TWN Info Service on Health Issues (Feb19/02)
18 February 2019
Third World Network

Patent protection not at the cost of local manufacture

K M Gopakumar

The amendment to the Drugs Price Control Order will undermine safeguards

When product patent protection was introduced in India for pharmaceutical inventions, one of the anticipated consequences was that it would undermine the local manufacturing of patented medicines — either through importation or prevention of local manufacturers from producing the patented medicines in the normal course. This apprehension has come true.

Transnational companies who enjoy patent monopoly on new medicines seem to be more comfortable with importing their patented medicines rather than producing it in India.

The situation just got worse with a recent amendment in the Drugs Price Control Order (2013), where patented products under the Indian Patents Act are exempted from price control for five years from the date of commercial marketing by the company. This is an anomaly the Government needs to address.

Indian lawmakers had incorporated a few safeguards in the amended Patents Act to discourage the patent holder from using the patent as an import monopoly tool. Section 83 of the Patents Act set the general principles on the “working of patents” as: (a) that patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay; (b) that they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article.  These principles are further strengthened in the Patents Act by making non-working of patents in India for three years from the date of the grant of the patent as a ground for granting a compulsory licence (where another company is allowed to make the product on payment of royalty to the innovator).

In fact, the Patent Office, Intellectual Property Appellate Body (IPAB) and the Bombay High Court interpret the term “worked in the territory of India” as local manufacturing and not the commercial availability.

Practical constraints

The latest amendment to Para 32 of the Drugs Price Control Order 2013 (DPCO) undermines the above-mentioned legislative objective through administrative action. The amended Para 32 (i) reads: “A manufacturer producing a new drug patented under the Indian Patents Act for a period of five years from the date of commencement of its commercial marketing by the manufacturer in the country”. This effectively means the DPCO provisions cannot be applied to control the price of patent-protected medicines. This would clearly incapacitate the government to control the price of patented medicines even if they are classified as essential medicines and also provide the patent holder a licence to import without fear of price control. The original Para 32 provided an exception to patented medicines from price control on the satisfaction of two conditions. First, a new drug patented under the Indian Patent Act, 1970 (39 of 1970) (product patent) and not produced elsewhere. Second, that the patented medicines are developed through indigenous research and development. Thus it addressed two policy objectives, viz, the promotion of domestic R&D and the promotion
of domestic production. The exception complemented provisions of the Patents Act and ensured policy coherence.

People’s health over profits

The amended Para 32 of DPCO is also impractical to implement. Since there are multiple patents on the same molecule/medicine it would be difficult for the National Pharmaceutical Pricing Authority to make a determination on whether the medicine falls within Para 32. This would lead to an easy exit route for companies to seek exemption from DPCO and defeat its very purpose.

Legally speaking, DPCO does not overrule the provisos of the Patents Act. However, when a compulsory licence is sought on the lack of working in India, the patent holder may cite the DPCO provision to justify that the commercial availability satisfies the requirement of working in the territory of India. The patent holder may argue that the Government’s support was evident in the amendment to Para 32, thereby vindicating their (innovator’s) stand that commercial availability satisfied the working requirement in the Patents Act.

The Government should not undermine the legislative intent behind Sections 83 and 84 of the Patents Act. In fact, it should uphold the legislative intent, i.e. people’s health over the profits of pharmaceutical companies.