The year 2005 marks the end of the transition period for many developing countries with competent pharmaceutical sectors that previously competed in supplying generic versions of patented drugs to least-developed countries (LDCs), thereby inducing price competition and enhancing access to medicines.
India's product patent regime for drugs, which is now five years old, has entered into a phase in which there are distinct changes in the kind of patents sought as well as patent challenges. It shows that the vigour of compulsory licensing as a price-leveraging instrument is incumbent mainly on its economic feasibility. India, without a doubt, recognizes that there is perhaps no industry that relies as heavily on patents as the pharmaceutical industry. And now that the Patents (Amendment) Act, 2005 provides for the Trade Related Aspects of Intellectual Property Rights (TRIPS) regime, it is indeed very important to understand the impact it will have on the $4.5 billion Indian Pharmaceutical Industry representing 1.6% of the global market, and, also considering the fact that patent is a critical issue that impinges upon the life of every common man.
According to the World Health Organization, about 10 million people—most of them in low- and middle-income countries—die needlessly every year because they do not have access to existing medicines and vaccines. Countless others suffer from neglected tropical diseases, such as sleeping sickness, lymphatic filariasis, and blinding trachoma, for which there are still too few safe or effective medicines. Drug companies have traditionally been reluctant to develop drugs for neglected diseases because the patients are too poor to pay for them, so there is no financial incentive for drug development.
The prices of drugs in India are in fact much lower than the prices in other countries like Pakistan, U.K. and U.S.A., where product patents are in force. Ranitidine is sold by Glaxo in India at Rs. 7.20. The same product is sold by the same company in Pakistan at Rs. 65 and in the U.S.A. at Rs. 545. Similarly, the anti-viral drug Aciclovir costs Rs. 33.75 in India while the same drug is sold in Pakistan at Rs. 363.
Under the Patents (Amendment) Act, 2005 patents are now granted both for products and processes for all the inventions in all fields of technology. The other implications for the pharmaceutical sector under this new patent system are: Under Article 34 the onus of proving on the legal complaint that process used by another enterprise is totally different than the patented process would lie with the defendant and he will have to prove that he is not guilty of infringement. (in the 1970 Act, the responsibility was with the patent holder).
This is the broad framework, which will guide the pharmaceutical industry of India in the WTO regime; Patents will be granted irrespective of the fact whether the drugs were produced locally or imported from another country; though the grant of the patent excludes unauthorized use, sale or manufacture of the patented item, yet there are clauses which provide manufacturing or other such rights of the patented item to a person other than the patent holder under Article 31; The patent term will be twenty years from the date of the application under Article 33 of the TRIPS agreement (compared to the seven years under the 1970 Act), which is applicable to all the member countries and thus rules out all the differences in the protection terms prevailed in different countries; It shows that Indian firms view the market potential (in terms of market size and profits involved in such supply, especially if they have to make specific technological investments to produce the drug) of the mechanism much more severely than before, and may be less inclined to engage in such production if their commercial expectations are grossly unmet. The analysis assesses implications of emerging strategies of firms in the Indian pharmaceutical sector for access to medicines both domestically and internationally, and highlights the challenges involved.
The pre-1995 inventions are not eligible for product patenting in India. All product patent applications received during 1995-2005 were categorised as "mailbox" applications and scrutinised after India changed laws to permit product patents in medicines from January 1, 2005. Now all the pending "mailbox" applications (received until 2005) by the Indian Patent office have already been cleared and there are specialised groups in place to analyse sector-specific applications. Right now, patent office is looking at the 2005-06 applications, which are better than the earlier ones. India received approximately 11,000 applications in the mailbox during the 1995-2005 period. A good number of these were challenged as they did not merit patent protection. The backlog is almost over. The new patent applications are of better quality and hence will face less pre-grant oppositions.
In last five years, there have been over 470 pre-grant oppositions and 200 post-grant oppositions. The second phase of India's patent regime will be marked by less pre-grant oppositions and more post-grant oppositions. There has, meanwhile, been an improvement in the quality of patent examination due to the specialised systems that are in place now. The next phase of the patent regime is also likely to see better enforcement, according to the head of medical affairs, Asia Pacific Region of US drug major Merck & Co Naveen Rao. "The industry has more clarity on patent laws and the country will gradually move towards a better system", he said. Over 80 per cent of India's patent applications are from foreign firms. Of the 6,000 plus applications that reached patent offices in 2008-09, only 17 per cent were Indian filings.
Irrespective of the competition, because of the socio-welfare implication of the pharmaceutical prices, all over the world other than in the US, the prices of medicines are subject to government regulations. In France and Italy, the manufacturer's price must be approved for a product to be reimbursed by the social insurance programme. In the absence of such health security schemes and with the very low purchasing power of the people in India, the Government of India has brought certain essential drugs under the price control. The price control along with the amendment of patent laws in early 70s resulted in a declining impact on prices. Based on India's own experience and on a selective comparison of prices of a few drugs in countries where product patents is in force, intellectuals forewarn that the stronger protection would result in increase in the prices of the drugs and thus medicines will be inaccessible to common people.
