Prices of Patented Medicines in India

Source: Economic & Political Weekly | Vol. 53, Issue No. 22, 02 Jun, 2018

by Sharmila Mary Joseph  & James J Nedumpara

To Regulate or Not to Regulate?

Medicines with valid patents generally enjoy exemption from price regulation in most countries. In India, the Drugs (Prices Control) Order lays down the rules for regulation of prices of medicines through a National List of Essential Medicines, inserted as Schedule-I of theDPCO. While any medicine that is included in Schedule-I automatically qualifies for price regulation, theDPCO exempts patented medicines that have been developed indigenously from price control for a period of five years.Can patented molecules for emerging as well as infectious diseases be brought under price regulation in India?

Pharmaceutical pricing, specifically the pricing of patented medicines, is a keenly debated issue, especially in the context of making essential medicines affordable, accessible and available to the public. While the determination of the affordability of a medicine is difficult and may depend on local and national parameters, the World Health Organization (WHO) holds that “‘affordable and fair’ price is one that can reasonably be funded by patients and health budgets and simultaneously sustains research and development, production and distribution within a country” (WHO nd). Providing medicines to the public at affordable prices is a key goal driving the public health policy design in many countries (Cockburn et al 2014).

Governments try to balance their pro-industry and welfare roles, namely, promoting and encouraging innovation in the discovery of new medicines, and making such new medicines affordable by way of various legislative measures. While governments provide incentives and protection to innovators through the instrumentalities of patents, they also strive to make these inventions “available at the marginal cost of production to maximise the benefits from diffusion and dissemination” (Subramanian 2004). The trade-off between patents and pricing controls needs to be fine and delicate, and governments need to find an appropriate balance between the rights of patentees and the requirements of the patients (Watal 2001). This article seeks to examine the need and the rationale for price regulation of patented medicines in India in the context of the high prices of such medicines.

Innovation versus Affordability

Pharmaceutical patents grant protection to the patentee for the duration of the patent term. The patentees enjoy the liberty to determine the prices of medicines, which is time-limited to the period of monopoly, but unaffordable to the public (MSF 2003). Such patent protection offered to the patentees is believed to benefit the public over the longer term through innovations and research and development (R&D), although it comes at a cost, in the nature of higher prices for the patented medicine (Hopkins 2006). While the patent regime and price protection—through a legally validated high price for the medicine during the currency of the patent—provide the patentee with a legitimate mechanism to get returns on the costs incurred in innovation and research (Winegarden 2014), it puts a huge burden on the public’s purchasing power in accessing these patented medicines.

It is nevertheless held by patent supporters that patent protection, while incentivising the time and capital invested by the innovator, also serves to put in public domain the knowledge thus gained at the end of the patent period (Lybecker 2011). Notwithstanding this argument, debates in developing countries revolve around the aspect of pharmaceutical patents entailing substantial costs to the public.

Despite the market-distorting effect of patents manifesting as high prices, some consider patents as “necessary incentives for innovation” (Strand 2014). The pharmaceutical industry perceives the right to patents and protection of intellectual property rights (IPRs) as “essential” requirements for enabling adequate investments for the discovery of new medicines and new molecules, and for “empowering the development of a vibrant generic market” (WHO 2005). The industry, therefore, believes that a system where IPRs do not guarantee adequate compensation will reduce the incentive to invest and research (Mercurio 2007).

In the pharmaceutical market setting, where the ability of patients to buy medicines is limited on account of “third-party decision-making” by the doctor, the entry of patented medicines has caused further imperfections. The monopoly rights enjoyed by the patentees “drive the prices up dramatically,” much to the misery of the patients (Kapczynski 2013).

From the Lab to the Market

The drug discovery and development process is complex and complicated (Vertinsky 2013). The long-drawn-out process may take 15 to 20 years, beginning in the laboratory with the discovery of a new molecule, after which there is a long process of chemical development, optimisation and pharmacological development, which might take about two–three years (WHO 2006). It then passes on to the pre-clinical development stage, which may last one–two years, and later to animal trials and several phases of clinical trials. On satisfactory completion of the trials and on reasonable establishment of therapeutic efficacy and safety, the drug is ripe for marketing approval and for launch in the market for use by patients (WHO 2006). However, there are attritions at every stage, such that only a small fraction of new molecules discovered actually reach the market; most fail to reach the market (Grabowski 2002).

