The Medicines Patent Pool (MPP) has announced a new licensing agreement for dolutegravir (DTG) with ViiV for four countries (Azerbaijan, Belarus, Kazakhstan, and Malaysia) excluded from earlier licensing agreements. Reports about this new announcement, which resulted from negotiations that directly involved the affected countries’ governments (unlike many past MPP licenses), have missed significant shortcomings in the deal.
First, only three generic companies will be selected as sublicensees via a call for expressions of interest from the MPP. Although all successful licensees will be required to register their generic DTG in all four countries, which will create a modicum of competition, the MPP also admits that generic licensees will in all likelihood price their generic versions substantially higher than the $75 per year secured through negotiations by the Clinton Health Access Initiative and others in 2014. In fact, the MPP anticipates an eventual price in the range of $400-$500 per year, a sign of both inexcusably high tiered pricing by generic licensees and an excessive royalty charged by ViiV.
The precise royalty is undisclosed, but is estimated to be orders of magnitude higher than royalties previously charged on MPP licenses, which have ranged from 5-10%. The royalty will decrease as volumes increase—although no one knows by how much, because that information is being hidden.
In an outrageous move, ViiV (GSK controlled) is claiming that the royalty rate information is “commercially sensitive” and thus must be kept confidential. The MPP for the first time is acceding to industry demands to redact the royalty terms from its published licenses. The MPP has historically been committed to full transparency of its licenses. Now upsetting that commendable principle and bowing to ViiV’s unprincipled demand and countries’ regrettable acquiescence to secrecy, a key term in an MPP license will be hidden from public view. This is a major setback to the principles upon which the MPP was founded and it is also a dangerous precedent in the COVID-19 era, where companies are hiding behind claims of transparency to maximize profits and power. They are insisting that everything—their R&D contracts, clinical trial protocols, research data, pricing decisions, advance purchase agreements, and option contracts are entitled to full confidentiality as “trade secrets.”
This precedent will also come back to haunt the MPP in future negotiations with Pharma companies that may now see a window of opportunity to override public demands for transparency in voluntary licenses and other agreements.
Although the MPP and countries share a portion of blame for acceding to ViiV’s demands for secrecy, the major blame falls squarely on the shoulders of ViiV and its parent company, Pfizer, that demand that a key term in their licensing agreement should be hidden from public view and criticism. There is no principled basis in the world why ViiV’s MPP royalty rates in previous agreements are subject to transparency, but royalties in these four countries are not.
It is a positive development that the new MPP/ViiV license includes four upper-middle income countries that have been unnecessarily excluded for six years, that countries were included in the negotiation process, and that prices are significantly reduced. However, prices are still excessive compared to the prices in low- and lower-middle income countries, both because of generic licensees’ freedom to set prices and high royalty rates charged by ViiV. The absolute worst part of the agreement is the secrecy of the royalty rate agreement, which now threatens to become a regular feature of all licensing globally, including at the MPP. The MPP might try to argue that they would only accept such a term for expansion into “commercial markets” or where countries agree, but Pharma is completely behind this downward ratchet to license transparency.
Finally, many upper middle income countries still excluded from VIiV’s voluntary licenses. People living with HIV in these countries are at greater risk of substandard treatment because of ViiV’s unjust monopoly. We call on those countries to urgently use their rights to override ViiV’s intellectual property rights in favor of cost-cutting generic competition.