A Review of Compulsory Licenses in Colombia

During the last two years, there has been a lot of interest and discussion about compulsory licenses in Colombia, particularly with respect a patent covering the beta polymorph of imatinib mesylate (imatinib), which is marketed by Novartis as Gleevec® or Glivec.  In this post, the BRIC Wall Blog looks at compulsory licenses in Colombia and the Glivec case in detail.

Compulsory licenses in Colombia – Background

In Colombia, a compulsory license may be granted:

  1. Three years following grant of a patent or four years following filing of a patent application, whichever is longer, if the patent has not been worked in Colombia or if working of the patent has been suspended for over one year, unless the patent owner is able to provide a valid reason(s) for its failure not to work the invention (such as, for example, force majeure, an act of God, etc.). Additionally, a compulsory license will only be granted if the third party applying for the license has made an effort to obtain a license from the patent owner on commercially reasonable terms and such efforts were not successful (Articles 61-64 of  Decision No. 486 of the Andean Community Commission Establishing the Common Industrial Property Regime (Decision)).
  2. Upon declaration of the existence of a public interest, an emergency, or other national security considerations. When a compulsory license is granted for one of these reasons, the patent is subject to the compulsory license only for so long as the considerations exist.  The Colombian Patent Office (CPO) will establish the scope of the license, specify its duration and the compensation to be paid to the owner (Article 65 of the Decision).  In Colombia, the declaration is made by the Ministry in charge of the subject matter of the patent; e.g. by the Ministry of Health (MoH) for pharmaceutical patents.  Once the declaration is made, the case is handed over to the CPO (part of the Superintendence of Industry and Commerce) to determine the terms of the compulsory license and to process the specific compulsory license request under those terms.
  3. By the CPO ex officio or at the request of a third party and after receiving the consent of the national antitrust authority, in situations where the practices of the patent owner are deemed to be detrimental to the exercise of free competition, particularly where they constitute an abuse by the patent owner of a dominant position in the market (Article 66 of the Decision).
  4. Upon request of a patent owner in situation where exploitation of its patent (the “first patent”) requires a license to another patent (the “second patent”) and the patent owner has been unable to obtain a license to the second patent on commercially reasonable terms (Article 67 of the Decision). Compulsory licenses granted under these circumstances are subject to the following conditions:
    • The invention claimed in the second patent must constitute an important technical advance of considerable economic significance in relation to the invention in the first patent;
    • The owner of the first patent is entitled to a cross-license on reasonable terms to use the invention claimed in the second patent; and 
    • The license authorized in connection with the first patent is non-assignable except when the second patent is assigned.

All compulsory licenses granted in Colombia are subject to the following general conditions:

  1. Before the grant of a compulsory license, the patent owner is notified and provided with a deadline of 60 days to submit arguments;
  2. Are non-exclusive and cannot be sublicensed;
  3. The licensee must work the object of the license within two years after grant, unless reasons of force majeure are proven;
  4. Compulsory licenses do not exclude the patent owner from working the patent;
  5. Are non-assignable, except in connection with the part of the business or goodwill which permits its industrial use. Any such assignments must be in writing and registered before the CPO,  otherwise such transfers shall not be considered legally binding;
  6. Are terminable if and when the circumstances which led to the granting of the compulsory license cease to exist and are unlikely to recur;
  7. The scope and duration of any compulsory license shall be limited to the purposes for which they were authorized;
  8. For patents protecting the semi-conductor technology, a compulsory license shall be authorized only for public non-commercial use or to remedy a practice declared by the competent national authority to be anti-competitive pursuant to Articles 65 and 66;
  9. Must provide for the payment of adequate remuneration pursuant to the circumstances of each case, taking into account the economic value of the license (without prejudice to the stipulations provided for in Article 66); and
  10. Must be used predominantly for the supply of the Colombian market.

Compulsory Licenses Granted on Public Interest Grounds

In Colombia, there have been two compulsory licensee cases on public interest grounds.  In both cases, the compulsory licenses were initiated by the same non-governmental organizations, namely, IFARMA Foundation, Mision Salud and CIMUN (collectively, NGOs).  In both cases, the compulsory licenses were rejected.  However, in both cases, price cuts were implemented or being sought.

The first compulsory license case began in 2008 and involved Kaletra®, marketed by Abbott Laboratories.  Kaletra® is an anti-retroviral medicine containing ritonavir and lopinavir and is used in the treatment of HIV/AIDS.  Although the MoH rejected the declaration of public interest and therefore, the compulsory license, the Colombia government cut the price of Kaletra® by 55%.

The most recent case involved Novartis’ Glivec product.  In November 2014, the NGOs began encouraging the MoH to declare access to Glivec to be of public interest with the goal of securing a compulsory license. Glivec costs about twice the average Colombian income of $15,000 per year.