A recent study conducted by the Tufts Center for the Study of Drug Development, Tufts University, Massachusetts has computed the average cost for development and marketing approval of new drugs as $2.6 billion, based on an examination of 106 drugs developed between 1995 and 2007 (Economist 2014; Tufts Center for the Study of Drug Development 2016). The study has been criticised as the calculations include the cost of capital (almost $1.2 billion), and cost on account of development of failed compounds earlier in the development chain. Further, subsidies, research grants and tax breaks provided by governments for R&D activities have not been reckoned in the calculations (Avorn 2015). The “mythic costs of R&D,” it is argued, support “a wealthy industry that gives new medicines with few or no advantages and then persuades doctors to prescribe that patients need these medicines” (Light and Warburton 2011). Such unethical practices unfortunately only serve to cause erosion of patients’ savings, rather than elongate their lives or alleviate their sufferings.

Pharmaceutical Patents and TRIPS

The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) lays down specific criteria and guidelines on the subject of patenting, “when the invention is new, involves an inventive step and is capable of industrial application” (Article 27).1 Article 33 of the TRIPS agreement allows a period of 20 years of patent protection from the date that the patent application is filed. The TRIPS agreement came into force on 1 January 1995. Further, the declaration of “TRIPS and Public Health” adopted at the Doha Ministerial in 2001 articulated the use of compulsory licensing provisions and parallel importing by member countries in the interest of public health.2

Developing countries like India could utilise the grace time until 1 January 2005 to make its patent laws compliant in accordance with Article 65.4 of the TRIPS agreement.3 The WTO TRIPS Council on 6 November 2015 extended the grace period for least developed countries further until 2033. The TRIPS Council also decided to keep open the option for further extensions beyond that date.4 This decision is in consonance with the adoption of the United Nations Sustainable Development Goals, which affirm the right of developing countries to utilise the TRIPS agreement flexibilities to ensure access for new medicines for all (WTO 2015).

Patent Regime in India

The Indian pharmaceutical industry has been able to make great inroads into the manufacture and export of generic drugs, through reverse engineering; India is often referred to as the generic pharmacy of the world. The Indian pharmaceutical companies supply antiretroviral medicines to African countries; many of the Indian companies also have regulatory approvals from the United States Food and Drug Administration (US FDA) and regulatory bodies of many other countries. The Indian generic pharmaceutical industry “has carved a niche for itself” in the global pharmaceutical market (GoI 2016).

The Indian pharmaceutical companies resorted to maximisation of the grace period provided to India under the TRIPS agreement, which enabled them to strengthen their manufacturing capabilities in accordance with the requirements of the markets of the developed world, and to produce generic versions of many highly priced innovative medicines in India in large numbers (Basant and Srinivasan 2015). In fact, the grace period for introduction of the product patent regime in India up to 2005 proved to be a blessing for the development of the Indian generic pharmaceutical industry (Angeli 2014). Many products that had patents elsewhere were manufactured in India through reverse engineering and catered to the requirements of the domestic and international market (Duggan et al 2012).

In the present scenario, when patent provisions in accordance with the TRIPS agreement are firmly in place in India, innovators are largely resorting to the practice of entering into voluntary licence agreements with generic manufacturers. Under the purview of these licences, the generic companies sell the product within the country, as well as export to low-income countries, as is seen in the case of Gilead Science’s Sofosbuvir (United Nations 2016).

The manufacture and marketing of patented pharmaceutical products in India is largely governed by the provisions of the Indian Patents Act, 1970, amended in 2002 and 2005.5 The 2005 amendment paved the way for India becoming TRIPS compliant, whereby pharmaceutical companies have been enabled to obtain full-scale product patent protection on their products (Gopakumar 2010). The impact of strong intellectual property protection has been felt by the generic companies in the post-2005 period, as they are denied the opportunity to manufacture generic copies of patented products during the validity of the patent period (Mueller 2007).

Certain constituents of the Indian pharmaceutical industry have been raising concerns over the rigidity inbuilt into the meaning, understanding and interpretation of Section 3(d) of the patents act, and the narrow scope of Sections 2 (1)(j) and 2 (1)(ja) thereof. This sentiment is echoed by the United States (US) pharmaceutical industry as well. The Pharmaceutical Research and Manufacturers of America (PhRMA) requested in their Special 301 submission to the office of the United States Trade Representative (USTR) in 2014 to designate India as a Priority Foreign Country (PFC) under the US Trade Act.

