Courts and Pharmaceutical Patents: From Formalist Positivism to the Emergence of a Global Law

Abstract

This article seeks to repurpose the relation between courts and IP law, avoiding describing them as a purely neutral and unidimensional process whereby ‘courts apply IP law’. Based on two cases from Brazil (Trastuzumab and Sofosbuvir), the article argues that the role of courts in implementing TRIPS flexibilities is in itself a factor that determines or at least influences the behavior of actors in the field. As such, courts are not arenas, but actors that influence competition and restructure markets. This pushes for the recognition that patent use and patent abuse, including practices in patent filings such as evergreening and sham litigation, are legal phenomena that ought to be regulated differently by law. Instead of formalist positivism, law should be more thoughtful of socio-economic consequences and of existing contexts. This aims at addressing economic structures rather than reinforcing them in cases pertaining to pharmaceutical patents.

The article concludes by proposing an interpretation of IP law which is integrated with competition law principles, both oriented towards, and based on, public interest provisions. Overall, the article posits that this is a better framework than regarding IP and competition law as ‘complementary’ and to address issues of how courts may be misused by economic actors due to fragmentation of the two legal fields. Furthermore, such endeavors are part of an emerging body of what some could even call “global law”; in this case, it means a nod for the transnational implications of national IP cases beyond its original realm.

1 Introduction

Courts are prominent actors in the implementation of intellectual property (IP) law. ¹ Apart from being enforcers of the existing law, they also delineate the contours of IP protection, including the definition of patentability criteria, scope of protection of IPRs, exclusions of patentable subject and conditions for enactment of injunctions. ² This is an intrinsic characteristic of how IP law is conceived and how it operates, rather than a process of politicization of courts or an expansion of their role beyond their competence. ³ By doing so, courts inevitably affect competition and play a major role in the implementation of TRIPS in national jurisdictions, often with transnational consequences.

Scholarship’s attention on the role of judicial and quasi-judicial courts in IP has risen, ⁴ including advocates for courts to be the best suited for balancing IP policies ⁵ and ample discussions on specialized IP courts. ⁶ Judicial enforcement of IP has become a common, yet very questionable, variable for assessing what is understood as the level of IP protection in a given country. ⁷ It has also deserved emerging importance by the WIPO, the South Centre and other international organizations as key players in implementing IP norms, each with a distinct approach. ⁸

In particular, the consequences of court rulings to access to medicines is a sensitive topic, particularly if decisions are taken prioritizing exclusively IP holder interests. A single court ruling (or sometimes lack thereof) may have huge consequences for public policies and the realization of rights, as IPRs may pose major barriers to competition and access to essential products. As such, it makes sense to craft a more comprehensive analysis of the role of courts in implementing or not the in-built TRIPS flexibilities ⁹ across jurisdictions.

This article seeks to repurpose the relation between courts and IP law, avoiding describing them as a purely neutral and unidimensional process whereby ‘courts apply IP law’. According to this view, the main issue of concern would be how to provide specific technical knowledge on IP for judges. Instead, this article aims at exposing that jurisdictional practices are themselves an element to interpret TRIPS flexibilities, as courts reshape markets and the extension of patent monopolies even when they decide not to take action. In this sense, courts apply IP and by doing so define markets; they are also mutually influenced by the market structures. Furthermore, other actors play crucial roles, including civil society organizations and lobbying economic pressures, ¹⁰ and dealing with them is another important dimension of the role of courts. In summary, it means a broader understanding of their role, which is embedded in certain structures of thinking and socio-economic implications and pressures. As we wish to propose, this framework allows a different legal assessment of what in practice courts do and what economic consequences their own behavior bear. For instance, when a court does not rule or takes too long to rule an IP case, this in itself likely generates more judicial uncertainty than the content of the decision. Despite differences in how this understanding reverberates in concrete IP cases, a general takeaway is that this requires a different interpretation of IP law, as per below.

The structure of the article is as follows: after this overview, it provides some inputs for the reasons why courts, while implementing TRIPS flexibilities, can be considered to be channels of “structural change”. This serves as a theoretical premise to the analysis. It is followed by an assessment of the consequences of the legal utilization—both directly and indirectly—of a narrative that treats intellectual property protection as necessary for innovation. ¹¹ This normative argument serves as a de facto tool for impeding evidence-based discussions on the competitive implications of IP in concrete cases. In short, the threat of decreased innovation is used, even if sometimes implicitly, to impede a more balanced and real consideration of rights and interests involved in IP law.

It then exemplifies the overall argument above through the comparison of two cases in Brazil. They share the similarity of dealing with access to medicines curbed by high prices (due to, among other reasons, intellectual property rights), albeit with different profiles, courts and arguments. In both, the role of courts is paramount, not only as the ones defining the interpretation of legal principles and rules in IP law with regards to demands of access to medicines, but also as setters of expectations for competitors and society at large. Both medicines have been subject to patent disputes in the country, in a way that IP is not necessarily the only issue to be considered, but certainly a relevant one. The first case refers to a litigation that questioned prices on the selling of cancer biological medicine Trastuzumab to Brazilian public entities, particularly in light of a stark price discrimination between regular public purchases and purchases to enforce judicial decisions. The second case deals with the procurement of hepatitis C medicine Sofosbuvir and the price differentiation after a patent was granted and later suspended, which is evidence for possible anti-competitive excessive pricing and/or abuse of dominant position.

Finally, the text provides some theoretical conclusions on the relation between courts and IP. It firstly proves that the role of courts in implementing TRIPS flexibilities is in itself a factor that determines or at least influences the behavior of actors in the field. As such, courts are not arenas, but actors that influence competition and restructure markets. This pushes for the recognition that patent use and patent abuse, including practices in patent filings such as evergreening and sham litigation, are legal phenomena that can be at least partly regulated differently by law. In fact, by shedding light and putting all pieces of this interaction together, there is a need for a different interpretation of IP law. Theoretically, it means a law that is more thoughtful of socio-economic consequences and of existing contexts, which aims at addressing economic structures rather than reinforcing them.

