Pharma patent owners can breathe a sigh of relief

Pharma patents account for a large share of patent portfolios. In 2015 the government considered a draft bill on compulsory licensing of patented medicines. The bill was initiated by the Federal Anti-monopoly Service (FAS), known for its “unusual” initiatives. The proposal suggested that pharmaceuticals could be manufactured without the patent owner's approval if the patent owner does not sell them in Russia or if their price is prohibitively high. FAS noted that compulsory licensing would be used in keeping with World Trade Organisation rules. The rules provide that every country has the right to grant compulsory licences and is free to determine the grounds for the grant thereof. As a precedent, FAS quoted a Canadian case in which the government ruled to license the drug Cipro because the patent owner could not produce sufficient quantities of the medicine. Compulsory licences have also been granted in other countries. FAS further argued that compulsory licensing would lower prices. A controversial point in the proposal was that compulsory licences would be granted by FAS alone, with no input from companies interested in drug production.

Provisions on compulsory licensing are part of all national IP legislation. If a patented product does not satisfy consumer demand and if the situation persists for four years, the court may grant a compulsory licence to an interested person. Only the court may consider the pros and cons of the case. However, this provision exists mostly in theory; no compulsory licences have been issued in the past 20 years. FAS acted as if it were unaware that provisions on compulsory licensing already exist. The media conducted a lively discussion of this proposal, in which FAS was reminded that no additional tools were needed to grant a compulsory licence.

The FAS move to introduce compulsory licensing was supported by a number of non-commercial organisations and generic drug companies involved in the treatment of AIDS. The proposal was sent to a number of government agencies, including the Ministry of Health and the Ministry of Trade and Industry.

Some months later, after careful consideration of the proposed measure, the government dismissed the proposal. Experts concluded that compulsory licensing, as proposed by FAS, would do more harm than good. It was recognised that compulsory licensing is an extreme measure which may be used when it is a question of life or death for patients, or when all of the options for agreement with the patent owner have been exhausted. This is also explained in Article 31 of the Agreement on Trade-Related Aspects of IP Rights.

The main risk that compulsory licensing presents is that leading pharmaceutical companies might quit the Russian market. This would also have other implications, including on the political front. The proponents of compulsory licensing argued that Russian pharmaceutical companies would be able to organise the manufacture of critical drugs. However, in practice, if a drug is protected by a patent it might not be possible to produce the same drug without the appropriate documents and technological standards. Drugs produced in this way might have unexpected side effects, which would nullify the expected result.

Nevertheless, FAS does come up with innovative initiatives in respect of pharmaceuticals. One of its proposals – which it is hoped will be implemented soon – is the waiver of clinical trials in certain cases.