Both sides appeal in ongoing civil society lawsuit for compulsory license

A Colombian administrative judge has ruled that Abbott Laboratories and the Ministry of Health threatened and violated collective rights to public health by maintaining the price of an HIV medicine above the reference price, flouting a government order. The court’s decision is a groundbreaking condemnation of Big Pharma pricing abuses and a precedent for health rights in Colombia.

The decision arises from a lawsuit filed by health groups seeking a compulsory license on lopinavir + ritonavir (LPV/r), marketed by Abbott as Kaletra and Aluvia. A compulsory license would introduce cost-cutting generic competition with Abbott’s patent-based monopoly.

The decision, technical documents and brief histories of Colombia’s ongoing access campaign are now available here, and a printable PDF of this backgrounder is available here.

The Decision and Case

The February 29, 2012 decision by Administrative Court 37 of Bogotá finds that Abbott violated a 2009 government pricing order and directs the Ministry of Health to initiate procedures for sanctions against Abbott (potentially including financial penalties). The court states that Abbott abused its dominant market position by pricing its essential medicine 350% higher in Colombia than in neighboring countries (about $3500 compared to about $1000). This harmed the sustainability of Colombia’s health system and violated “public administrative morality.” According to the court, “mercantile utility and patent ownership” does not justify “disobeying the national policy of price control for HIV/AIDS medicines.” The decision calls for maintaining Kaletra on a parallel importation list to ensure availability of the international reference price.

The lawsuit, filed by Colombian health organizations in September 2009, is an “Acción Popular,” a mechanism under Article 88 of the Colombian Political Constitution to protect collective rights, public services and administrative morality. It is analogous in some regards to a private attorney general action in the United States.

Colombia’s Access Campaign

In April 2008, with prices for Abbott’s monopolized HIV treatment Kaletra in the several thousands of dollars per person per year, Fundación IFARMA, the Colombian Network of People Living with HIV (RECOLVIH), Misión Salud and the Group of NGOs working on HIV/AIDS (la Mesa) requested a license from Abbott to facilitate generic competition. When Abbott did not respond, the groups petitioned the Colombian government and launched a public access to medicines campaign. In April 2009, the government issued an order establishing a price ceiling for Kaletra, which Abbott ignored. In September 2009, the health groups filed their lawsuit, seeking a compulsory license to inaugurate competition. In January 2010, Colombia announced a financial emergency in its health system and strengthened the powers of the medicines pricing commission. Abbott finally complied with the price order. The price reductions, initially around 54-68%, were projected to save Colombia’s HIV programs approximately US$12 million in the first year alone.

Despite these savings, thus far Abbott’s monopoly over LPV/r remains intact in Colombia. A compulsory license and generic competition could reduce prices much further.

Court Declines to Issue Compulsory License

In its recent decision on the Acción Popular, Administrative Court 37 declined to issue a compulsory license, stating that Colombian law does not permit “expropriation without indemnification.” This reflects a misunderstanding of compulsory licensing.

Government rights to authorize use of a patented invention are embedded and expressly reserved in the grant of a patent. Exercising these rights by issuing a license does not modify or expropriate the patent right. Further, a license does not prevent the patent holder from continuing to sell its product, prohibit non-licensed uses of the invention or prohibit non-licensed parties from using the invention.

Additionally, if indemnification in the court’s decision means compensation, compulsory licensees pay compensation via royalties to patent holders. If indemnification means making the patent holder whole for all market loss, then the court’s reasoning would vitiate one of the primary purposes of compulsory licensing – cost savings. Under an indemnification rule, savings from licenses would be wiped out, passing instead back to the patent holder. This would depart radically from international practice and render aspects of Colombian law and Andean Community licensing rules all but meaningless.[1]

The court mistakenly asserts that compulsory licenses are reserved for “truly extraordinary cases.” This too overlooks international practice, including but not limited to government use and court-issued licenses to remedy anti-competitive practices in the United States. The World Trade Organization clearly states that countries are free to grant compulsory licenses on “grounds of their choosing.” The Colombian court itself recognizes that licenses may be granted in Andean Community countries for reasons of “public interest.”

Notably, Andean Community rules also provide for compulsory licensing as a means to remedy anti-competitive practices.  The court states that Abbott abused its dominant market position, which is typically considered an anti-competitive practice.

Both Sides Appeal; Access Campaign Expands

Parties on both sides of the case – the health groups and Abbott – have appealed Administrative Court 37’s judgment to the Supreme Administrative Court.

Since 2008, Colombia’s access campaign has led to major price reductions, intensified and high-level public scrutiny of medicine price abuses, a government regulation on compulsory licensing in the public interest, and has helped reinstate parallel importation — a means to reduce medicine prices by shopping on the world market. Colombian groups have consistently expanded their campaign across the country and found new mechanisms to challenge pharmaceutical monopoly power.

More on the case, including the court’s decision (in Spanish), source documents, and a history of the campaign is available at: http://www.citizen.org/actions-colombia.

Read about the global Kaletra campaign at: http://citizen.org/Kaletra-campaign.

Public Citizen’s Global Access to Medicines Program (formerly Essential Action) has worked with and provided technical assistance to the Colombian health organizations since 2008.

 

[Note 1: Andean Community Decision 486 (Common Intellectual Property Regime) is law in member countries. Article 65 provides for licensing on public interest grounds.  A separate article (Art. 61) provides for licenses to remedy patent holder failures to exploit or work a patent. Public interest grounds must therefore mean something other or more than working failure. Common international practice and many sources of legal analysis worldwide suggest cost control is a, if not the, leading purpose for such rules.]

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Click here for the full backgrounder from Public Citizen.