Patients First, Patents Second

Ecuador will allow domestic pharmaceutical companies to produce generic versions of some patented medications. President Rafael Correa announced the move on October 17, 2009, during his weekly television address, saying that introducing generics would make life-saving drugs more affordable for the country’s poor majority. “Medicine,” Correa told the audience, “especially when it comes to human health, cannot be considered merchandise.”

In reality, Ecuador will not revoke patents. Instead, the government will impose compulsory licenses, which allow third parties to produce a medication but guarantee royalty payments to patent owners. The policy is allowed for under international treaties, including the World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights.

Transnational pharmaceutical companies have publicly accepted the new policy, despite some reports that they were surprised by the announcement. Ecuador’s Pharmaceutical Industry for Research (IFI)—representing 14 pharmaceutical companies in the country, including Bayer, GlaxoSmithKline and Pfizer—responded that it “respects the lawful actions taken by the Government.” In a statement to Scientific American Worldview, IFI emphasized patent ownership rights, saying that “compulsory licenses … in no way revoke or eliminate patents on medicines.”

Still, critics say that Ecuadorian domestic firms lack the technical expertise and capacity to produce many complicated medications, and have called for heightened oversight and quality control from the government. But the Ecuadorian Association of Pharmaceutical Laboratories (ALFE)—one of the policy’s major beneficiaries—welcomed Correa’s move, claiming that generic production will create 12,000 jobs.

The Intellectual Property Institute of Ecuador will issue compulsory licenses once the Ministry of Health completes a list of priority drugs. The institute can only issue licenses for drugs if the ministry determines them to be public-health priorities.
Still, the IFI thinks that transnational pharmaceutical companies will have a role to play in the Ecuadorian market. As the IFI stated: “We hope to continue working with the state and government of Ecuador to find the best way to expand access to medicine.

We believe that a constructive relationship between our companies and the government is the best way to find solutions.”

Meanwhile, Correa continues to increase the government’s role in making pharmaceuticals. In December 2009, the Ecuadorian government created Enfarma, a state pharmaceutical company that plans to research, import and manufacture pharmaceuticals.

At present, Ecuador’s government and the IFI will continue to cooperate and, with more public and private producers entering the market, prices could drop. Much depends on whether the state expands its stake in the industry and if domestic producers are able to meet their goals. Companies and governments throughout Latin America will without a doubt be keeping a close eye on Ecuador to see how compulsory licensing plays out.