on the recent licence agreement between Gilead Sciences and the Medicines
Patent Pool. We very much welcome analysis and comments from
various
stakeholders, as this helps to improve our work. However, we cannot let the
factual inaccuracies and misleading statements in the paper go unchallenged. It
is important that analysis of this agreement be firmly
grounded in facts. In our view, the licences are a significant improvement upon
the status quo, but also have important shortcomings. The Pool is committed to
working to improve the terms and conditions in future licences,
and relies upon the support of all stakeholders to make this happen. (Further
details are available in the Q&A that was issued when the licence was first
announced, and available here [1]). A general response to the various
commentaries issued on the licences has also been widely circulated and is
annexed to this letter.
Because
of the serious inaccuracies and misinterpretations of the licence presented in
the ITPC/I-MAK briefing paper, we feel obligated to respond to a number of the
points.
*Field
of use and second use patents*
The licence does not restrict sale of TDF for HIV only (as in previous TDF voluntary
licences), but rather expands the field of use for TDF into hepatitis B (HBV).
This is positive for access to medicines and public health. The field of use
that is defined under a patent licence agreement is a completely separate issue
from that of new use patents. It is incorrect to suggest that limiting the
field of use to HIV would somehow make the manufacture and sale of the same
medicine for treatment of HBV royalty-free.
If
a patent licence for a compound that has known therapeutic benefit for both HIV
and HBV limited the field of use only to HIV, that would mean that it would be
a contractual violation for a generic company to market that medicine for the
treatment for HBV. This would mean that generic companies would be prohibited
from supplying the same drug to the millions of people who are living with HBV,
and also reduce the scope for greater economies of scale that is created by a
larger potential market for that drug. There are no patents for new uses
covered under the licence agreement. Expanding the field of use in a licence
agreement does not in any way validate patents on new uses, which many
jurisdictions do not allow, consistent with flexibilities contained in the
TRIPS Agreement.
*Severability of the licences*
An important feature of the agreement is that it is severable on a product-by
product basis (the licence is not `bundled`). This feature was specifically
negotiated into the licence by the Patent Pool, particularly in light of the
patent situation of TDF in India and elsewhere. This means that a generic
company that has developed a non-infringing process to make TDF in India can
opt-out of the TDF portion of the licence and be free of any obligation to pay
royalties for its sale of TDF. Based on the information that has been made
publicly available on our website in the Patents Status Database for Selected
HIV Medicines, it would appear that opting out of the TDF licence would mean
that licensees are free to supply TDF to a number of countries outside the
licensed territory where Gilead does not hold a patent, including Argentina,
Brazil, Chile, Colombia, Malaysia, Peru, the Philippines, the Ukraine and
Uruguay (and possibly others). Moreover, because the licences are severable on a
product-by-product basis, the licensee is free to terminate the licence on a
product upon the expiration of what it deems to be the strongest patent (e.g.,
a patent covering the active compound) without any further obligation to pay
royalties on what it deems to be weak patents or those that it can
design-around. The licensee is also free to challenge the validity of any of
the patents under applicable national law. The licences negotiated through the
Patent Pool expressly allows for both things to happen. It is, therefore,
inaccurate to claim that these licences somehow introduce a "global patent
system" or allow royalties to be paid "in perpetuity."
*Right
of licensee to supply in the event of a compulsory licence*
The Medicines Patent Pool supports the use of TRIPS flexibilities by countries,
and is mandated under its Statutes to ensure that the licence agreements that
it negotiates are consistent with the use of such flexibilities. As such, the
licence agreement expressly allows for a licensee to supply a country outside
the territory in the event of a
compulsory licence. Further, as Professor Brook Baker`s analysis [2] explains,
Indian law relating to compulsory licensing for export can potentially be
interpreted and implemented in a manner that overcomes many of the difficulties
with the use of the WTO 30 August decision.
*Transfer
of know-how*
The Medicines Patent Pool has consulted extensively with generic companies regarding
a number of issues, including the necessity and desirability of a knowhow
transfer in a patent licence agreement. Although some companies declared it
unnecessary, others felt that it could potentially be of use. Therefore, the
Medicines Patent Pool agreed to a know-how transfer, but ensured that no
further obligations independent of the patent licences came with the transfer
of knowhow. Under the previous Gilead licences, a licensee could potentially be
obligated to pay royalties on a product even after some or all of the patents
on a product were declared invalid as a result of the know-how transfer. The
licensees are now free to terminate the licence for any reason with 30 days
notice.
*Grant-back
obligations*
The licence agreement grants Gilead a non-exclusive, royalty-free licence back
to Gilead for any improvements developed by the licensee. TRIPS, Article 40
allows countries to take measures against licensing practices
that are deemed to be anticompetitive, such as exclusive grant-back provisions.