In particular, the PhRMA cited the narrow standards of patentability as provided in Section 3(d) of the Indian Patents Act. The submission even argued that Section 3(d) was inconsistent with the framework provided by Article 27 of the TRIPS agreement, specifically with the non-discrimination provision. The submission referred to the “overly narrow standards for patentability in India,” which undermined the incentives for innovation (PhRMA 2014). This was further reflected in PhRMA’s subsequent 301 submission to the USTR in 2015 (PhRMA 2015). Its 2016 submission too reiterated the earlier views and pointed out examples of patent denial, under the provisions of Section 3(d) of the patents act. The PhRMA recommended that India should continue to remain on the Priority Watch List (PhRMA 2016).

Practices such as developing modified versions of existing drugs through “evergreening” of existing formulations are often resorted to by pharmaceutical companies. They “tend to abuse the patent system, tweaking old molecules to extend monopolies so that prices remain high” (Collier 2013). A correct interpretation of the statute by the Indian courts and a proper analysis of the provisions of the patents act vis-à-vis the claims of companies seeking patents for modified versions of their products are essential in deciding the merits of any such case. In Novartis AG v Union of India and Others (2013), the Supreme Court of India on 1 April 2013 delivered a landmark judgment denying a patent to Novartis for the beta crystalline form of imatinib mesylate. The Supreme Court observed that the product did not pass the test of patentability as prescribed in Sections 2(1)(j) and (ja), and 3(d) of the Indian Patents Act (Novartis AG v Union of India and Others 2013).

This case demonstrates how pharmaceutical companies claim undue benefits at the expense of the health of patients, under the guise of patents (Joseph 2013). Many researchers and public health activists have acknowledged that the ruling would have beneficial implications on affordability of medicines and spillover effects in other developing countries too, with nations such as the Philippines, Vietnam and Sri Lanka introducing similar provisions in their patent laws (Turrill 2013).

Critics of this view accuse the “anti-evergreening” provisions of the Indian patent law to be supportive of “reverse engineering” of patented medicines by generic companies (Banerjee 2013). This school of thought maintains that setting high patentability standards will “be detrimental to innovation” and has labelled the Novartis case as a “missed opportunity” for pharmaceutical innovation in India (Bennett 2014).

Costly Patented Medicines

Prices, particularly of patented antineoplastic (anticancer) medicines are restrictively high in India (Singh and Khanna 2015). The public is put to much distress as most of these medicines generally do not find any place in the essential medicine list (Baker 2009). The “unsustainable high price” of new anticancer medicines has become a major area of concern as “cancer has become a money-maker” for pharmaceutical companies (t’Hoen 2016). Some researchers have analysed that the prices of anticancer medicines in the US are fixed arbitrarily: “the average launch price of anticancer medicines after adjusting for inflation and health benefits increased by 10 percent annually or an average of $8,500 per year from 1995 to 2013” (Howard et al 2015).

The data regarding prices of some patented anticancer medicines in India as indicated in the database of monthly sales data of pharmaceuticals maintained by the All India Organisation of Chemists and Druggists (AIOCD–AWACS) is given below. Erlotinib tablets, used in the treatment of locally advanced or metastatic small-cell lung cancer, patented by Roche are priced at ₹4,800 per 150 milligram (mg) tablet. Its patent expired in March 2016. However, the generic version of the tablet is being sold by Cipla at ₹220 per tablet (data of February 2017). Nilotinib, an antineoplastic used in the treatment of chronic myeloid leukaemia, patented by Novartis is priced at ₹8,343 per 200 mg tablet. Crizotinib, patented by Pfizer and used in the treatment of lung cancer is priced at ₹1,554 per 200 mg tablet (AIOCD–AWACS monthly sales data for February 2017).6 When the overall treatment costs for one course of treatment of a patient are computed, the figures, no doubt, reach exorbitant levels.

