Compulsory licensing provision under Indian Patents law : A historic move to make drugs affordable

Though this topic is not related to Entrance Exams or MCQs, we are giving it here, as we feel that this is a significant step in Indian Health Care Delivery

From http://www.thehindu.com/opinion/op-ed/article2991869.ece

The government’s decision to grant a compulsory licence for the manufacture of an important anti-cancer drug should be the first step towards making available essential drugs at little or no direct cost.

India’s use of the compulsory licensing provision under its patents law for the first time to make the patented cancer drug Nexavar available at affordable prices is an essential, although belated step to curb the mounting cost of drugs.

The grant of the licence by the Controller-General of Patents, Designs and Trade Marks to Natco Pharma for manufacture of the drug Sorafenib Tosylate (Nexavar) to treat liver and kidney cancer is a landmark event, consistent with the test of public interest that governs such a measure. Under Section 84 of the Indian Patents Act, 1970, any person can make an application to the Controller for a compulsory licence after the expiry of three years from the date of sealing of the patent, on the following grounds — non-fulfilment of reasonable requirements of the public, or non-availability of the invention to the public at a reasonable price. The Trade-Related Aspects of Intellectual Property Rights and the Doha Declaration provide for compulsory licensing in specified circumstances, including concerns on public health or public interest.

Licence till 2021

Mere application of the test of reasonable price in a country with a weak social health insurance infrastructure provides a strong argument for compulsory licensing in the case of Nexavar, the patent for which is held by the German multi-national company, Bayer. At present a month’s treatment regime of 120 tablets costs Rs.2.84 lakh, but manufacture under compulsory licensing will slash it to Rs.8,880. The Indian applicant has been granted the licence till the expiry of the patent in 2021.

The use of compulsory licensing is bound to raise the temperature in the pharmaceutical industry and be dubbed a move that will stifle innovation. But that would be ignoring the point that it is perfectly legal, and is in fact provided for in the patents regime to balance public interest and corporate profits. Use of the provision has been advocated by the High Level Experts Group (HLEG) of the Planning Commission headed by Dr. K. Srinath Reddy, to address the issue of lack of access to essential drugs and affordability.

The question of drug access and prices has become particularly important after India changed over from a regime that recognises process patents for medicines to one of patents for products, since 2005. The effects are expected to be felt most acutely in the case of new drugs, notably those relating to cancer, HIV/AIDS and psychiatric conditions. Further, the Planning Commission HLEG has drawn attention to more possible negative outcomes if enhanced provisions of TRIPS Plus, which would enable “evergreening” of patents beyond 20 years, are applied.

Producing drugs is, no doubt, an expensive business, and significant funds are invested in research and rigorous testing. The drugs developed through this process have great impact on the well-being of people. Yet, patents can also produce monopolies, and thus immense power for corporations. It is important to remember that patents deal with intellectual property, which, unlike other property, produces no conflict over use. Use by one person does not cause any rivalry with another and thus has no marginal costs.

Medical prize fund

The economist and Nobel Laureate, Joseph E. Stiglitz summed up the problem in the British Medical Journal five years ago thus: Restricting the use of medical knowledge not only affects economic efficiency, but also life itself. We tolerate such restrictions in the belief that they might spur innovation, balancing costs against benefits. But the costs of restrictions can outweigh the benefits. He cited in particular, the discovery and patenting of genes linked to breast cancer, a development that would, in countries without a national health service, deprive many poor women access to the expensive test. As a departure from the corporate-led pathways of innovation, which often invest in lifestyle drugs research rather than life-saving formulations, Professor Stiglitz advocated a medical prize fund to spur innovation, with large rewards for discoverers of cures or vaccines for scourges such as malaria, and smaller rewards for others that are similar to existing drugs. Such intellectual property would then be open to generic drug manufacturers.

Issue of pricing

In the absence of effective intervention by the government, drug pricing can produce expensive distortions. Indians consumed about Rs.56,000 crore worth of medicines through private chemists in the open market, going by March 2011 figures submitted to the Planning Commission. What is revealing is that the price gap between government procurement of drugs and retail sale can be staggeringly wide — between 100 per cent and 5,000 per cent. Moreover, the price index for medicines has parted from the index for all commodities and moved steadily upward, since 1997-98. This is clear evidence of unethical pricing of many medicines for rising profit, using patents as a cover, as well as lack of regulation.

The bold move on compulsory licensing should be a first step in a process of reform and price controls that will make available essential drugs to all Indians at little or no direct cost. Drawing up a strong essential drug list to suit the current national disease profile is important. The public sector pharmaceutical industry and its capability to produce generic drugs have a strong role to play in such a plan, and deserves encouragement to revive its fortunes. This initiative is crucial to the universal health coverage that the Indian government wants to provide to all its citizens in coming years, starting with the Twelfth Plan. It should also serve as a clear signal to pharmaceutical companies to stop extracting staggering profits from a market with weak social support mechanisms.

anant@thehindu.co.in