The Competition Act, Patents and Over Hyped Drugs – Part I

Shamnad drew my attention to a recent news report in the Business Standard, “Law not Equipped to Handle Pharma Monopoly: Experts” The report states:

“With anti-competitive practices of global pharma companies increasingly coming under regulatory scrutiny internationally, Indian public interest groups and the domestic medicine makers complain that India’s competitive laws are not equipped to face a similar situation of monopoly in the sales of patent protected medicines in the country.”

The report provides two view points: (1) Leena Menghaney, project manager Medecins Sans Frontieres is quoted as having said that “The Competition Act needs to be reviewed by the government and amendments that facilitate the usage of the Act vis-à-vis patents for drugs and resulting monopoly and dominant position should be introduced,” and “There is also a lack of clarity as to what can be considered as an anti-competitive practice and who monitors excessive pricing of medicines to bring it to the notice of the Competition Commission. The Sections 3 to 6 of the Competition Act need to be reviewed keeping in mind anti-competitive practices arising out of abuse of dominant position by the patent owner.”

(2) Vinod Dhall, the acting chairman of the Competition Commission of India (CCI) however opined that “The CCI is empowered to inquire into any unreasonable conditions attached to the intellectual property rights (IPR) agreements. It can impose penalty on each right holder or enterprises which are involved in activities like packaged licensing, payment of royalty on patents as well as patent pooling among others.” He also said that “the Commission has the powers to direct the companies to modify their agreements on patent sharing, discontinue or impose fine up to 10 per cent of the turnover for the last three financial years and ask a company not to re-enter into agreements…. In case of abuse of dominant position under Section 4 by virtue of an IPR by an enterprise, in addition to the above penalties, the Commission has the power to order division of enterprise under Section 28 of the Competition Act, 2007. We can take suo motu action or even on the basis of a complaint from common man.”

As many of our readers know, India enacted the Competition Act, 2002 to repeal the Monopolies and Restrictive Trade Practices Act, 1969. The Competition Act came into force in parts – it received the assent of the President in January 2003. A few sections of the Act came into force in May and June of 2003.

The Act’s coming into force has been stalled by a number of events beginning with a writ petition before the Supreme Court (Brahm Dutt v. Union of India interim order of the Supreme Court of India dated November 2003) which contended that the doctrine of separation of powers enshrined in the Constitution of India required that the Competition Commission be headed by a judge chosen by the judiciary (and not a bureaucrat chosen by the executive.) The Supreme Court agreed with the Petitioner and in order to address the issue, the Competition (Amendment) Bill, 2006 was introduced in the Parliament. For a summary of the key changes introduced by the 2006 Amendment Bill, see here. In August 2007, the Competition Amendment Bill, 2006 was withdrawn and replaced by the Competition Amendment Bill, 2007. A copy of the Bill is available here. As was reported by SpicyIP in an earlier post, the 2007 Bill was passed by the Lok Sabha and (as far as I know) awaits Presidential assent (anyone aware of the current status of the Bill?)

I found this article rather interesting. It reminded me of a report I’d submitted to the National Human Rights Commission, India in 1999. The report studied the prices of a life saving drug (insulin) and the conditions surrounding hikes in insulin prices following (and despite) economic liberalization in India. The investigations for the report were done primarily through interviews with doctors, patients and a few industry players. While I was unable to unearth the entire picture, certain interesting trends and practices were revealed which appeared at the time to be aimed at removing a certain variety of insulin from the market. More on this and Dr. Samir Brahmachari’s open source initiative tomorrow… stay tuned 🙂


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