While anticancer medicines account for the majority of patented medicines, there are quite a few patented medicines used for other therapeutic purposes too, such as antihypertensives, anti-diabetics, bronchodilators, and antifungal, antiretroviral, and anti-hepatitis medicines. To name just a few, Indacaterol, a bronchodilator patented by Novartis is priced at ₹2,479 per inhaler; Abatacept, an anti-rheumatoid medicine patented by Bristol-Myers Squibb (BMS) is priced at ₹30,000 for a 250 mg vial; Tocilizumab, marketed by Roche for rheumatoid arthritis is priced at ₹20,274 for a 200 mg vial (AIOCD–AWACS monthly sales data of May 2017).

In the therapeutic regimen for tuberculosis, Bedaquiline, the only medicine that obtained a patent from the USFDA in the last 40 years, faces the issue of inaccessibility in India, more than affordability (Datta 2016). This medicine is patented by Janssen Pharmaceuticals and is used for the treatment of multidrug-resistant tuberculosis. Although priced high, the company supplies the medicine “free” to patients through the Revised National Tuberculosis Control Programme. Despite this relief provided by the company, the medicine is available only in six centres across the country (Economic Times 2017). Cases such as this demonstrate the requirement for a quick solution to address the twin issues of affordability and accessibility of patented anti-tuberculosis medicines in India, especially when “India accounts for one fourth of the global tuberculosis burden” (GoI 2017).

Pricing of Medicines in India

The National Pharmaceutical Pricing Authority (NPPA) under the Department of Pharmaceuticals is tasked with the responsibility of fixing the prices of medicines in India. The NPPA implements the Drugs (Prices Control) Order (DPCO), 2013 which aims at making available essential and life-saving medicines to all at affordable prices through price control.7 The DPCO, 2013 draws its powers from the Essential Commodities Act, 1955 (EC Act).

The DPCO, 2013 follows a market-based pricing methodology for fixing the ceiling prices of medicines. The key principle underlying the market-based pricing methodology of the DPCO, 2013 is “essentiality.” This principle is satisfied by considering the list of medicines included in the National List of Essential Medicines (NLEM) declared by the Ministry of Health and Family Welfare, and revised from time to time. The NLEM, 20118 was adopted as Schedule-I of the DPCO, 2013. Subsequently after the notification of the NLEM, 2015,9 it came to be adopted as Schedule-I of the DPCO, 2013. The NPPA fixes and notifies ceiling prices of formulations listed in Schedule-I. Pharmaceutical companies launching products that qualify as “new drugs”10 under the provision of paragraph 2(u) of the DPCO, 2013 need prior price approval from the NPPA.

The DPCO, 2013 in paragraph 32 has exempted patented medicines developed indigenously in India from the purview of price control.11 This exemption is valid for a period of five years from the date of commencement of commercial production of the product. The domestic pharmaceutical industry has not taken advantage of this provision till date. On the other hand, patented medicines developed outside India fall under price regulation if listed in the NLEM; if not, such medicines remain outside the price control regime.

The National Pharmaceutical Pricing Policy (NPPP), 2012 of the Government of India12 has not outlined guidelines regarding the broad principles to be considered for determining the prices of patented medicines. The policy has only given a plain suggestion that a decision on pricing of patented medicines would be taken based on the recommendations of the committee constituted by the government for the purpose.

Pricing in the NLEM

Currently, patented medicines included in the NLEM fall under the purview of the DPCO, 2013. The NLEM, 2015 has included some patented medicines such as Entecavir, Raltegravir, Sofosbuvir and Trastuzumab. These medicines are, therefore, scheduled formulations in accordance with the provisions of the DPCO, 2013. The NPPA has fixed the ceiling prices of these patented medicines on market-based price fixation methodology.

BMS enjoys a valid Indian patent running till 2021 for Entecavir, an anti-hepatitis B medicine. Raltegravir—an antiretroviral medicine used in the treatment of AIDS patients who have failed both first- and second-line antiretroviral treatment—has an Indian patent valid till 2022 in favour of MSD Pharmaceuticals. The NPPA fixed the ceiling prices of these patented medicines in March 2016. The ceiling price of Trastuzumab, an antineoplastic patented by Roche was also notified by the NPPA on a market-based methodology in May 2016.13 The patent of Roche has since expired.

