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Compulsory Licensing in Indonesia

08

SEP

2022

Introduction

Hepatitis C is one of viral diseases that requires special medication. As a viral disease, it means that it requires essential medicine for the treatment. In intellectual property, this becomes one of the issues because of the pricing of essential medicine. The inventor(s) finding this drug are entitled to an exclusive right to their invention, i.e., patent. In order to guarantee access to the medicine, it requires the regulations that regulate on how to make the patented medicine become accessible especially for Indonesia as a developing country. The TRIPs Agreement and Indonesian Law regulate this matter of compulsory licensing. Compulsory licensing is the way to make the patented medicine accessible for patients. However, even though Indonesia has implemented it, there remains problems for poor patients, and the regulations concerning compulsory licensing are still lacking in Indonesia. On the other hand, the determination of royalty for the inventor(s) must be proportional.

The access to medicines strongly relies on pricing and financing mechanisms that can be differently applied to each country. In developing countries, in the absence of broad health coverage systems, a large part of expenditure comes from patients’ own pocket, provided, of course, that their level of income allows them to afford it. This does not happen, however, in many cases where medicine prices are inaccessible to various segments of the population. As medicines are financed by a third-party payer, high prices are the biggest source of pressure on the budget.

A compulsory license can be issued by a government to allow a local company to manufacture the patented product or to import it under certain conditions. Article 31(f) of the TRIPS Agreement stated that “any such use shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use.” However, a mechanism put in place in 2003 allows WTO members to waive this condition to grant special compulsory licenses for the manufacture and export of generic medicines to countries that do not have local manufacturing capacities in order to supply the needed medicines to their patients.

Historically, Indonesia’s pharmaceutical drug utilization has been the lowest in the region compared to neighbouring markets; however, with its trend of significant and sustained population growth, the country is seeing increasing demand for access to safe, effective medications and healthcare services. In particular, Indonesia’s changing epidemiology of chronic illnesses such as diabetes, obesity, cardiovascular diseases, and other similar conditions has revealed a rise in related incidence as well as unprecedented healthcare needs. The existence of compulsory licensing on hepatitis C medicine is a tool for accessibility. Pricing issues were the most important problem for compulsory licensing in Indonesia. Despite the fact that Indonesia has applied compulsory license for generic version of hepatitis C medicine, the access remains limited because pharmaceutical companies set prices that are not affordable.

Lack of Regulations

One of the legal implications of compulsory licensing is the accessibility and affordability of the essential medicine which are deserved by patients in developing countries, such as Antiviral and Antiretroviral, since the developing countries can use the justification based on the reason of protecting public health and also the developing countries have a freedom to issue the law to determine what emergency situation to justify the implementation of compulsory license. Thus, the compulsory license enables state to protect the right to health.

The procedure to grant a compulsory license is, however, governed by the respective national (patent) law, which has to define the specific grounds for which a compulsory license can be granted as well as the procedure to be followed. Hence, the Indonesian Government has already amended the Patent Act by following the TRIPs Agreement. The reason for exercising compulsory license in Indonesia is based on Article 109 of the Indonesian Patent Act. With the existence of Patent Law specifically concerning compulsory licensing, it is necessary to have further provisions in the form of Government Regulation. The issue of lacking in regulation for the payment of royalty to the inventor(s) under compulsory licensing is also a problem. Because there is only a regulation concerning royalty on patent exploitation by government use. The royalty regulation concerning compulsory licensing is still missing. The question is whether the rate could be classified as an adequate remuneration for the inventor(s) or not. A more important reflection is what adequate remuneration should amount to. Due to the obvious reason that most developing countries lack available funds, which makes them unable to pay even modest royalties without financial assistance and so leaving the flexibility unreachable. Hence, the risk in this situation is that compulsory licensing could undermine incentives for R&D investments and slow down the development of new drugs. Thus, the role of the government in making regulation regarding royalty payment of compulsory license, should take into account on how to provide proportional royalties to inventor(s), so that no party feels disadvantaged.

Conclusion

The implementation of compulsory license in Indonesia has been running for a long time. Yet, the regulation of compulsory license is still lacking. Indonesia in implementing compulsory licensing is still bound to use the government regulation No. 27 of 2004 on Procedures for Patent Exploitation by Government Use where the substance patent exploitation by government use and compulsory license are different. Thus, the government should enact new government regulations focusing specifically on the compulsory license, so that the parties get legal certainty.

The problem of determination of royalty is also important for making regulation that give proportional royalties to the parties, so that no party feels disadvantaged. Thus, the government role is very important in determining royalties for compulsory license scheme.

Author: Tanya Saraswat- a student of Narsee Monjee Institute of Management Studies (NMIMS), in case of any queries please contact/write back to us via email chhavi@khuranaandkhurana.com or at Khurana & Khurana, Advocates and IP Attorney.

About the Firm

Khurana and Khurana, Advocates and IP Attorneys
Address E-13, UPSIDC, Site-IV, Behind-Grand Venice, Kasna Road, Greater Noida - 201310, UP, National Capital Region, India.
Tel 91-120-4296878, 91-120-4909201, 91-120-4516201
Fax 91-120-4516201
Email info@khuranaandkhurana.com
Link www.khuranaandkhurana.com

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