In Addition to Outrageous Prices and Preferential Supply to the US only, Gilead’s Allowance for Compulsory Licenses in its Remdesivir License Needlessly Limits Supply

Gilead has experienced well-earned outrage since its announcement of a $3,120 price tag to insurers for remdesivir with a slightly lower prices of $2340 for U.S. government buyers and buyers in other developed countries. For a medicine with no proven benefit on survivability, that has received huge public subsidies, and that can be produced for an estimated cost of $5.58 (for a five-day course of treatment) and is already being sold for as little as $400 by generics, Gilead has a lot of nerve. In addition to nerve, Gilead has shown callow and callous favoritism, having supplied 60% of its initial remdesivir donations to the U.S. and now committing almost all the next three months’ production, 500,000 doses, to the U.S., leaving every other country in the world out in the cold.

As if these outrageous prices and supply embargoes were not enough, Gilead’s previously voluntary license with nine generic companies denies competitive access in 73 countries that house 48% of the global population.  A new feature of Gilead’s secret licenses has recently been revealed, one that allows for generic supply pursuant to a compulsory license, but this terms provides largely illusory benefit.

Ellen ‘t Hoen has confirmed that the Gilead voluntary licenses for remdesivir allow supply to countries outside the listed 127 countries if and when required and valid compulsory licenses are issued.

It would be important to confirm what the remdesivir contractual provision is, but if it is based on the comparable Section 10.3(d) in Gilead’s sofosbuvir license, it will ordinarily require a compulsory license to be issued in both the country of production/export and the country of import/use (note: unlike the remdesivir license, the original Gilead sofosbuvir license was only granted to India generic producers).

… it shall not be deemed to be a breach of the Agreement for Licensee to supply an API or Product outside the Territory into a country where: (i) the government of such country has issued a Compulsory License relating to such API or Product allowing for the importation of such API or Product into such country, provided that Licensee’s supply of Product or API into such country is solely within the scope and geographic range of such Compulsory License and only for the duration that such Compulsory License is in effect; and/or (ii) the Government of India has issued a Compulsory License allowing for the export of an API or Product from India and into such country, provided that: (Y)(1) there are no Product Patents owned or controlled by Gilead (or its Affiliates) issued in such country or (2) a Compulsory License has also been issued by the relevant authorities of such country; and (Z) Licensee’s supply of Product or API into such country is solely within the scope and geographic range of the Compulsory License issued by the Government of India, and only for the duration that such Compulsory License is in effect.

This requirement of double compulsory licenses would certainly be true for Gilead’s existing licensees based in India, where two remdesivir patents have been granted and Egypt where a remdesivir patent is pending. (Although I have not researched the issue, it is possible that Egypt does not have a provision allowing for compulsory licenses on a pending patent, and thus Eva Pharma might not be eligible to become a compulsory licensee.) For Ferozsons Laboratories , the Gilead licensee from Pakistan, where there seems to be no patent application on remdesivir filed, a compulsory license would only have to be granted in the country of use/importation.

I have not verified the patent status of remdesivir in all 73 excluded countries, but since the vast majority are upper-income and upper-middle income countries, we can assume that there are pending or granted patents in most of them. Some excluded countries with manufacturing capacity could issue licenses to domestic companies that could arguably meet all needed local demand. If instead, they wanted to license an existing Gilead licensee they could certainly do so, but with certain limitations and complications.

For example, if they were a country with sufficient local manufacturing capacity, they would be eligible for an export license under the Article 31bis system. Similarly, it they had ill-advisedly opted out of the Article 31bis system, which most upper-income countries did, they too would be barred from using Article 31bis and would instead be dependent on ordinarily compulsory licenses.  Unfortunately, under “ordinary compulsory licenses,” the generic licensee would only be able to supply non-predominant quantities outside the country of production. Thus, even though India and Egypt are big population countries with big COVID-19 infections, generic companies would clearly not be able to export to all the 70 countries outside the Gilead license, but only  less 50% of what they actually sold in either India or Egypt. Because of these limitations on external supply outside the licensed territories and because of additional requirements to seek product registration in countries of importation, prospective compulsory licensees might not actually be eager to supply outside markets unless they were sufficient large and lucrative.

Two additional aspect of the Gilead license are relevant with respect to the use of compulsory licenses.  First, the existing remdesivir license allows the licensee to set its price. Thus, a Gilead licensee who becomes a compulsory licensee would clearly remain free to set a price and might well charge higher prices in upper-income and upper-middle income countries than it does within the licensed territory, especially in the absence of meaningful competition. A compulsory licensee would also have to pay royalties to Gilead, even though Gilead’s current voluntary license does not otherwise require royalty payments until WHO declares an end to the pandemic or until another medicine is approved to prevent or treat COVID-19.

None of this analysis should be interpreted as suggesting that countries should not adopt and use compulsory licensing measures to address access to COVID-19 medicines to overcome high prices and/or to expand available sources of supply. Indeed, I think excluded countries should consider banding together to gain access to generic product that are 1/8 the price of what Gilead intends to charge.

Instead, the analysis shows how Gilead’s collusive arrangement with the U.S. with respect to the first 500,000 doses in combination with Gilead’s restrictive provisions will act as a nearly insurmountable barrier to access for countries excluded from the remdesivir license.