Sofosbuvir, a nucleotide analogue used in the treatment of hepatitis C and marketed by Gilead Sciences has a valid patent in the US and Europe, and in India. A 12-week treatment with this drug could cost around $84,000 in the US (Hill et al 2016). The patent story of Sofosbuvir has had its twists and turns in India with the Office of the Deputy Controller of Patents, New Delhi denying Gilead a patent for the product on 13 January 2015,14 as the company could not establish inventiveness and novelty for the product. The authority rejected the patent as it found that the product had only minor modifications compared to the previous formulations. However, on 9 May 2016, the Office of the Deputy Controller of Patents, New Delhi dismissed all pre-grant opposition and granted a patent to Sofosbuvir, having found the product to be novel, inventive and therefore patentable under the patents act.15

The reversal of the decision by the patent office has raised a few eyebrows concerning the availability of affordable Sofosbuvir, which is considered to have a significant therapeutic use in the treatment of hepatitis C (Hindu 2016). It is also reported that Gilead had entered into voluntary licence agreements with a few Indian companies to manufacture the product for retail sale and for export. The ceiling price of Sofosbuvir was fixed and notified by the NPPA in May 2016 on a market-based pricing methodology taking into account the prices of different voluntary licensed versions of Sofosbuvir for the purpose of computation of price.16

The possibility of exclusion of patented medicines from the NLEM and from the ambit of general pricing regulations provides scope to the companies to launch their products at high prices. If the patented medicine is included in the NLEM and, hence, in Schedule I of the DPCO, 2013, then the patentee may perhaps consider entering into voluntary licences with other local manufacturers. This has a positive spillover effect from the public health perspective, as it can help bring down the prices to some level at least, as was seen in the pricing data of some patented medicines.

Similarly, threats of compulsory licensing have prompted innovator pharmaceutical companies to bring down the prices of their patented medicines and even to enter into voluntary licences in countries such as South Africa and Brazil (Scherer 2007). In India, the legal legitimacy for compulsory licences in the patent regulations has been put to use only once as of date. In March 2012, the Controller General of Patents granted a compulsory licence in favour of Natco Pharma, permitting it to manufacture and market Sorafenib tosylate used in the treatment of kidney cancer,17rejecting the claims of the patentee, Bayer. This decision sent a strong signal to the pharmaceutical industry that patient requirements cannot be ignored when patented medicines are priced exorbitantly high, making them unaffordable and inaccessible (Nedumpara 2012). Thus, “if properly calibrated, compulsory licensing can ensure an effective balance between public interest and legitimate private interest of patients” (Kuan 2009).

Pricing under DPCO, 2013

Under paragraph 19 of the DPCO, 2013,18 the maximum retail price of Sitagliptin, an oral anti-diabetic, was capped in public interest in July 2014.19 Sitagliptin has a valid Indian patent granted by the Controller General of Patents. The patentee, MSD, which imports and markets Sitagliptin as Januvia, has also entered into an agreement with Sun Pharma Laboratories, which sells Sitagliptin under the brand name, Istavel. A group of pharmaceutical companies had approached the Bombay High Court seeking the quashing of the NPPA’s order whereby prices of 106 medicines (antihypertensive and anti-diabetic medicines) were capped by the NPPA in July 2014, under paragraph 19 of the DPCO, 2013. (Sitagliptin was one medicine in this list of 106.) However, the court, while dismissing the writ petition on 26 September 2016, did not find any reason to interfere with the notification issued by the NPPA in regulating the price of this medicine as well as other medicines covered in the referred notification.20 A special leave petition filed by the above group of pharmaceutical companies too was dismissed by the Supreme Court on 24 October 2016 (Indian Pharmaceutical Alliance and Another v Union of India and Others 2016b).

Patentees not only fix the prices of their products at unaffordable levels for the public, but also tend to resort to legal recourse whenever generic manufacturers launch variants of the patented products, without any agreement or understanding with the patentee. In the case of Erlotinib, Cipla had launched a modified version (a different polymorph). A series of litigations followed. The Delhi High Court in November 2015 ruled that Cipla’s version of the product infringed upon Roche’s patent (F Hoffmann-La Roche Ltd and Another v Cipla Ltd 2015). This order, however, did not include any injunction in favour of Roche as the patent was due to expire in March 2016. The court ruled in favour of Roche in this case. Nevertheless, it remains to be seen whether the case would draw attention of the generic companies to interpret the loopholes in the patent laws in a manner that would enable them to come out with modified and low-priced versions of the patented medicines, akin to the evergreening tactics resorted to by the innovators.

