India has time and again reiterated that it is in full compliance with its obligations under the multilateral agreement on trade related intellectual property rights (TRIPs) of the World Trade Organization [WTO].
At another extreme, the office of the US Trade Representative (USTR) argues with equal alacrity that there has been substantial deterioration in our intellectual property rights [IPR] regime. USTR has placed it under Priority Watch List [PWL] for two years in a row [2014 & 2015] under the Special 301 report on trade and industry practices.
Meanwhile, US based multinational companies [MNCs] in pharmaceutical, biotechnology and agrochemical segments who invest billions of dollars in discovery and development of new products are putting pressure on USTR to continue India on PWL during 2016 as well.
At the core of the gulf between two sides is their differing perception on how IPRs are put to use. While, MNCs feel that they do not get reasonable opportunity to recoup their investment in research and development [R&D], Indian government is worried that armed with patent, MNCs will exploit poor patients by charging high price.
These fundamental differences between developed [mainly US and EU] and developing countries [India, Brazil et al] were at the heart of long-drawn negotiations leading to TRIPs agreement sealed in 1995. Under TRIPs, even as former got product patents, latter got flexibilities to break them in certain situations to make medicines ‘affordable’ to patients and ensure their availability in ‘sufficient’ quantities.
The grant of a patent confers ‘exclusive rights’ on patent holder for manufacturing and marketing of patented product. During its term, any person keen to make and/or sell cannot do so without seeking prior consent of patentee. At the same time, one of the flexibilities allowed under TRIPs is issue of compulsory license (CL) to a generic firm for a new drug for which an innovator company holds a patent.
A CL authorizes the concerned entity to manufacture and market a patented product without prior consent of the innovator/holder of patent. It is a weapon that government can use to circumscribe the right of patentee when it deems necessary to do so in public interest.
Under Section 84 of Indian Patent [Amendment] Act 2005, a CL can be issued for “private commercial use” if it is found that patent holder has not taken required steps to make patented product available in ‘sufficient’ quantities or price charged is not ‘affordable’ to patients.
Further, under Section 92, which allows government route, the Controller of Patent [CoP] can issue the CL only based on central government notification citing circumstances of “national emergency or circumstances of extreme urgency or in case of public non-commercial use”.
The intent of flexibility provided under TRIPs agreement was that the government would use grant of CL ‘sparingly’; in fact, as a last resort. However, actions of the controller and ministry of health [MoH] in recent years show that this is being observed more in breach.
In 2012, using Section 84, CL was granted to Natco Pharma to make cheaper version of Bayer’s kidney and liver cancer drug sorafenib [brand name Nexavar]. This was upheld by SC in 2014. Besides, MoH has been ever keen to grant CL for Bristol-Myers Squibb’s [BMS] chronic myeloid leukaemia drug dasatinib (branded Sprycel). It is also pursuing “government route” under Section 92 to grant license for other blockbuster drugs like Roche’s trastuzumab [Herceptin] for treatment of breast cancer.
This together with Section 3[d] of Patent Act [2005] which literally blocks grant of patent for ‘incremental’ innovations has caused jitters among MNCs who strongly feel that flexibilities are being exploited to a point of undermining the very philosophy behind patent grant. They get a sense that TRIPs agreement which was intended to strike a balance between interest of innovator and patients, in actual practice, is turning out to be imbalanced.
These concerns are compelling and can be addressed if only the government resists the temptation of invoking sections 84/92 under Patent Act at the drop of a hat. But, then how does it deal with a situation where there is clinching evidence of patentee exploiting his monopoly power for individual gains at the cost patients? A prudent approach may be to approach the Competition Commission of India [CCI].
In this regard, a recent judgment by a single judge bench of Delhi High Court [DHC] in the case of Ericsson vs Micromax and Ericsson vs Intex, clearly brings out that the abuse of patent rights can be dealt with under Competition Act [2002]. The judgement finds no conflict between the Patent Act and Competition Act; that the CCI cannot be ousted from its jurisdiction just because a given case comes under patent regulator.
The verdict of DHC also brings out that if there is an investigation going on by CCI against a patentee, then the Controller of Patent [CoP] can consider it while looking at the compulsory license [CL] applications against the same patentee. If, CCI has found a patentee’s conduct to be anti-competitive, CoP would have to compulsorily consider it while giving its own final judgement.
The above approach is ‘fair’ and ‘equitable’ as government’s decision to grant a CL will be predicated upon an independent regulator [read CCI] conclusively establishing that the patentee has exploited his monopoly. MNCs will have no basis to find fault which would happen if a generic firm rushes to CoP for grant of the license and latter yields even before this process is gone through.
Meanwhile, it is good to see the department of industrial policy and promotion [DIPP] – nodal authority on IPR issues -asking tough questions from MoH in BMS case viz., number of people affected, how CL for the drug could fall in the category of ‘public non-commercial use’, how it intends to ensure that generic version can help save lives, whether there are already generic versions available in market and also an explanation as to why MoH wants to invoke the emergency/urgency clause? This change of stance looks sensible.
Further, if only the government takes a cue from pronouncement of DHC and first involves CCI for dealing with alleged misuse of patent monopoly instead of jumping straight to CoP, this will instill confidence about India’s sincerity to respect IPRs. It will be a good step forward in addressing USTR concerns and avoiding PWL tag.