The type of nonexclusive grant back provision included in the Gilead licences,
however, are not considered to be controversial under competition law. Finally,
we disagree with the ITPC/I-MAK briefing paper that this obligation will prevent
the Indian generic industry from remaining far more competitive than originators
in manufacturing quality medicines in high volumes at low cost. This is
demonstrated in MSF`s Untangling the Web data for TDF [3], which shows that
several Indian companies are selling TDF for less than half of Gilead`s
reported at-cost price, and at five times less then when the first generic
version of TDF was introduced.
*Expert
Advisory Group*
The Medicines Patent Pool`s Governance Board is in the process of formally convening
an Expert Advisory Group (EAG). As specified in the Patent Pool`s Statutes, the
members of the EAG shall have a broad range of expertise,
including IP expertise and public health in developing countries. The list of
EAG members will be made public when the EAG is formally convened. For the
Gilead licence, an ad hoc group of experts was consulted, which
presented its recommendations for final decision by the Patent Pool Board.
*Administrative
fee*
UNITAID has mandated that the Pool assess paths to self-sustainability, including
the possibility of charging a commission to licensees for services rendered
through the standard licensing agreements. The Statutes of the
Medicines Patent Pool, which are publicly available on the Patent Pool website,
expressly contemplate the possibility of the Patent Pool receiving a portion of
royalty payments, where it states, "At all times, the majority
of the Foundation`s funding from third parties (excluding royalty payments, if
any) shall come from sources of public and/or non-profit nature." The Statutes
also mandate that, "The revenues that may be realised by the
Foundation shall be used exclusively in furtherance of the Foundation`s public
utility aim." The proportion of royalties payable to the Patent Pool under
the Gilead licence is 5% of the 3-5% royalty that Gilead itself
receives -- in other words, the commission is 0.15% to 0.25% of the generic price.
(The ITPC/I-MAK briefing paper is incorrect in asserting this as 5% of the
generic price). Based on the market size and growth projections, the
Pool has estimated the total revenue to the Pool from this royalty stream as ranging
from $1,500 to $30,000 in 2011-2012, an amount that comprises less than 1% of
the Pool?s annual operating costs. These amounts do not increase the royalty
level (3-5%) or total amounts payable by generic firms to Gilead; rather, they
are a portion of the royalty stream.
We
reject the assertion that these amounts create `a serious conflict of interest`
and reaffirm the commitment of the Pool to the mission for which it was
created, to improve access to medicines and public health in low- and
middle-income countries.
*Transparency*
A key point that needs to be highlighted is the unprecedented transparency of
the licences issued by the Pool. This is in stark contrast to the common practice
in the pharmaceutical field, where voluntary licences, including
those issued or obtained by public research organisations on HIV medicines,
have been kept confidential. This may be why voluntary licences between
companies and generic manufacturers have not received the same level of public
attention, despite being significantly more restrictive than the licences
negotiated by the Pool. Gilead and other companies that enter into the Pool
know the licences will be made public and that as a result will face greater
scrutiny due to the public nature of the licence. We hope that this process
will become the accepted norm as we believe such transparency leads to stronger
public health protections in the licences. We also hope that misleading
comments and inaccurate criticisms such as those found in parts of the briefing
paper will not discourage others from taking this route.
As
ITPC/I-MAK noted, Gilead negotiated `semi-exclusive` licences with four Indian
generic firms and also negotiated a licence with the Pool. The terms and
conditions of the semi-exclusive licences have not been publicly disclosed;
therefore, it is not possible to assess their contents since they are kept
confidential. As noted above, the Pool licences are publicly available, open to
scrutiny, and contain a number of public health
safeguards. Very concretely, the Pool license will enable increased production
capacity, more robust competition and security of supply – all needed to put 15
million people on ART by 2015.
Since
the licence was announced, ITPC and members of the World Community Advisory
Board convened by ITPC have been briefed on the licence and discussions were
held with members of the Pool several times over the last weeks including
proactive invitations from the Pool to provide briefings. Discussions included
extensive dialogue on the licence, on the terms and conditions and on the
implications for access to the products. Immediately prior to the announcement,
various members of ITPC and of WCAB were briefed on the workings of the Pool in
various settings. At no time during all such meetings were most of the concerns
raised in the briefing paper, factual or otherwise, presented so that any
misunderstandings could be cleared up. We remain available and indeed invite
continued dialogue so that going forward we can continue to work together to
support our common goal of access to safe and affordable medicines for all and
more access-friendly licensing of
HIV medicines.
Keywords: MPP Licenses / ITPC-I-MAK / Briefing Paper
/ Gilead