The article concludes by proposing an interpretation of IP law which is integrated with competition law principles, both oriented towards, and based on, public interest provisions. Overall, we argue that this is a better framework than regarding IP and competition law as ‘complementary’ and to address issues of how courts may be misused by economic actors due to fragmentation of the two legal fields. Moreover, this interpretation is derived from international law, from the theoretical foundations of IP and competition laws, and from the historical development of substantive national provisions—and not a mere theoretical speculation. Furthermore, such endeavors are part of an emerging body of what some could even call “global law”; in this case, it means a nod for the transnational implications of national IP cases beyond its original realm.

2 Assessing the Role of Courts in TRIPS Flexibilities As Forms of Structural Change

In previous works, the authors have argued that the strong interplay between economic power and law are so pervasive that structural interventions are needed in order to prevent law from becoming a mere instrument of economic interests, and to instead promote broader societal goals. ¹² A “neo-structuralist” approach ¹³ means that individual, moral(istic), and even institutional explanations are insufficient and even sometimes misleading. Therefore, efforts to ensure the full implementation of TRIPS flexibilities need to rely on a legal interpretation that is structural in the sense of taking into account the role of economic structures of pharmaceutical monopolies and ready to counter their negative consequences when needed. The approach generally proposes that, willingly or not, legal interpretation will either be accepting of the status quo (adopting compensatory mechanisms at most) or transformative in a structural way. This analysis provides some inputs for a legal proposal for the role of courts to be less formalistic—in its intimate, self-referred and negative connotation—and more mindful about structural intervention through the application of public values. Whether courts wish to acknowledge this role or not, adjudicators will invariably perform it.

Specifically on the topic of TRIPS flexibilities, achieving broad access to medicines for all knowingly demands structural reforms in the current R&D model for pharmaceuticals, a high-level policy commitment by governments to act boldly, and a major rethinking in the behavior of companies. ¹⁴ None of this is primarily a task of any courts around the world; none is exclusively a legal enterprise. Indeed, judges and decision-makers should operate within the realm of existing laws and have, in the majority of circumstances, a limited role for structural change. This is all true. However, it should equally be stressed that structural change is a task that includes courts and includes legal thinking. Legal interpreters need to rely, even if partly, on philosophical foundations and legal theories for the interpretation of concrete cases. Judges and adjudicators reflect certain viewpoints and distinct ideologies even if they do not acknowledge so. ¹⁵

Both considerations seem particularly relevant to IP and access to medicines, where notions of innovation, public interest and limits of monopolies are deeply intertwined and even part of ordinary legal arguments on IP. ¹⁶ Considering how the implementation of IP norms around the world since the TRIPS Agreement has been the result of a push by developed countries and their industries, ¹⁷ courts that adopt a formalist and limited approach will invariably reproduce the notion that IP needs to be expanded at all costs. This disregards that TRIPS flexibilities, including a focus on technological development and public health, are all primarily legal and legitimate tools. As such, if courts would strictly “follow the law”, they should enforce the validity of TRIPS flexibilities, and be particularly aware of the socio-consequences to the public interest of patents and other intellectual property rights. ¹⁸ In other words, courts have the potential of de facto limiting the policy space of a country, and it is no surprise that so much effort is now given to the role of courts as part of the international economic architecture. ¹⁹

In developing countries, these considerations are even more evident for two reasons: on one hand, the material conditions of access to medicines are generally worse; ²⁰ on the other, the majority of such countries contain constitutional and legal provisions that advocate for implementation of socio-economic rights (such as health) and development goals, often in more directive and transformative ways than the counterparts in industrialized economies. ²¹

Therefore, courts’ stance on TRIPS flexibilities is of utmost importance, such as the position towards the validity of stringent patentability criteria for pharmaceuticals and the use of competition law to address anti-competitive practices in IP and health cases. Courts do not need to be “advocates” nor political actors to applying IP law in a manner that is consistent with broader societal goals such as ensuring access to medicines. However, they sometimes refrain from doing so on such grounds. As we have noted before, the mere lack of decision is also a crucial feature in the lack of their implementation. ²² In this context, advocates for judicial adjudication as a purely neutral and technical process do not address the negative impact this very stance has or might have on access to medicines.

3 Access and Innovation in Legal Discourse: From Opposition to Coexistence

There is one economic narrative that has profoundly influenced the debate on IP and access to medicines: the rhetoric whereby IP is an enabler of innovation, to the extent which it provides incentives for inventors, and therefore is also a prerequisite for access to future technologies. ²³ In short, no access without IP. Importantly, this has been often converted into a self-standing legal argument, either underpinned or explicitly referred to, in multiple cases, without further consideration of historical and empirical circumstances of the real markets they address.

The objective of this section is not to delve deeply into the broader debate on IP and innovation, and how IP affects access to the outcomes of future and existing innovation, but to note how the conversion of this narrative into a legal argument is highly problematic. According to this view, less IP protection would necessarily lead to less innovation and therefore less access. This means that protecting IP would always be, according to this particular narrative, in the public interest. ²⁴ Accordingly, if IPRs are to be anyhow limited or restricted—even when they were wrongfully granted in the first place—this argument will consider that innovation will be hampered and, as a final result, access will be compromised. ²⁵

However, this assumption is remarkably questionable. For one, the role of IP in fostering innovation is far from clear. ²⁶ Some markets are innovative and creative despite the lack of exclusivity rights, ²⁷ and in many cases, IP is simply detrimental to innovation. A number of evidence-based studies propose that the barriers created by IP serve not as catalysts, but hinderances, of innovation. ²⁸ Notions of “patent trolls” and “patent thickets”, where strategic patenting filing leads to an overlap of multiple IP rights that unfairly block competition, have become a major issue for contemporary markets. ²⁹ As economist Joseph Stiglitz noted, following the US Supreme Court Myriad Genetics case (2013), which defined that isolated genes cannot be patented, “innovation has been accelerated, leading to better diagnostic tests […] at much lower costs.” ³⁰ Accordingly, it is possible to argue that markets without patents may be equally or even more innovative than those with IP protection and simultaneously also conducive to better access conditions.

