SpicyIP brings to its readers another spicy post from Suchita Saigal, this time on Complusory Licensing. Suchita provides a possible solution to one of the compulsory licensing issues arising from a recent case involving Merck and Cipla.
A recent article published by Moneycontrol states that Mumbai based pharma giant Cipla has applied for a compulsory licence to manufacture Merck’s anti-HIV drug Isentress on the basis that the drug is exorbitantly priced and is inaccessible to needy patients in India.
Section 84 of the Indian Patents Act 1970 states that, “at any time after the expiration of three years from the date of the grant of a patent, any person interested may make an application to the Controller for grant of compulsory licence on patent on any of the following grounds, namely:
….(b) the patented invention is not available to the public at a reasonably affordable price…”
Reasonably affordable price
The construction of ‘reasonably affordable price’ forms the crux of the argument in this case. Is Isentress available at a reasonably affordable price for the Indian market?
I have not come across any academic writing on the concept of ‘reasonably affordable price’ specific to Section 84 of the Patents Act 1970. Any analysis has been case specific. For instance, Shamnad in his article ‘India’s new patent regime: aiding access or abetting “genercide”?‘examines whether patented drugs used to cure bird flu were reasonably affordable vis-à-vis similar drugs manufactured by the generic drug manufacturers. In the article he states that, “Section 84(1)(b) permits a compulsory licence when “the patented invention is not available to the public at a reasonably affordable price”. Hetero, Roche’s licensee in India, is currently selling to the government at Rs 75 ($USD1.68) per tablet. Since the only available generic equivalent in India, Antiflu made by CIPLA, sells for Rs 65 ($USD1.46) per tablet, it may be difficult to argue that the Hetero’s pill is unaffordable.”
The concept of ‘affordable price’ has been analysed by Prashant Iyengar in an article relating to the library exception under the Indian Copyright Act 1957. In the article he suggests a per-capita GDP based comparison to determine affordability. Applying this criteria in the context of his article he states that, “[for the purposes of Section 52(1)(o) of the Copyright Act 1957,] a “book” would be deemed “available for sale in India” only if the ratio of its price to the per-capita GDP remains constant across all the countries in which it is sold – in other words, it must be equally affordable in India as the country where the same “book” is most affordably sold.” To take [an] example from his article, “the book Harry Potter and the Deathly Hollows retailed in 2007 in India at a price of Rs. 1080 (or approx $USD24). This represented about 2.4% of India’s per capita GDP ($USD975) at the time. At the same time, the same book retailed at $USD35 in the US representing 0.0008% of its per capita GDP ($USD43,444). Had the book been sold in the US at 2.4% of US per capita GDP, its price would have been $USD1042. If it had been sold in India at 0.0008% of India’s per capita GDP, its price ought to have been a mere 0.78 $USD or Rs. 35. At a price of Rs. 1080, the book was approximately 30 times less affordable in India than in the US.”
The measure put forth by Prashant is interesting in light of the fact that the Moneycontrol article states that Merck has launched Isentress in India at a fourth of its US prices – that is $USD7 for a day’s treatment as against $USD28 in the US. If one uses the numbers used by Prashant, then $USD7 represents about 0.717% of India’s per capita GDP while $USD28 represents about 0.06% of US’s per capita GDP. Hence, applying Prashant’s criteria of affordability, Isentress as currently priced in India is clearly not reasonably affordable and the price differential is not sufficient to support any argument of reasonable pricing.
On a related note, in the past, countries like Brazil have effectively negotiated with pharmaceutical giants such as Merck to bring down prices of drugs to support national health programmes. For instance, in 2003, post Brazil’s initiative to allow generic manufacturers to import or produce ARV drugs without the consent of the patent holder, several drug manufacturers (including Merck) and Brazil reached an agreement whereby a wide package of ARV drugs were available in Brazil at discounts ranging from 25% to 75% of the original market price. It would be interesting to see how far Cipla pursues this application and any policy guidance which comes out of the same.
(image from here)