On January 1st, 2005 India woke up to a new patent regime. Post GATT regime, drug prices were likely to surge up in a gradual, sustained and imperceptible manner to an all time high. Despite that this amendment was inevitable because India is a signatory to the World Trade Organization (WTO) and its Dunkel Draft proposals. WTO has 125 members out of which 77 members including India have signed the Dunkel Draft on April 15, 1994 at Marakash. Dunkel Draft comprises of four main areas viz., GATT (General Agreement on Tariffs and Trade), TRIPS (Trade related Intellectual Property Rights), TRIMS (Trade related Investment Measures) and GATS (General Agreement on Trade and Services). Of these, TRIPS and GATT have a direct bearing on the pharmaceutical industry whereas other areas of the draft have an impact in the form of funding or manpower. TRIMS proposals necessitate that foreign investment be made at par with national sector, without any export obligations, with no obligations to use local raw materials or components and to allow open competition. TRIPS proposals cover patents, copyrights, trade marks, designs and trade secrets. So far as copyrights, trademarks and designs are concerned there are no major controversies since the Indian laws are at par with the standards proposed vide TRIPS. However a major conflict between Indian Patents Act, 1970 and TRIPS proposals is in relation to the patents and trade secrets.
Dunkel Draft requires all member countries to introduce new patent regimes and to align their legislations on intellectual properties like new drug molecules, agro-chemicals etc in conformity with their obligations under TRIPS and GATT agreements. It also accorded India a ten year transition period upto Dec., 31st, 2004. During this period, patent office in India was to receive applications for product patents w.e.f., January 1, 1995. All patent applications were however to be kept in a mail box (also called black box) by the Controller of Patents and were not to be opened or registered before Jan., 1, 2005. Since the transition period is about to end now, around 5000 applications for product patents have been received by the Controller General of Patents which are to be examined after Jan., 01, 2005 for subsequent registration or rejection, as the case may be. In the event of all these applications being accepted, 5000 basic drug molecules will fall under patent regime whose prices will be subsequently determined by their patentees commensurate to their exclusive marketing rights afforded by the new regime. As this process of examination and registration of patent applications will be carried forward, more and more drugs will fall under patent regime thereby conferring exclusive rights to their original inventors and thereby leading to a sustained and impalpable, yet considerable hike in their market prices. It is noteworthy that the rise in drug prices will not be as abrupt and visible as the rise in petrol prices. The effects will be explicitly visible only after a few months of the enforcement of new regime.
However implementation of the new patent regime w.e.f. Jan., 01, 2005 requires third amendment to be made in the existing Indian Patents Act of 1970 (IPA). Two amendments have already been made in this Act in order to bring it at par with the TRIPS and GATT provisions-one in 1999 (made effective retrospectively from January 01, 1995) and the other in 2002 (made effective from May 20, 2003). Present Patents Act provides patents only for processes and not for products. An Indian manufacturer is allowed to manufacture the drug developed by some other company by a different process, but as per TRIPS, this will not happen since the drug molecule (product) itself would be patented. This implies that the owner of the product patent will have a right to exclude third parties from making, using, offering for sale, selling or importing the product. Those owning a product or a process patent can totally control and direct the import of the product for sale in India. Moreover the amendment of IPA also provides for pipeline protection of the intellectual property before final registration or rejection of the patent application i.e., full control over a new drug molecule by way of exclusive marketing rights for a period of five years or till the product patent is granted or rejected whichever is earlier. The duration of patents according to IPA, 1970 is 7 years for process patents and 14 years for product patents from the date of registration. Under TRIPS, patent right can be retained for twenty years and the patent term can be extended by another twenty years as the product patent holder can seek a process patent on the expiry of the product patent claiming novelty of process, new dosage form or a new combination with some old drugs etc.
Under old patent regime anyone could use the patent by paying a fixed royalty as determined by the Controller of Patents. The Controller of Patents on public demand or depending upon the situation could grant license to manufacture the same drug to another person. But under the new regime of TRIPS, Indian manufacturer will have either to wait for 10-12 years to start manufacturing the drug molecule which has been invented by someone else. Alternatively he will have to pay a huge sum as royalty to the patentee to manufacture that drug with a view to compensate for the manufacturer’s investments made into developing that drug. Thus the drug prices are likely to go up by a whopping 10-25%.
The amendment to the Patents Act, 1970 that is due from Jan 01, 2005 will basically be a substantive amendment from the view point of the pharmaceutical and agro-chemical industry. Apart from drug prices, this amendment also has implications on other aspects like the availability of drugs, public health issues and implications for the Indian industry that has hitherto basically operated and flourished through reverse engineering of drugs. Reverse engineering means the manufacture of drugs and pharmaceuticals by Indian companies through processes and techniques developed by the R&D efforts of mostly other multi-national companies (MNCs). In view of the high business and commercial stakes involved in any change in India’s patent regime, the pharmaceutical sector has been sharply divided in its views. Perspectives range from maintenance of the status-quo to renegotiation of TRIPS agreement, to stronger provisions for protecting domestic industry, to introduction of product patent protection at the earliest etc.