Furthermore, for many accounts, IP has been historically an inefficient incentive at best. ³¹ The development processes of the overwhelming majority of now industrialized countries were based on copying strategies, national industrialization and the creation of innovation ecosystems that include know-how and skilled professionals. In fact, IP has been deemed a limitation to development and innovation in most cases. ³² The innovation landscapes of highly innovative countries in current times are also not reliant on IP alone, ³³ even if the extent of its impact is debatable. In fact, even among its strong defenders, there is a general consensus that IP is not necessarily conducive to innovation at all times, ³⁴ and that in particular the effects of patents differ between industrialized and developing countries. ³⁵ An example of the detrimental consequences to access without accruing any benefits of innovation is the early implementation of the TRIPS Agreement in Brazil in 1996, which can be contrasted with the relative positive experience of India. ³⁶

Finally, there are also particular issues with any direct association between IP and innovation in legal thinking. The TRIPS Agreement and many national laws note that IP requires a constant balancing between public and private, the public value pertaining to access to medicines being one of paramount importance. ³⁷ Patents are granted taking into account the public interest related to the disclosure of the invention and competition; they are an exceptional, limited and temporary legal bundle of exclusivity rights granted by the State solely in, and to the extent which it favors, the public interest. ³⁸ As a consequence, the impediments created by IP as barriers to access should always be taken into account in the interpretation of concrete cases more prominently.

Indeed, the pharmaceutical sector is a particular and very sensitive case. On one hand, R&D investments are higher than most other industries, and risks are larger, with few successful products out of a much larger pipeline of candidates. On the other, in this field, there is much more public investment in R&D (in many cases the main investment is public not private) because its products are or at least should be essential goods, as they directly relate to health, sometimes as a life or death dilemma. Perhaps curiously, these arguments have been utilized to sustain opposite views: both the need for less or no patents (prioritizing access) and for more patents (prioritizing innovation). In light of the overview above, the problem with the debate framed in such a way is that it reinforces a questionable direct relation between IP, innovation and access.

Many have empirically exposed, for instance, that the enactment of compulsory licensing has not had detrimental effects to foreign investment and has not undermined innovation overall, ³⁹ and successful cases have drastically reduced prices and therefore enhanced access to medicines. Additionally, the global community increasingly acknowledges that a model based only on patent protection is not the best incentive for innovation in the pharmaceutical sector, and alternatives exist. ⁴⁰ For example, Amy Kapczynski compellingly describes the open science network of the Global Influenza Surveillance and Response System (GISRS), where “a global influenza virus-sharing network that has for decades produced critically important information goods, at significant expense, and in a loose-knit group—all without recourse to IP”, ⁴¹ which both responds better to societal health needs and does not treat innovation and access as a trade-off.

The global initiatives seeking the development and subsequent “equitable and affordable” access to Covid-19 vaccines and treatment, treating them as “global public goods” and as a “people’s vaccine”, ⁴² with support by key actors such as the European Union and China, have highlighted the needs for collaborative efforts. Unprecedented funding and multiple actions have been taken, including the creation of the voluntary WHO Covid-19 Technology Access Pool on the basis of a proposal by Costa Rica, ⁴³ public international pledges for more resources, ⁴⁴ as well as private pledges for making IP-protected technologies related to Covid-19 free of charge. ⁴⁵ It highlights a possible new approach to global pharmaceutical R&D, not based on competition, but rather on intense sharing of information, which may produce faster and much more accessible outcomes in terms of health products. Again, in this sense, a more efficient approach that may achieve more innovation and broader access. ⁴⁶

Finally, a caveat to the association between IP and innovation refers to the real costs of R&D, which are deeply non-transparent, and where, as noted before, the role of public funding is pivotal. ⁴⁷ It challenges once again the assumption of a necessary trade-off, rendering explicit instead the possibility of achieving a coexistence between access and innovation. More transparency on the pharmaceutical sector could enable courts to rely not on the general, abstract notion that IP is conducive to innovation, and instead make an empirical assessment of, for instance, how much public funding the medical product received or not, how the final net pricing has been fixed, and the exact socio-economic repercussions of a patent or other IP to the market. This would mean a better balance between private and public interest in IP and access to medicines.

In summary, this section aimed at presenting two important points for adjudicators dealing with IP and access to medicines to consider:

• 1. arguments that entangle the protection of IP with innovation and access are an improper interpretation legal technique, which disregards the socio-economic and developmental implications of IP as much as it tends to limit the role of the public interest in IP. ⁴⁸

• 2. access and innovation are not a necessary trade-off: under many (and perhaps most) circumstances, collaborative and deeply competitive markets are more inventive and also provide better access conditions.

As a conclusion, adjudication in IP and access to medicines calls for an evidence-based and thoughtful analysis of what is really at stake in a particular case. From a legal point of view, the broader pharmaceutical sector regulation can be interpreted in a way that secures both access and innovation, and not as a trade-off as a departing point. The following section attempts to exemplify how a legal rationale in that sense could take place, and what may happen when this is not taken into account. By doing so, it will also be possible to reflect on what role do courts have in TRIPS flexibilities' implementation.

4 Trastuzumab High Price Litigation in Brazil

Trastuzumab (sold under brand name Herceptin) is a groundbreaking medicine for the treatment of breast cancer, listed as essential medicines by the World Health Organization (WHO). ⁴⁹ Breast cancer is a disease that kills thousands of persons, especially women, yearly around the world. In Brazil alone, 53.680 cases were reported in 2013, and more than 56.000 in 2014. Trastuzumab was developed by Genentech, a pharmaceutical company based in San Francisco, United States, which later licensed to Swiss pharmaceutical ⁵⁰ company F. Hoffmann-La Roche (henceforth Roche) for US$40 million upfront, later sharing royalties with Genentech. ⁵¹ In practice, Roche is the owner of patents related to the drug and manages them. According to a Forbes article on 28 August 2019, Trastuzumab “is the leader in the breast cancer drugs space with annual sales of around $7 billion”, accounting for about 15% of the overall profits of Roche yearly. ⁵²

