A couple of years back, an internal committee of the department of pharmaceuticals (DoP) in the 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 junked.
In January, 2014 government constituted an inter-ministerial committee with a much wider mandate to examine negotiating prices of patented medicines before these are allowed entry in the Indian market. Apart from DoP, this included representatives of health ministry, drug price regulator and department of industrial policy and promotion (DIPP) in Ministry of Commerce.
The committee is actively pursuing this idea and has even asked manufacturers to submit all relevant data viz., costs, prices (in India and other countries), availability of drugs with similar therapeutic effect etc. The information sought also covers patent protected medicines already being marketed in India.
This may have been prompted by government desire to rein in prices of such medicines and ensure that these are ‘affordable’ to patients. But, it is a flawed idea as it will seriously undermine India’s access to new discoveries. What is the point of fixing a low price when such action results in denial of access?
Discovery and development of new medicines involve huge effort in conducting research and clinical trials (as per stringent registration guidelines and protocols) to demonstrate their safety and efficacy to national regulator before these are granted market access. For a new drug molecule, associated costs may be well over US$ 1 billion.
An innovator company has a fundamental interest in launching products of innovation in a jurisdiction where it gets a reasonable opportunity to recuperate such high cost. It seeks a legal and regulatory framework which rewards it commensurately and also protects test data submitted to get market approval.
The reward for innovation is given vide patent grant. This confers on innovator a period of ‘exclusivity’ (20 years from date of filing patent application) during which any person wanting to produce/import, distribute and use the patent protected product can do so only with his prior consent. India provides for this under Patent (Amendment) Act in 2005.
[As regards protection of proprietary/registration data, the issue was examined by an inter-ministerial Committee (IMC) 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].However, due to poor enforcement of the law, de facto the benefit of patent protection is not available. This is corroborated by several instances of denial of patent or revocation where patent was already granted. Invariably, orders of patent controllers are upheld by the judiciary. Additionally, government is also using compulsory licensing (CL) to allow generic companies to make and sell the medicine on payment of royalty to innovator.
This has even irked US administration. In its Special 301 report on trade and industry practices released in early 2014, the US Trade Representative (USTR) stopped short of putting India on its Priority Foreign Country (PFC) list.
Under Special 301, USTR tracks the intellectual property (IP) rights record of countries and lists them according to the strength of their IP environment. If, on review, it identifies substantial deterioration in any country’s IP regime, it gets downgraded to PFC status which carries with it trade and economic sanctions. Although, India was spared PFC tag, the Damocles sword hangs as the USTR is conducting what it calls ‘out-of-cycle’ reviews to engage with India on IPR challenges.
At Indo-US CEO’s forum meeting on January 26, 2015, Obama reiterated the concern of US industry on this burning issue. Prime Minister Modi assured that all IPR related issues will be addressed in the high level Working Group (WG) set up under the aegis of Trade Policy Forum (TPF) in the follow up to his summit meeting in September, 2014 (Washington).
However, Modi needs to be aware that in the backyard, bureaucrats are cooking up proposals which if implemented, will add one more dimension to the already deteriorating IPR environment and end up completely jeopardizing the effectiveness of patents. This will even come in the way of conducting a constructive and fruitful dialogue in the WG under the TPF.
The very concept of negotiated price is flawed as it infringes on the freedom of an innovator company to fix the price of a new medicine taking in to account the cost and other factors. Given the huge burden of R&D expenses on developing it, there is bound to be big gap between what the company would look for and government’s expectation driven by what is ‘affordable’ to patients. It is well nigh impossible to reach a figure that satisfies both!
During the interactive process for arriving at the price, government cannot wish away looking at registration data as also expenses and break-up viz., discovery, development, clinical trials etc. This will hit against wall of ‘confidentiality’ and in absence of a law to protect the data (government is yet to act on recommendation of IMC in this regard) no innovatory company would share it.
The committee has examined other options. For instance, 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 the most. Moreover, for a new medicine being launched in several markets around same time, there won’t be any data to look for.
Another option is ‘differential pricing’. Under this, the 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. This too suffers from basic flaw. Besides, resulting dual prices will give rise to diversion/leakages and black marketing etc.
Price ‘negotiation’ is a more dignified phrase for ‘control’. Any attempt to bring a patented medicine under price control is not only impractical, but it would also discourage an innovator/multinational from bringing new discoveries to India. Juxtaposed with poor enforcement of patent law, they would simply turn their back.
Our bureaucrats should shed their present mind-set of riding piggy back on the efforts of MNCs to ensure availability of new medicines at affordable prices. This is un-workable and will dent our image. Instead, they need to focus on creating an environment in which companies intensify their R&D efforts on Indian turf.
India has a huge pool of scientific manpower and infrastructure available in public research institutions and universities which can be leveraged to discover and develop new molecules locally at substantially lower cost than in developed countries. Why should former not aim at doing it at say, 1/3rd of the cost of latter?
This strategy along with effective enforcement of Patent (Amendment) Act and protection of registration data will not only help in making available new drugs at reasonable prices, it will also preserve India’s image as a country that encourages innovations and protects intellectual property.