India Assures the US it Will Not Issue Compulsory Licences on Medicines

The government appears bent on decisively abandoning the earlier consensus of adherence to public health goals.

In what is widely being hailed as an extraordinary victory for the multinational pharmaceutical industry over the Indian government, the US-India Business Council (USIBC), in its submission to the United States Trade Representative (USTR), reports that the Indian government has “privately assured” the industry that it would not use compulsory licences (CLs) for commercial purposes. Since it came to power in 2014, it has been speculated that the NDA government is keen to accommodate objections of the USTR and the US based pharmaceutical industry regarding the use and implementation of a number of health safeguards in domestic laws on intellectual property rights designed to promote affordable access to medicines in India. We now have confirmation that the government is willing to travel the extra mile in order to placate the US and that the Big Pharma’s vicious campaign after the first CL was granted in India has been a success.

Striking at the heart of India’s Patent Act

Mukesh Aghi, president of the USIBC that claims to represent “more than 350 of the largest global companies investing in India”, writes in his submission to the office of the USTR on February 5, 2016, “Overall, the U.S.-India Business Council believes there have been important developments related to the Intellectual Property policy in the last 12 months in India that have paved the way for substantive improvement in India’s IP environment”. He further adds, “…the level and frequency of engagement between the U.S. and Indian governments was encouraging and many have noted that they had not seen this level of engagement with the Government of India before”. Aghi goes on to compliment Prime Minister Narendra Modi for “several public statements reaffirming his commitment to a strong and robust intellectual property regime” and also notes with approval that “(the) Government of India has denied several compulsory license applications”. Particularly disturbing is his assertion that “the Government of India has privately reassured India would not use Compulsory Licenses for commercial purposes”. Curiously, David Hirschmann, the senior vice president of the US Chamber of Commerce, uses exactly the same phrase regarding “private reassurance” in his submission to the USTR.

That these are not isolated reactions becomes clearer when similar sentiments are echoed in the deposition by Patrick Kilbride of the US Chamber of Commerce’s Global Intellectual Property Centre. Kilbride in his deposition to the USTR on March 1, 2016 notes, “The U.S. and Indian governments have re-opened a formal dialogue through the bilateral Trade Policy Forum, with the creation of an Intellectual Property Working Group as a core element”. He goes on to say, “The election of Indian Prime Minister Sri Narendra Modi in 2014 provided an important opportunity to re-establish a collaborative and productive working relationship on intellectual property issues between India and the United States”.

One may legitimately ask if it is bad news that the US and India are talking to each other. The issue is not that they are talking but what the substance of their talks indicate. Let us not forget that the US and India are traditional adversaries in the area of IP protection and India has been on the USTR’s Special 301 ‘watch list’ for over a quarter of a century. In such a situation, a ‘private’ assurance that compulsory licences will be denied is abject surrender, not dialogue. The compulsory licensing provisions in the Indian Patents Act are a critical part of India’s attempt to prevent monopolies and assure access to new medicines of public health importance. A compulsory license allows domestic companies to produce cheaper generic versions of drugs under the patent monopoly of MNCs (many of them US based). When CL provisions are used, prices decreases can range from 50% to 97%, resulting in massive cost savings to governments and patients, and a significant increase in the number of patients able to access the medicines. This is the option, embedded in our national law, which is being gifted away by the ‘private assurances’. It is a disingenuous attempt to strike at the very heart of the legislative intent embodied in the Indian Patents Act.

Why is compulsory licensing important?

A recent study identified 140 patented products being marketed in India. Information about if they were manufactured in India was available for 92 products, but only four of these were manufactured in India and the remaining 88 were being imported. Thus, we see a growing trend of imported drugs forming a significant portion of the domestic market. The table below provides the prices of some of these.

Cost of patented protected drugs

Attempts to regulate the prices of these patented medicines have yet to bear fruit. A ‘Committee on Price Negotiation of Patented Drugs’ was set up to recommend ways in which the prices of patented drugs could be controlled. The committee’s report, submitted in 2013, suggested the ceiling prices of patented drugs be fixed by factoring in their prices in a select group of reference countries (a practice known as reference pricing), and the comparative per-capita GNP of India and the reference countries. No headway has been made since as the industry, especially the Organisation of Pharmaceutical Producers of India (OPPI) – representing drug MNCs in India – has opposed the formula suggested. Concerns have also been raised that reference pricing would push up costs enormously given that patented drugs are exorbitantly priced in all countries and have no relation to real manufacturing costs.

