All developing countries with preponderance of poor would like to ensure availability of medicines at affordable prices even if these happen to be product of new discoveries entailing much higher cost of supply.
Discovery and development of new medicines involve huge effort in terms of both time and money to demonstrate their safety and efficacy through R&D and clinical trials conducted as per stringent regulatory requirements.
The cost involved in carrying out these efforts have increased substantially due to escalating cost of materials & manpower and high failure rate on one hand and ever increasing bar of regulatory standards on the other. For a new medicine, this may be well over US$ 1 billion.
An innovator company has a fundamental interest in launching products of its R&D efforts in an environment where it gets a reasonable opportunity to recuperate these high cost. It would desist from coming to a country which does not promise this.
What it looks for is a legal framework under which Government rewards it appropriately for innovation and also protects its proprietary data generated to satisfy regulatory authorities about efficacy and safety of medicine.
The reward for innovation is given by way of patent grant. This confers on innovator a period of ‘exclusivity’ during which any person wanting to produce/import, distribute and use a product based on this innovation can do so only under his authorization. Indian legislative framework provides for this consequent to amendment of Indian Patent Act in 2005.
[As regards protection of proprietary data, the issue was examined by an inter-ministerial Committee constituted in 2004 under Secretary, Department of Chemicals & Petrochemicals. In its report submitted in May, 2007, Committee felt that existing laws were adequate to ensure compliance with relevant provisions of TRIPs (trade related intellectual property rights) agreement of WTO].While, grant of a patent offers a good opportunity to innovator company to suitable price its product and generate adequate returns to amortize high R&D expenses, de facto this is denied due to poor enforcement of Indian patent laws.
This is corroborated by several instances of denial of patent or revocation where patent was already granted. Invariably, orders of Patent controllers were upheld by the judiciary. Besides, patent denial/revocation, Government is also using compulsory licensing to nullify effect of patents.
Not quite content with above methods to prevent high prices of new medicines to patients, for quite some time now, Government is also seriously considering ‘direct’ interventions to rein in prices of patented products brought by MNCs to Indian shore.
A couple of year back, an internal Committee constituted by Department of Pharmaceuticals in Ministry of Chemicals & Fertilizers had recommended a negotiated price mechanism for patented medicines in respect of government purchases and for use by insurance companies. This was shelved.
The issue is now being looked in to by an inter-ministerial Committee consisting of representatives of health ministry, pharmaceutical department, drug price regulator and department of industrial policy and promotion (DIPP) in Ministry of Commerce & Industry. The Committee is likely to meet early next month.
Apart from taking a re-look at the negotiated pricing mechanism, the Committee will also explore the possibility of ‘reference pricing’ and ‘differential pricing’.
Under a system of reference pricing, domestic price is linked to those in comparable markets in other countries. Germany uses the reference price methodology besides spending caps used for coverage through insurance funds.
Negotiated price involves price fixation based on negotiation with the drug company. France has a universal healthcare system but companies have to agree to negotiated price if National Healthcare System has to reimburse patients.
In case of differential pricing, Government can fix separate prices for its procurement program (for supply to hospitals & health centres under its jurisdiction) and for purchase by others including individual buyers.
Globally, one can find several instances of price controls on patented medicines to ensure their availability at affordable prices. Thus, in Mexico and Canada, patented drugs come under price control. UK National Health Service (NHC) uses various control measures, including price control and generic substitution.
Citing global practice including in developed countries, Indian Government may justify bringing patented medicines under price control. However, that will infringe on flexibility of innovator companies to fix prices taking in to account the cost especially R&D expenses and need to earn a reasonable return.
Given the huge liability of R&D cost, there is bound to be big gap between the expectation of innovator company and price that Government would like to fix keeping in mind concerns of ‘affordability’ to patients. It would be mountain of a task to reach a figure that satisfies both.
For controls to be meaningful, Government cannot wish away looking at cost data and its break-up viz., discovery, development, clinical trials etc. This will hit against issues of ‘confidentiality’ and no innovatory company would share it. There would be questions of trust and Indian regulators cannot push things beyond a point.
A reference price based on price prevailing in other similarly placed countries may avoid pitfalls of a cost-based approach. This may not be helpful either. India cannot simply choose a country which suits us most. Moreover, for a new medicine being launched in several markets around same time, there is no data to look for.
Even if Government is able to hammer a deal, that can at best cover limited supplies for procurement by state controlled hospitals/dispensaries and healthcare centres. Resulting dual prices can lead to serious distortions, diversion/leakages and black marketing; not a healthy sign for any one.
Thus, any attempt to bring patented medicine under price control is not only impractical, but it would also be a serious dis-incentive to an MNC bringing medicine to India. Juxtaposed with poor enforcement of patent law, they would simply turn their back.
In other national jurisdictions, R&D majors enjoy full and effective patent protection. But, here in India with poor IP protection record, price controls is bound to be a tough call.
Instead of looking for easy solutions, Government should endeavor to make India a R&D hub where companies – both foreign and Indian – compete in innovations and strive to supply new medicines at affordable prices to millions of patients without any outside intervention.