Ecuador issues compulsory licence for Abbott's Kaletra

Abbott's antiretroviral Kaletra (lopinavir plus ritonavir) is facing generic competition in Ecuador after the government issued a compulsory licence, following a request from the ESKE Group, for ritonavir on 14 April. The R&D pharmaceutical industry has criticised the decision, saying it undermines the patent system.

In addition the Indian firm Matrix has requested a second compulsory licence for the same drug, which could follow soon, Peter Maybarduk, a spokesperson for the NGO Essential Action, told Scrip.

This is the first compulsory licence to be issued in Ecuador since President Rafael Correa published a decree declaring access to medicines to be a matter of public interest last November. In doing so he opened the door for action on compulsory licences (scripnews.com, 21 October 2009).

The licence allows the Latin American ESKE Group to distribute a generic version of Kaletra to government run programmes on behalf of India's Cipla.

Abbott charges Ecuador's public sector around $1,000 per patient per year for Kaletra, in line with its tiered pricing strategy for low-middle income countries.

But within days of the compulsory licence, Ecuador's national HIV/AIDS programme was able to cut the cost of a "major drug purchase" by 27%, said Mr Maybarduk. "The point is, the compulsory licence is already saving money."

A second compulsory licence could save even more. For example Peru, where there are no patents on Kaletra, currently pays $396 per patient per year for a generic version available through the ESKE Group and Cipla. This is currently the lowest price for lopinavir plus ritonavir in the world, according to Mr Maybarduk. "This price came through competition, Cipla had to compete, so Peru ended up with a great price," he said.

Ecuador could reach a similar price if the patent office grants Matrix the second compulsory licence. The firm could then provide the drug in Ecuador through the Clinton Foundation at $470 per patient per year, driving competition further. Abbott is perhaps unlikely to lower the price of Kaletra in Ecuador as this may have a knock-on effect on its tiered pricing system.

Abbott told Scrip it was disappointed with issuance of the compulsory licence and said that this was not in the best interests of patients. "Abbott did not have a chance to respond to ESKE Group's reasons for why a compulsory licence should be issued," said a spokesperson. He declined to comment on the possibility of a second licence.

The IFPMA, the international federation which represents the pharmaceutical industry, said it too was disappointed by "a lack of transparency and due process, resulting in the right holder being unable to provide appropriate input".

It recognised the right of developing countries to use TRIPS flexibilities but said that compulsory licensing should be viewed as a last resort. "Negotiated approaches, such as differential pricing or voluntary licensing, are generally more effective and sustainable, both medically and economically."

PhRMA, which represents the US pharmaceutical industry, said that compulsory licences undermine the patent system. "It is in the best interests of patients if companies and countries work closely together; there needs to be more dialogue before a compulsory licence is issued," said a spokesperson.

setting an example?

In issuing the compulsory licence, Ecuador could well be setting an example for other countries wanting to expand domestic access to medicines. According to Mr Maybarduk, the model could be used by other countries. "The terms of the licence are very good. It contextualises the licence within a setting of public health and access to medicines. And it references international accords as well as domestic legislation," he said.

Moreover, it uses the Tiered Royalty Method to calculate the royalties to be paid to Abbott. This reflects the therapeutic value of the product and the country's ability to pay, which essentially means that lower income countries with high disease burdens pay less than middle income countries with low disease burdens, said Mr Maybarduk. "It represents a more sustainable contribution to R&D."

Colombia will be paying close attention to Ecuador's compulsory licensing move. Civil society bodies there have been arguing for a compulsory licence for Kaletra for some time, especially since the government recently declared a social emergency over the viability of the public health system.

Last year the Colombian government set a maximum price ceiling for Kaletra of $1,067 for public sector purchasers and of $1,591 for the private sector (scripnews.com, 13 May 2009). Abbott said that talks with the government were ongoing and that it had already cut the price of Kaletra twice over the past three years.

However, the industry does not seemed too concerned that Ecuador's compulsory licence will have a knock-on effect. "We don't see this as a future trend in South America," PhRMA told Scrip.

But Mr Maybarduk points to increasing cross-border dialogue between civil society groups and patient organisations, which are looking at expanding access to medicines through IP flexibilities.

Intellectual property and access to medicines are indeed hot topics across the region. Last year the Venezuelan government said it would be reviewing its IP laws to promote wider access to medicines through domestic production. And the ALBA group (the Bolivarian alternative for the people of the Americas, which includes Venezuela, Bolivia, Ecuador, Cuba, Honduras, Nicaragua and Dominica) told Scrip that it was "looking at the use of TRIPS flexibilities to improve the availability of medicine" (scripnews.com 13 August 2009).

Meanwhile, UNASUR, the union of South American nations, has declared medicines to be of public interest and an essential component of the right to healthcare. The group said it would promote policies that would make the region self-sufficient in terms of medicines production. The group also said it would promote IP rights from the perspective of public healthcare, incorporating TRIPS flexibilities.