A costly prescription

Print edition : February 25, 2005

The United Progressive Alliance government's promulgation of an ordinance amending the Patents Act of 1970, a model piece of legislation hailed around the world for checking exploitation by pharmaceutical MNCs, draws international criticism.

in New Delhi

INDIA'S patent legislation, hailed as a model all around the world for its far-reaching provisions, is on the verge of being amended. The Union Ministry of Commerce has promulgated an ordinance amending the Patents Act, 1970, to fulfil India's obligations under the World Trade Organisation's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). The ordinance, promulgated in December 2004, makes wide-ranging changes to the Act and paves the way for a product patent regime to replace the process patent system. A process patent only protects the method or process that the patent holder uses to manufacture a drug. This allows other pharmaceutical companies to make the same drug using a process different from the one that is patented. The different versions of the medicine thus produced are called generic drugs.

Ciprofloxacin being manufactured at a factory of the German multinational Bayer A.G. A file picture.-REUTERS

The British-framed Patents and Designs Act (1911), which was in force until the 1970 Act was legislated, provided for a product patent system. Prior to 1970, 85 per cent of medicines available in India were produced and distributed by multinational corporations (MNCs) and the prices of drugs in the country were among the highest in the world.

The Patents Act was framed after years of deliberation and on the basis of the recommendations made by the Justice Rajagopal Ayyangar Committee (1958). The report of the committee, which was constituted by the Central government to revise the law relating to patent and design, said: "[T]he monopoly created by patent and the reward to the inventor by the grant of such monopoly offer advantages which have been claimed for the system only in highly industrialised countries which have a large capital available for investment in industries and a high degree of scientific and technological education." The Act provided for process patents for pharmaceuticals and agro-chemical products. This enabled the growth of a strong local generic drug industry, which produced the same drugs as the MNCs at relatively low prices . When Indian generics such as Cipla, Ranbaxy and Hetero began manufacturing drugs, especially for Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome (HIV/AIDS), at much lower prices, the demand for these drugs grew in countries that could not afford to buy these drugs from MNCs.

DEVELOPED countries first linked intellectual property rights with the development of trade, investment and services during the General Agreement on Tariffs and Trade (GATT) negotiations which began in Uruguay in 1986. This international regime, given a final shape in the TRIPS agreement in 1994, was to control and govern almost all aspects of intellectual property rights. TRIPS had no caveats and no member-country could withdraw from it. The only concession given to developing and least developed countries (LDCs) was an initial discretion in implementing the provisions, which were to be progressively eliminated.

However, the derailment of the WTO's Seattle Ministerial Conference in 1999 by anti-globalisation activists forced a rethink. The Doha Ministerial Conference in 2001 adopted the Doha Declaration in which countries agreed to implement the TRIPS agreement in a manner supportive of the WTO members' right to take measures to protect "human, animal, plant life or health or of the environment at the levels it considers appropriate". India, along with Brazil and South Africa, played a crucial role in bringing together developing countries on the issue (Frontline, December 7, 2001).

According to TRIPS, while developing countries (which includes India) had time until January 1, 2005, to enact domestic legislation to conform with the agreement, LDCs were given time until 2016. Since the Indian patent regime did not provide product patents for pharmaceuticals and agro-based products, it became obligatory to provide for a "Mail Box" facility for filing patent claims to protect these products with effect from January 1, 1995. Similarly, those "Mail Box" patent applications that satisfied certain conditions were entitled to receive exclusive marketing rights (EMRs) for five years. The date of application of TRIPS provisions, other than product patents, was January 1, 2000. The Indian government introduced the Patents (Second Amendment) Bill in December 1999 in order to implement TRIPS provisions other than product patent provisions. This Bill was referred to a Joint Parliamentary Committee. It was amended on the basis of the recommendations made by the committee and enacted in December 2002. The National Democratic Alliance (NDA) government tabled a Bill in December 2003 to introduce the product patents regime in all fields of industrial economy. The Bill lapsed when general elections were called in March 2004. The United Progressive Alliance (UPA) government's ordinance has made only minor changes to the Bill.

