When a life-saving drug costs more than a person’s annual income, who gets to decide if it’s sold at all? That’s where compulsory licensing comes in - a legal tool that lets governments step in and let others produce patented medicines without the drug company’s permission. It’s not about stealing intellectual property. It’s about making sure people don’t die because a patent is being held too tightly.
What Compulsory Licensing Actually Means
Compulsory licensing doesn’t cancel patents. It just says: if a patent holder isn’t making the invention available at a fair price or in sufficient quantity, the government can authorize someone else to make it. The patent owner still gets paid - but not by choice. They get what’s called "adequate remuneration," usually based on what a reasonable royalty would be in a voluntary deal.
This isn’t some radical idea invented during the pandemic. It’s been part of international law since 1883. The modern rules were locked in by the 1994 TRIPS Agreement, which lets countries use this tool - but with conditions. The biggest one? The license has to be mostly for the country’s own needs. You can’t just make a thousand doses and ship them to another continent unless you’re following a special waiver.
When Is It Used? Real-World Examples
Most compulsory licenses are for medicines. Over 95% of the 70 licenses reported to the WTO between 2000 and 2020 were for drugs. Here’s how it played out in real places:
- India issued 22 compulsory licenses between 2005 and 2021. The most famous one was for Nexavar, a liver and kidney cancer drug made by Bayer. The price dropped from $5,500 per patient per year to under $175. Natco Pharma started making a generic version after Bayer refused to license it at a reasonable price.
- Thailand issued licenses for HIV and heart drugs in 2006-2008. Lopinavir/ritonavir went from $1,200 a year to $230. Efavirenz fell from $550 to $200. The government didn’t ask permission. It just said: public health comes first.
- Brazil forced Merck to lower the price of efavirenz for HIV treatment. The cost per tablet dropped from $1.55 to $0.48. The result? More people got treatment. More lives saved.
In each case, the drug was still patented. The company still owned the rights. But the government said: if you won’t make this accessible, someone else will - and you’ll still get paid.
How Different Countries Handle It
Not every country uses this tool the same way. The U.S. has the legal power but rarely uses it. There are three paths:
- Title 28, U.S.C. § 1498: Lets the federal government use any patent without permission - as long as it pays. This has been used 10 times since 1945, mostly for military or government tech. Never for drugs.
- Bayh-Dole Act "march-in" rights: If a drug was developed with federal funding (like NIH money), the government can force a license if the company isn’t making it available. The NIH has received 12 petitions since 1980. It denied every single one.
- Clean Air Act: Allows compulsory licensing if a patented technology is needed to meet environmental rules. Very rare.
Compare that to Germany, which has the law but has never issued a license. Or Spain, which in 2020 passed emergency rules letting it bypass negotiations entirely during the pandemic. Canada used it once - in 2012 - to send HIV drugs to Rwanda under a special WTO waiver.
India and South Africa have more straightforward processes. You file a request, show you tried to negotiate, prove public need, and wait 18-24 months. If approved, you can start making the drug.
The Debate: Innovation vs. Access
Drug companies argue that compulsory licensing kills innovation. A 2018 study in the Journal of Health Economics found that countries with active licensing programs saw 15-20% less pharmaceutical R&D investment. The IFPMA claims each license announcement causes an 8.2% drop in stock prices for affected companies.
But here’s the flip side: the threat of compulsory licensing often forces companies to lower prices voluntarily. Dr. Brook Baker from Northeastern University found that since 2000, 90% of HIV drugs in low-income countries got cheaper - not because of licenses, but because companies feared they’d get one.
And the numbers don’t lie. In places where compulsory licenses were issued, drug prices dropped by 65-90%. UNAIDS reports that first-line HIV medications fell 92% in price between 2000 and 2020. That’s not just savings - that’s millions of people who got treatment because the price was no longer a barrier.
What’s Changing Now?
The 2022 WTO agreement on COVID-19 vaccine patents was a game-changer. For the first time, countries could produce vaccines without patent holder consent - and export them. But so far, only 12 facilities in 8 countries have been authorized. The system is still slow, and most countries don’t have the factories or regulatory capacity to use it.
The EU is pushing new rules: if a company doesn’t respond to a licensing request within 30 days, the government can skip negotiations and issue a license automatically. That’s huge. It cuts through red tape.
And the WHO is drafting a new Pandemic Treaty. Draft Article 12 says: during a declared global health emergency, essential health products should be automatically licensed. No waiting. No negotiation. Just access.
Why It Matters in South Africa
Here in Durban, we’ve seen how drug prices can kill. HIV, TB, and cancer treatments are still out of reach for too many people. South Africa has had compulsory licensing laws since 1997, but we’ve never used them. Why? Because the legal process is complicated. We lack the technical capacity. We fear trade pressure.
But the world is changing. The cost of inaction is higher than the cost of action. When a child dies because a medicine is too expensive, no patent justifies it.
What’s Next?
Compulsory licensing won’t become common. It’s not a tool for everyday use. But in emergencies - pandemics, cancer drug shortages, climate-related health crises - it’s the last line of defense. The question isn’t whether we should have it. It’s whether we’re ready to use it when it matters most.
Right now, 34 countries have the law. Only 12 have ever used it. That gap isn’t about legality. It’s about courage.
Can any country issue a compulsory license?
Yes - under international law, any WTO member can. The TRIPS Agreement allows it, as long as certain conditions are met: the government must try to negotiate first, pay fair compensation, and limit production mostly to its own market. But in emergencies like pandemics or national security threats, the negotiation step can be skipped.
Does compulsory licensing stop innovation?
It’s a risk, but not a guarantee. Some studies show R&D investment drops in countries that use it often. But the bigger picture shows that the threat of licensing - not its use - is what drives companies to lower prices voluntarily. In fact, most new drugs still come from high-income countries with strong patent systems. The real problem isn’t licensing; it’s pricing that ignores human need.
How is "adequate remuneration" calculated?
There’s no universal formula. The U.S. uses the "Georgia-Pacific factors," which look at 15 things like royalty rates for similar licenses, the value of the invention, and market demand. India uses a simple formula: 6% of net sales. Brazil and Thailand negotiated prices directly with manufacturers. The goal isn’t to punish - it’s to ensure fair payment without blocking access.
Why hasn’t the U.S. used compulsory licensing for drugs?
Political pressure, industry lobbying, and legal risk. The U.S. government has the power under Bayh-Dole and Section 1498, but it’s never granted a license for a drug. Even when public health groups petitioned for cheaper HIV or cancer drugs, agencies said the companies were "making sufficient efforts." Critics say that’s a euphemism for "we’re scared of the drug companies."
Can a country export medicines made under compulsory license?
Only under special rules. The WTO’s 2003 waiver and 2005 TRIPS amendment allow countries with no manufacturing capacity to import medicines made under compulsory license elsewhere. Canada used this once - to send HIV drugs to Rwanda in 2012. But the system is slow, bureaucratic, and rarely used. Most countries still can’t access this option easily.
Is compulsory licensing legal under international law?
Absolutely. The TRIPS Agreement, signed by nearly every country, explicitly allows it. The Doha Declaration in 2001 confirmed that public health overrides patent rights in emergencies. No court has ever ruled a compulsory license illegal under international law - only whether it was applied correctly.