Parallel Import, Compulsory Licensing And Differential Pricing Of Patented Drugs

The difference in price structure between patented drugs and generic drugs is rationally resulted from the aim of encouraging the R&D of new drugs, which cost much higher than marginal cost. But in public health perspective, the high price of patented drugs has severely handicapped the poor population in less developed region from acquiring the needed drugs. The meaning of discussing the issue of parallel import, compulsory licensing and differential pricing is how to find a institutional way to resolve the problem of drugs'accessibility, under the premise that no violation to the patent system. The Introduction briefly deals with the inherent conflict between accessing to drugs and the patent system. It has included the reason of higher price and lower accessibility of drugs in developing and undeveloped countries. Then it turns to how to resolve this conflict which we will discuss later. Chapter One focuses on the parallel import of patented drugs. Section One has found out the origin of parallel import. The existence of parallel import is due to the price discrimination between different market: different price policy of multinational pharmaceutical firm in different market, different levels of tariff, fluctuation of exchange rate, and different price-control measures on drugs in different countries, all of which can result in this kind of price discrimination. Except for the four reasons mentioned, compulsory licensing (which will be explored in detail later)can also contribute to price discrimination. Section Two is the theoretical issue of parallel import. Exhaustion of intellectual property rights theory is the most fundamental. Automatic exhaustion of patent rights includes national exhaustion, international exhaustion and regional exhaustion. The essence of this simply partition in geography is actually about the national legislation, and is hard to handle the problem of drugs'accessibility in general. Optional exhaustion of patent rights is to negotiate the restriction in license agreement, which is even narrower in extent and may not be use as guidance. In this Section, the author primarily brings about the new concept of regional exhaustion, in drugs'accessibility perspective, relieving from geographic restriction, it asserts that patent right exhaust in less developed region once patented products sold or used; whereas in developed countries, patent rights may not exhausted after first sale or use, and patented products are still under protected. This is a try in patented drugs regime, and shared the same stand with differential pricing. Nevertheless, it incurs difficulty in operation. Section Three deals mainly with the advantages and disadvantages of parallel import of patented drugs. Advantages aspect embodies that parallel import can decrease the price of drugs readily, and meet the need of poor population; while the disadvantages especially lies in that it may severely affect the initiative of R&D, then it's not good for the health interest of human being as a whole. As to the countries in different stages of economic development, parallel import means differently: developed countries are against large scale of parallel import, since it means the terrific loss of profit of their own pharmaceutical firms; developing countries in the meanwhile, hope to get more cheap patented drugs through parallel import. But if parallelimport's advantages are more than disadvantages in developing countries is still questionable. Section Four illustrates the provision of parallel import under the WTO framework. The provisions of TRIPS are about the "exhaustion of rights", and left the enough space for member states to regulate the exhaustion of intellectual property rights. Doha Declaration further throw light on the issue of parallel import which is obscure in TRIPS to some extents, it confirm that as long as no violation to the principle of national treatment and most favorable treatment, member states have the authority to regulate the exhaustion of intellectual property rights of their own. Chapter Two is compulsory licensing issue of patented drugs. Section One has addressed some basic problems of compulsory licensing, which give readers a general concept. These problems involve: the procedure of grant, review the compulsory license; restriction to compulsory licensing; and the decision on the sum of remedy to patent holders. Section Two introduces compulsory licensing in TRIPS, Doha Declaration and the development from then on. In this Section, detailed interpretation is provided about Article 31 and part of Article 30 of TRIPS. It points out that TRIPS'provisions are still ambiguous and far from perfect regarding the compulsory licensing. The most significant breakthrough of Doha Declaration is that it has approved undeveloped countries who are lack of capability of drug production to import generic drugs, through amending the law for public health purpose. This is an important try to figure out the issue of drugs'accessibility. Section Three is the core of this Chapter. It stands for public healthinterests, argues that if compulsory licensing is effective for the goal of accessing to drugs in affordable price, and where is the "outlet"of this system. First of all, the grantee should be capable of producing drugs, otherwise, taking the third party as a "transfer station"to achieve the purpose will change the nature of the issue—it turns to parallel import issue; Second, compulsory licensing is seldom used in practice, which is almost due to the harsh restriction, technical and information bottleneck in implementation, and the quality of drugs under compulsory licensing and so on. To sum up, compulsory licensing can not be used as a feasible measure that resolves drugs'accessibility. Chapter Three is differential pricing of patented drugs. In brief, differential pricing means pharmaceutical firms grant low price specially with reference to the region where can not afford the patented price. While it will be a very complicated procedure in building up a integrated system of differential pricing. Section One argues that differential pricing can fulfill fairness and effectiveness when deals with the inherent conflict between patent system and accessibility to drugs. First of all, with regard to drugs'accessibility, differential pricing is aware of the significant difference between developed and undeveloped world. Thus different price level in different countries or regions can embody fairness in such a discriminating world, and can make drugs reach the sick more readily and effectively. Section Two discusses the feasibility of differential pricing. Theoretically, only parallel import, external referencing, and compulsory licensing are all well controlled in operating process of differential pricing ,can "leakage"in...