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

Lets start today with an overview of some of the sections of the Competition Act that might have a bearing on any patent related competition issues:

Chapter II of the Act proscribes Anti Competitive agreements including tie-in arrangements, exclusive supply agreements, exclusive distribution agreements, refusals to deal and resale price maintenance. Sub-section (5) of section 3 however provides (inter alia) that the section shall not be read to restrict the “right of any person to restrain any infringement of, or to impose reasonable conditions, as may be necessary to protect any of his rights which have been or may be conferred upon him under” the copyrights Act, the Patents Act, the Trademarks Act, the Geographical Indications Act, the Designs Act or the Semi-conductor and Integrated Circuits Layout Design Act.

Section 4 of the Act proscribes “Abuse of dominant position” and provides that there shall be an abuse of dominant position if
(1) an enterprise directly or indirectly imposes an unfair or discriminatory (i) condition in purchase or sale of goods or services; or (ii) price in purchase or sale (including predatory price) of goods or services; or
(2) an enterprise limits or restricts (i) production of goods or provision of services or market thereof; or (ii) technical or scientific development relating to goods or services to the prejudice of consumers
(3) if an enterprise indulges in practices that result in denial of market access; or
(4) makes conclusion of contracts subject to acceptance of supplementary obligations which have no connection with the subject of such contracts; or
(5) uses its dominant position in one relevant market to enter into or protect other relevant market.

The Act also defines “dominant position” as a position of strength enjoyed by an enterprise in India which enables it to operate independently of competitive forces prevailing in the relevant market; or affect its competitors or consumers or the relevant market in its favor.

There are, at present no cases in India that I am aware of that deal with the definition of “dominant position.” However, because the Competition Act was based considerably on EC Competition Law, it is likely that case law from EC and UK would be considered by Indian courts. Under both EC/UK and US law, merely having/holding a patent does not evidence a “dominant position”. In other words, holding a patent does not necessarily mean that the patentee is a dominant player in the relevant market.

Section 5 of the Act discusses “Combinations” of enterprises that individually or collectively have an asset of more than certain specified amounts and section 6 makes it illegal to enter into “Combinations” of the type described in section 5 that cause or are likely to cause an appreciable adverse effect on competition. Section 6(2) (as sought to be amended by the Competition (Amendment) Bill 2007) also requires any person or enterprise that proposes to enter into a combination to give notice to the Commission.

Which of the above provisions can be called in to remedy an insulin type situation that we discussed yesterday? My favorite provision is the one dealing with abuse of dominant position, particularly abuse in the form of imposing an unfair or discriminatory price in purchase or sale of goods or services. But would this provision be directly applicable in an insulin-type case study where the rise in prices were not direct? In the insulin case, the price of the competing product (bovine insulin) was going up more rapidly under suspicious circumstances that could however, not be fully proved. Alongside, the marketing strategies for human insulin seemed to be aimed at systematically wiping out the competition.

The most important question for me is whether the practices of pharma companies including practice of over-hyping the merits of the newer versions of the drug can be considered anti-competitive and stopped? (Under the old MRATP Act, could such practices amount to restrictive trade practices?) While such practices can (at least hypothetically speaking) result in elimination of competition in the market, I believe that this may not be possible to outlaw them ( I am happy to be opposed on this). What we can however do is launch a counter campaign telling people why the older cheaper drugs are still good to use and in what way the merits of the newer drugs are over-hyped. Kudos therefore to the open source initiatives of the CSIR.

As of now, the fear of elimination of older drugs from the market maybe non-existent in India where there isn’t much of a health insurance trend; there will always be a very large % of the population that just cannot afford the newer drug and doctors will be compelled to prescribe the cheaper (older) versions, thereby keeping these in the market. But will this always be the case? If not, we are back once again to the wisdom of having provisions like 3(d) that prevent evergreening by denying patents to incremental innovations that do not otherwise demonstrate enhanced efficacy.

Other interesting provisions under the Competition Act

Any person can make a complaint: Section 19 of the Competition Act provides that any person, consumer, trade association, Central Government, State Government or statutory authority can make a complaint to the competition commission alleging contravention of the provisions of the Competition Act. The CCI can also suo moto action in case it receives information of such contravention.

Co-operation between various statutory authorities: Section 21 of the Competition Act provides:

Reference by statutory authority.- (1) Where in the course of a proceeding before any statutory authority an issue is raised by any party that any decision which such statutory authority has taken or proposes to take, is or would be, contrary to any of the provisions of this Act, then such statutory authority may make a reference in respect of such issue to the Commission.

(2) On receipt of a reference under sub-section (1), the Commission shall, after hearing the parties to the proceedings, give its opinion to such statutory authority which shall thereafter pass such order on the issue referred to in that sub-section as it deems fit.

Provided that the Commission shall give its opinion under this section within sixty days of receipt of such reference.

The above section would allow co-operation between the Statutory authorities under the Patents Act (the Controller of Patents) and the competition commission. However, it may be noted that the Controller of patents shall not be bound by the opinion of the CCI.

I haven’t received any comments from our readers on the last two parts of this 3 part post. I am hoping that this last bit will inspire some comments.