Compulsory licensing and access to drugs.

Area of Science:

• Health Economics
• Intellectual Property Law
• Pharmaceutical Policy

Background:

• Compulsory licensing permits patented drug use without owner consent, aiming to enhance access to essential medicines.
• The pharmaceutical industry expresses concern that widespread compulsory licensing may hinder innovation.
• The interplay between compulsory licensing, generic drug manufacturing capabilities, and intellectual property rights is complex.

Purpose of the Study:

• To model the economic interaction between a Northern patent holder and a Southern government seeking drug access.
• To analyze how a Southern country's generic manufacturing cost influences compulsory licensing outcomes.
• To evaluate the global welfare implications of compulsory licensing, considering both access and innovation.

Main Methods:

• Economic modeling of patent holder-government negotiations.
• Analysis of compulsory licensing under varying generic manufacturing costs.
• Global welfare assessment incorporating drug access and innovation impacts.

Main Results:

• Drug access and innovation are significantly influenced by the Southern country's ability to produce generics.
• High manufacturing costs deter compulsory licensing; moderate costs lower prices but reduce access and innovation.
• Low manufacturing costs enable generic production, maximizing access but with some innovation reduction.

Conclusions:

• Compulsory licensing can yield positive global welfare, even with reduced innovation, particularly when generic production is feasible.
• The effectiveness and impact of compulsory licensing are contingent on manufacturing costs and intellectual property strength.
• Policy decisions regarding compulsory licensing have potential global repercussions across markets.