My colleague Mark Jolink published an article about the consequences of the pharmacist’s exemption in the Dutch Patent Act. The exemption lets pharmacists prepare patented drugs themselves for individual patients on prescription. But it’s not the government’s only tool for influencing the pharmaceutical market. It’s also setting up a committee to consider granting compulsory licences. Compulsory licences can be used in any market. But what are they?
Patented drugs
The government has two ways to tackle problems in a market: patent exemptions and compulsory licences. Here, the trigger is the high price of patented drugs. The exemption has done little to change that, so the government is turning to the second tool.
Compulsory licence
With a compulsory licence the government can force the manufacturer of a patented drug to grant licences for that drug to one or more parties. This does not mean that the licence is free. It has to be paid for, but the committee has a say in the price.
General interest
This is just one of the many aspects that the committee has to weigh up. Costs are one thing. Other variables include the scope and term of the licence. On top of that, it is necessary to determine whether a compulsory licence is in the general interest of the country. If an epidemic were to break out and the only manufacturer of a drug is unable to produce enough of that drug, that interest is much clearer than when it comes to prices within a market.
A way to apply pressure
This makes the granting of a compulsory licence a complex process. There are only a handful of instances way back in the past where these have actually been granted. It is nevertheless a step that the government is willing to take in this case. The fact that the committee is being set up is in itself a means to exert pressure. There are several examples from other countries where this step has led to new price agreements in a market.
The committee’s effect
It is doubtful whether compulsory licences will become commonplace. It is just as unclear how long that would take. Needless to say, we will keep you informed about the latest developments. For the time being, however, it remains to be seen what the consequences of the establishment of this committee are going to be for the pharmaceutical market. Alluding to a compulsory licence mainly involves putting the relationship between the government, licensee and competitors on edge.
