CHANGING SCENARIO OF PATENT PROTECTION FOR PHARMACEUTICAL PRODUCTS - IMPLICATIONS FOR THE CONSUMERS
*Kavitha Chalakkal
“Thirty years ago, modern health technology had just awakened and was full of promise. Since then, its expansion has surpassed all dreams, only to become a nightmare. For it has become over sophisticated and over costly. It is dictating our health policies unwisely, and what is being useful is applied to too few.”
- Dr. Halfdran Mahler, Director General, WHO (1973- 1988).
The impact of the intellectual property regime and practices on the health of poor people in developing countries has generated an animated debate in recent years. A patent is a form of intellectual property right granted and protected under the law. It is an exclusive right granted to a person who has invented a new and useful article, or an improvement of an existing article, or a new process of making an article. Patents grant local monopolies to companies, who hold them for a certain period. Patents are granted with a view to rewarding innovation and encouraging research and development, which would result in better products. Patent holders on a subject matter are given the legal right to prevent other entities from producing or selling the patented drug in that country for the duration of the patent. The pharmaceutical industry is one of the three technology based industries in which a patent virtually equals the product the others being the biotechnology industry and the chemical industry.
Historical Overview
India is a country with a long historical tradition in health and healing. The modern pharmaceutical industry for the production of allopathic drugs started in India only in the 20th century with the establishment of the Bengal Chemical and Pharmaceutical Works in Calcutta in 1903. During World War I, the domestic industry received a boost on account of import restriction and rising prices. Yet India remained largely dependent on Germany, France and U.K. for meeting its demand for medicines in the first half of the 20th century. The spurt in demand caused by World War II and commencement of the production of several synthetic drugs and of drugs based on indigenous raw materials gave an impetus to the local industry in the immediate post War years. At the time of Independence, the pharmaceutical market in India was US $ 28.5 million (35 percent formulations and 65 percent bulk drugs) but only 10 percent of the demand was met by indigenous production. After independence, the pharmaceuticals sector was accorded the status of a core sector. Large investments were made by the Government to reduce the dependence on pharmaceutical imports. The commissioning of Hindustan Antibiotics Limited (HAL) in 1954 and the Indian Drugs and Pharmaceuticals Limited (IDPL) in 1961 proved that it was possible to produce drugs in India at competitive costs. However, selfreliance in the sector remained an elusive goal.
Protection of Pharmaceutical Products under Patent Laws in India
The first legislation in India relating to patents was the Act VI of 1856. The Act IX of 1857 replaced the 1856 Act since the latter was enacted without the approval of the British Crown. The legislation introduced in 1859 for granting ‘exclusive privileges’ repealed the 1857 Act. In 1872, the Act of 1859 was consolidated to provide protection relating to designs. It was renamed as “The Patterns and Designs Protection Act” under Act XIII of 1872. The Act of 1872 was further amended in 1883 (XVI of 1883) in line with the amended patent law of the United Kingdom. The Indian Patents and Designs Act, 1911, (Act II of 1911) replaced all the previous Acts. The 1911 Act was further amended in 1920 and 1945 to give patent holders exclusive privilege over pharmaceutical products for 14 years. Under the Act, importation of the invention satisfied the working requirement14. Foreign firms were quick to take advantage of this provision. They patented heavily and preferred to import bulk drugs from their home countries and produce formulations in India. Between 1947 and 1957, foreign companies held 99 percent of the 1704 drugs and pharmaceutical patents in India. The country did not benefit form the spill over effects of the introduction of new technology, mainly because most products were imported in the finished form or in the almost finished bulk form. Drug prices in India were also amongst the highest in the world.
The Government of India recognized the need to introduce basic changes in the law to bring them in line with the aims of a rapidly growing industrial economy. It appointed the first Patents Enquiry Committee (1948-50) under the leadership of Bakshi Tek Chand. This was followed by the Iyengar committee, (1959). These committees found that foreign entities owned 80-90 percent of Indian patents and 90 percent of them were not worked in India. The Joint Committee on Patents of 1965 finalised the essential features of what was to become landmark legislation - the Indian Patent Act, 1970. The Joint Committee concluded that the monopoly control exercised by foreign companies on production of the drugs resulted in high prices and that medicines were generally unaffordable to the public. In 1970, the Indian Patent Act was passed. Concomitantly, it was decided to stay out of the Paris Convention keeping in mind India’s domestic interests. Under the 1970 Act, there could be no monopoly on the end product in two vital areas of Health and Food.
