New Delhi: The industry department is about to finalize the terms under which the government can order the manufacture of drugs without seeking the permission of the patent holder by the end of this month, in the face of stiff opposition from multinational drug companies and lobby groups.
“We will finalize our views on the matter by 31 March,” an official of the department of industrial policy and promotion (DIPP) said, speaking on condition of anonymity.
Also Read What They Are Saying (PDF)
Concerned that recent acquisitions of Indian pharma companies by overseas firms may lead to the reduced local availability of patented drugs and an increase in prices, including those of generics, DIPP had issued a discussion paper in August last year seeking views on compulsory licensing.
Compulsory licensing can be used by the government to allow third parties to produce and market a patented product or process without the consent of the right’s owner, thus ensuring the availability of the drug at a reasonable price. Among other things, the department will decide whether compulsory licensing should be allowed only in the case of public health emergencies or whether there will be other valid circumstances, such as companies abusing their dominant position or engaged in unfair competition.
In the discussion paper, DIPP had said that the objective was “to develop a predictable environment for use of such measures”.
The official said the department is also continuing inter-ministerial consultation on whether to reduce the existing 100% foreign direct investment (FDI) allowed in pharma companies without the need for prior approval.
“We are clear that 100% FDI through automatic route in greenfield pharmaceutical projects should continue. However, we are yet to take a view whether FDI in existing domestic drug companies should be reduced below 100%,” the official added.
The DIPP paper had asked for public debate on whether the 100% FDI allowed through the automatic route in pharma companies should be routed through the Foreign Investment Promotion Board, so that proposals for mergers and acquisitions in this sector could be scrutinized.
However, the health ministry later batted for reducing FDI to prohibit the takeover of domestic pharma companies.
In recent years, India has seen several big-ticket deals in the pharma sector.
In June 2008, Japanese drug maker Daiichi Sankyo Co. Ltd acquired New Delhi-based Ranbaxy Laboratories Ltd for nearly $5 billion (Rs 22,500 crore today).
Two years later, US-based Abbott Laboratories bought the healthcare solutions business of Mumbai’s Piramal Healthcare Ltd for $3.72 billion, becoming India’s largest pharmaceutical company in the process.
The discussion paper said there were concerns that if such trends continued, an oligopolistic market may develop, resulting in a few companies dictating prices of drugs critical for addressing public health concerns, including front-line diseases such as AIDS and hepatitis C.
DIPP said large Indian pharmaceutical firms that have been taken over by foreign companies may no longer be willing to apply for a compulsory licence even if eligible. It also flagged the concern that such foreign companies may utilize the marketing channels of Indian firms they take over to sell costlier patented drugs or branded generics rather than the cheaper generics being sold earlier. The department pointed out that over the years, though exportsof domestic pharma firms have been growing, the value of domestic consumption contracted in 2008-09.
“The emphasis on exports has resulted in a significantly lower growth of domestic consumption when compared with exports during most years during this period (2003-09). This is despite the fact that India itself has a large unmet domestic demand for critical medicines (and) 65% of the Indian population still lacks access to essential medicines,” the discussion paper said.
“Enabling provisions for imposing compulsory licensing are present in the Patents Act,” said Leena Menghaney, campaign coordinator (India) for Médecins Sans Frontières.
“All you need is rules for calculating royalty payments,” she said. “It is also better to have transparent and time-bound procedures in the patent office to issue compulsory licensing.”
Menghaney also said that issuing such licences should not be limited to national health emergencies.
“Compulsory licences could be issued for government use, non-commercial use and against anti-competitive practices,” she added.