Compulsory Licensing and the TRIPS Flexibilities Explained

Patents grant pharmaceutical companies a period of market exclusivity, allowing them to recoup research and development costs. While this system incentivises innovation, it can also result in high prices that limit access to essential medicines. To balance intellectual property rights with public health needs, the international trade system includes a set of legal mechanisms known as TRIPS flexibilities. These flexibilities allow countries to authorise the production or importation of generic versions of patented medicines under specific, regulated circumstances.

The TRIPS Agreement and Public Health

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) is an international agreement administered by the World Trade Organization (WTO). It sets out minimum standards for intellectual property protection that all WTO member countries must enforce. Before TRIPS came into effect in 1995, many countries did not grant patents on pharmaceutical products, which allowed local manufacturers to produce affordable generic medicines freely. Once TRIPS was implemented, countries were required to provide 20-year patent protection for pharmaceuticals.

However, to ensure that intellectual property rules did not harm public health, the agreement included several built-in "flexibilities." These provisions allow governments to override patent rights when necessary to protect public health, promote access to medicines for all, or remedy anti-competitive practices. These flexibilities are entirely legal under international trade law and are intended to be adapted to each country's specific public health needs.

The Doha Declaration

By the late 1990s and early 2000s, the tension between patent protections and access to medicines reached a critical point, largely driven by the HIV/AIDS epidemic in developing countries. Patented antiretroviral medicines were prohibitively expensive for many governments. In response to pressure from developing nations, the WTO adopted the Doha Declaration on the TRIPS Agreement and Public Health in 2001.

The Doha Declaration explicitly affirmed that TRIPS should not and does not prevent member states from taking measures to protect public health. It clarified that each member state has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted. Crucially, it confirmed that public health crises, including those related to HIV/AIDS, tuberculosis, malaria, and other epidemics, can constitute national emergencies. This declaration was a landmark moment in public health, firmly establishing that public health takes precedence over commercial intellectual property rights in times of crisis.

How Compulsory Licensing Works

A compulsory licence is a legal mechanism that allows a government to authorise a third party—such as a generic pharmaceutical manufacturer—to produce a patented product without the consent of the patent holder. Under standard TRIPS rules, the country must usually attempt to negotiate a voluntary licence with the patent owner first, under reasonable commercial terms. However, in cases of national emergency, extreme urgency, or public non-commercial use, this negotiation step can be bypassed.

Even when a compulsory licence is issued, the patent holder retains ownership of the patent and must be paid adequate remuneration, which is generally determined by the issuing government. Traditionally, compulsory licences were intended to be granted predominantly for the supply of the domestic market of the issuing country, meaning a country could not routinely issue a compulsory licence purely to export generics globally.

Addressing Manufacturing Limitations and Historical Examples

One major challenge with compulsory licensing was that many developing countries lacked the pharmaceutical manufacturing capacity to produce the generic medicines they needed. Because compulsory licences were initially restricted to domestic supply, countries without manufacturing infrastructure could not effectively use this flexibility. To solve this, the WTO introduced a temporary waiver in 2003, which was later made permanent. This waiver allows countries with sufficient manufacturing capacity to issue compulsory licences to produce generic medicines specifically for export to countries that cannot manufacture them themselves.

Several countries have used compulsory licensing to lower medicine prices. In the early 2000s, Brazil and Thailand issued compulsory licences for antiretroviral drugs, which drastically reduced the cost of national HIV/AIDS treatment programmes. More recently, countries such as Malaysia and Indonesia have issued compulsory licences for direct-acting antivirals to treat hepatitis C. The first use of the export waiver system occurred in 2007, when Canada authorised a generic manufacturer to export an HIV/AIDS medicine to Rwanda.

The South African Context and Access

South Africa maintains the right to use these TRIPS flexibilities under its Patents Act, which allows for compulsory licensing under specific conditions, including national emergencies. Should a generic medicine be authorised via this route in South Africa, it would still need to undergo rigorous evaluation by the South African Health Products Regulatory Council (SAHPRA) to ensure safety, quality, and efficacy before entering the market.

Once registered, the medicine's price would be subject to South Africa's Single Exit Price regulations, ensuring that the savings from generic production are passed on to patients. For those seeking information on the registration status and pricing of medicines available in South Africa, the HealthSA tool provides a searchable database of registered products and their regulated costs.