The Act required the patentee to work 15 his invention in the country so that it meets the reasonable requirement of the public.16 It also provided that a patented subject matter used as food, medicine or drug shall be deemed to be endowed with ‘licences of rights’ three years after they are issued. 17 Thus, the Government could ask the controller to endorse a patent with the ‘licences of right’ on grounds of non-availability to public or unreasonable price. Further, on endorsement, any member of the public may ask the original patentee for licence. A ceiling of 4% was fixed on royalty in cases of licences for food, medicines, or drugs. 18 The Act provided patent protection only for methods or processes in case of substances capable of use as food, medicine or drugs and substances made from chemical processes, alloys, optical glass, semi conductors, and inter metallic compounds.19 This special framework gave the Indian pharmaceutical industry the legal right to manufacture through a noninfringing process any drug required by the country and market it. It heralded a free, open pharmaceutical market in India without monopolies and initiated the golden age for the industry and the public. With a regulatory framework, which focussed on process patent, local firms were encouraged to come up with cheaper processes through reverse engineering. 20 Thus, the foundation of a strong and highly competitive domestic pharmaceutical industry was laid. Operating under a rigid price control framework, 21 the industry grew to become a global supplier of bulk drugs and medicines at affordable prices to the public in India and the developing world. Technologically, the Indian pharmaceutical industry was classified by the UNIDO as one of the most advanced amongst developing countries. 22 The production of pharmaceutical products grew more than forty eight times from Rs 250 crore in 1971, at the time when the Act was introduced, to RS.12,068 crore in 1997 -98. 23 During the same period, the number of registered pharmaceutical producers increased from 5,000 to 24,000.
Amendment of Indian Patent Law and its Implications
During the period from 1995 to 2005, India carried out three amendments to its patent laws, to conform to the requirement of Trade Related Intellectual Property Rights Agreement (TRIPS). Under the new patent law, product patents in the pharmaceutical and food industry were recognised. India also signed the Paris Convention 1883 and the Patent Co-operation Treaty in 1998. The first amendment in 1999 introduced “mailbox provisions” 25 to provide a means by which product patent application could be filed with effect from January 1, 1995. The second amendment in 2002 provided for incorporation of all substantive provisions except for providing patent to products. The important provisions included (a) redefining patentable subject matter, (b) extension of patent to 20 years and (c) amending the compulsory licence system. 26 The third amendment in 2005 provided for product patents, which marked the beginning of a new patents regime in India.
The major legal implications of these amendments on the pharmaceutical sector are the following:
- Patents are granted for products and processes for the inventions in the pharmaceutical
sector. - The term of the patent is twenty years from the date of application, as against the seven
years under the 1970 Act, - The terms of compulsory licensing is made more stringent and these have failed to take
into consideration the flexibilities available under TRIPS and Doha Declaration, - There has been a reversal of the burden of proof in that the defendant has to prove that he
is not guilty of infringement. In the Patent Act, 1970, the responsibility of proving an
infringement lay with the patent holder.
Much of the debate on the impact of product patents on the pharmaceutical industry in India has centred on the prices of the patented products and their accessibility. The Indian pharmaceutical sector has achieved global recognition as a low cost producer of high-quality pharmaceutical products due to the flexibility available under the 1970 Act. It has become a global leader in the manufacture of generic drugs. Drug prices in India are much lower than the prices in countries like Pakistan, UK and USA, where product patents were in force. 27 Thus, the welfare loss due to a possible price increase has been highlighted in most of the discussions relating to the 2005 Amendment. However, the discussions failed to consider the loss of welfare due to non-introduction of new drugs to the Indian market because of the weak patent protection regime. Most of the multinational pharamaceutical companies introduced many new drugs in Pakistan and not in India because of the weak patent protection regime even though these companies were present in India.
India is a major exporter of generic drugs to the developing and under developed countries. The amendment of the Indian patent law has had an adverse impact on the drug markets of these countries, especially Africa. The new amendment, however, does not affect the manufacture of generic drugs, which were in the market prior to 1995 or were in production prior to 2005. These generic drug manufacturers will have the right to continue to produce these drugs in return for the payment of a fixed royalty to the patent holder. The concern of price increase and unavailability arises for those drugs that have been granted product patents under the new law. The only way by which such drugs can be manufactured in India is by way of compulsory licenses. The Government grants compulsory licenses on grounds such as non-availability, high prices, or public interest. The procedure of securing a compulsory licence which ought to be simple, has however been left ambiguous by the new Act.
The most controversial area in the discussions has been the introduction of Section 3 (d) that prohibits the patenting of new forms of existing pharmaceutical substances that do not demonstrate a significantly enhanced “efficacy.” 28 This unique concept of ‘efficacy’, 29 a drug regulatory term, intends to control the ‘ever greening’ 30 of patents. 31 Section 3(d) contains an innovative norm that attempts to strike a balance between two conflicting priorities namely availability of drugs at affordable prices to the public, and encouraging and remunerating innovations of domestic industries. According to some experts, this section also tries to strike a balance between the interest of the domestic producers, MNCs and the consumers.