Given how essential the medicine is ⁵³ and its very high prices overall, various concerns about access to Trastuzumab have been highlighted in multiple jurisdictions around the world by civil society organizations. The production cost of the medicine is reported to be around US$240 for a 1-year supply. ⁵⁴ Nonetheless, as reported by Médécins sans Frontières in 2017, Trastuzumab’s annual prices were set at around US$ 38 365 for the private sector and US$ 15 735 for the public sector in South Africa, where patents will only expire in 2033. ⁵⁵ Brazil, as we will expose in more details, prices were also extremely high: unaffordable for patients and unsustainable for the public budget. It is further relevant to note that the basic patent of Trastuzumab has expired in many other countries, including the USA. In both USA and Europe, there are already biosimilar versions available in the markets, which contributes to reducing prices. In Brazil, due to the patent extension term for cases of backlog of patent applications (provided for by Article 40, sole paragraph, of the Industrial Property Law (Law 9279/1996) and currently pending constitutionality ruling at the Federal Supreme Court ⁵⁶), the patent will not expire until 16 June 2028. ⁵⁷

However, even the lack of patent is no guarantee of reduced prices per se. In India, where patent oppositions had been filed, Roche withdrew patent applications on Trastuzumab. Still, the company has relied on litigation against biosimilar producers through India's drug regulatory body, which effectively enables Roche to be the sole provider of the medicine in the country as well. ⁵⁸ This has been taken to the Indian Competition Commission as a possible abusive conduct for stalling the approval of generic drugs. ⁵⁹

These facts are important evidence to highlight that high prices of Trastuzumab are not only caused by its uniqueness, as there are already biosimilar medicines available in international markets, and that the balancing between profits and health seem to be radically unaligned. The similarity of high prices around the world further denotes a tendency of monopoly pricing and abuse of patent.

The medicine was registered by the Brazilian regulatory agency ANVISA as early as 1999 and was incorporated as a treatment provided for by the public health system SUS in 2012. Cancer prevention, detection, treatment and control are all covered by the public health system. Nonetheless, diminishing prices was a condition for effective access to take place after its incorporation as a registered medicine paid by the SUS. During that occasion, and discounted taxes, prices of Trastuzumab were 62% higher than international price average and 115% of the lowest reported international price (surprisingly or not, in the United States). ⁶⁰

Public procurement bids were conducted by the Ministry of Health in order to generate economies of scale, later distributing to State Health Secretaries under Brazilian federalist system. After direct negotiations with Roche, prices were reduced from R$7.860,26 per dose, charged in 2007, to R$3.446,89 in 2012 (without taxes, prices in Brazilian Real). However, State Health Secretaries have also been obliged through individual health claims, to provide Trastuzumab. This is a consequence of Brazil’s widespread “judicialization of health”, which enables individuals to go to courts demanding specific medicines and treatments, also obliging public entities to provide them regardless of costs in the majority of cases. ⁶¹ In practice, this means that there were two main routes for access to Trastuzumab: via the general universal public healthcare system and via individual court litigation. If this, on one hand, may pressurize public entities to provide better healthcare services and avoid individual claims, on the other hand, this dual system creates strong inequalities in terms of who may access medicines and when (often with “shortcuts”). An often-disregarded issue regarding this topic is how this system may also present an opportunity for abusive pricing conducts and patent abuses. In the specific case of Trastuzumab, Roche provided the medicine under a price agreed by the public bid, but refused to sell Trastuzumab for the same price in individual healthcare litigation cases, charging instead R$7.192,00—more than double the negotiated with the Ministry of Health. Further evidence shows that similar higher pricing occurred for all purchases not related to the centralized procurement, i.e., all individual litigations (Table 1). ⁶²

Table 1 Unity prices of Trastuzumab before July 2012 (in Brazilian Real—BRL)

In light of this data, the Law and Poverty Research Group of the University of São Paulo (USP) produced a comprehensive report on the prices charged by Roche on Trastuzumab, reporting the figures above. It then filed in June 2014 a “representation” (i.e. a form of denunciation mechanism) for the Federal Public Ministry of Brazil, the authority mandated with the protection of collective rights in the country and general overseer of the public interest. ⁶³

The research group noted that the price differentiation between markets is a case of abuse of dominant position, a doctrine of competition law but applicable more broadly to this case also, and further noting a case of excessive pricing given the existence of market power by Roche. The company in this case was apt to discriminate between consumers without justification, leading to an overprice. ⁶⁴ According to the legal document, they are in violation of the constitutional economic order and of a conduct of arbitrary profits (Articles 170 and 173, §§4 and 5 of Brazilian Federal Constitution). In this sense, although some arguments are usually found only in competition/antitrust law, the case dealt with civil torts.

Finally, the average price charged in Brazil above the international average was utilized as grounds for another evidence of abusive conduct, according to Brazilian law. This takes into account precisely the monopolistic power of Roche in an international context, with discretion to charge higher prices in jurisdictions where, at least in theory, prices should be lower. With these elements, the research group's representation requested the launch of an investigation by the Federal Public Ministry, demanding damages in the benefit of the public, the compulsory licensing of Trastuzumab, the immediate parallel import of biosimilars and for all conditions for local manufacturing to be available.

Indeed, the Federal Public Ministry welcomed the document and later filed a collective claim (“Inquérito Civil n. 1.16.000.000699/2015-87”, which proposed the civil public action) against Roche in 2016, replicating the arguments above and further considering that, while within the boundaries of the maximum regulated prices by CMED, they were still abusive due to the stark differentiation. ⁶⁵ Notably, prices were much up to three times higher than those in the United States, and more than double of the international average. The decision to pursue a judicial litigation was rooted, among others, in the dissatisfaction with the laboratory’s formal response. The Federal Public Ministry requested all purchases to be equated with the centralized public procurement price, and requested a compulsory licensing to be issued and the immediate authorization for parallel imports.

In August 2018, however, the Federal Court of the Federal District (Brasilia) responsible for the case agreed with Roche that there was no demonstration of price abuse nor illegal conduct, since Roche had brought justifications. ⁶⁶ As a conclusion, the whole situation described above remained unchanged. While there was an appeal filed against such decision, taking the case to the Appeals' Federal Court and pending final decision, some members within the Federal Public Ministry (claimant) opposed the continuation of this litigation.