Those opposing the TRIPS regime opine that Indian Patents Act has helped the Indian pharmaceutical companies to grow by leaps and bounds and enabled them to manufacture medicines at low costs as well as to increase exports. The prices of Indian manufactured drugs are considered to be the lowest in the world. With a patent period of only 7-14 years (of which usually 3-4 years are spent in developing the drug molecule), several manufacturers were able to produce the same drug which led to competition and subsequent lowering of drug prices without compromising on their quality. It is now apprehended that as an aftermath of implementation of TRIPS proposals, drugs prices will sharply rise, national health-care programmes for the poor will be affected because operating costs will be high and unaffordable, investments in drug industry will be low and growth and exports will also decline. TRIPS proposals provide immense rights to the patentee. He can demand a huge sum as royalty. After expiry of product patency, the inventor can enjoy extension for another 20 years. This patency may be extended to cover new dosage forms or combinations of old drugs. The inventor shall hold exclusive rights on marketing, using, selling or exporting the drug. This implies that in case of shortage, government cannot import the drug without prior permission of the inventor. All this will lead to more dependence on imports and a consequent price rise.
Supporters of TRIPS on the other hand argue that the use of costly, patented drugs can be replaced by off-patented drugs. This would mean making already existing drugs of less efficacy or more side-effects available to poor patients in place of new and better drug molecules that would evolve in future. Consequently only rich people can have the benefit of new drugs while the poor will continue to be treated with old medicines. Govt. agencies also argue that there are sufficient provisions to check prices and ensure prompt availability of patented products, however these provisions can be applied only after the expiry of the term of patent. These provisions include introduction of Bolar System and Parallel Import System. It is needless to discuss these provisions further since they can not be enforced until 20-40 years after a new drug molecule has been developed by some pharmaceutical company. Moreover in all likelihood the new drug molecule would have become obsolete by then and lost its suitability, reliability and efficacy to a considerable extent. Union Ministry of Chemicals and Fertilizers has expressed its helplessness in stalling the proposed patents amendment bill on the pretext that TRIPS agreement is a legal fact and its obligations are binding on all signatories including India who have drawn other monetary benefits from WTO in lieu of signing this agreement. Now only a consensus among all WTO members can lead to any change in the TRIPS agreement and per-se there are no indications at this stage that the obligations of developing countries in respect of product patent regime shall be diluted or revised.
While commenting on the new regime, ASSOCHAM in its discussion paper has opined that while introduction of a product patent regime in all fields of technology will align the domestic law with the international obligations of the country, it will also help India to exploit its growing strength in research ability, not only in pharmaceuticals and agro-chemicals but also in bio-technology. They have pointed out that the product patents are already available in many areas even under the earlier Act e.g., a novel device, novel electronic systems, synergistic paint/cement compositions etc. However product patents relating to the important areas of pharmaceuticals, agrochemicals and food products will have to be made available after 01-01-2005. Therefore they recommend that the present Patents Act will have to be amended.
In defense of its plans to implement the new product patent regime, Govt. of India has assured that the following safeguards have been taken to ensure minimum effect of TRIPS proposals on common people.
1) Almost all drugs on the essential list of WHO and India are outside patent protection. Further, for essential drugs under patent protection, alternatives are available in most cases.
2) The existing patent law is fully equipped to deal with issues relating to
non-availability of drugs and/or exploitative pricing. Elaborate safeguards have been incorporated in the law for compulsory licensing, government use, parallel imports and assumption/revocation of patent rights in cases of health-related national/public urgency.
3) India also has a strong drugs price control mechanism to ensure availability of drugs at reasonable prices.
4) The development of new drugs and pharmaceuticals to meet emerging challenges involves substantive R&D initiatives and huge investments. The near total reliance of the Indian pharmaceutical sector on reverse engineering impacts adversely on substantial foreign investment in the pharmaceutical sector as also on India’s own emergence as a technology and R&D driven economy.
5) It is not appropriate to link the state of public health in India almost totally to the presence or absence of a product patent regime. In India, the expenditure on the health care system is reportedly around 2% of the GDP, which is quite low as compared to 8% - 10% recommended by WHO. Health concerns are, therefore, to be primarily addressed through a more comprehensive set of initiatives involving investments, infrastructure development, HRD etc.
6) India is developing a modern patent administration to cope up with the new challenges.
All said and done, though critics agree with the govt. view that after the introduction of new patent regime, quality of drugs will drastically improve since there will be more investments by both national and foreign concerns on R&D efforts, they fear that availability of good quality drugs will only be a distant dream for the poor people who cannot afford to pay for the huge investments of MNCs on their R&D inputs. Critics also believe that the small scale industry will be subjected to extinction thus again raising doubts on the availability of drugs to rural masses for various healthcare schemes. They opine that the GOI wants to earn foreign exchange, initiate foreign investment and increase exports by implementing GATT proposals. If India rejects GATT and Dunkel Draft agreements now, it is feared that there will be an erosion of its credibility in the international fora since it has availed of the entire transition period under TRIPS agreement and in the event of any default at this stage, developed countries will use their economic might to throttle India by raising a dispute against it in the WTO. Given these aspersions, a new product patent regime in compliance with TRIPS and GATT proposals seems to be in the offing and a subsequent drug price hike in near future seem inevitable. For the time being, all eyes are on the fate of Patents Amendment Bill that will be tabled in the ongoing winter session of the Parliament of India.
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