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Compulsory licensing system for the production and export of generic medicinal products to developing countries

The purpose of this Regulation is to harmonise within the European Union (EU) the conditions for granting compulsory export licences to companies intending to manufacture generic medicinal products for export to developing countries which do not have sufficient production capacity of their own. The Regulation aims to prevent distortion of competition among operators in the single market and to apply uniform rules in order to avoid the reimport into the EU of pharmaceutical products manufactured under the compulsory licences.

ACT

Regulation (EC) No 816/2006 of the European Parliament and of the Council of 17 May 2006 on the compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems.

SUMMARY

PROCEDURE AND CONDITIONS FOR THE GRANTING OF COMPULSORY LICENCES

The Regulation lays down a procedure allowing undertakings wishing to manufacture generic pharmaceutical products for export to apply to the national authorities for the granting of a "compulsory licence" from a patent holder who has exclusive rights to the products in question and their sale.

The Regulation does not impose any restrictions with regard to the pharmaceutical products and illnesses covered. A "pharmaceutical product" is any product of the pharmaceutical sector, including medicinal products, as defined by the Community Code relating to medicinal products for human use.

Eligible importing members

Compulsory licences are granted where the products concerned are intended for export to eligible importing countries with public health problems.

The Regulation identifies the following categories of eligible importing countries:

  • the least-developed countries (LDCs);
  • World Trade Organisation (WTO) members, other than the LDCs, which have notified the Council for TRIPS (Trade-Related Aspects of Intellectual Property Rights) of their intention to use the system as importers;
  • non-WTO members which are listed as low-income countries by the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD) and have notified the Commission of their intention to use the system as importers.

Competent authorities

It is the responsibility of the competent authorities of the Member States to order that a compulsory licence be granted. The competent authorities are those with the power to grant compulsory licences in accordance with national patent law, unless otherwise provided for by the Member State. The European Commission must be notified of such alternative provisions.

Applicants for compulsory licences

Anyone may apply for a compulsory licence to the competent authorities of the Member State(s) where the patents are applicable.

If the applicant for a compulsory licence has submitted applications for the same product to several countries, this must be mentioned in each application with an indication of the quantities and importing members concerned.

The applicant must prove that he has received a specific request, either from the importing country or its authorised representative, or from a health organisation (be it non-governmental, a United Nations body or another international organisation) acting with the formal authorisation of one or more importing countries.

Rights-holders

The competent authority must notify the rights-holder without delay of the application for a compulsory licence.

Admission requirements for applications

The competent authorities must verify that the basic admission requirements for making use of the system have been satisfied.

The competent authority must therefore check that each WTO-member importing country mentioned in the application has notified the WTO in respect of each of the products covered by the application. For importing countries that are not WTO members, the competent authority must check that the Commission has been notified. The competent authority must also check that the quantities indicated in the application are no greater than those which were notified to the WTO or the Commission.

In this notification, the importing countries (except LDCs) must in particular show that their pharmaceutical manufacturing capacity as regards one or more specific products is insufficient or non-existent.

The applicant for a compulsory licence must also provide evidence that he has endeavoured to obtain authorisation from the rights-holder and that these endeavours have not been successful within a period of thirty days before submitting the application. This rule does not apply in the event of national emergency, nor in cases of public, non-commercial use.

Conditions for granting a compulsory licence

The competent authority may refuse to grant a licence if one of the conditions is not met. Once granted, licences are non-exclusive and non-transferable and must be notified to the Council for TRIPS through the intermediary of the European Commission.

The compulsory licence is strictly limited to the quantities needed by the importing country or countries indicated in the application and to the manufacturing of the product in question for export and distribution there.

Thus, no product manufactured or imported under a compulsory licence may be sold or marketed in any country other than those indicated in the application. This does not apply to exports to partner countries in a regional trade agreement which have the same health problem.

Products manufactured under the licence must be clearly marked by a label or special marking to distinguish them from those manufactured by the rights-holder, provided that this is physically possible and does not have a significant impact on the price.

If the products covered by the compulsory licence are patented in the importing countries indicated in the application, they may be exported only if these countries have issued a compulsory licence for the import, sale or distribution of the products.

Lastly, the holder of the licence must make a suitable payment to the rights-holder. This will be calculated by the competent authority on the basis of the economic value of the authorised use under the licence and of non-commercial factors in the granting of the licence. In the event of a national emergency or in the case of public, non-commercial use, on the other hand, the payment is fixed at a maximum of 4 % of the total price paid by the importing country.

MEASURES TO PREVENT REIMPORT INTO THE EU

To ensure that the medicinal products do not fail to reach those who need them, the Regulation bans their reimport into the EU and calls on customs authorities to take measures against reimported products.

The customs authorities thus have the possibility of detaining any product suspected of being reimported into the Community. They may not do so for more than ten working days.

Throughout the suspension procedure, account will be taken of national provisions on the protection of individual data, commercial and industrial secrecy, and professional and administrative confidentiality.

If the competent authority finds after investigation that the products were to be imported into the Community, it will ensure that they are seized and disposed of in accordance with national legislation.

These provisions do not apply, however, to goods of no commercial value contained in travellers' personal luggage and intended for their personal use.

TERMINATION AND REVIEW OF A COMPULSORY LICENCE

A patent holder may make use of national procedures for appealing against a decision and for disputes concerning compliance with licence conditions.

A licence may be terminated if the holder fails to comply with the conditions. Following termination, the holder must arrange within a reasonable period of time for the products in his possession, custody or control to be dispatched at his expense to the countries that need them.

Where quantities of the pharmaceutical products have become insufficient to meet its needs, the importing country must notify the competent authority. The latter may modify the conditions of the licence at the holder's request.

EVALUATION OF MEDICINAL PRODUCTS

In order to be sure that the exported medicinal products are safe and effective, applicants for a compulsory licence for a medicinal product may make use of the EU procedure for a scientific opinion, or of other similar procedures under national legislation.

In addition, if the product in question is a generic version of a standard medicinal product which is or has been authorised in the EU, the protection periods laid down in Regulation (EC) No 726/2004 and Directive 2001/83/EC do not apply.

Background

Most national legal systems do not currently authorise compulsory licences for export because, until recently, the World Trade Organisation TRIPS Agreement provided for compulsory licences "predominantly for the supply of the domestic market" only.

As a result of the Doha Declaration on trade and health adopted in November 2001, a decision was taken to tackle the difficulties caused by this restriction for developing countries that lack manufacturing capacity.

After lengthy negotiations, the members of the WTO agreed on 30 August 2003 on the principle of a waiver allowing these countries access to those generic medicinal products of which they were in urgent need.

This Regulation underlines the EU's status as a pioneer in guaranteeing poor countries access to reasonably-priced medicinal products.

REFERENCES

ActEntry into force - Date of expiryDeadline for transposition in the Member StatesOfficial Journal
Regulation (EC) No 816/2006 [adoption: codecision COD/2004/0258]

29.6.2006

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OJ L 157 of 9.6.2006

 
Last updated: 11.07.2007
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