In addition to stockpiling existing antiviral drugs, the U.S. government is promoting the development of new antiviral drugs to combat influenza. Prior to 2006, Roche was the exclusive manufacturer of Tamiflu and significantly struggled to meet the strong demand for the patented drug. The Tamiflu production shortage in 2005 prompted both international and domestic pressures on Roche to ease its patent monopoly and permit other companies to manufacture generic versions of the drug. It was believed that such action would help to increase supplies of the flu treatment to meet the backlog of orders, as well as make the drug more affordable. However, we are concerned that the U.S. drug supply is increasingly vulnerable to a variety of increasingly sophisticated threats. The rise in global demand for Tamiflu has contributed to the production and sale of illegal, fake Tamiflu. Those same arguments were made in the case of Tamiflu. In 2006 and 2007, Roche expanded its capacity to manufacture Tamiflu by contracting with 19 external production partners. Due to its efforts to sublicense its patent rights to manufacture Tamiflu to these other drug companies, Roche has increased production of the drug to over 400 million treatments annually (as of April 2007)—an amount that exceeds the existing orders for Tamiflu from governments and corporations. While the concern over the then-limited supply of Tamiflu has largely been addressed by Roche's substantial manufacturing expansion, the issue of intellectual property rights potentially conflicting with public health needs may again arise in the future. Therefore, this report will now examine the ways in which a patented drug's production may be increased, either without a patent holder's consent or with the patent holder's cooperation. The primary legal mechanisms to accomplish permissible encroachment upon a patent right include (1) compulsory licenses under a government's statutory authority to issue them; (2) compulsory licenses pursuant to an international treaty that grants this right; and (3) voluntary licensing agreements negotiated between the patent owner (or patent licensee) and third parties. 28 U.S.C. § 1498(a). TRIPS and Compulsory Licenses

The Agreement on Trade-Related Aspects of Intellectual Property Rights ("TRIPS Agreement") is an international agreement on intellectual property that is one component of the treaties that created the World Trade Organization (WTO) in 1995. As many nations attempt to stockpile antiviral drugs to prepare for the possible bird flu pandemic, the TRIPS "national emergency" provision for compulsory licenses has garnered public interest as a possible way to increase the production and supply of Tamiflu. In addition, Roche has donated "rapid response" supplies of Tamiflu (more than 5 million treatment courses) to the World Health Organization for establishing regional stockpiles to help contain or slow the spread of a pandemic. Finally, Roche has agreed to arrange for special pricing for government orders and to reduce the price of Tamiflu for low income countries.
The potential for a worldwide influenza pandemic caused by bird flu has generated public interest in the availability and affordability of influenza antiviral medications such as the prescription drug Tamiflu. The possibility of a pandemic flu outbreak has contributed to a surge in orders for Tamiflu, as countries attempt to stockpile sufficient countermeasures. In 2005, there was considerable concern that the owner of the exclusive right to manufacture the patented drug, the Swiss pharmaceutical company Roche, Inc., lacked the production capacity to meet the needs of these governments worldwide. In response to the heightened demand for the drug, as well as faced with threatened abrogation of its patent rights by U.S. politicians and government officials in other countries, Roche significantly boosted Tamiflu production in 2006 and 2007 by voluntarily signing licensing agreements with 19 external contractors in 9 different countries to manufacture the drug. This expansion in manufacturing capacity has increased production of the drug to over 400 million treatments annually—an amount that, according to the company, is sufficient to fulfill its existing orders (as of April 2007) for Tamiflu from governments and corporations. In addition, Roche has donated "rapid response" supplies of Tamiflu (more than 5 million treatment courses) to the World Health Organization for establishing regional stockpiles to help contain or slow the spread of a pandemic. Finally, Roche has agreed to arrange for special pricing for government orders and to reduce the price of Tamiflu for low income countries.
This report examines the role that intellectual property rights play in affecting the availability of a patented drug such as Tamiflu during public health crises. The report also explains one legal mechanism for increasing a patented drug's production without the patent holder's consent: governments may abrogate a pharmaceutical company's patent rights by issuing compulsory licenses to other drug companies to manufacture generic versions of the drug. Such option is available to countries under the Trade-Related Aspects of Intellectual Property (TRIPS) Agreement, a component of the treaties that created the World Trade Organization (WTO) in 1995. The U.S. government's authority to declare compulsory licenses is Section 1498(a) of Title 28 of the U.S. Code. Other legal avenues to increase the supply of, and lower the price for, a patented drug include voluntary licensing agreements between the drug's patent holder and other companies for manufacturing or distributing the drug. In the case of Tamiflu and the avian influenza antiviral drug supply, Roche's willingness to sublicense its patent rights to several manufacturing partners has helped to lessen the concern over intellectual property rights hindering efforts to prepare for and respond to an influenza pandemic.