Analysis

Such examples lead us to the important question as to whether patented medicines need to be brought under the purview of price control in the Indian context. When the prices are kept at very high levels, automatically such medicines become out-of-bounds for the poor. The patients literally “are at the mercy of the patent-holders” when the products are priced high (t’Hoen 2016). The impact becomes worse, as the cost of medicines is to a large extent borne by the patient or their family in India (Turrill 2013). Unaffordability of the medicine leaves the patient with no option but to avoid purchasing the costly medicine which would have given them an extended lease of life, rather than get caught in a veritable debt trap. These new “wonder medicines do not improve health unless patients are actually able to receive them” (Outterson 2005). The consequent consumer welfare loss and resultant dead-weight loss far outweigh benefits that are secondary and likely to accrue in future (Flynn et al 2009).

The WHO Commission on Intellectual Property Rights, Innovation and Public Health had observed thus:

Where most consumers of health products are poor, as are the great majority in developing countries, the monopoly costs associated with patents can limit the affordability of patented healthcare products required by poor people in the absence of other measures to reduce prices or increase funding. (WHO 2006: 174)

The introduction of new highly priced patented medicines in the Indian market has triggered discussions on the need for price regulation of patented medicines. Some researchers, having analysed the prices of imported patented medicines to India, have observed that, while no real technology transfer has happened, higher prices are levied on the Indian consumers (Chaudhuri 2014). The impact on the public becomes substantial as newer products with significant breakthrough effects are introduced in different therapeutic regimes, which are largely unaffordable for the common man (Grace 2005). Thus, in the imperfect patented medicine market, the price of the patented medicine becomes the major determinant of the quality of life of the patient or a life-or-death deciding factor for the patient. Given this situation, it becomes imperative that some yardsticks are firmed up to overcome the challenges and imperfections thrown up by the patented medicine market.

The unaffordable prices of patented medicines compromise equitable access to them and threaten the financial sustainability not only of patients, but even that of the public health system (Espin et al 2011). When patented medicines are excluded from the national list of essential medicines or for that matter any essential medicine list of any state government or any government health institution, the loser is the patient: they lose the opportunity to purchase the patented medicine at a price that they can afford. Medicines that have a patent tag are those which are required by patients for specialised treatments, most often when the normal or first- and second-line treatments have failed. It, therefore, becomes important that new-generation medicines with better potential for treatment or cure become available at affordable prices.

Left to itself, the market will fix the prices arbitrarily for such patented medicines. The market’s focus would only be to recover the fixed costs of the product from the sale of the products, during the validity period of the patent, so as to recoup the investment in R&D for discovery of the product. There are no intrinsic checks and balances in the market when a patented medicine is introduced, as there is no competition from any rival pharmaceutical company for market space for the same product. Governments in their national health programmes will also not be able to procure such medicines even in the face of overwhelming public demand, except in certain select cases like that of Bedaquiline.

In a country like India, this puts undue burden on the patients who are already impoverished by the magnitude of the disease. There is, hence, no other alternative but to consider some form of price regulation for patented medicines. Besides, there is no express provision either in the WTO or the TRIPS agreement that explicitly prohibits price regulation of patented medicines (Chaudhuri 2012).

Conclusions

Keeping the interest of the citizens in mind, it is important to firm up a blueprint for price regulation of patented medicines in India. This will, no doubt, be a complicated exercise, the stringency of which would depend on a multiplicity of factors, including the outcome of a complex bargaining process between the government and the patentee (Lanjouw 2004).

Patented medicines that need to be made more affordable from a therapeutic perspective are to be identified as a first step for this exercise. This has to be done judiciously, after studying the standard therapeutic protocols for the treatment of specific diseases. Those patented medicines that have been included in the list of essential medicines should not be exempt from the provisions of price control. Where the medicine can be made part of any governmental programme, as was done for Bedaquiline, urgent steps are required for ensuring accessibility.

A move to bring in any form of price regulation of patented medicines may not go down well with the pharmaceutical industry, as they may fear an imminent dip in their revenues. However, economies of scale would aid the industry in increasing sales and, hence, regaining lost profits. Moreover, the patients would stand to gain financially and in clinical outcome levels. A market study analysis by the industry will also facilitate voluntary licence agreements with generic manufacturers, with a price advantage for the patient. Any governmental measure signalling a compulsory licence will indirectly facilitate a lowering of price for the patient, while at the same time widening the reach of the medicine. Price regulation of patented medicines in some form would be a win–win solution for both, patients and the pharmaceutical industry.

