The Effects of Compulsory Licensing: A Case Study of HIV Drugs

Abstract

Compulsory licensing is a legal mechanism that allows governments the use of patented medicines without the owner's consent, subject to conditions and compensation, to meet public-health needs. Despite its policy relevance and increasing use, empirical evidence on its market effects remains limited. This study examines the association between compulsory licensing and the commercial accessibility and affordability of HIV medications across 11 countries from 2002 to 2022. We combine quarterly data on drug sales and prices from IQVIA with implementation dates from the TRIPS Flexibilities Database, focusing on 21 HIV drugs subject to at least one compulsory license. Using a staggered difference-in-differences design, we estimate the average treatment effect on the treated (ATT) of compulsory licensing on drug consumption and prices, under a parallel trends assumption. We find an economically meaningful increase in retail and hospital sales following the implementation of compulsory licenses, amounting to approximately 21% of a standard deviation in the countries that implemented them. In addition, we estimate a reduction in prices of approximately 19% of a standard deviation. These associations are consistent with compulsory licenses having contributed to improved availability of HIV drugs through commercial channels, with meaningful effects on prices. Our estimates do not capture—and therefore cannot rule out—potential additional effects on access via public importation or production, donations, or NGO-led supply chains.