Compulsory licensing is one of the most powerful tools available to a government to ensure health security for its people. Through it a government can make available a vital medicine at an affordable price to meet a health emergency by setting aside the rights of the patent-holder in question. Simply put, if there is an AIDS epidemic in a country and an effective new medicine is beyond the reach of most of the victims, and the government does not have the resources to procure it at a prohibitive cost and distribute it with a huge subsidy, then it can unilaterally license its manufacture and sale with a royalty paid to the patent-holder.
Obviously, compulsory licensing is opposed by patent-holding drug companies that see its exercise as a threat to their intellectual property rights (IPR) and the incentive to innovate. The TRIPS agreement, which has strengthened IPR protection across the world and to which India is a party, also lays down the ground rules under which members can resort to compulsory licensing and a legal framework exists in India for the exercise of this provision. Significantly, India has never exercised this right though countries like Brazil and Thailand have. Compulsory licensing is really a deterrent. The fact that it can be used often produces the necessary results.
Since the 2000s, recalls the UK charity AVERT, large pharmaceutical companies manufacturing drugs to treat HIV/AIDS have faced public pressure to cut prices. Several of them first offered to negotiate price cuts for severely affected regions. The Clinton administration also issued an executive order promising the US government would not interfere with African countries that violate American patent law to obtain cheaper AIDS drugs. In 2001, major pharmaceutical companies sought to prosecute the South African government for passing a law that allowed easy production and importation of generics (compulsory licensing in substance) but were eventually forced to back down. One of the pharmaceutical companies involved, GlaxoSmithKline, even granted permission (voluntary licence) to a major South African generics producer, Aspen, to share the rights to three of its drugs. India comes in because it is a major producer of generic AIDS drugs.
In the case of India, compulsory licensing is likely to become more important in the future than it has been in the past. Clean water and proper sanitation have till now dominated discussion on public health. It is with the coming of the AIDS epidemic that the availability of modern medicines for public health delivery has become an issue. Also, the use of generic equivalents had not been a problem under the old patent regime till 2005. The crunch will come as increasingly new medicines are developed for new and old diseases. Quick and easy cures for malaria and tuberculosis, once available, will become prime candidates if they are priced exorbitantly. What is more, diabetes and cardio-vascular diseases (Indians are particularly prone to the latter), considered till not so long ago as the burden of the better off, have now crossed the urban-rural and rich-poor divide. If these diseases are seen to have acquired epidemic proportions before large numbers are able to afford the new good cures, compulsory licensing will become a serious option. The crunch has already come with cancer, by no means an affliction of solely the better off. If screening and detection among the poor were anywhere near adequate, the numbers and the need to reduce suffering, when the knowledge to do so exits, would cry out for action.
In a new development in the last few years, several prominent Indian pharmaceutical companies manufacturing generics have been taken over by global companies. This has created a fear that India’s unique capabilities as a leading producer of cheap medicines in the world may be compromised by the policies of the new global parents. There is now a demand that curbs be put on foreign investment in pharma. But the problem is that some of the other leading Indian firms have also made global acquisitions. Ranbaxy made global acquisitions before itself being taken over, Dr Reddy’s took over Betapharma and Sun Pharmaceuticals’ long battle to acquire the Israeli company Taro is now coming to a successful end. So, what should Indian policy aim at?
It is instructive to look at the case of Thailand and its attempt to use compulsory licensing successfully. Says AVERT, when it did so in the case of an Abbott AIDS drug, the leading drug firm retaliated by deciding not to apply for licences in Thailand to sell several new products. Thailand has since been repeatedly placed on the US Trade Representative’s “priority watch list” of countries seen to be committing intellectual property piracy. Abbott has recently acquired the domestic generic brands of Piramal Healthcare. The disturbing thought is what if Cipla, an aggressive global leader in producing and marketing generic versions of AIDS drugs in the face of strong opposition by big pharma companies, were to become a target of foreign takeover?
It is important to maintain a perspective on compulsory licensing. It is one of several tools available to deliver affordable health care to all but comes with a cost. Patent-driven pharma companies — all foreign now but hopefully to be joined by a few Indian ones — will fight it tooth and nail. Conducting this battle will consume energy and the mind space of policy-makers. So, the weapon should be used in carefully selected cases and with caution. What can and ought to be done more aggressively is using access to the Indian pharma market as a bargaining chip to further the cause of affordable health care.
