Unease Persists Over Compulsory Licences

BMI View: Thailand's status as a priority watch list country in the Pharmaceutical Research and Manufacturers of America (PhRMA)'s submission to the Special 301 Report is unsurprising. The compulsory licence issued by Thailand in 2011 is still in place, negatively affecting its reputation for intellectual property protection. We highlight that Thailand will continue to be listed in the Special 301 Report, given that it permits parallel imports - which hinders PhRMA's revenues in the country.

The US Trade Representative (USTR) has released the 2013 Special 301 Report, an annual review of intellectual property protection and enforcement worldwide. Thailand remains on the Priority Watch List, which is the highest level of concern. In PhRMA's submission to the Special 301 Report, the association also placed the country under Priority Watch List. BMI notes that, with the exception of New Zealand, countries listed under the Priority Watch List by PhRMA (India, Indonesia and Thailand) have all issued compulsory licences before.

PhRMA's Key Concerns:

Compulsory Licensing And Intellectual Property Protection Issues: PhRMA is concerned by the Ministry of Public Health re-issuing compulsory licenses (CL) against HIV treatments, such as Bristol Myers Squibb's Stocrin (efavirenz) and Abbott's Kaletra (lopinavir and ritonavir) without consulting with the affected companies. Importantly, royalty payments on the earlier compulsory licenses in 2007 for the two drugs were not made.

BMI highlights that Thailand's actions have contravened the World Trade Organization's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Under the agreement, the country would first have to negotiate a voluntary licence with the patent holder. Secondly, patent owners must also receive payment. While the reissuance of the licence is negative for Thailand's reputation, BMI believes that it is unlikely that it will have any major financial impact on PhRMA members, given that the threat of issuing CL for non-emergencies and health epidemics is low. This is unlike the case in India, which issued a CL for a cancer drug in March 2012.

In addition to CLs, PhRMA expressed concern over Thailand's weak patent enforcement. Statements suggested that the country lacks effective mechanisms to resolve patent issues before generic drugs are marketed, and that the country fails to recognise the importance of innovative products (i.e. patented pharmaceuticals) in terms of their health, scientific and commercial benefits.

Market Access And Discriminatory Procurement:

PhRMA stated that hospitals must procure products supplied or produced by Thailand's Government Pharmaceutical Organization (GPO) and that under Procurement Regulation B.E. 2535 issued by the Prime Minister office, hospitals affiliated with the Ministry of Public Health must spend 80% of their health budget on medicines listed under the National List of Essential Drugs (NLEM). More critically, GPO (under the Drug Act) does not need to obtain a licence from Thailand's Food and Drug Administration to produce, sell or import pharmaceuticals. This negatively impacts member firms, as the process essentially allows for parallel imports.

In addition, PhRMA members highlight the government's aim for cost containment in the Civil Service Medical Benefits Scheme through various means, such as price negotiation and prescription criteria of non-NLEM drugs and prior authorisation for high-cost drugs. BMI believes that the association is concerned this will limit patented drug revenues.

This article is tagged to:
Sector: Pharmaceuticals & Healthcare
Geography: Thailand, Thailand, Thailand, Thailand

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