Pharma Firms Pressed to Relax Patents for Developing Countries
Investors emphasise the need for companies to increase voluntary licensing of medicines, after new benchmark report reveals slowdown.
The Access to Medicine (ATM) Foundation and its investor signatories have urged pharmaceutical companies to improve access to medicines in low- and middle-income countries (LMICs) by accelerating voluntary licence agreements.
Voluntary licences are private contractual agreements through which pharmaceutical firms holding patents set out terms for a generic version of a patented medicine to be manufactured and sold by alternate suppliers.
This can make medicines available for lower prices and on a wider scale – including regions where products are not currently accessible or affordable. ATM pointed to past examples of companies using voluntary licensing to increase access to treatments for HIV, hepatitis C, and COVID-19.
Lack of access to medicines in LMICs affects around two billion people, with such countries disproportionately impacted by diseases such as HIV, malaria, and diabetes, which vaccines and medicines have the potential to reduce.
The foundation said that voluntary licences are a “powerful” way for firms to improve long-term and sustainable access to their products, particularly in regions where they have limited or no operations. However, just two new non-exclusive voluntary licensing agreements were ratified during the analysis period for the ATM 2024 Index.
“Many companies are not present in all markets across the world, so they are sitting on assets and not allowing broader access, which is a key problem,” Jayasree Iyer, CEO of the ATM Foundation, told ESG Investor.
“Voluntary licences are a tried and tested mechanism to widen access to more markets. Any level of responsible intellectual property (IP) management can make a huge difference and impact on people’s lives, and the reputation and trust in companies and the industry.”
ATM bi-annually ranks and evaluates 20 of the world’s leading pharmaceutical companies on their efforts to expand access to their products. It has 147 institutional investors signatories to its principles with a combined US$22 trillion in AUM.
The two agreements recorded in 2024 marked a decrease from six agreements identified in the last index in 2022, which the foundation branded a “concerning loss in the momentum gained over the last few years”.
Tricky thickets
ATM’s latest report cards show that many pharmaceutical firms make between 20% and 30% of their revenue from sales in LMICs. This includes Switzerland’s Novartis – which was the best performing company in the 2024 index – and Roche, but the country’s authorities are looking to further strengthen IP rules which could detrimentally effect LMICs.
Despite its ranking, Novartis is among the Swiss firms accused of using ‘patent thickets’ to stave off generic competitors to maintain both profits and high prices for their products. Patent thickets are when companies file numerous overlapping patents on a drug after the primary patent has been granted.
ATM member the Interfaith Center on Corporate Responsibility (ICCR), a coalition of over 300 global institutional investors, has filed several shareholder resolutions during the last three AGM seasons at US companies on non-competitive practices enabled by patent thickets.
Meg Jones-Montiero, Senior Programme Director for Health Equity at the ICCR, said that the organisation has asked companies about the access impacts of patenting strategies during engagements, with its members urging wider use of voluntary licences.
“We are disappointed to see that licensing activities have slowed and that there are opportunities that companies may not be utilising,” said Jones-Montiero, adding that ICCR has particularly seen gaps in product access caused by patents in middle-income countries.
“Investors such as ICCR have put forward shareholder resolutions clearly saying they will not invest in companies that have demonstrated patent tickets, but we are hoping that this becomes more mainstream across investors and they ask more questions,” said Iyer. “The problem with patent thickets and is that investors don’t necessarily understand what it even means, making it hard to hold the industry accountable for the practice.”
Ramping up R&D
Frank Wagemans, Senior Engagement Specialist at Achmea Investment Management, stated that pharmaceutical companies must implement IP strategies that enable access for LMICs. This can include patent waving rights, licensing, or starting to produce medicines themselves in the countries in need.
He also called for firms to heighten their R&D focus on diseases that disproportionally affect LMICs. ATM found that R&D in is lacking in many countries, citing a “worryingly low” representation of resource-poor populations in clinical trials.
Just 43% of trials take place across the 113 LMICs covered by the index and 70 of these have no active trials. The foundation said that a lack of improvement risks excluding genetically diverse populations in research, resulting in insufficient access.
“For investors, entering new markets will have a huge impact on their future,” said Iyer. “Voluntary licensing has been shown to generate significant levels of revenues via the generic manufacturers supplying these particular markets.”
She added that ensuring R&D is being used to broaden access should be a priority for investors, adding that pharmaceutical firms’ failing to make progress at the scale and pace expected in this area should pose a concern.
“Companies must plan early about access, expand clinical studies to more regions, and register products in more countries,” said Iyer. “This can unlock growth in markets across the world and is one of the biggest opportunities where the industry [and] investors can really drive the agenda.”
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