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Blog | What you need to know about compulsory licences | EP&C

What you need to know about compulsory licencesLast month my colleague Mark Jolink published an article about the consequences of the pharmacist's exemption in the Dutch patent act, which makes it possible for pharmacists to prepare patented drugs themselves, should this be medically necessary. This is not the only means available to the government to exert influence on the pharmaceutical market. A compulsory licences committee is also being set up to consider the possible granting of such licences. This is another instrument that can be used for any market. But what exactly is it?

Patented drugs

The government has two means at its disposal to exert influence on undesirable situations in the market, namely patent exemptions and compulsory licences. In this specific case, the use of these stems from the high prices charged for patented drugs. The exemption has done little to change this, so the second instrument is now also being used.

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.

Means to exert 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.

Effect of the committee

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.