DIPP Discussion Paper on Compulsory Licensing in the Indian Pharmaceutical Sector: An ‘Acquired’ Afterthought?


The Department of Industrial Policy and Promotion (DIPP) has recently sought to address concerns regarding market-availability of low-price life saving drugs, by way of reviewing the provisions relating to compulsory licensing enshrined in the Indian IP regime. With multinational pharmaceutical giants having acquired as many as 6 Indian drug manufacturing companies 2006 onwards, the domestic market for drugs (particularly medicines for battling HIV, some types of cancer and Hepatitis C) has exhibited a steep inflationary rise in the pricing curve. This has in turn alerted government officials intent on preventing monopoly in the market for critical drugs and promoting manufacturing growth in India rather than rely solely on imports. Mr. Anand Sharma, the Commerce Minister, has been known to have indicated such concern in a letter to the Union Health Ministry, emphasizing the need to provide affordable healthcare.

Compulsory licensing allows government to license parties other than the patent holder to manufacture and sell patented products without the patent holders’ consent. Despite being WTO compatible, compulsory licenses are yet to be issued under the amended Patents Act, although the concept has been successfully applied in developed countries including the US, UK, Canada and Italy and also to countries such as Brazil, Thailand, Malaysia, South Africa, Kenya and Ecuador, following the Doha Declaration.

In this context, DIPP has come up with a discussion paper, with an objective to facilitate development of a predictable environment for the use of compulsory licensing in the pharmaceutical sector, thereby balancing the rights of the patent holder and the governmental obligation to ensure availability of products, especially life saving drugs at reasonable prices. The paper includes a series of recommendations, including the opening of a loophole for third-party manufacturers to produce patented drugs and the threat of dragging price-inflating companies to the Competition Commission of India (CCI).

In the paper, different stakeholders’ views have been sought on the scope of compulsory licensing provisions to gauge the need for new guidelines. The issue has also been examined regarding the feasibility of issuing a compulsory license to a qualified company to produce a critical drug, whenever the demand for such drug remains unfulfilled.

The different options explored by the paper includes:

(1)Invoking the Competition Act, 2002 to scrutinise whether the price/availability of a drug is a consequence of an anti-competitive agreement or has adverse effect on competition or abuse by a company.

(2)Reviewing the policy on foreign investment for pharmaceutical companies, viz. modifying investments in the pharmaceutical sector that are entirely on the automatic route at present to the Government route, thereby enabling FIPB scrutiny of M&A proposals and monitoring of technology introduced by foreign company during acquisition of Indian company.

(3)Expanding the ambit of the National Pharmaceutical Pricing Authority, allowing it to act as regulatory authority over a larger number of drugs.

The fear has been voiced in the paper that unless these recommendations are paid heed to, “[w]hile the bulk of essential drugs are still under the process patent regime, new formulations will steadily be issued product patents, resulting in monopoly power among the patent holders.” Referring to the high price of cancer medicines and consequent low demand, the paper has also floated the question as to whether it is a case suitable for issue of compulsory license. The possibility has also been mooted of issuing such licenses under the competition law if the manufacturing/selling company’s dominant position adversely impacts the availability of medicines. Among other efforts, an attempt has also been made to define a “working patent”. In some nations, it signifies the patent protection given to medicines manufactured within the country, while others consider a patent as “working” if the medicine is made available in the country, whether through import or otherwise.

DIPP has also asked for opinions regarding whether publicly-funded Indian research organisations should stipulate (while selling/ transferring patents to Indian private sector companies) that the ownership of patents will revert to these organisations in case the ownership of those companies passes on to foreign hands. The deadline for sending comments to the paper is September 30, 2010. The Indian Pharmaceutical Alliance, the representative body for leading domestic drug firms, is yet to come up with a definite response to the paper, although Mr. D.G. Shah, Secretary General of the Indian Pharmaceutical Association, has said that it “is a welcome move as it will ensure that consumers in India are assured of affordable drugs. Indian drug companies will also benefit as they will be able to produce drugs ahead of the patent expiry which will give them a headstart in other markets.”

Shouvik Kumar Guha

Shouvik Kumar Guha

Shouvik is at present employed as a Research Associate and a Teaching Assistant at The W.B. National University of Juridical Sciences, Kolkata. He has obtained his B.A. LL.B. (Hons.) degree from NUJS itself and is also currently pursuing his LL.M. degree from the same university. From his very year at law school, he had been attracted towards the discipline of Intellectual Property and that interest has been kindled further in course of time. The interface between IP and other disciplines such as Economics, Anti-trust Law, Human Rights, World Trade Law and the technological developments relating thereto, has especially caught his attention since then. He’s authored several papers on issues relating to IP and other legal disciplines for journals, books, magazines and conferences in national as well as international levels. He is also currently co-heading an organization called Lexbiosis, which is an endeavor meant to facilitate the collaboration between the legal industry and academia.

3 comments.

  1. AvatarNikyraja

    This is utterly disgusting issue that the governments decision about compulsory licensing with out even understanding what is about patenting and what for patents are for. A single patent compulsorily need not go for industrial application. Since most of the R & D efforts are based on lab scale level and also all the conditions of the laboratory need not be applicable in industrial up-scaling. Who shall bear the loss of the manufacturing costs is any. This adds to the fuel of economical inflation. It is an totally unwarranted at this time.

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  2. AvatarD.Bheemeswar

    This may be an welcome gesture for the drug/pharmaceutical industry, but if the Indian government has given exclusive marketing rights to multinational companies in this field, those who’s patents are valid in India shall make a set back to entire industry. As usual Indian S & T and R & D organizations private or public, were unable to deliver goods as they are more oriented towards academic nature and not industry oriented research, which requires altogether different type of expertise.

    Under this circumstances such rule application is not necessary.
    However, government for the sake public interest has always has upper hand as per the patent law’s or constitutional rights to assign it to Indian companies to produce and cell, provided they also bear the some cost of production or exempted from other taxes.

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  3. Avatarpatent litigation

    Compulsory licensing is indeed a valuable practice that helps ensure the availability of low-cost healthcare treatment to individuals of every economic level. It also retains a nexus between patent law and the public interest — a connection that is sometimes lost in the quest for profit. Measures should be taken to make certain that this system is strengthened and continues to function as intended.

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