Government expropriation of patents – more drugs to combat HIV/AIDS and Hep B in Indonesia

On 3 September 2012, the Indonesian Government issued a “government use” decree, a type of compulsory licence, in relation to seven patent-protected HIV/AIDS and Hepatitis B medicines in Indonesia. The decree gives the Minister of Health authority to appoint drug companies to exploit patents on behalf of the Government and the authorisation will be effective until the end of the term of each patent. This means that generic versions of the brand-name drugs can enter the market, creating widespread competition and resulting in considerable cost savings for consumers. In return, Indonesia will pay the patent holders a 0.5% royalty on sales.

The drugs affected are listed in the table below, taken from IHS Country and Industry Forecasting: IHS Global Insight:

The decree states that this measure is “in line with the urgent need” in Indonesia to control HIV/AIDS and hepatitis B and “is necessary to … provide access to Antiviral and Antiretroviral medicines that are still protected by patent”.

It is estimated that there were 310,000 people living with HIV in Indonesia in 2009, with the prevalence rate for 15-49 year olds being 0.2 per cent.  Although this is not a particularly high incidence of HIV, Indonesia has the world’s fourth largest population and the virus is spreading.  Further, according to UNICEF, only 23,000 people out of the 70,000 who need treatment receive antiretroviral therapy.

The decree issued by Indonesia is said to be the world’s largest government expropriation of pharmaceutical patents. In Australia, government expropriation is provided for in section 163 of the Patents Act 1990 (Cth), where an invention may be exploited by the Crown if it is “for the services of the Commonwealth or the State”. This appears broad enough to include use for health crises, and under the World Trade Organisation rules, member states can override patents where it is necessary to do so to protect the public health.

There is increasing demand from developing countries for cheap and accessible drugs. The issuing of the decree in Indonesia follows on from a decision in India authorising a drug manufacturer to make and sell a generic copy of patented Bayer cancer drug Nexavar (sorafenib); China’s amendments to its intellectual property laws to allow the local production of patented medicines through a compulsory licensing scheme; and back home in Australia, IP Australia’s release of an “Exposure Draft” of the Intellectual Property Laws Amendment Bill 2012 (see our post here).  If enacted, the Bill would introduce a compulsory licensing system in Australia for patented pharmaceuticals produced for export, with the aim of helping developing nations deal with health epidemics, such as HIV/AIDS and malaria.

It will be interesting to see whether the move by Indonesia will encourage other developing countries to follow suit.