Not surprisingly, the attempt by the Colombian organizations to secure a compulsory license were met with resistance and response from a variety of players including developed countries, Big Pharma and Colombian trade authorities.  As a result, the NGOs sent a letter in May 2016, to the Chairman of the World Health Organization 2016 Consultative Expert Working Group on Research and Development:  Financing and Coordination (CEWG) alleging that the enormous pressure was being applied by those opposing the compulsory license that combined “inaccuracies, distortions of international trade rules and even threats of trade claims under the dispute settlement mechanism”.  Adding more fuel to the fire, also in May 2016, a letter was sent by 28 organizations to President Obama that expressed concern access to medicine and U.S. aid to support peace in Colombia.  Moreover, still also in May 2016, a letter was sent to Columbia President Manuel Santos by lawyers, academics and other experts specializing in intellectual property and health encouraging his administration, the MoH and the Superintendence of Industry and Commerce to proceed with the public interest declaration and grant the compulsory license for imatinib.

On June 14, 2015, Alejandro Gaviria, Health Minister of the MoH, issued Resolution No. 2475 declaring the existence of public interest for imatinib.  However, this resolution did not order the issuance of a compulsory license for Glivec but instead requested that the National Price Pharmaceutical Commission (NPCC) provide a new price methodology for Glivec (which had already been included in the Price Regulation Regime; and, additionally, the price of Glivec, had already been regulated twice in the past). The new methodology, proposed in a NPPC draft circular (directive), stated that the maximum price for a drug subject to a declaration of public interest would be equal to the lowest price of any competitor in any referenced country. A “referenced country” comprises 17 countries. This circular (directive) is still in a preliminary stage.

Please continue to watch the BRIC Wall Blog for more updates on compulsory licenses in Colombia.

This post was written by Lisa Mueller and Alexander Agudelo of Olarte Moure.

 

 

Ukraine’s Competition Authority Issues a Major Decision on Drug Pricing Practices

In September 2016, the Antimonopoly Committee of Ukraine (the “AMC”) issued a significant decision holding Alcon Pharmaceuticals LTD (Alcon), a Swiss subsidiary of Alcon, Inc. (Novartis group), and four of its Ukrainian distributors liable for uncompetitive conduct as a result of overcharging for drugs in Ukrainian public tenders.  This decision is important because it sheds light on the AMC’s approach in enforcing Ukraine’s competition policy as it relates to discount and pricing practices in the Ukrainian pharmaceutical market.

Details of the Decision

The main focus of AMC’s scrutiny in this case were the discounts provided by Alcon at the time of drug supply (namely, at the time of importation) into Ukraine and the effect these discounts had on drug pricing for both the Ukrainian pharmacy market as well as the tender segment.  The AMC held that the retroactive discounts granted by Alcon to its distributors via the use of credit notes lacked transparency and also served as a tool to manipulate drug prices for Ukrainian consumers. Specifically, the AMC stated that such discounts effectively decreased the price at which distributors purchased drugs from Alcon.  Moreover, at the same time, the distributors chose not to apply for a reduction in the prices offered for Ukrainian tenders. As a result, the prices for drugs supplied to public sector customers were higher than those available at pharmacies.

Most significantly, the AMC concluded that this discounted structure resulted in the circumventing of the pricing restrictions established by Ukrainian law for supplies of drugs for public procurements, even though these actions did not per se violate the law.  In the AMC’s view, Alcon should have realized that when it officially declared its nominal (namely, before discount) prices in the official Ukrainian drug price register, that distributors might excessively charge Ukrainian public sector customers based on such nominal prices, instead of the real prices after all discounts.  Moreover, considering that distributors regularly report the volume of their sales, price levels, customers, etc. to Alcon, the AMC held that the company was aware of, and contributed to, the resulting price manipulations.  As a result, the AMC found that the actions of Alcon and its distributors constituted concerted anticompetitive practices that resulted in excessive pricing of medicinal products for Ukrainian public tenders.

What does this mean for pharmaceutical companies doing business in Ukraine?

This decision is believed to be indicative of the approach that the AMC is likely to apply in similar investigations. Accordingly, pharmaceutical companies may wish to consider re-visiting their pricing and discount strategies for Ukraine to ensure that potential competition risks are duly addressed.  Specifically, pharmaceutical companies should consider the following risk factors:

  • Credit notes: Retroactive discounts via credit notes may be viewed as lacking transparency and enabling price manipulations;
  • Level of discounts: Risk may increase proportionally to level of the discount provided;
  • Application of discounts: Discounts granted at the producer-distributor level are expected by the AMC to be adequately applied at distributor-customer level;
  • Pricing regulation: Medicinal products subject to pricing regulations in Ukraine, including those supplied for public procurements, require increased attention;
  • Difference in pricing approaches for retail and tender business: If prices differ substantially, this may be an additional risk factor; and/or
  • Level of detail in distributor reports: Excessive reporting by distributors to pharmaceutical companies may contribute to the qualification of their conduct as anticompetitive concerted practices.

Continue to watch the BRIC Wall Blog for further updates on decisions by the AMC regarding drug pricing policies in Ukraine.

This post was written by Lisa Mueller and Viktoriya Podvorchanska and Oksana Franko of Egorov, Puginsky, Afanasiev & Partners Ukraine.