Meanwhile, Roche also joined a Partnership for Productive Development (PPD) with the Ministry of Health, securing transfer of technology for national laboratories Tecpar and Axis, while guaranteeing a market (following this agreement, 40% of all purchases by SUS would come from Roche). In theory, PPDs would lower prices, even if higher than direct competition. However, once again, prices went up, which led to another proceeding in August 2019, this time by the Union Audits Court (“Tribunal de Contas da União”), a quasi-judicial administrative court responsible for auditing public expenses, for abusive pricing. ⁶⁷ This case is still pending at the conclusion of this paper.

From this description, a few preliminary comments can be made. In this particular case, the existence of patent protection over Trastuzumab was the defining feature that permitted Roche Brazil to charge monopolistic prices, putting the public health sector in an extremely unequal position (having one sole provider of a product with an extremely inelastic demand). If generics to Trastuzumab were available, individual litigations could also purchase from the alternative providers, and the bargaining power of Roche towards the Brazilian public sector would be much more limited. Moreover, it is possible to conceptualize this behavior in relation to public purchases and court rulings as an abuse of patent rights under Brazilian competition law: although often disregarded, the way market players may benefit economically from legal uncertainty, multiple case filings and lack of competitors should be under the scrutiny of competition and IP law alike, not only as background facts, but as evidences. All in all, this is equally an important call for the inclusion of responsibilities of companies in litigations of public interest such as those related to access to medicines.

What is the direct result of this federal judicial ruling? The maintenance of the status quo and an implicit legitimization of Roche’s pricing practices. Also, while the new investigation at the Union Audits Court is unrelated to the previous one, it allows other reflections, including what is the relation between them and what are the possible legal impacts of one investigation in the other. The fact that this case has been framed as a “non-patent” issue or which has perceived the market monopoly power conferred by a patent as ancillary at best is the result of the limited understanding pointed out in the Introduction: failing to acknowledge the role of courts in individual litigations to enhancing the power stemming from a patent in this particular web of details, the ultimate result does not properly apply the public interest requirements of Brazilian IP and competition laws.

Finally, even though a preliminary analysis could possibly focus on the role of the individuals involved in the litigation, this description highlights in fact that the functioning of the IP system is extremely reliant on the role of courts. ⁶⁸ As stated before, this is less about individual biographies of adjudicators/attorneys/businesspeople and more about a judicial system based on silos and typically reluctant to commit to applying law in a more comprehensive manner, even in light of such socio-economic circumstances. This has been moreover a case where a hesitant and absent role of the Judiciary to address IP and access to medicines issues has directly impacted the possibility of implementing access to medicines policies, even if at first glance this seems to not be a case on patents or competition. Importantly, the argument of how price differentiation by Roche was only being possible due to the complex web of various litigations had indeed been brought to courts, but the decisions overall preferred to interpret the facts in a much more limited way.

5 The Sofosbuvir Case in Brazil

Sofosbuvir—sold under the brand name Sovaldi by pharmaceutical multinational company Gilead Sciences—is a key medicine for the treatment of Hepatitis C, for decades an incurable disease. It has been deemed a long-waited game changer for the treatment of the disease. The utilization of direct-acting antivirals (DAAs) such as Sofosbuvir, in combination with other drugs, ⁶⁹ is able to provide a cure in a very high percentage of cases (over 95%), and also contains a drastic reduction of collateral effects in comparison with the most utilized treatment for decades until then, based on inter-venous use of Interferon. Since its launch, Sofosbuvir has been a major commercial success for Gilead around the world, with estimations of billions of dollars in profits, largely superseding its overall investments in R&D by any possible account. ⁷⁰

The major global concern on Sofosbuvir has been the fact that it is extremely costly in developed countries and in the majority of middle-income countries. It has been reported that the 12-week treatment has cost up to US$84.000 in the United States. In countries with generic offer, such as those coming from Egyptian generic company Pharco Pharmaceuticals, the same treatment can be provided for as low as US$300. ⁷¹ Importantly, Egypt did not grant the patent on Sofosbuvir, and Gilead has offered a much lower price of US$900 per treatment, since Pharco Pharmaceuticals was also able to produce it. ⁷² The real beneficiaries were consumers and the public health sector of Egypt, which could have access to a full treatment at substantially lower prices than the majority of countries in the world. Importantly, the fact that prices are so dramatically different around the world is another evidence that pricing is a process that is disentangled from innovation processes. ⁷³

Gilead established a large international scheme of voluntary licenses for certain Indian generic companies to produce and export Sofosbuvir at very low prices to least developed countries (LDCs). ⁷⁴ However, middle-income countries (including Brazil) were not part of the scheme at all. Such agreements also prevent competition with non-licensee generic producers, and also impede exports to territories not covered by the licenses. Thus the majority of world population in need remained excluded from this beneficial scheme. ⁷⁵ For those countries, the medicine remained an extremely pricy drug, and likely even more in countries with weaker health systems. This led Sofosbuvir to be at the central stage of global efforts for reduction of prices, campaigns for affordable and equitable access, and different attempts by governments to reduce prices, including the issuance of a compulsory license in Malaysia. ⁷⁶ Patent oppositions have been filed in multiple countries, including Argentina, Brazil, Morocco, Egypt, Ukraine, Malaysia, India, China, Russia, the United States, Vietnam and in the European Patent Office (EPO), ⁷⁷ some with successful outcomes to have a patent claim rejected or limited.

With millions of hepatitis C patients, Brazil incorporated DAAs as part of the universal public health system and opted in 2014 to negotiate prices of Sofosbuvir with Gilead directly. While a positive initiative that prevented prices from being even higher, Sofosbuvir sold for the public health system through public procurement mechanisms was estimated to be up to 52 times more expensive than generic versions available in other countries, according to GTPI, a Brazilian civil society organization. ⁷⁸ From the outset until the present moment, while lower than the maximum charged in the United States, prices in Brazil were substantially higher than countries with generic availability such as Egypt and Malaysia (following its compulsory license).

