TRIPS, compulsory licensing, and retaliation: Implications for access to essential medicines in the long term

Can the TRIPS agreement and the compulsory licensing provision deliver in the effort to ensure accessibility to essential medicines by the poor? This paper uses economic analysis to answer this question. Access to essential medicines for the poor in developing countries is critical to healthy development and has been identified as one of the most important channels through which the Millennium Development Goals are to be achieved. Since the adoption of the Doha Declaration, compulsory licensing has been one way in which some developing countries have attempted to make access to essential medicines possible. However, pharmaceutical companies can perceive this to be a violation of intellectual property rights and a threat to their monopoly status. This paper applies the theory of repeated games to determine to what extent the TRIPS agreement is self-enforcing in the long term. We find that the viability of the agreement will depend on its flexibility and responsiveness to anything that changes the incentive to either violate or to abide by the agreement. We examine the implications for trade policy and trade negotiations strategy, as well as for advocacy in view of our findings. The paper also discusses legal and structural options for developing an effective compulsory licensing system and utilizes the analytical approach taken to shed light on the feasibility of these options. Finally, we assess potential gains in terms of the increase in access to essential medicines in developing countries that a restructuring of the compulsory licensing system might engender.