The amendment expands the scope of what can be patented. Vandana Shiva, director of the Research Foundation for Science, Technology and Natural Resource Policy, said: "The second amendment of the patent law opened up agricultural patenting. It deleted old exceptions; for example, plants were not patentable earlier. With the third amendment they have now brought product patents. In agriculture, a product patent could mean that a company may take the gene of a salinity-resistant rice variety, put it into a variety of rice through genetic engineering, and take a patent on it. But since the product patent is on the trait or salinity resistance, it means that any occurrence of that trait without paying a licence fee is an infringement, and there are cases to this effect. So, in the Basmati rice case, if we had not defeated Rice Tech, there would have been several cases of Rice Tech claiming a patent and then having that monopoly on the aroma and the size of the grain."

Vandana Shiva said: "While the government was preparing to table the ordinance, it tabled another totally unnecessary law called the Seed Act. The Seed Act of 1966 was doing its job fine. It provided for quality and reliability in seeds. The farmer's varieties were not regulated. The new Seed Act undoes the 1966 Act. It now requires compulsory registration of all farmers, which means that any farmer growing his or her own traditional varieties will be treated as illegal. This is the way this compulsory seed registration has been used in other countries to shut down the farmer's seed supply alternatives. Therefore I would say that the implications for agriculture are huge."

A pharmaceutical worker with a new anti-HIV/AIDS medicine, dubbed by government officials as the "world's cheapest anti-AIDS cocktail", at a laboratory in Bangkok, Thailand. A file picture.-JASON REED/REUTERS

"Invention", as defined by the ordinance, is too broad and could lead to "ever-greening", that is, filing patent applications for new forms of older patented drugs and of new uses of older drugs, thereby blocking the entry of generic drugs into the market. B.K. Keayla, convener of the National Working Group on Patent Law, said: "China and the United States define `invention' broadly in their patent laws and have to deal with over three lakh claims annually. This kind of volume will create chaos in India." The ordinance prohibits "mere new use" for a known substance, which does not clarify whether polymorphs, hydrates, isomers, metabolites and so on are patentable, which can lead to "ever-greening". D.P. Shah, secretary of the Indian Pharmaceutical Alliance, said: "A good example is Aventis, which in 1979 obtained a patent for fexofenadine hydrochloride. In 1996, Aventis obtained a second patent for the same compound claiming that it was a substantially pure drug."

Gajanan Wakankar, executive director of the Indian Drug Manufacturers' Association, said: "The compulsory licensing provisions are adequate only as far as the conditions are concerned. But the procedures are extremely lengthy and we feel that these procedures will defeat the purpose. The procedures are such that the patent holder has the upper hand and can thwart the application of a compulsory licence by delaying it."

The ordinance reduces the grounds for pre-grant opposition and says that henceforth it will only be treated as a representation and not as a party to the proceedings. It has a provision for post-grant opposition directed against the Controller who grants the patent. Ironically, the Controller will finally dispose of the post-grant opposition. The weakening of pre-grant opposition makes it tougher to prevent the filing of frivolous patents.

Commerce Minister Kamal Nath described the ordinance as an interim measure to fulfil India's obligations within the stipulated time. He stated that it would be discussed in detail in the Budget session of Parliament. While justifying the provisions of the ordinance, he claimed that the fear that prices of medicines will spiral is unfounded because 97 per cent of all drugs manufactured in India are off-patent and will remain unaffected.

D.G. Shah said: "We have been told a number of lies consistently by the government. Our estimate is that drugs worth Rs.3,000 crores will have to be withdrawn from the market. Our total market is worth $4.5 billion. PhRMA, the association representing the U.S. pharmaceutical industry, claims that its members are losing $1.8 billion worth of revenue [or 40 per cent of the total Indian drug market] because there is no patent regime in the country. If the U.S. pharmaceutical industry is saying that 40 per cent of the market is eligible for patent, on what basis is the Minister saying that only 3 per cent will be eligible?" .