The TRIPS compatibility of the above provision has become an important legal issue in the Indian Patent law scenario. The TRIPS Agreement does not define the patentability criteria in any of its provisions. Article 27 of TRIPS states that patents shall be available to any inventions provided that they are new, involve an inventive step and are capable of industrial application. 32 The absence of definitions for these terms in TRIPS gives the flexibility to the member states to create a legal framework that would be able to meet and balance of the interests of the parties involved. The provision for non-discrimination does not prevent the member countries from prescribing a higher threshold for the grant of patents. The Doha Declaration on the TRIPS Agreement and Public Health 33 also gives the flexibility to the member countries to formulate their domestic laws in manner supportive of the right of WTO members’ to protect public health and, in particular, to promote access to medicines for all. The criterion of efficacy in this context can be construed as an effective tool to prevent frivolous patents in the pharmaceutical sector. R.A Mashelkar as Chairman of the Technical Expert Group (TEG) on Patent Law Issues had specifically dealt with the issue of TRIPS compatibility of Section 3(d) of Indian Patent Act, 1970 as amended in 2005 in his revised report. According to him, the provision is not compatible with TRIPS. 34 The report also states that frivolous patents should not be allowed, as it will lead to evergreening of patents. This report has been received by the consumers with apprehension, because the suggestions made by the expert group if adopted, can take away the available leeways in the Act which ensure that some drugs are available in the market at a cheaper price. The proposal that the term “efficacy” should be given a high standard while analysing a patent application may affect the domestic pharmaceutical companies, which are now at the stage of patenting incremental inventions. Also, defining the term narrowly such that it leads to rejection of patent applications will amount to TRIPS violation. Thus, the threshold of “efficacy” would have to be a point at which the interests of the domestic producer and consumer interests are harmonised.
Competition among producers to gain a greater market share has always been a time-tested method of bringing the prices down and increasing the availability of goods. The increased term of protection under the new regime gives rise to a concern, as an extended monopoly in patented drugs would affect local market competition. A combination of factors such as provisions for limited patent duration, process patents for pharmaceuticals and chemicals, conducive licensing provisions and compulsory working of patents ensured a boom time for the domestic pharmaceutical industry under the old regime. In the new patent protection scenario, the major problem could be the availability of affordable drugs. The impact of this aspect on Indian society would be adverse, as the country still does not have a proper social security system or medical insurance system in place. However, we have to take into consideration the fact that a patent regime that favours reverse engineering and offers scant protection to innovation, would discourage the development of new and more effective drugs. By not acknowledging innovation, India would have run the risk of not having access to future medicines vital for ameliorating the standard of public health.
One of the advantages of the new system is that it would facilitate introduction of new medicines and access to these new medicines. With a strong patent regime, the MNCs would be encouraged to introduce the newly developed drugs into the Indian market and move for collaboration with the local pharmaceutical industry. 35 Similarly, with the new system in place, the outsourcing of laboratory research and clinical trials to India will increase, thereby finetuning domestic processes for the approval of the marketing of a new drug. This would help in lower research costs, and eventually prices. The new system would also benefit domestic drug producers who are keen on international mergers and acquisitions. The present legal framework urges them to focus on process innovation and graduate from generic manufacture to novel product innovation. As a result of the expansion, the Indian pharmaceutical and healthcare market is undergoing a spurt of growth in its coverage, and services, and benefiting from increased spending in the public and private sectors. This has opened a window of opportunities in the medical field and has boosted clinical trials in India.
Conclusion
Today, the Indian pharmaceutical industry is a highly organized sector worth about $ 4.5 billion and growing at a rate of 8 to 9 percent annually. At a growth rate of 10 per cent per year, this sector is well set for rapid expansion. The lenient interpretation by the Patent Office of the patentability criteria provisions in the Indian Patent Act has opened the door for domestic drug makers to acquire patents for mere modifications or new forms of known drugs. However, the present inconsistency and lack of transparency in interpreting the provisions relating to patentability of a subject matter are points of concern as it could lead to discrimination and violation of TRIPS.
Better interpretational guidelines have to be developed for compulsory licence provisions, taking into consideration the flexibilities available under TRIPS and Doha Declaration,. Though the exception available for generic drugs under the regime would help keep the prices of the medicines that are already in the market in check, the apprehensions about new drugs, which have acquired product patents, have to be addressed by the governement. The regulations issued by National Pharmaceutical Pricing Authority keep a check on the Indian pharmaceutical market and pricing of drugs. In the changed context, the Authorty will have to play a pro-active role in ensuring the availability of drugs at an affordable price.
*Ms. Kavitha Chalakkal is a Ph D student at the School of International Studies,
Jawaharlal Nehru University, New Delhi.
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‘Oh, don’t worry, I can drive myself, anyway.’
• • • • • • • • • •
‘My wife is always asking for money,’ complained a friend of ours. ‘Last week she wanted two hundred dollars. The day before
yesterday she asked me for one hundred and twenty-five dollars. This morning she wanted one hundred fifty dollars.’
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