Notes

1 Article 27 of TRIPS—Patentable Subject Matter 1 Subject to the provisions of paragraphs 2 and 3, patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Subject to paragraph 4 of Article 65, paragraph 8 of Article 70 and paragraph 3 of this article, patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced.

2 Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect ordre public or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law.

2 The Doha declaration

5 Accordingly and in the light of paragraph 4 above, while maintaining our commitments in the TRIPS Agreement, we recognize that these flexibilities include:

[…]

(b) Each Member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.

(c)
Each Member has the right to determine what constitutes a national emergency or other circumstances of extreme urgency, it being understood that public health crises, including those relating to HIV/AIDS, tuberculosis, malaria and other epidemics, can represent a national emergency or other circumstances of extreme urgency.

(d) The effect of the provisions in the TRIPS Agreement that are relevant to the exhaustion of intellectual property rights is to leave each Member free to establish its own regime for such exhaustion without challenge, subject to the MFN and national treatment provisions of Articles 3 and 4. (WTO nd)

3 Article 65.5  of TRIPS—Transitional Arrangements:

A Member availing itself of a transitional period under paragraphs 65. 1, 2, 3 or 4 shall ensure that any changes in its laws, regulations and practice made during that period do not result in a lesser degree of consistency with the provisions of this Agreement.

4 The WTO’s Council for Trade-related Aspects of Intellectual Property Rights (TRIPS) decided at the meeting held on 6 November 2015 that least developed country members of the WTO will be allowed to maintain flexibility in their approach to patenting pharmaceutical products until at least 2033. This is in line with the directions set by WTO ministers in the Doha Declaration on TRIPS Agreement and Public Health in 2001.

5 The Indian Patents Act defines patents in Section 2(m) of the act as any new invention granted under the act. Invention is defined under Section 2(1)(j) of Patents Amendment Act, 2002 as “new product or process involving an inventive step and capable of industrial application.”

The Patents (Amendment) Act, 2005 defined “inventive step” in Section 2 (i)(ja) as “a feature of an invention that involves a technical advance as compared to the existing knowledge or having economic significance or both and that makes an invention not obvious to a person skilled in the art.”

Section 3(d) of the Indian Patents Act is broadly regarded as the provision defining the standards of Indian patentability, a section that is widely held to be one which discourages “evergreening of new molecules.”

Section 3(d) reads “the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such known process results in a new product or employs at least one new reactant,” as not falling within the ambit of invention in accordance with the meaning of the act:

Explanation: For the purpose of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in the properties with regard to efficacy.

6 The All India Organisation of Chemists and Druggists (AIOCD–AWACS) collects monthly sales and price data regarding sales of pharmaceutical products in India. The database otherwise called Pharmatrac maintains the price data formulation wise and is made use of by the National Pharmaceutical Pricing Authority for working out the ceiling prices of medicines listed in Schedule-I of the DPCO, 2013. The database also captures data regarding year of launch of the product, the maximum retail price of the product and the quantity of the drug sold in the market.

7 The DPCO, 2013 was notified by the Department of Pharmaceuticals (Ministry of Chemicals and Fertilizers), Government of India on 15 May 2013.

8 The NLEM 2011 was published by the Ministry of Health and Family Welfare in 2011 and included in the First Schedule of the DPCO, 2013 by the government through a notification in the official gazette (para 2(t) of DPCO, 2013).

9 The NLEM 2015 was notified by the Ministry of Health and Family Welfare, Government of
India vide notification no X. 11011/1/2015, dated 23 December 2015.

The Department of Pharmaceuticals notified the NLEM, 2015 as Schedule-I of DPCO, 2013 vide notification no 701 (E), dated 10 March 2016.

10 “New drug,” as defined under para 2(u) of the DPCO, 2013, means a formulation launched by an existing manufacturer of a drug of specified dosages and strengths as listed in the NLEM, by combining the drug with another drug either listed or not listed in the NLEM or a formulation launched by changing the strength or dosage or both of the drug as listed in the NLEM.