At a retail medical outlet in Kochi, Kerala.-K. K. MUSTAFAH

There are an estimated 9,000 applications for drugs pending in the "Mail Box". The government, in reply to a question raised in Parliament, said that there were 5,636 applications for drugs in the "Mail Box", of which 4,398 were filed by foreign corporations. With 78 per cent of the patent applications for drugs having been filed by foreign nationals and with the danger of "ever-greening", the prices of medicines are likely to rise. The government has said that the prices of life-saving drugs will not rise. But details of which drugs are in the "Mail Box" have not been made public. "How does one classify a disease like cancer? Can one say cancer drugs are not life-saving? If a drug is not listed as essential medicine in the Drug Price Control Order, does that mean it can be priced at exorbitant rates?" asked Leena Menghaney, who is part of the Affordable Medicines and Treatment Campaign (AMTC), a coalition of non-governmental organisations (NGOs), patient groups and health care workers that campaigns for sustained accessibility and affordability of medicines in India. A comparison of the generic and patented drug prices shows how drug prices are likely to rise exponentially .

The government has to pass the ordinance in the Budget session of Parliament. While the NDA has said that it will oppose the ordinance, the Left parties are against it in its present form. D. Raja, national secretary of the Communist Party of India, said: "We have told the government that we will oppose the ordinance as it is not in the national interest. It will have serious implications for the pharmaceutical industry, agriculture and biodiversity. The government will have to amend it drastically keeping in mind the national interest. This is bound to come up in the coming Budget session and the Left parties will take up the issue clause by clause."

A detailed discussion on the contents of the legislation with such far-reaching impact is essential. Wakankar said: "It is an important piece of legislation and should be considered by either a joint committee or a standing committee of Parliament." A.D. Damodaran, former Director of the Council of Scientific and Industrial Research's (CSIR) Regional Research Laboratory in Thiruvanthapuram, said: "Patent law is a techno-legal document. It must be given to an expert committee for consideration and the report of the committee should be made public."

INTERNATIONAL reaction to the ordinance has been critical. Indian generic companies brought down the prices of antiretroviral therapy for HIV/AIDS from $12,000 to $140 a year. Bill Haddad, chairman and chief executive officer of Biogenerics Inc., the largest generic drug company in the U.S., said: "Two-thirds of the world' s population will be systematically deprived of life-saving drugs as of January 1, 2005. Countries in Africa dependent on Indian generic products, the WHO [World Health Organisation] and AIDS organisations worldwide have written to the Indian Prime Minister asking him to reconsider the ordinance." Activists have organised demonstrations against the ordinance in front of Indian embassies across the world. Olivier Brouant of the Medecins Sans Frontieres said: "ARV treatment is given to 25,000 HIV/AIDS patients worldwide. The Indian government has a big responsibility to the rest of the world to ensure that these drugs remain affordable."

The New York Times said in an editorial on January 18 that the ordinance was heavily influenced by multinational and Indian drug-makers eager to sell patented medicines to India's huge middle class. Describing the decree as "a double hit that will cut off the supply of affordable medicines and remove generic competition that drives down the cost of brand-name drugs", the newspaper said that the ordinance was so tilted towards the pharmaceutical industry that it did not even take advantage of the rights countries enjoyed under the WTO regime to protect public health.

There are options in TRIPS allowing countries to meet public health goals. For instance, Article 31, or the compulsory licensing provision, enables governments of member-countries or third parties authorised by these governments to use the subject matter of the patent without the permission of the patent holder. Article 8 stipulates that "in formulating or amending the national patent laws and regulations, members may adopt measures to protect public health and nutrition and to promote public interest in sectors of vital importance to their socio-economic and technological development". The ordinance contradicts the UPA's Common Minimum Programme, which promises that the government will "take all steps to ensure availability of life saving drugs at affordable prices".

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