Multiple patent applications had been filed by Gilead at INPI, the Brazilian IP office. In February 2017, Fiocruz files a pre-grant opposition to the main patent application (PI0809654-6). MSF Brazil, GTPI/REBRIP, and other organizations would follow. From the very beginning, the patent applications were controversial: in March 2017, ANVISA denied the prior approval (“anuência prévia”) to the patent. ⁷⁹ In March, the National Council of Health (“Conselho Nacional de Saúde”) issued a technical-political recommendation against the patent and called for attention to public health needs. However, in May 2017, a preliminary injunction questioned ANVISA’s decision and it was therefore, according to the Brazilian legal system, legally bound to grant its prior approval—with the possibility of this decision to be upheld or overruled in later stages. In practice, the court ruled that the prior approval should be granted.

In its pre-grant opposition on the same patent application, GTPI/REBRIP, argued that it did not meet patentability criteria, but also further noted that the patent application in question referred to an essential drug, and therefore its granting would lead to violation of the right to health of Brazilian population. While this explicit public interest argument was not utilized, the INPI released on 19 April 2018 a preliminary technical examination report against the patent. While not legally binding, it signaled that the patent would not be granted. On 5 June 2018, ANVISA gave the regulatory approval for the generic drug to be produced locally by a Farmanguinhos-Fiocruz and Blanver (a generic company) partnership. It was largely expected that the patent would not be granted at this point. In June 2018, daclatasvir, dimeprevir and sofosbuvir were incorporated in the Brazilian SUS; they were expected to be distributed freely and universally by December 2018.

On 18 September 2018, in an unexpected decision, INPI granted the patent on one of the 126 substances filed, having denied 125 others and reversing its own preliminary technical examination. The main compound was not patented, but still, the decision was met with outcry and major discontent by civil society and patient groups. Although in principle generics could be produced if they did not infringe this limited patent, any generics reaching markets, in this case, would be subject to costly and limiting litigation. This risk is substantially higher in Brazil for generic companies given the fact that damages for patent infringement are necessarily set at the highest possible amount, which hinders competition. ⁸⁰ Subsequently, the generic medicine was legally and effectively blocked from entering the markets and Gilead enjoyed a legal monopoly due to its new patent.

Shortly thereafter, on 20 September 2018, Marina Silva, a former environment Minister and presidential candidate filed a federal lawsuit against the INPI decision in order to annul the patent, based on arguments of public health and on the precarity of the patent application, citing, among others, precedents in other countries. ⁸¹ The federal judge in Brasilia accepted the arguments and issued a preliminary injunction suspending the effects of the patent. ⁸² During this period, it can be said that there was a competition period, whereby patents were not a barrier to competition and the generic version was able to be commercialized and be part of public bids of Sofosbuvir-based treatments. The price reached an all-time low of R$64,84 (also see graphic below for the comparison).

In November 2018, combination medicines containing Sofosbuvir were procured at an emergency procedure by the Ministry of Health. Gilead filed a claim to impede its distribution due to patent infringement. In this context, a decision in favor of Gilead is taken but later overruled. ⁸³ In December 2018, the preliminary ruling in Brasilia was overruled and the patent on Sofosbuvir is once again valid, leaving Gilead to wait for its patent letter to start enforcing it. It is noteworthy to mention that the decision by the Federal Court in Brasilia—1st Region was taken on procedural grounds and was therefore not based on substantive patentability requirements. ⁸⁴

Following the previous decision, a decision by a Rio de Janeiro Federal Court in December 2018 suspends, under request of Gilead, PDP between Blanver and Fiocruz/Farmanguinhos for the production of generic Sofosbuvir until final decision on patent is taken. ⁸⁵ This effectively suspended the generic in Brazil. Also in December 2018, Gilead commits to reducing prices in public procurement. ⁸⁶ However, still much higher than the generic version. Gilead received its patent in mid-January 2019. In February 2019, Gilead won major public procurements of Sofosbuvir in Brazil.

This intricate description of events means temporally the occurrence of three main phases:

• 1. a de facto monopoly, when there was only a patent application and Gilead was the sole provider of Sofosbuvir; ⁸⁷

• 2. a short competitive market period where the recently granted patent was suspended due to a preliminary injunction based on public interest provisions, and the generic version was able to enter the market;

• 3. a legal monopoly phase after the patent was reinstated, with only Gilead again in the market. ⁸⁸

It should also be highlighted the number of legal actions taken by all parties, but in particular Gilead, which utilized various different legal tools, including infringement claims of its then suspended patent and attempts to nullify public procurement bids that would have competition. Furthermore, while indeed the patent granted to Sofosbuvir is not on its basic compound and some generics could theoretically still be produced, in practice, some of the public bids are only available to Gilead. In short, the current situation at the time of writing is of full legal and de facto monopoly for the patent holder (Table 2).

Table 2 (Extract from Law and Poverty Research Group report) Effect of Introduction of Generic Sofosbuvir (Blanver/Farmanguinhos) in National Market

The most decisive feature of this case, however, deals with the prices charged after the patent was reinstated, as they were substantially higher than those from the competition phase, but also from the original de facto monopoly situation. According to another report by the Law and Poverty Research Group, there was a spike of up to 1421.55% between the competition market period in mid (prices as low as R$64,84 on average) and the later patented phase (R$986,57 on average), representing an overwhelming extra budget toll for the public sector. ⁸⁹ Furthermore, between the legal monopoly phase in 2019 (patented market) and the de facto monopoly from 2015-2018, there is also a major difference in pricing. For instance, in 2016, where a large number of Sofosbuvir units were purchased, the average unit price was R$179,41, compared to R$986,57 charged in 2019 during the new patent monopoly.

This complex intertwinement in the case calls for antitrust scrutiny. In light of the situation, a group of nine different Brazilian civil society organizations, representing both patient, consumer and human rights groups, as well as the Public Defenders of Brazil, filed a joint formal notification to the competition authority (CADE ⁹⁰) in order to request the launch of an investigation for abusive anti-competitive practices (both excessive pricing as abuse of dominant position and abuse of patents) and asking for adequate remedies to be taken, including issuing a compulsory licensing for Sofosbuvir on the grounds of an anti-competitive conduct (Article 31k of TRIPS and Art. 38, IV, “a” of Brazilian Competition Law, Law 12.529/2011).