The best method of controlling the prices of patented drugs would be by breaking the monopoly of the patent holder through the grant of CLs to domestic generic manufacturers. The ‘assurance’ to eschew the grant of compulsory licences for ‘commercial’ use is at variance with the Make in India rhetoric of the current government. The Indian generic industry, now a 200,000 crore rupees commercial enterprise, was a product of the Patents Act of 1970, which rejected the high patent protection enshrined in the British patent regime and did not allow patents on pharmaceutical products. Since 2005, with the implementation of the India’s commitments under the World Trade Organisation’s Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), India now grants 20-year product patents on pharmaceuticals. The TRIPS Agreement incorporates the right of all WTO members, including India, to issue CLs on any grounds, a right that was re-iterated in the 2001 Doha Declaration on TRIPS and Public Health that signed by all WTO members, including the US thus: ” Each member has the right to grant compulsory licences and the freedom to determine the grounds upon which such licences are granted.”

By promising not to grant CLs for commercial purposes, the only possible lifeline to keep the domestic industry competitive and capable of challenging the monopoly power of foreign companies over patented medicines is sought to be denied. Possibly this is a sneak peek into the real intentions of the Make in India campaign – opening up Indian infrastructure and technological capacities for foreign companies to exploit our cheap labour and lax regulations, and repatriate super profits to their home countries. The Indian Patents Act provides clearly that CLs can be issued if commercial activities in India are prejudiced. Clause 84.7 a (iv) states: “…the reasonable requirements of the public shall be deemed not to have been satisfied if the establishment or development of commercial activities in India is prejudiced”. International legal experts have confirmed that CLs can indeed be issued to ensure local working of a patent.

Compulsory Licence provisions remain unused

It is noteworthy that the CL provisions in the Indian law have remained virtually unused and only one CL has been issued till date. In contrast, several low income countries – Zambia, Zimbabwe, Eritrea, Ghana, Mozambique – have issued CLs to promote the access to high-priced patented medicines. The only CL issued in India (to NATCO in 2012 for Sorafenib, an anti-cancer drug marketed by Bayer as Nexavar) indicates the power of a CL. NATCO’s price for Sorafenib is 8,800 rupees for a month’s treatment, in contrast to 2,80,000 rupees for Nexavar.

Although several patented drugs have started entering the Indian market, there have been few CL applications. Intuitively this would indicate a link between the new strategy of domestic Indian companies to ‘collaborate’ rather than to ‘oppose’ pharmaceutical MNCs. In large measure, this is related to the chilling effect of the government’s overt manoeuvre directed at appeasing foreign drug companies and the USTR. As submissions to the USTR indicate, CL applications are being actively discouraged, especially over the last two years. The most recent case is the denial of a CL for anti-diabetic drug Saxagliptin.

Abandoning popular consensus to safeguard public health

The pursuit of market-based reforms has brought about changes in the industrial climate. Indian generic drug companies are increasingly tying up with foreign MNCs, given their interest in developed country export markets. While domestic demand for medicines has stagnated due to poor public investment in healthcare, the major source of expansion for large Indian companies is this export market in the EU and the US. Given this backdrop, it should come as no surprise that the present government appears bent on decisively abandoning the earlier consensus of adherence to public health goals, which the previous UPA government had nominally retained.

The latest revelation on the ‘private assurances’ is another link in a long chain of events heralded by the installation of the NDA government. The shift in stance of the Indian government’s policy towards IP was signaled by the joint communiqué at the end of Modi’s visit to the US in 2014, which agreed to “establish an annual high-level Intellectual Property (IP) Working Group with appropriate decision-making and technical-level meetings as part of the Trade Policy Forum”.

In January 2015, the government unveiled its Draft Intellectual Property Policy. The draft policy enunciates a vision that proactive promotion of IP protection is in harmony with India’s developmental goals and claims that it is designed to “Stimulate large corporations, both Indian and foreign, that have R&D operations, to create, protect and utilize IP in India”. Nary a mention of the possible negative effective of strong IP protection on the access to health services and other basic needs, or of the benefits of open innovation systems and non-exclusive licences.

India is now perched on a slippery slope where decades of effort to promote a liberal IP regime, which allowed easier access to medical products, stands to be frittered away. It will really be a sad day for millions across the world if India continues to walk this talk and succumbs to the designs of Big Pharma. At stake are poor patients in three continents, who look towards India with hope for medicines that are cheap and effective. Surely ‘national interest’ demands that public health be privileged over the interests of foreign governments and foreign corporations.

Amit Sengupta is Associate Global Co-ordinator, People’s Health Movement.