Healthy Skepticism Library item: 12892

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Publication type: news

Anderson T.
India Considers Compulsory Licenses For Exportation Of Drugs
Intellectual Property Watch 2008 Feb 20
http://www.ip-watch.org/weblog/index.php?p=933

Full text:

The Indian government will consider whether it should grant permission for patented drugs to be manufactured and exported without the consent of the patent owners at a hearing scheduled for the last week of February.

If the government agrees to the application, it would be the first time such permission has been given in India and only the second time in the world. The decision also would be controversial as it likely would bring a reaction from patent holders in industry.

The hearing has been scheduled in response to an application to India’s Patent Controller by Hyderabad-based generic pharmaceutical company Natco to produce two drugs for export to Nepal in September last year.

It is unclear whether the government will make its final decision at a hearing. A spokesman for Natco said: “It is the pure discretion of the [Patent] Controller whether to grant the same [licence] or not. There is no specific time limit fixed for the government to take the decision.”

One drug, called Erlotinib, was patented in India last year by Swiss manufacturer Roche under the brand name Tarceva. This lung cancer drug is approved for use in 87 countries worldwide.

The other also is a cancer drug, called Sunitinib, and is sold by US manufacturer Pfizer under the brand name Sutent.

Specifically, Natco has asked for a so-called compulsory licence, a recognised legal instrument contained within the World Trade Organization Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).

TRIPS does not stipulate exactly when countries might need to use such a provision; it is a flexibility built into the agreement that leaves it up to governments.

If compulsory licences are issued for purposes of a national emergency or extreme urgency then there is no requirement to try to negotiate a voluntary licence with the patent owner.

What is special about the Natco case is that it invokes new compulsory licence rules that were introduced to the TRIPS agreement relatively recently.

Before 2003, compulsory licences could only be issued for production predominantly for domestic use, thereby allowing a country to permit domestic manufacturers to produce copies of patented drugs for its own citizens. However, while many countries could, in theory, access drugs quickly as a result of the compulsory licence mechanism, some of the poorest countries in the world could not. Many of the countries lack domestic drug manufacturers that could produce medicines.

In 2001, the WTO’s Doha Ministerial Conference decided to change TRIPS so that countries unable to manufacture the pharmaceuticals could obtain cheaper copies elsewhere if necessary. By August 2003, WTO’s General Council had issued an addendum to TRIPS, which legalised the process by which generic drugs, made under compulsory licences, can be exported to countries that lack production capacity. WTO members approved a permanent amendment to TRIPS in December 2005, and two-thirds of the membership must ratify it by 2009 for it to enter into effect.

India has transposed this provision into its amended patent law, which entered the statute books in 2005. Under Section 92A of that law, companies can apply for a licence to export copies of patented drugs to a country that requests it. Both the importing and exporting country must also fulfil a range of other criteria set out by the WTO before export can take place (the importing country must issue a compulsory licence too, for instance).

Natco’s application is significant because, if successful, it will be the first time that Section 92A has been invoked. It would only be the second time since 2003 that this particular TRIPS provision has been used throughout the world – partly because the criteria under which such exports can take place are seen by many to be cumbersome.

Nevertheless, the first compulsory licences for export were issued last year by Canada and Rwanda. The licences enable Canada’s manufacturer Apotex to manufacture and export copies of the anti-AIDS drug TriAvir, patented by GlaxoSmithKline, to Rwanda.

Although there is no indication of what course the Indian government might take, the decision to issue a licence could open the door for a slew of other compulsory licence applications.

Several other Indian manufacturers are understood to be watching the case closely and considering whether to apply for such compulsory licences, say observers such as Shamnad Basheer, a research associate at the Oxford Intellectual Property Research Centre (OIPRC) within Oxford University.

“As you can appreciate, if this turns out to be a legally and administratively costly affair, it may deter more companies from applying,” Basheer said. “However, if the process is fairly easy and a good revenue model is established via this CL mechanism, then big pharma has much to fear.”

Good revenue models from least developed countries may not be the only focus of generic companies.

The Indian Patent Act prevents compulsory licences that allow manufacturing for the Indian market from being issued for the first three years of a patent.

However, when those three years are up, the law permits compulsory licences under some of the broadest conditions in the world, said Basheer. For instance, a compulsory licence can, in theory, be issued if the drug is not available in adequate quantities, not reasonably priced, not manufactured in India or the drug was manufactured by a generic company before the law came into effect.

Indeed, experts believe generic manufacturers might begin to apply for compulsory licences for export, in order to build up manufacturing capacity until they can manufacture for the potentially huge domestic market. Of course there is no guarantee the Indian government will grant licences easily.

However, the size of that market is unclear because the law only came into force in 2005 and many of the patents issued under it are less than three years old.

By definition, generic companies will be able to sell drugs at a fraction of the cost of patented drugs.

Although Roche has refused to comment on the price of Erlotinib, Indian public health activists say the drug is beyond the reach of most Indians. In contrast, generic companies might be able to manufacture the same drug for a fraction of the cost – although by just how much appears to be unclear.

But if generics over-ride patents and undercut the price of drugs, originator companies say they will not be able to recoup the investments in research and development that created the drugs in the first place and invest in new innovations. Indeed, they consider compulsory licences to be a form of theft of patented intellectual property.

When it became clear that two countries, Thailand and Brazil, might issue such licences last year, albeit for domestic use, the originator pharmaceutical industry cried foul.

Billy Tauzin, president and CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA), which represents some of the world’s largest pharmaceutical research and biotechnology companies, said in a statement: “PhRMA is deeply troubled by the recent trend toward the issuance of compulsory licences for pharmaceutical products. This misguided focus on short-term ‘budget fixes’ could come at a far greater long-term cost, potentially limiting important incentives for research and development that are necessary to positively impact the lives of millions of patients worldwide.”

It is unclear what the industry’s reaction will be if India issues a compulsory licence. Roche, for instance, has refused to comment on what the next step might be. Meanwhile, it is busy fighting a case against another Indian generic manufacturer, Cipla, which had begun manufacturing Erlotinib for the Indian domestic market and has not applied for a compulsory licence. That case is ongoing.