Compulsory Licensing as an Instrument to Tackle High Medicine Prices: A Realist Review of Industrial and Health Consequences

Although compulsory licensing of medicines is traditionally discussed in the context of low- and middle-income countries tackling high prices, it has recently sparked debate in several high-income countries. This study aims to examine the industrial and health consequences of compulsory licensing when applied by a high-income country. Our literature review found that the impact of compulsory licensing is challenging to predict as it can have multiple (opposing) consequences in terms of economic activity, patient outcomes and public health. Compulsory licensing can, under particular circumstances, serve as a lever of industrial policy in a country that wishes to develop its domestic generic pharmaceutical industry. However, originator pharmaceutical companies and other industries may reduce investment, which can be negative for countries with a high presence of innovators, adversely impacting long-term economic activity. Compulsory licensing may also induce state retaliation against the license-issuing country. From a health policy perspective, compulsory licensing likely increases patient access to expensive medicines and frees up resources that can be invested in other (health) programs. However, pharmaceutical companies may delay medicine launches or cancel clinical trials in the license-issuing country. Although there are benefits resulting from a credible threat to use compulsory licensing, the overall desirability of actually using it depends on the specific context and needs to be assessed on a case-by-case basis.