Compulsory Licensing of Pharmaceuticals in High-Income Countries: A Comparative Analysis

Abstract

Policy Points Pharmaceutical trade organizations and media outlets in the United States regularly point to compulsory licensing-or even its threat-as the mechanism that peer countries use to control the price of prescription drugs. Our comparative analysis shows that compulsory licensing is not frequently employed in high-income countries outside the United States as a direct response to drug prices. When its use is threatened, a license is rarely issued and even less often does it lead to a price discount. Accordingly, compulsory licensing is unlikely to contribute to price discrepancies between the United States and other developed nations. In fact, of the 21 compulsory licensing petitions we identified outside the United States, over one-third were made by pharmaceutical companies themselves and only three were threatened by a government authority.

Context: Compulsory licensing is a practice whereby national authorities can license a third party to produce a patented product, such as a pharmaceutical drug, effectively enabling the production of a generic before the original patent expires. The policy was designed-and has historically been used-to improve access to essential medicines in low-income countries and during public health crises. Although it was not intended to impact drug prices directly, the threat of compulsory licensing may indeed contribute to lower drug prices in high-income countries outside the United States. Our study sought to determine the plausibility of this claim.

Methods: We compiled a comprehensive database of compulsory licensing episodes in the United States and 17 comparator nations over the 20 years following the 2001 Doha Declaration, and we recorded the motivation and outcome of each instance. Our search began with publicly available reports compiled by organizations specializing in pharmaceutical intellectual property, expanded to a query of legal proceedings in Westlaw, and concluded with a comprehensive literature review on PubMed.

Findings: This strategy yielded 45 unique episodes of compulsory licensing, 24 in the United States and 21 outside. A minority (24%) of petitions outside the United States were motivated by high prices, and in all countries, only three cases were clearly associated with a price discount.

Conclusions: We found no evidence to suggest that compulsory licensing is either frequently threatened or successfully implemented by countries outside the United States to secure price discounts for the most expensive pharmaceuticals, those that are newly patented and just entering the market.

Keywords: compulsory licensing; drug costs; intellectual property; international health regulations; pharmaceutical policy; pricing.

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Schematic of Literature Review