Compulsory licensing (CL) is a method used by the government which allows a domestic company to manufacture and sell a generic version of a patented drug with or without the consent of the patent-holder. Sections 84 and 92 of the Indian Patents Act, 1970, provide for Compulsory Licensing in cases where the patented drug is unavailable, unaffordable, or if there are problems with its supply in India. Compulsory Licensing reduces the price of a drug manifold, and is a practice as a welfare step in many developing countries.

The first cancer drug to be issued a compulsory license in India was Bayer’s Nexavar (sorafenib tosylate), a drug for liver cancer, last August. After the Compulsory License, Nexavar is available for Rs 8,880 per pack of 120 tablets (a month’s dose), over 95% cheaper than its earlier price. More recently, the Department of Industrial Policy and Promotion (DIPP) here, has started the process of issuing Compulsory Licensing for the three most commonly used anticancer drug namely

  • Trastuzumab (or Herceptin, used for breast cancer),
  • Ixabepilone (used for chemotherapy) and
  • Dasatinib (used to treat leukaemia).

These three are more expensive than Nexavar, costing Rs 1, 10,000, Rs 70,000-80,000 and Rs 15,000 respectively for a month’s dose. Doctors still say after the Compulsory License even, the Drugs are very expensive for general public who can’t afford them. From this decision, the most common reaction from Big Pharma (including mainly Roche and BSK; as for GSK, it has already reduced prices for its Breast cancer drug Tykerb, hence is out of the compulsory licensing decision of DIPP at present) is to cry foul and threaten the Indian Government about the repercussions of its decisions to issue CLs. Those threats have rarely worked in the past and are unlikely to work in the future.

The Pharma Biggies are crying a havoc on their IPRs because according to them Indian Law provides for a compulsory license only if any of the three conditions are met 1) National emergency 2) Cases of extreme urgency and 3) Public non-commercial use; and the Nexavar step does not conform to either of these.

Such a belief is wrong as TRIPS does not specify any conditions for imposition of a Compulsory license except that ‘voluntary licensing’ should have been tried and the CL should only be for domestic purpose and not for exports. Rest has been left to the Governments of the developing countries as to when is the requirement for Compulsory Licensing. Therefore, the Indian Patent Act does specify more than what has been interpreted by the Pharma MNCs.

In India Sections 84, 91, 92, and 92A of the Patents Act 1970, enumerate the various circumstances under which compulsory licenses may be granted. Section 84 of the Act specifies the following requirements:
(a) if reasonable requirement of the public have not been met; or
(b) the drug is not ‘reasonably affordable’ as being marketed by the patentee; or
(c) patented invention has not been worked in India.

Then comes Section 92 which provides for the grounds believed by the MNCs, in short national emergency, extreme urgency, or public non-commercial use. It also states Compulsory Licensing in cases of epidemics and endemic. Although here Cancer cannot of course be categorized as an epidemic or endemic, but can be categorized in the second category provided by the Section 84. These drugs now targeted by the DIPP are not reasonably affordable by the public. Since the drugs are still under the scanner what is suggested here is to bring into use more often the present provision under which all ill-affordable drugs can be Compulsorily Licensed. In this manner the term ‘Compulsory Licensing’ which sounds more taxing, will convert into ‘Welfare Licensing’.

To analyze the Welfare Licensing concept here, I would like to expand the reasons (more pro-consumer for sure) for CL. Following reasons come to fore:
(i) to ensure massive production of patented products like Drugs to cure a disease – this basically is to ensure that the demand of the drug is met and the Patentee does not assume dominance through price fixing tactics;
(ii) as a measure towards fair competition in market and avoid cartels and domination of one Pharma Firm;
(iii) and to allow non-commercial use of the Patented drug in public interest.

All these are what we call ‘Abuse of Patent Rights’ and the Patentee can not be allowed to do the same in cases of medicinal drugs at least, as a healthy citizenry is  the basic requirement of any developing nation . Licensing procedure also needs to be effective, transparent and reasonable towards the Patentee, so that these patent rights are not abused by Government in the name of CL also.

CL is a method adopted in TRIPS for Welfare motive only, and this has to be achieved but the effect it has on the Pharma Industry cannot be left out in our discussion. The problems cited by the Pharma Companies with the CL concept and their enduring losses due to the methods adopted by different developing countries is also a concern which needs to be addressed. Frontline, an Indian magazine came up with an issue last year, its cover story dedicated to Indian Patent law covering medicinal drugs and how that affects the pharmaceutical companies (Vol 29: No. 08, Apr 21 – May 04 2012).

Amit Sengupta’s article “Patent to Plunder” in the issue highlighted how India’s efforts to produce and supply life-saving drugs at affordable prices were facing challenges from multinational companies who were trying best to “evergreen” their patents. He has discussed about the current regime of IPR seeking  to exercise monopoly control over the production and reproduction of knowledge. As a result the drugs needed to treat a range of diseases which are fatal, are being denied to those who need them the most merely because they cannot pay for them. The true reason to this is not that these medicines cannot be produced at a reasonable cost but because a few corporations treat the knowledge as their property and sell these medicines at exorbitant prices. They also use the monopoly created by patents to prevent other companies from producing and selling these drugs at much lower prices.

After the completion of the 10 year transition period granted to India under the WTO Agreement of 1999, the Patents Act was amended in 2005. Product Patent regime was adopted but not without sufficient health safeguards. The above mentioned sections  of the Patent Act were crafted very carefully in order to disarm any patent abuse tactic. The conditions provided in the Indian Act, whereby any CL may be granted are sufficient enough to fulfill the anti-trust objectives along with the health requirements of the nation. The distress in the Pharma sector is seen, specifically to mention Novartis which had been trying to convince the Government to eliminate or weaken the Section 3(d) of the Act so that it can patent its drug Glivec.

As KMPG International had enumerated the consequences of our first CL to Nexavar, that India’s credibility will wane in terms of a weak intellectual property regime. Innovator companies will not feel secure enough to invest in a country where their extensively researched products (incurring millions of dollars) could be subject to such strict compulsory licensing.  The Search Engine also says that the decision of “Government of India (GOI) has decided to kill the domestic research pipelines with this move, because a company would not risk the huge expenditures involved in research when with a single stroke the GOI can allow another company to copy the product legally at a negligible cost”#.

Here the threats are more if the regime is straining the relations of Indian companies with their Global counterparts; as a result of which there would be no technology collaborations and the research sharing will be hampered. We can’t risk to lose the Global R&D assistance at this stage of development.

These strategies might include could local manufacturing or sourcing of products in line with costs in that particular market, rational pricing and ensuring a wider distribution network to avoid any trigger for government action, and others as have already been adopted by many MNCs. An example is The Pharma giant Roche announcing plans to cut prices of three of its patented cancer products in India by getting them made locally, soon after the country’s compulsory license decision.

Although most of the Pharma products on Indian Essential Drugs list are not patented, this regime will prove to be beneficial in coming age with newer diseases and their resistant streams. The Pharma Sector will adapt with it faster than can be predicted, therefore the problems created by wrong posing debates and press releases and MNC lobbies should be controlled to allow a Welfare Licensing Scheme be realized rather than Compulsory Licensing whereby both Government and Pharma Sector ensures a healthy world, both hand in hand.