One of the major advantages of the universal system is that, it would facilitate access to new medical products. While the welfare loss due to the possible price increase in the post WTO regime is highlighted in most of the studies, the welfare loss due to the non-introduction of new-patented drugs in India due to the weak protection regime is not discussed adequately. In this context, one of the advantages of the product patents is that the stronger patents will provide access to the latest inventions in drugs, which the developed world will not shy away from introducing in India. It is observed that, though Pakistan also has process patent regime, some of the new drugs that were introduced in Pakistan by the MNCs were not introduced in India at all even though these MNCs were present in the country. This is because the MNCs feared about the competition from the counterfeit products in India, whereas in Pakistan MNCs are stronger than the domestic firms.
But it also argued that since the new patent regime would either raise the prices of new drugs to the international level or make the Indian population wait until the patent expires and drugs become cheaper, they in any case will be consuming old drugs, and the purpose of getting quicker access to new drugs will be defeated. So actually prices would increase without much welfare gains in terms of access to new drugs.
It is also possible that higher prices charged by the MNCs may not really affect the consumers because; the research activities undertaken by the MNCs are totally different and not pertain to the Least Developed Country (LDC) market. Only 13 of 1373 new molecules developed during the last 30 years target diseases of tropical countries like India. Hence it can be said that the percentage of population affected by the price rise would be very less.
For instance, the UK multinational Glaxo was faced with several local competitors on the first day when its subsidiary marketed its proprietary drug Ranitidine in India, because the competitors enabled by the weaker patent regime were ready with the indigenous version of Ranitidine.
The more recent case of adapting the technology developed elsewhere to local conditions enabled by the process patent regime is the case of Viagra introduced by Pfizer. A patent for this drug was granted by the US patent office to Pfizer in 1993. The company spent about 13 years and several millions of dollars to develop the drug. Apparently what took Pfizer 13 years and millions of dollars in R&D to perfect, the Indian firms have managed to do in weeks, for a fraction of costs. Of the 30 raw materials used in this drug, 26 are available locally. Utilising the information that was available on the Internet, US patent records and industry literature some of the Indian firms started their work on the indigenous version of Viagra, which was available in the market within weeks of Pfizer formally launching the product. Absence of stronger protection in the chemical and pharmaceutical sector in developing countries like India is cited as one of the reasons that holds back foreign investment especially from countries like the US, Japan and Germany . However, with the change in scenario, domestic companies, which had invested in biotechnology, were finding the lack of protection as a problem to commercialise their innovations, because in DNA recombinant technologies, novelty is the product. The process of discovery is complicated, but once the product is obtained, its propagation can be achieved in many ways.
There has been an apprehension that in the wake of globalisation the focus of research in the LDCs could change and the major R&D firms may be more involved in drug discovery that addresses the global diseases and neglect the research that is more relevant for the LDCs. In this context Amit Sen Gupta, of the National Working Group on Patent Laws, adds: I think for me it is frightening that ten or twelve people today are deciding what are the kind of drugs that need to be researched because clearly those drugs are being researched not because of the health needs but based on how much profits they can bring in. That is why you have research money going into drugs for baldness or Viagra but the last drug for tuberculosis was 30 years back. When you deny people cars or washing machines they don't die, when you deny people drugs they die and they die in millions.
The strength of the Indian pharmaceutical industry is in reverse engineering. Such units by utilising the provisions under compulsory licensing and exceptions to exclusive rights under the TRIPS agreement should aim at producing the generic version of the patented product and those that are nearing patent expiry. Such firms should also be engaged in research leading to new drug delivery mechanisms and in identifying new uses of existing drugs. In this context, it is also essential to protect the innovations that have been introduced by the technology spillovers. In order to develop domestic innovations, developing countries require utility models or petty patents. These petty patents can be available for a shorter period of time for process innovations made over an existing product. The TRIPS agreement leaves members to introduce such legislation, as there are no specific rules on this subject. Such patents will encourage the small firms.
It is true that the impending WTO regime has stimulated the R&D investment in India. Some of the big units have started strengthening their R&D and have also filed number of applications for patents. One of the concerns regarding product patents is the access to patented products. Some of the provisions within the TRIPS agreement mentioned in the above paragraphs clearly indicate that price controls could be imposed on the patented products. However, exemptions from price controls has been suggested by the government for the products that are produced domestically using the domestic R&D and resources and are patented in India. Such exemptions will keep the prices high and make access to the drugs difficult.
Comprehensive solutions are thus needed to increase both access to existing medicines and research on neglected diseases. These solutions must involve strengthening health-care systems increasing financial flows for the most pressing public health crises, and better matching our research and development efforts to the needs of the poor.
As far as India's pharmaceutical industry is concerned, the path currently is being followed by international standards for patent protection moves inevitably toward a clash between public health and intellectual property. Despite the Doha Declarations affirmation of public health as the paramount concern, it is not clear how such an objective would be achieved, because generic substitution is so instrumental in the effort to improve drug accessibility. Stringent intellectual property protection for pharmaceuticals would only retard public health initiatives in the coming years. So only by keeping in mind the true objective of drug innovation of saving lives and achieving a better understanding of the modern world health situation can we hope to effectively ensure the safety and well-being of the people of India and the world's population as a whole in the ongoing century.
Sudpkata Sarkar http://www.legalserviceindia.com
Associate Professor of Law,
KIIT University, Bhubaneswar, India,
Research Papers: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=1189281