You can't escape CCI !!

Author: Prigya Arora, 1st year student of RGSOIPL, IIT Kharagpur Law School.

The pharmaceutical industry of India has matured over the years into a major producer of bulk drugs, rated among the top five in the world[1]. With the escalating number of diseases, more resistant bacteria and constantly evolving viruses, there is a constant increase in the demand of drugs in market. But making new drugs and taking them into the market is a hellacious task. It includes a lot of research and development and trials and rejections that leads to enormous costs.

A new analysis conducted at Forbes puts grim numbers on these costs. A company hoping to get a single drug to market can expect to have spent $350 million before the medicine is available for sale. In part because so many drugs fail, large pharmaceutical companies that are working on dozens of drug projects at once spend $5 billion per new medicine[2].

To acknowledge the efforts and costs put up by the pharmaceutical companies for this R&D, the novel drugs are given patents so that these companies can get the exclusive rights to manufacture that drug under The Patents Act, 1970. But once the patent expires, the formula of the drug becomes open (generic) and anyone is free to produce and manufacture it. The core issues for most drug companies are pricing, patent expiration of number of drugs and increasing legal and regulatory concern. To recover these high costs, the pharmaceutical companies try to maintain the monopoly in the market by paying off small local cheap generic drug producers for keeping them off the market. Some companies alter the compound and sell at much lower prices which surely upsets the comparatively larger companies.

Such issues can be observed as in the case of F. Hoffmann-La Roche Ltd. v. Cipla Ltd.[3]In 2008, Roche sued Cipla before Delhi High Court claiming that Cipla’s generic product Erlocip violates Roche’s patent rights over the Erlotinib Hydrochloride (EH); Indian Patent No. IN '774. Moreover, Cipla’s generic version costs about 1/3rd of Roche’s patented drug. The Court dismissed Roche's patent infringement suit in 2012. To counter such problems, the Competition Commission of India (CCI) which regulates country’s competition may now examine the details of patent settlements being negotiated between foreign branded medicine companies and local generic drug makers as these agreements may restrict the access of cheaper drugs to the unwell.

The other cases which CCI is likely to examine includes patent infringement battle between Swiss drug maker Novartis and Indian biotech firm Biocon, and the other between US-drug multinational Merck Sharp and Dohme Corp. (MSD) and India’s Glenmark Pharmaceuticals Ltd., both these cases are based on patent infringements of anti-diabetic drug of different kinds.

The argument is not that MNCs should be stopped from coming to India; the real concern is to guarantee that if they potentially harm competition, then steps are taken to ensure that the harmful effect is diluted. Generic drugs on the other hand, have become a necessity for the availability of cheap medicine to the poor class of India. With the involvement of CCI in the pharmaceutical sector, it is expected to bring a positive impact on the distribution of medicines in India as well as a check on prices charged to the customers.

In the past, until the passage of the CCI’s involvement, these issues were managed by administrative decisions of ministries and the Foreign Investment Promotion Board (FIPB) route. This approach had the impression of arbitrariness of government decisions. On the contrary, CCI operates within a well defined structure, providing legal certainty and transparency to the parties with clearly defined appellate processes. The Competition Act, 2002 empowers the Commission to evaluate all aspect of the proposed deal such as reduction of capacities for production or R&D and market distorting issues related to ownership of IPR. Further, this structure has in-built systems for consultation with appropriate sources, including ministries, department of government and designated persons or cells in these organizations[4].

Government of India has taken a very optimistic decision to allow CCI to be the watchdog of pharmaceutical settlements. As the role and powers of the CCI have been notified very recently, the ultimate test of their efficacy lies in the implementation. Both domestic and foreign pharmaceutical companies must realize the importance of public health and the need for affordable and accessible medicines to all consumers in a densely populated country like India and must rearrange their business models to serve the larger purpose.

 Disclaimer: This blog or any post thereof is not to be considered to be in any way associated with the official stand of IIT kharagpur or RGSOIPL on the issues being discussed in the said post. The opinions on the blog are the authors own and should not be considered as legal advice.

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[1] Dr. Geeta Gouri (Member: Competition Commission of India), Competition Issues in the Generic Pharmaceuticals Industry in India,http://www.cci.gov.in/images/media/presentations/ComIssGenPharmIndusIndia_20100401142

346.pdf

[2] http://www.forbes.com/sites/matthewherper/2013/08/11/how-the-staggering-cost-of-inventing-new-drugs-is-shaping-the-future-of-medicine/

[3] 159(2009)DLT243

[4] “Foreign Direct Investment in Indian Pharmaceutical industry”,http://cci.gov.in/images/media/ResearchReports/shahbaazInternreportdec2011.pdf

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Effect of TRIPS on Public Health

Author: Sutapa Jana , 3rd Year student of RGSOIPL, IIT-Kharagpur.

