Praise for Ecuador's grant of compulsory license for AIDS drug

4 May 2010

Published in SUNS #6915 dated 30 April 2010

Geneva, 29 Apr (Kanaga Raja) -- Civil society organizations have praised a recent decision by the Ecuadorian government to issue its first compulsory license for lopinavir/ritonavir, a key medication in the treatment of HIV/AIDS.

Welcoming the move by Ecuador, the civil society groups called on other governments in the Latin American region to use compulsory licenses and parallel importation to improve access to essential medicines.

The compulsory license for ritonavir was granted by the Ecuadorian government to Eskegroup SA on 14 April, a Latin American distributor headquartered in Guayaquil for CIPLA, a leading Indian generic drug producer.

The patent for ritonavir, sold under the brand-name Kaletra, is held by the US-based pharmaceutical company Abbott Laboratories.

The compulsory license was issued by the national Ecuadorian Institute of Intellectual Property (IEPI), and the term of application of the license is until 14 November 2014.

On 23 October 2009, said the IEPI document granting the compulsory license, Ecuadorian president Rafael Correa had declared access to medicines used for the treatment of diseases that affect the Ecuadorian population, and which constitute a priority for public health, to be in the public interest. To this end, it was determined that compulsory licenses could be granted on patents for drugs for human use which are necessary for the treatment of these diseases.

According to the IEPI document, on 5 January 2010, Eskegroup SA submitted to IEPI an application for a compulsory license to be granted for ritonavir, following which on 15 January, IEPI issued instructions for the granting of compulsory licenses for patented drugs.

On 19 February, Eskegroup SA submitted the required documents concerning its application, and Abbott Laboratories was duly notified of the application by IEPI.

In issuing the compulsory license, the IEPI cited amongst others the Constitution of the Republic of Ecuador, the Universal Declaration of Human Rights, Article 31 of the WTO TRIPS Agreement and the Doha Declaration on the TRIPS Agreement and Public Health.

On the issue of financial compensation to Abbott Laboratories, the IEPI document said that the "Tiered Royalty Method" (TRM) shall be the model and guide in the calculation of royalties to be paid by Eskegroup SA.

[The IEPI document cites a joint publication by the UN Development Programme and the World Health Organization titled "Remuneration Guidelines for Non-Voluntary Use of a Patent on Medical Technologies" as the global guide for royalty rates for pharmaceutical products. The 2005 document was authored by James Love, previously of Consumer Project on Technology, and now Director of Knowledge Ecology International.

[According to the joint UNDP/WHO publication, in the TRM, the royalty rate "is not based upon the price of the generic product. Instead, the royalty is based upon the price of the patented product in the high-income country. The base royalty is 4% of the high-income country price, which is then adjusted to account for relative income per capita or, for countries facing a particularly high burden of disease, relative income per person with the disease."

["The TRM provides a more rational framework for sharing the costs of R&D, and may be more sustainable for some middle- or high-income countries that are sensitive to global norms concerning the sharing of R&D costs. The TRM provides for much higher royalties in middle- and high-income countries with low burdens of disease, and the lowest royalties for countries that have the lowest incomes and the highest rates of disease burden," says the joint publication.]

Applying the TRM calculation, Eskegroup SA has been instructed by IEPI to pay the following financial compensation: The royalties established in favour of Abbott Laboratories are US$0.04 per capsule for Ritonavir 100mg; US$0.02 per capsule for LOPIMUINE Lopinavir 200mg + Ritonavir 50mg; US$0.01 per capsule for Lopinavir 100mg + Ritonavir 25mg; and US$0.0082 for the paediatric Oral Solution formulation of Lopinavir 80mg + Ritonavir 20mg.

In a press release, Public Citizen said that by opening the door to competition from generic drug-makers, Ecuador is making a critical HIV/AIDS drug much more affordable for its public treatment programmes, a move that other countries should follow.

According to Public Citizen, while the patented version of the drug costs Ecuador's public health sector roughly $1,000 per person per year, Ecuador will soon be able to access generics at half that cost.

"Ecuador is setting an example for countries that seek to expand access to life-saving medicines, but struggle to pay for ever-more expensive drugs," said Peter Maybarduk, director of Public Citizen's new Access to Medicines Programme.

"Competition has consistently proven the most effective way to lower the prices of medicines. Countries should count compulsory licensing among their essential public health policy tools," he added.

According to Public Citizen, many countries have used compulsory licenses to promote public interest objectives and to remedy anti-competitive practices in a variety of sectors. In recent years, a number of countries have issued compulsory licenses to improve access to medicines, including Thailand, Malaysia, Eritrea, Mozambique and Indonesia, among others.

The United States is perhaps the world's most frequent user of compulsory licensing, including the government use of defense technologies, and judicially issued licenses to remedy anti-competitive practices in information technology and biotechnology, among other instances, said Public Citizen.

It noted that Ecuador's compulsory license immediately reduced the cost of a major HIV drug purchase last week by 27%, and that prices are expected to drop much further soon, as Ecuador licenses more competitors to enter the market.

A UNAIDS 2008 country report estimated that 42% of Ecuadorians needing antiretroviral therapy received it. Ecuador's national HIV/AIDS treatment programme will expand public access to treatment this year, aided by savings from the compulsory license, said Public Citizen.

In a separate press release, civil society organisations that came together in Quito in a meeting of the Latin American & Caribbean-European Alliance for Access to Medicines assessed and praised Ecuador's recent decision to issue a compulsory license for Kaletra (lopinavir + ritonavir), a key medicine in the treatment of HIV/AIDS.

Roberto Lopez, Director of Health Action International for Latin America and the Caribbean (AISLAC) and a member of the Alliance, welcomed Ecuador's initiative and advised countries in the region to follow its example.

"Competition is the most effective way to reduce the prices of medicines. Promoting competition through multiple measures including compulsory licenses is therefore an important step to protect the right to health and access to medicines. Other countries in the region should follow suit," said Lopez.

According to the Alliance, over the last ten years, global competition from generic medicines has revolutionized the treatment of HIV/AIDS, reducing the cost of first-line treatment from about $10,000 to about $100 per person per year.

Jose Teran of HAI Ecuador said, "Until now, treating HIV/AIDS with Kaletra under Abbott's monopoly has cost the Ecuadorian government around $1,000 annually per person. Now, under the compulsory licence, generics are already available to the government at $800. Prices will continue to fall as the government licenses more competitors."

"Ecuador could soon access generics at an annual cost of $470 or less. Civil society, including national and international organisations, will continue to monitor Ecuador's progress toward expanding access to medicines," he added.

Sophie Bloemen of Health Action International (HAI) Europe said: "TRIPS flexibilities, like compulsory licenses and parallel imports, are sovereign rights enabling countries to expand access to medicines. Initiatives like Ecuador's compulsory licensing and Colombia's new Decree 1313, which authorises parallel imports, are examples other countries in the region should follow, to expand access to medicines in accordance with the Millennium Development Goals."

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