A preliminary administrative investigation was indeed launched by CADE, but the case remains open. It might reach the Administrative Tribunal Council, which decides upon antitrust cases in Brazil. At first impression, there seems to be more space for a competition authority to address the case than judicial courts. ⁹¹ However, the relatively more flexible administrative procedure under competition law and the stronger pressures on administrative bodies by government and interested private companies (patent holders) make the results uncertain. This is especially the case at a time in which pharmaceutical industries effectively threaten countries with possible delays in the supply of Covid-19 related medicines (Gilead’s voluntary licensing of Remdesivir, which excludes middle-income countries—including Brazil—is an example ⁹²). Despite the yet inconclusive outcome of this preliminary investigation by CADE, the subsequent steps are largely dependent on how the institution decides to perform or not such role.

6 Theoretical Conclusions on the Role of Courts in IP Based on the Concrete Cases

The two cases reveal a number of issues on the interconnectedness between IP protection and the role of courts. A different kind of interpretation on the role of the Judiciary and other courts (including competition authorities’ adjudication bodies and regulatory bodies, when applicable) with regards to patent protection may thus be enabled. This section aims at presenting some theoretical conclusions drawn partly from the cases discussed and examples presented.

• a) Courts can reshape markets (and are also influenced by them). As such, patents and patent use or abuse can be seen mainly as a legal phenomenon and their scope depends on the enforcement given to the monopoly in different jurisdictions.

Firstly, courts affect competition. Instead of purely arenas where legal arguments meet in search of a ruling that clarifies the law, they are rather active actors that end up determining the behavior of the parties involved in an IP dispute, even when adjudicators refuse to recognize this role. In other words, judicial rulings and courts are a factor that influences the economic behavior of patent holders, competitors and governments.

As a consequence, they may in an intended or unintended manner expand the patent monopoly’s effective scope. For instance, if companies are aware of the extreme success rates of individual health litigation cases, such as it was the case of Trastuzumab in Brazilian courts, and that there is no scrutiny for the prices charged to the public sector in order to enforce judicial orders, this means that the patent monopoly is enhanced exorbitantly. It becomes an implicit authorization to charge any price, even if likely anti-competitive. Similarly, if companies know that their litigation practices and their price discrimination (between different entities in a same jurisdiction and/or across different countries) are to be considered lawful from a competition law perspective, such as what has been argued in the ongoing Sofosbuvir case before the competition authority (CADE), they also see their patent monopoly reinforced, allowing them to pretty much shield themselves from antitrust suits. The monopoly legally granted by a patent is not supposed to be so overarching and comprehensive. However, it may become so due to courts. The conclusion is that access to drugs is directly restrained.

In general, it is not possible to disregard the impact of courts; the absence of the Judiciary decision is also often the main feature to expand patent monopolies. The absence of rulings from the Brazilian Constitutional Court (STF) on patent matters since the enactment of the 1988 Constitution and the 1996 Industrial Property Law until a May 2021 decision which ruled automatic patent term extensions unconstitutional is a present and dangerous example of this absenteeism. Therefore, in short, courts can reshape markets (and are also influenced by them). As such, patents and patent use or abuse can be seen mainly as a legal phenomenon and their scope depends on the enforcement given to patent rights and its flexibilities in different jurisdictions.

• b) “IP as crucial to innovation” wrongly becomes a legal argument, which hampers access

Secondly, rhetorical and economic narratives have direct legal consequences when turned into arguments deployed or accepted by courts. By applying as a given fact that maximal IP protection will lead to more innovation (therefore, according to this view, IP protection per se is in the public interest), courts impede an evidence-based assessment of concrete cases, preferring to rely on a pre-set definition. Most laws themselves do not define the specific trade-off related to patents, access and innovation, and invariably will require robust interpretation by courts in practical terms.

This means that there will be no real balancing between, for instance, the effects for competition or the impacts on prices and consequential increase in medicine prices, and the protection of a certain patent claim. Furthermore, an analysis of even “technical” aspects, such as patentability criteria, will tend to be informed and biased by a tendency towards the granting of a patent—similarly to the notion adopted by some IP offices that patent applicants are “clients”, and not public offices working for the public interest.

The economic narrative that equals IP with more innovation tends to overly expand the scope of protection of IP from a temporary monopoly granted by the State (quasi-public right, for some) to a naturalized and almost absolute right. ⁹³ This, in a sense, is an effect of IP protection on the role of courts. This narrative has been implicitly seen in the two cases analyzed, especially through the arguments provided for by the law firms representing the pharmaceutical companies in Brazil. This is the main conventional stream of argumentation in pharmaceutical patent litigation and legislative debates around the world. ⁹⁴

• c) Anti-monopoly and IP law share public principles. As such, principles of competition/anti-monopoly law should be directly applicable to patents (neither as exemption nor complement)

Thirdly, apart from an IP interpretation that is more sensitive to the socio-economic implications of IPRs, there is a case to be made about the applicability of principles of anti-monopoly laws to patents. ⁹⁵ This should not be seen as an exception or as a complement to the legal discipline of patents and other IPRs, but as an integral part of the meaning of IP: there is no IP without competition, even if it may sound paradoxical at first.

In practice, in relation to the Trastuzumab civil federal case in Brazil, this would lead to the recognition that the stark price differentiation between the price of public procurement and the price charged resulting from a judicial ruling against the State is so high that it should have been considered illegal. To do so, an application of principles of competition law, in particular a discipline of abuse of dominant position, would have been in our view sufficient to prove the case. The doctrine of competition law abuse of dominant position should definitely be applicable to this case, even if it was being ruled by an instance outside of the Brazilian competition law system. This would be arguably also the case in other jurisdictions. Conversely, for the Sofosbuvir competition case, the differences in the historical series of prices, and between the de facto monopoly, the legal monopoly (patent protection) and the competition situations (with generic drugs available in the market), highlight another anti-competitive practice based on both excessive pricing (price demonstrated through price discrimination) and abuse of patent power. ⁹⁶ As noted before, this case is still pending as of the conclusion of this paper.