11 Para 32 of the DPCO, 2013:

Non-application of the provisions of this order in certain cases. The provisions of this order shall not apply to,

(i) a manufacturer producing a new drug patented under the Indian Patent Act, 1970 (39 of 1970) (product patent) and not produced elsewhere, if developed through indigenous Research and Development, for a period of five years from the date of commencement of its commercial production in the country.

(ii) a manufacturer producing a new drug in the country by a new process developed through indigenous Research and Development and patented under the Indian Patent Act, 1970 (39 of 1970) (process patent) for a period of five years from the date of the commencement of its commercial production in the country.

(iii) a manufacturer producing a new drug involving a new delivery system developed through indigenous Research and Development for a period of five years from the date of its market approval in India.

12 The National Pharmaceutical Pricing Policy (NPPP) 2012 was notified by the Government of India on 7 December 2012.

13 The ceiling price of Entecavir 0.5 mg tablet and Entecavir 1 mg tablet was fixed by the National Pharmaceutical Pricing Authority (NPPPA) at ₹71 and ₹112.81, respectively, vide price notification No S.O.1254 (E), dated 29 March 2016.

The ceiling price of Raltegravir 400 mg tablet was fixed by the NPPA at ₹139.25 vide price notification No S.O.1254 (E), dated 29 March 2016.

The ceiling price of Trastuzumab 440mg/50 ml injection pack was fixed by the NPPA at ₹5,5812.29 per pack vide price notification No S.O.1687 (E), dated 9 May 2016 (NPPA 2016).

14 The Deputy Controller of Patents, New Delhi, rejected the patent application of Gilead Life Sciences for its product Sofosbuvir under the relevant sections of the patents act vide an order dated 13 January 2015, in patent application No 6087/DELNP/2005.

15 The Deputy Controller of Patents, New Delhi, granted a patent to Gilead Life Sciences for its product Sofosbuvir under the relevant sections of the patents act vide anorder dated 9 May 2016, in patent application No 6087/DELNP/2005.

16 The ceiling price of Sofosbuvir was fixed and notified as ₹619.31/400 mg tablet by the NPPA vide notification No S.O. 1254 (E), dated 29 March 2016 (NPPA 2016).

17 Decision of the Controller General of Patents in Natco vs Bayer in compulsory licence application No 1 of 2011 (9 March 2012).

18 Para 19 of the DPCO, 2013:

Fixation of ceiling price of a drug under certain circumstances. Notwithstanding anything contained in this order, the government may, in case of extra-ordinary circumstances, if it considers necessary so to do in public interest, fix the ceiling price or retail price of any drug for such period, as it may deem fit and where the ceiling price or retail price of the drug is already fixed and notified, the government may allow an increase or decrease in the ceiling price or the retail price, as the case may be, irrespective of annual wholesale price index for that year.

19 Notification of NPPA, Department of Pharmaceuticals, Ministry of Chemicals and Fertilizers, Government of India -S.O. 1735 (E) dated 10 July 2014 (NPPA 2014). This notification indicates that NPPA capped the MRP of Sitagliptin 100 mg, an oral antidiabetic medicine at ₹41.8 per tablet, “as prices of Sitagliptin tablets in the strength of 100 mg manufactured/ marketed in brand name by respective companies, M/s MSD and M/s Sun Pharma were found exceeding the limit of simple average price of medicine plus 25% as per market-based data (IMS Health) for the month of April 2014.”

20 The High Court of Bombay dismissed the petition filed by Indian Pharmaceutical Alliance (IPA) on 26 September 2016. The court observed that the price notifications such as those of the NPPA dated 10 July 2014 capping the prices of 106 medicines (84 cardiovascular and 22 antidiabetic formulations) “become necessary, especially when exploitative pricing makes medicines un-affordable and beyond the reach of most and also puts huge financial burden in terms of out-of-pocket expenditure on health. … The drugs and medicines must reach all those who can afford and all those who cannot afford.” The court did not hold the view that the government exceeded its power while issuing these notifications (Indian Pharmaceutical Alliance and Another v Union of India and Others 2016a).

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Sharmila Mary Joseph (sharmila.mj@gov.in) is Secretary to Government of Kerala (Finance, Expenditure, and Planning and Economic Affairs Departments). James J Nedumpara (headctil@iift.edu) is head, Centre for Trade and Investment and Law, Indian Institute of Foreign Trade, Ministry of Commerce and Industry, Government of India.

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