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Drug Patent Compulsory Licensing

Penn State researcher argues that ambiguous international rules outlining when and how governments may "break" pharmaceutical patents may end up significantly reducing incentives for innovation while at the same time failing to increase access to medicines.

In a new paper "Confronting Myths and Myopia on the Road from Doha," Daniel Cahoy, associate professor of business law at Penn State's Smeal College of Business, argues that the problem is a lack of clarity in compensation for patent owners.

He suggests that a three-tiered approach to compulsory license remuneration based on a country's individual ability to pay would do much to resolve the predicament.

Current international law "has few limitations on which countries can 'break' patents simply to control costs, what circumstances create a necessary condition, or even what level of remuneration is required," Cahoy writes. As a result, relatively wealthy nations may receive unintended windfalls while least developed countries may continue to struggle for access.

Under complex World Trade Organization rules, governments are permitted to issue patent compulsory licenses, which allow countries to manufacture cheaper versions of patented pharmaceuticals for non-commercial use or in cases of health care emergencies.

Just recently, Brazil and Thailand have invoked these rules simply to lower the cost of expensive AIDS and heart medications-a strategy that Cahoy argues should be more controlled. In his paper, Cahoy identifies three myths that have typically obscured workable remuneration rules:

Myth No. 1: Equitable compulsory licenses must offer savings from the market. Cahoy argues that it is possible for patent holders to be compensated at market prices even when compulsory licenses are invoked. At the very least, he writes, market compensation should be integrated into the debate.

Myth No. 2: Pharmaceutical companies shoul
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