While at first the difference in courts (federal judicial court and competition authority) would seem to lead to completely different legal reasonings and rationale of distinct bodies of law, in reality the similarity of cases denotes that the disciplines of IP and competition law—and also in tune with public interest provisions and fundamental rights—are or should be in fact in a path of merger. An IP court cannot dismiss competition law as much as a competition body should not ignore IP provisions; although they may have different organizing structures, and are usually seen as targeting different goals, they have increasingly similar objectives and intertwinements. Integrated principles and integrated disciplines does not mean conflating all norms, arguing that IP and competition law are the same (they are not), but it does mean passing from essentially private law spheres to a way of interpreting law that should be based on public principles, particularly in light of the demand that it should not reproduce socio-economic structures as natural entities, but instead seek to regulate them for their economic power, as we have argued before in different occasions. ⁹⁷ Both are informed by and conceptualized under public interest law more than bearers of private interests. This also means that the cases described above would have required a different kind of interpretation that adequately addresses competition impacts of IP protection both directly and indirectly—including the role of courts as such. As many have argued in terms of the evolution of both disciplines (IP and competition law), the trend towards a broader consideration of interests, consequences and stakeholders denotes a process of “publicization” of private law, rather than the opposite. ⁹⁸

• d) There is an emerging global (case) law of TRIPS flexibilities based on screening and transparency. The role of courts is not dissociated from, but rather based on, an interaction between academia, NGOs and other actors.

Finally, a few notes should be made on how an emerging body of decisions taken by courts around the world has become a crucial feature for TRIPS flexibilities much beyond their own initial scope. Courts are increasingly required to navigate distinct “fields of law” and take into account other jurisdictions—both for the impact of their decisions and as sources of legal arguments. ⁹⁹ There is also a “screening” process between courts. ¹⁰⁰ Some national decisions have direct transnational repercussions, such as a ruling on the legality of parallel exports, which will impact countries which import or export medicines to that jurisdiction. An antitrust decision may deem illegal a conduct based on abusive exercise of IPRs, and may impose restrictions and sanctions that affect the outcomes of patent litigations in judicial courts.

But in other cases, there are indirect consequences, which cannot be underestimated either. Landmark rulings such as the USA Supreme Court Myriad Genetics Case ¹⁰¹ and the Indian Supreme Court Novartis Case ¹⁰² have been immensely discussed, read in law classrooms and utilized by courts around the world that in theory would not be bound anyhow by such decisions. Others have this emerging potential, such as the Kenyan High Court decision that, based on the right to health, struck down a law with a concept of “counterfeit” which ended up including safe and high-quality generic drugs. ¹⁰³ In this sense, they are a real source of law for other courts.

Similarly, pharmaceutical patent applications also have a transnational dimension. Pharmaceutical companies file patents around the world, sometimes translating the content of application claims without proper adaption to national laws. ¹⁰⁴ Civil society groups and generic competitors counter applications of key medicines through patent oppositions in one jurisdiction, such as India, which then become the basis for subsequent oppositions in other countries. This can be deemed a form of “patent activism”. ¹⁰⁵ The cases of Trastuzumab and Sofosbuvir, as previously noted in their respective descriptions, have both been subject to scrutiny and advocacy by patients’ groups, and the dialogue between different actors and jurisdictions is a key feature for understanding the conducts and strategies deployed in Brazil.

Theoretically, these and other cases may be understood as part of global and transnational law, ¹⁰⁶ which may help to elucidate how specific courts are part of global economic governance, even as national decisions. As such, adjudicators are key actors in the consolidation of a global law of TRIPS flexibilities based on the sharing of positive experiences, transnational advocacy, international solidarity and in the benefit of developing countries. ¹⁰⁷ It should include not only finalized cases, but also legal proceedings initiated but not prosecuted, injunctions granted or not, negotiations and settlements, and activists campaigns. Furthermore, developing countries have an ever-growing importance in IP jurisprudence. ¹⁰⁸ The current Covid-19 pandemic and its multifaceted international reaction has a clear potential to accelerate and foster this process.

7 Concluding Remarks

This article sought to repurpose the relation between courts and the implementation of intellectual property. It argues for a shift from limited and uni-dimensional, i.e. “courts apply IP law neutrally”, to broad and multi-dimensional, through which courts define the contours of IP law and are also mutually influenced by IP arguments, theories and stakeholders, all and each with specific socio-economic impacts. Access to medicines is a field where these considerations become more evident.

It proposed two main arguments. Firstly, that courts have an enormous impact on the implementation of TRIPS flexibilities. While they are and should not be the only variable in place, any efforts for advancing or curbing the flexibilities involves courts. In particular, tribunals shape markets, even when—and maybe particularly when—adjudicators decide to refrain from broader consideration of circumstances and socio-economic impact of their own decisions. For this reason, the role of courts itself (e.g. a ruling or a lack thereof) has competition impacts and should be taken into account in legal interpretation.

Secondly, that a specific narrative which associates IP protection with fostering innovation is misleading, as it establishes an incorrect trade-off between access to health products and innovation. Since it is widely deployed by courts without further consideration, this narrative turned into legal argument is particularly problematic for over-expanding the effective protection of IP without a balance with the public interest. Thus, it should not be accepted as a juridical category or narrative.

The description of the cases of Trastuzumab and Sofosbuvir in Brazil serve as examples of how these different pieces come together, even if sometimes indirectly and not explicitly. Many other rulings can and should be described under those lenses. This article may present a framework for further analyses that include, rather than ignore, the specific role of courts and their respective arguments on TRIPS flexibilities.

A general conclusion is that this set of elements justifies a legal interpretation that is mindful of structures such as patents, including their effects on societies and the need for them to be reformed, rather than exclusively based on an allegedly formalist interpretation of laws. Such laws, as described above, already enable the restructuring of patent interpretation according to TRIPS flexibilities. This could be deemed a “neo-structuralist” approach to patent law. ¹⁰⁹ These cases also lead to the recognition that IP and competition laws should be both interpreted jointly according to integrated public interest principles. ¹¹⁰

Finally, the article posited that the increasing cross-referencing of courts and the transnational characteristics of IP and competition laws may be described—both descriptively and normatively—as an emerging global law of TRIPS flexibilities, based on screening and transparency. The reaction to the Covid-19 pandemic has the potential to accelerate this process. This is where other actors, including civil society and governments, through for instance patent oppositions, transparency of R&D costs and limitation of anti-competitive abuses, play a crucial role.