       

Health is one of the basic fundamental needs of all human beings. Health policies encompass a number of elements, from prevention to cure and access to drugs.[1] Access is now defined by both availability and affordability which clearly establishes the economic link between this “access” and poverty.

The scenario of HIV/AIDS in the African continent clearly illustrates this relationship. The epidemic which is going on ruining countries has brought in limelight the utterly inhuman face of the Multi National Companies (MNCs), as they continued to sell the drugs to treat HIV-AIDS at 20-50 times their actual cost by seeking shelter under laws mandated by the TRIPS agreement. A kind of relief was given to those deprived people when the Indian companies like Cipla offered these drugs at very low prices by March 2001.

This has been the spark for an upsurge in the public opinion against the ruthless practices of MNCs, questioning the rationale of TRIPS, particularly in public health. These developments ultimately resulted in the Doha Declaration on TRIPS Agreement and Public Health (November 2001) seeking to limit, to some extent, the damage done by the TRIPS agreement and its underlying philosophy.[2]

The Doha Declaration does not open new avenues within TRIPS but confirms the legitimacy of measures seeking to use to the largest extent possible the in-built flexibility found in TRIPS. This emphasizes that the TRIPS Agreement does not and should not prevent members from taking measures to protect public health and reaffirms the rights of Members to fully use the flexibilities available in the TRIPS Agreement for this purpose. The TRIPS Agreement has to be interpreted in a manner which is supportive to safeguard the public health of Member countries and to promote access to medicines to all ("interpreted and implemented in a manner supportive of WTO members right to protect public health and, in particular, to promote access to medicines for all" ). In other words, the declaration does not open new avenues within TRIPS but confirms the legitimacy of measures seeking to use to the largest extent possible the in-built flexibility found in TRIPS.

It also clarified the provisions for the flexibilities granted under TRIPS, i.e. Compulsory licensing. Compulsory licensing has long been used as a tool to regulate the exclusive rights conferred by patents. In the case of health, the rationale is to make sure that the existence of a patent does not create a situation where a protected medicine is not available to the public because of non-health related factors. The Patents Act, 1970 provided an elaborate regime that included both compulsory licenses and licenses of right. The TRIPS Agreement has not explicitly mentioned the word compulsory licensing but that does not mean it has done away with the notion of compulsory licenses but provides a more restrictive framework than the current regime in force in India. It explained that each member has the right to grant compulsory licenses and has the discretion to determine the grounds upon which such licenses are to be given. The recognition in the Doha Declaration that TRIPS member-states can use the flexibility provided in the agreement and can, thus be understood in the context of a generally increasingly restrictive international patent regime. It was also mentioned that compulsory licenses can be issued for importation as well as for domestic production.

In regard to exhaustion of IPRs, the Declaration has clearly mentioned that each Member is free to establish its own regime without challenge if they are subject to provisions of TRIPS, prohibiting discrimination on the basis of nationality of the right holder. In the declaration it was reaffirmed that the developed countries are committed to the provisions of providing incentives to their enterprises and institutions to promote technology transfer to LDCs under Article 66.2 of TRIPS.

The declaration has been hailed as a giant leap in the direction for making the TRIPS Agreement more responsive to the needs of developing countries and more specifically to the individuals who are unable to afford the cost of patented drugs. In fact, it tries to address a number of important issues related to the implementation of medical patents. However, it fails to take up the much more fundamental questions of the scope of patentability and the duration of patents in the health sector. The Doha Declaration acts an important instrument in India for two main reasons. Firstly, at a political level, India was among the most vocal and one of the leading developing countries at the ministerial conference in putting forward developing Countries' interests. Secondly, the declaration was adopted while the joint committee of Parliament was finalizing its report.

The major goals identified in this millennium which are of immense importance include reducing poverty and hunger, improving health and education and ensuring environmental sustainability. There has been arguments in favor as well as  against the implementation of  IPR regime. Some strongly recommend the implementation of IPRs will reduce the poverty by stimulating economic growth. As protection for new innovation increases this will in turn increase the production calling for both domestic and foreign investment which will ultimately lead to availability of medicines to combat diseases. People who vehemently oppose this argue that it stimulates innovation to only a limited extent, on the other hand developed countries use it as a tool to ouster the domestic competitors from the market and encourage importing of medicines instead of manufacturing which in turn increases the price of essential drugs. 

Hence, even if those drugs are available they are beyond the reach of the destitute.  IP rights are not conferred to only attain profits but also to provide affordable health care for long term. Such rights must therefore be closely monitored to ensure that they do actually promote healthcare objectives and, above all, should not act as barrier in promoting access to healthcare.

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[1] Prachi Pallavi; Patent Regime and Right to Health: National and International Perspective; : http://www.legalservicesindia.com/articles/pg.htm

[2] Prachi Pallavi; Patent Regime and Right to Health: National and International Perspective; http://www.legalservicesindia.com/articles/pg.htm

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