Compulsory licences and the myths surrounding them

© Karin Hutter/Public Eye
There is a little-known instrument, both legal and legitimate, that enables reductions in the price of medicines: the compulsory licence.

The issuing of a compulsory licence allows a government to authorise the commercialisation of less expensive generic products, and thereby guarantee access to drugs. In fact, compulsory licences are an integral part of international patent rights, but they are still too seldom used, as governments wishing to resort to them are subjected to major commercial and political pressures.

© Mark Henley/Panos. Collage: Karin Hutter

Pharmaceutical companies are not the only ones to exert pressure on governments wishing to use compulsory licencing. The countries hosting the pharma giants also threaten to use political and economic sanctions, which often discourages the southern countries from using this legitimate option.

Most industrialised countries also hesitate to use this instrument, for fear of going against the interests of their own pharmaceuticals industries, whose business model relies on patents. They therefore try to restrict the room to manœuvre provided by TRIPS – which authorises compulsory licencing in a very broad way – by suggesting that the instrument can only be used in urgent or exceptional cases, or only for certain illnesses such as HIV/AIDS.

In 2018, in cooperation with the Swiss Cancer League, Public Eye launched a vast information campaign, calling on the Federal Council to use, in Switzerland, the instrument of compulsory licencing, and to stop pressurising countries who wish to take this step. The report “Protect patients, not patents” explains, in 45 pages, everything you should know about the excessive prices of medicines, the problematic business model of the pharmaceutical industry, and effective solutions to remedy this situation.

Myths around compulsory licencing

The governments of the industrialised countries do not hesitate to discredit compulsory licencing by spreading false truths. For example, they assert that a compulsory licence is equivalent to an expropriation of the patent, that it results in a reduction in investments, or that it is only justified in urgent or extreme situations.

In reality, the compulsory licence is not a disproportionate instrument, as the patent concerned remains in force. Moreover, financial compensation (in the form of royalties) is awarded to the patent holder, who can also continue to market his/her product.

The pharmaceuticals companies and the countries that host the biggest ones often assert that compulsory licences are a brake on innovation and investment in R&D. This effect is not however demonstrated – no more than the assertion that patents stimulate innovation. On the contrary, the experience of several countries having often had recourse – and sometimes over long periods – to compulsory licencing (such as Canada and the USA) does not show any weakening of innovation. This experience even sometimes reveals an increase in investment in R&D. Neither is there proof allowing the affirmation that a compulsory licence endangers direct foreign investment.

More infos

  • Myth No. 1: “Only in a national urgency or other circumstances of extreme urgency . . .”


    ... An urgent situation only has the effect of shortening the procedure. Each country can decide freely on the motive for requesting a compulsory licence.

  • Myth No. 2: “. . . limited to a given number of illnesses, such as HIV/SIDA or infectious diseases with epidemic potential”


    ... The use of a compulsory licence is limited neither to a pathology in particular, nor to any category of specific diseases.

  • Myth No. 3: “. . . use limited to poor countries”


    ... Each member of the WTO has the right to grant a compulsory licence.

  • Myth No. 4: “An instrument of last resort . . .”


    ... The expropriation of a patent is actually the instrument of last resort, not the compulsory licence.

  • Myth No. 5: “The compulsory licence is equivalent to an expropriation . . .”


    ... The patent developer remains its holder; he retains the right to exploit the invention and to receive adequate remuneration.

  • Myth No. 6: “. . . have a dissuasive effect on innovation and on investment in R&D ”


    ... There is no empirical evidence that compulsory licences reduce investment in R&D or that they have a negative impact on direct foreign investment.