Compulsory licence: Only solution for drug pricing?

By Manoj K Singh, Singh & Associates, Advocates & Solicitors
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Acompulsory licence (CL) is granted by the government to a third party to use a patented invention so as to prevent the patent holder from abusing or misusing its rights to the detriment of public health.

Manoj Singh
Manoj Singh

In past 10 years, governments of developing nations such as Zimbabwe, Malaysia, Zambia, Indonesia, Thailand and Brazil have invoked compulsory licensing to increase patients’ access to medicines. India granted its first CL in 2012.

The main rationale behind the grant of a CL in India is to ensure: the availability of an adequate amount of the patented product; the commercial exploitation of a patented invention in India and not merely importation into India; the availability of the patented product to the public at reasonable prices; and a reasonable advantage for the patentees for their patent rights.

Legal provisions

Under section 84(1) of India’s Patents Act, 1970, as amended, an application for the grant of a CL can be made to the Controller of Patents at any time after the expiration of three years from the date of the grant by any person interested on the grounds that: (a) the reasonable requirements of the public with respect to the patented invention have not been satisfied; or (b) the patented invention is not available to the public at a reasonably affordable price; or (c) the patented invention is not worked in the territory of India.

Under section 84(6), the controller considers the following factors when an application for a CL is filed: the nature of the invention, the time which has elapsed since the sealing of the patent and the measures already taken by the patentee or any licensee to make full use of the invention; the ability of the applicant to work the invention to the public advantage; the capacity of the applicant to undertake the risk in providing capital and working the invention, if the application were granted; whether the applicant has made efforts to obtain a licence from the patentee on reasonable terms and conditions and such efforts have not been successful within a reasonable period, ordinarily not exceeding six months.

Under section 92, a CL may be granted by the central government any time after the sealing of the patent in a national emergency or a circumstance of extreme urgency or a case of public non-commercial use, which may arise or be required due to a public health crisis relating to an epidemic.

Under Section 92A, a CL may be granted to permit the manufacture and export of patented pharmaceutical products to any country having insufficient or no manufacturing capacity for the product to address public health problems.

Recent developments

In a move that alarmed the pharmaceutical industry, India’s first CL – for Bayer’s patented cancer drug Nexavar – was granted on 9 March 2012. The grant permits Natco to manufacture and market a generic version of Nexavar at an affordable price of ₹8,800 (US$160) for 120 tablets per month in return for paying a 6% royalty on sales to Bayer. The CL was granted on the grounds in section 84 of the Patents Act.

The Indian government’s recent announcement that the Department of Industrial Policy and Promotion is exploring a proposal from the Health Ministry to issue CLs for three more anti-cancer drugs has been cheered by health activists and patients across the country.

The drugs concerned are Roche’s Herceptin (trastuzumab), a biotech drug for the treatment of breast cancer; Bristol-Myers Squibb’s Sprycel (dasatinib) for the treatment of leukemia; and Ixempra (ixabepilone) for the treatment of breast cancer.

Mumbai-based BDR Pharmaceuticals International has applied to the Indian patents office for a CL on dasatinib, proposing to sell generic versions at much lower prices.

What’s next?

Under a new draft policy by the Department of Pharmaceuticals, patented drugs would be subject to government pricing controls. Once regulated by the government, the provision to issue a CL on the basis of being non-affordable would no longer be relevant, as drug cost would be considered to be reasonable during pricing control.

The CL provisions under the Patents Act are available as a remedy against the abuse of patent rights, non-working of patented inventions and to address the public health concerns in India. The concept of CL comes into play when the patented invention is not commercialized in India or non-affordable for general consumers or not manufactured in requisite amounts. Currently, the CL is seen as the best way of improving access to costly patented drugs in India while creating an atmosphere that harnesses R&D.

Interestingly, while the provisions and procedure are detailed under the law, only one CL has been issued in India to date. The issue is not how long it will take to halt the predatory pricing of drugs by pharmaceutical giants but that the process has begun.

Manoj K Singh is the founding partner of Singh & Associates, a full-service international law firm with headquarters in New Delhi.

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