More compulsory licensing of patent-protected medicines coupled with state procurement and distribution could be a panacea for the healthcare system

The promise of universal access to healthcare and affordable medicines is inextricably linked to the ongoing debate on patent regimes. Recent months have seen an escalating battle between big business or multinationals in the pharmaceutical sector and the government on the question of the intellectual property rights of life-saving medicines and the impact of such regimes on drug affordability.

In a landmark decision, earlier this year, the Indian Patent Office granted a compulsory license of a patented drug in India. Using a clause in Indian patent law that allows for compulsory licensing if “reasonable requirements of the public with respect to the invention have not been satisfied”, the Patent Office authorised an Indian company, Natco Pharma, to make and sell a generic copy of multinational pharma corporate Bayer’s drug, which is used to treat advanced kidney and liver cancer, by paying six per cent of its net sales in royalties.

Priced at an exorbitant Rs. 2.8 lakh (for a month’s dose), Bayer’s pill Nexavar was bought by just 200 people in India in 2011. By its own submission Bayer supplied to only two per cent of the patient population, and thus did not meet these “reasonable public requirements”. Natco, which says at least 8,000 patients need it, will supply the drug’s generic copy at Rs. 8,800. India now becomes the second country after Thailand to enforce compulsory licensing for a cancer drug, though both Thailand and Brazil have allowed this provision in the case of many other medicines.

Public health experts and activists hope that in a country where access to affordable medicines and healthcare has seen a sharp decline, this decision will pave the way for compulsory licensing of many more critical drugs. With this India becomes the second country after Thailand to enforce compulsory licensing for a cancer drug, though both Thailand and Brazil have allowed this provision in the case of many other drugs.

Only half the battle

Allowing for compulsory licensing is half the battle, but the other half cannot be won without increased government spending and state intervention in the procurement and distribution of drugs. Take for instance, the case of Nexavar. Even after compulsory licensing is enforced, the drugs manufactured by the Indian company still have a profit component: at Rs. 8,800 for a month's supply, the life-saving medicine is still inaccessible to a vast majority of Indians.

The truth is that these battles apart, India, often known as the 'pharmacy of the global South' as it exports life-saving drugs across the world, has failed to provide affordable medicines to a large section of its population. This 'duality' has been noted by the High Level Expert Group (HLEG), commissioned by the Planning Commission, which in its report on 'Universal Health Coverage' points to unreliable supply or distribution system, poor system of medicine, skewed priorities in drug spending, unaffordable drug pricing and a stringent pricing regime as the main factors affecting affordable access to medicines.

Evidence from large sample surveys of households in India suggests that impediments to access to drugs have only increased. Over three decades the access to free medicines have plummeted from 31 per cent to 8.9 per cent (for in-patients) and 17 per cent to 5 per cent (for out-patients), according to National Survey Sample Rounds in 2004. Largely uncontrolled after the price decontrol policies of the 1990s, the price of drugs that were not controlled increased by 137 per cent, and the price of essential drugs too grew by 15 per cent from 1996 to 2006, the HLEG points out.

Abysmal statistic

Karnataka does not fare too well in terms of access to medicines. The HLEG report quotes a study which finds the median availability of critical drugs in the public healthcare system was an abysmal 12.5 per cent in the State. It trails other States in terms of drug expenditure, which has declined from 7.9 to 6 per cent of total health expenditure from 1996 to 2006.

Procurement and distribution

However, States such as Tamil Nadu have led the way by procuring drugs from companies and giving it free for all those in need at the state-run hospitals. Bulk procurements of both patented and generic drugs drive down the price point; this variation could range between 100 and 5,000 per cent, the HCEG report notes. This system is a universal one, not a targeted scheme, along the lines of the Union government proposal to supply free medicines across disease segments in state-run hospitals.

Coupled with more green signals for compulsory licensing of patented drugs, a universal public distribution system-like infrastructure to procure and distribute drugs could be the panacea for what ails our healthcare system. Shamnad Basheer, IP expert and professor at National University of Juridical Sciences, says that the government has a huge role to play in realising this. “So far the government is saying that it will permit generics to enter the market wherever possible, and that there will be a more competitive market. But these drugs are still unaffordable. The burden of making it affordable to the common man is still with the government.”

Post the Bayer-Natco decision, currently being contested in a patent appelate tribunal, global pharmaceutical majors are complaining that the Indian patent system does not protect their innovations. Another case now pending in the Supreme Court is an appeal by Novartis against the denial of a patent for a cancer drug, one that the multinational claims has been patent protected in over 30 countries.

Mr. Basheer emphasises that the stance taken by India is significant. Significantly, China too recently reportedly too made a statement supporting compulsory licensing. He says: “While there is pressure from US and EU lobbies, the fact is that under TRIPS (Trade-Related Aspects of Intellectual Property Rights), countries are free to decide on compulsory licensing. Over the years, the developed world has made it difficult to get such licences, but developing countries are now going to push for it.”