Ecuador Grants Compulsory License for Merck's HIV Drug Raltegravir to Local Pharma SoulPharma

On February 25, 2021, the Ecuadorian National Institute of Intellectual Property announced the issuance of a compulsory license against the patent for the HIV drug raltegravir (Raltegravir, Isentress®, Isentress®). This decision authorized the Ecuadorian pharmaceutical company SoulPharma to import the active ingredient of raltegravir from Indian manufacturers based on public interest, with the generic drugs restricted to sales within the domestic market of Ecuador. The compulsory license was valid until October 21, 2022, the exact date on which the patent was set to expire.

Raltegravir is an HIV integrase inhibitor, a novel anti-HIV drug produced by Merck Sharp & Dohme (MSD), primarily indicated for the treatment of HIV-1 infection. It was first launched in the United States in October 2007.

On November 5, 2020, SoulPharma filed a request with the Ecuadorian National Intellectual Property Office for the grant of a compulsory license for the patent. The patent holder, MSD Italy, opposed SoulPharma’s request, arguing primarily that SoulPharma had not obtained registration for the drug from the Ecuadorian health regulatory authorities. However, SoulPharma contended that the unregistered status of the drug was not a factor to be considered in the determination of a compulsory license. The Intellectual Property Office supported SoulPharma’s position, holding that whether the company had registered the drug domestically was irrelevant to the decision on granting a compulsory license. It deemed it unreasonable for the health regulatory authorities to require that an applicant for drug registration hold a patent right or a license (whether voluntary or compulsory) for a specific technology of the drug in order to obtain registration. Likewise, it was considered unreasonable for the intellectual property authorities to be required to wait until after drug registration before declaring the implementation of a compulsory license.

Similar to voluntary licensing of patented technologies, compulsory licenses typically also require the licensee to pay royalties. In determining reasonable royalty rates, the Ecuadorian National Intellectual Property Office referenced the Tiered Royalty Method (TRM). In 2005, the United Nations Development Programme (UNDP) and the World Health Organization (WHO) jointly issued the "Guidelines for Determining Remuneration for Non-Voluntary Licenses of Patents on Medical Technologies," which proposed using the tiered royalty approach to calculate and determine royalty rates for compulsory licenses on pharmaceutical patents. Under the Tiered Royalty Method, the royalty rate for a compulsory license is determined based on the price of the patented medicine in high-income countries, rather than on the price of generic drugs (whereas countries such as Japan and Canada use generic drug prices as the basis for calculating royalties). Generally, the base royalty is a certain percentage (e.g., 2–4%) of the originator drug’s price in high-income countries, adjusted according to per capita national income; for countries facing a particularly high disease burden, adjustments may be made based on patients’ per capita income.

Pursuant to this method, the Ecuadorian National Intellectual Property Office considered two factors in determining the royalty rate for the compulsory license. The first factor was the price of raltegravir in Italy, with the base royalty set at 5% of the per-tablet price. The second factor was Ecuador’s per capita national income, derived from the latest Gross National Product (GNP) per capita indicators published by the World Bank. Based on these two factors, the final royalty rate for the compulsory license of the patent in question was determined to be USD 0.17 per tablet. Accordingly, SoulPharma is required to pay MSD Italy, the patent holder, a royalty of USD 0.17 per tablet of raltegravir annually. As a result, once SoulPharma’s generic version of raltegravir, produced under this compulsory license, obtains marketing authorization, it will be eligible to participate in pharmaceutical procurement in the domestic market of Ecuador.

In addition to its use in the treatment of HIV in adults, raltegravir is also a second-line antiretroviral therapy recommended by the World Health Organization (WHO) for children aged 4 weeks to 3 years. In 2015, Merck Sharp & Dohme (MSD) entered into a patent licensing agreement with the Medicines Patent Pool (MPP) regarding pediatric formulations of raltegravir. This agreement allows generic drug manufacturers to apply to the MPP for patent licenses for pediatric raltegravir and to supply generic pediatric formulations to the 92 countries specified in the agreement (covering approximately 98% of the global pediatric patient population); Ecuador is not included in this list. However, global generic pharmaceutical companies have shown limited interest in obtaining technology licenses for the pediatric formulation of this drug. To date, only the Indian pharmaceutical company Lupin has submitted an application to the Medicines Patent Pool.

The patent-protected technology involved in the raltegravir case is also under patent protection in China and is set to expire on October 21, 2022. Imported raltegravir products are already available in the domestic market, but no generic drug applications have been submitted for registration yet. China is also not among the 92 countries covered by the patent licensing agreement for pediatric raltegravir between the Medicines Patent Pool and MSD.