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Drug Patent Compulsory Licensing

d be indifferent to compulsory licensing so long as "reasonable" remuneration is available.

Compulsory licensing supporters say that pharmaceutical companies should be satisfied with payments that allow them to break even or turn a small profit, but Cahoy argues that the equity in such a payment scheme is far more elusive than many suggest.

Myth No. 3: Antitrust compulsory licenses provide a reliable royalty benchmark. Cahoy argues that the low royalties attached to remedial compulsory licenses for antitrust violations should not be used to set remuneration levels in non-punitive cases in which the patentee has done nothing wrong.

Taking these myths into account, Cahoy's proposed licensing regime keeps innovation incentives intact, but also ensures that developing countries have access to pharmaceuticals.

During public health crises, he argues for a three-tiered arrangement, in which remuneration is based on the economic status of the country issuing the compulsory license. Industrialized nations will be required to pay full market price, even during a pandemic.

Developing countries would be allowed a limited free ride, with royalties based on the individual country's ability pay. Finally, the world's least developed countries would be granted the ability to issue royalty-free compulsory licenses during health emergencies.

In cases outside of a public health crisis or antitrust violations, Cahoy's approach establishes full market compensation as the default policy for every country. He also identifies the adoption of a national exhaustion rule, which would limit importation into non-licensing countries, and manufacturing limits as important elements to any new compensation system.

But, regardless of the approach that is ultimately adopted, Cahoy argues that "a revision of essential international law is required to both better enable access and shore up innovation ince
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