When the government initiated discussions last week to lay down norms for the issuance of compulsory licensing (CL) for medicines under the Indian Patent Act 1970, it rekindled the issue facing the Indian pharmaceutical industry of the affordability of and the access to medicines.

The topic was raised through a draft discussion paper issued and circulated by the Department of Industrial Policy and Promotion (DIPP). The CL issue is to be discussed while adhering to provisions of the Trade Related aspects of Intellectual Property Rights (TRIPS) agreement to which India is a signatory since 1995. CL is a system whereby a government permits third parties (other than patent holders) to produce and market patented products without the consent of the patent holder. Essentially, the paper proposes to elicit a response regarding the scope of the TRIPS in regard to CL and the availability and access to medicines, particularly amid the backdrop of the growing presence of multinational pharmaceutical companies in India and declining domestic sales.

Speaking to The Hindu, Dilip G. Shah, Secretary General, Indian Pharmaceutical Alliance (IPA), a body representing Indian pharmaceutical players, said, “The discussion is welcome. In the years since TRIPS, no Indian company has applied for a CL either in India or in developing countries. This is because there is lack of clarity on the government's position and the procedure is very cumbersome.”

Mr. Shah said that statistics indicated the Indian pharmaceutical market as $19 billion. “Over the last five years, the share of multinational pharmaceutical companies has risen from 15 per cent to 25 per cent and in five years could exceed half the market. They could then influence the price of products, which is dangerous. Import of finished dosage forms has been rising and their prices are unaffordable even for middle-class.” These fears are founded on the large acquisitions of Indian pharma businesses and the fact that already most of these companies were export-oriented and once acquired, they would become even more so.

The DIPP's draft discussion paper suggested four options to combat the threat. These include, invoking the provisions at the time of a public health emergency, invoking the Competition Act 2002 to find out if the price or the availability of a drug is a result of an anti-competitive agreement or a combination which has an adverse effect on competition, a review of the foreign investment policy for pharmaceutical companies and finally, expanding the ambit of the drug pricing authority to regulate prices of a larger number of drugs than the present 74.

“Barriers to acquisitions can be created. If medicines are considered a sensitive sector as even developing and poorer countries are dependent on India for drugs, this can be done. Investments should be moved from the automatic route to the Foreign Investment Promotion Board (FIPB) route to ensure better clarity,” said Mr. Shah adding that the imposition of a price control would hurt the domestic industry. “It is after all price-based and MNCs using transfer pricing would not be impacted. Imports of finished dosage forms rose 30 per cent in the last five years on the basis of transfer pricing.”

Clearly, the DIPP paper has prompted the domestic industry and lawmakers to take notice of the need for more transparency in the laws and their implications to facilitate growth of this industry and Mr. Shah said, “We had projected it to reach $40 billion by 2015. This can be done as the domestic market doubled between 2005 and 2010 and the export market has grown 2.5 times, but a more conducive environment must be in place.”

More In: Industry | Business