Patents, prices, and public

Patents, prices, and public
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First Published: Sun, Feb 18 2007. 11 52 PM IST
Updated: Sun, Feb 18 2007. 11 52 PM IST
Dr Mashelkar is being assailed for his report on the validity of our patents law in the context of the WTO Trips agreement. There are strong views, for and against. One gets an impression that the debate is more about entrenched interests in industry, and the need to sustain barriers against entry of multinationals, than about the legality of provisions in the law.
The Patents Act, 1970, by blocking product patents, empowered an indigenous industry to become a leading supplier of generic drugs and enabled it to replicate patented drugs through alternative chemical engineering processes. The industry consists of a few strong, and a large number of small, players. The larger players have global market reach and are among the best in terms of manufacturing efficiencies. But they are small, compared to large global firms, and can’t spend the vast amounts needed for drug discovery.
With the Trips pact, India agreed to introduce product patents that would effectively stop local firms from putting out their versions of patented drugs in the market. And right since the Patents Act was amended in 2005, there’s been much concern in Parliament, and the public, about the impact of this move.
Public concern that the new regime would mean higher drug prices, and scarcities, is driving policymakers towards drug-price controls. Riding this fear is the concern of indigenous industry that the advantages of the last three decades would be lost, and they would not be able to compete against the multinationals. The latter (MNCs) are concerned that pricing controls, the lack of data protection and non-transparent processes at the patent office would stop them from further developing their market in India.
The Mashelkar Report, by considering some of the provisions of the new Patents Act violative of Trips, may now extend the ambit of patentability, something that the local industry obviously dislikes. Under Section 3(d), a new form of a known substance would not be patentable unless it differs significantly in properties with regard to efficacy. An element of vagueness is, indeed, built into the language of Section 3 (d). This has led to diverse interpretations in our four patent offices. It leaves room for subjective judgement about the significance of any modification of the original product.
The real issue for the public is the availability and pricing of drugs. But neither the government, nor the domestic industry, is really concerned. The ministry recommends price controls purely for reasons of power and patronage. The local generics industry is fighting price controls recommended by the ministry concerned, and has been able to get a GoM (group of ministers) constituted to look into this. For patented drugs, a panel will determine reference pricing prior to marketing approvals, a move that MNCs fear will make several of these drugs commercially unviable in India.
It is worth noting that public health delivery is not a matter of drug pricing alone. NFHS-3 (National Family Health Survey) points to falling vaccination rates and rising anaemia even in better administered states. Drug availability and delivery has as much to do with the inefficiencies in the public-health system. Some states, notably Tamil Nadu, seem to have fared better. They have also an innovative price control system. The government negotiates for its needs with the manufacturers. Each tablet is labelled and packaged distinctly and its sale in the open market is an offence. The manufacturers save distribution margins and are assured of a sizeable order. Beyond the state supply, the free market, with market-based pricing, is used by private hospitals and the public that doesn’t access government health care. The system has been working extremely well for over a decade, is an example quoted by the World Bank, and can be replicated in other states.
Provided, of course, the bureaucracy and the politics there do not see it as a taking away of ‘benefits of office’.
S. Narayan is a former finance secretary and economic advisor to the Indian Prime Minister. Your comments are welcome at policytrack@livemint.com
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First Published: Sun, Feb 18 2007. 11 52 PM IST
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