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‘Patent Linkage’: Can The Core Issue Be Resolved?

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On February 10, 2015, a leading business daily of India, quoted the Commerce Secretary of India – Rajeev Kher, saying, “India needs to relook at its Intellectual Property Rights (IPR) Policy with a view to bring in a differentiated regime for sectors that have a greater manufacturing potential.”

In the present Government regime, it appears virtually impossible to make such important comments out of turn by a senior bureaucrat without the blessings of the Prime Minister’s Office (PMO). I hold this view, despite the fact that the Commerce Secretary reportedly added that his suggestion is “a highly controversial subject and if I discussed this in the government, I think I will be shot down in the very first instance”.

Be that as it may, as I indicated in my just previous article, several recent media reports also speculated, around the same time, that the Government of India is probably considering putting in place ‘Patent Linkages’ and ‘Data Exclusivity’ through administrative measures, without making any amendments in the Patents Act 2005 of the country.

As I had indicated in my blog post of January 19, 2015 titled, “New ”National IPR Policy” of India – A Pharma Perspective”, these speculations originated mainly from the following events:

  • During Prime Minister Narendra Modi’s visit to the United States in September 2014, a high-level Indo-US working group on IP was constituted as a part of the Trade Policy Forum (TPF), which is the principal trade dialogue body between the two countries.
  • Almost immediately after the Prime Minister’s return to India, in October 2014, the Government formed a six-member ‘Think Tank’ to draft the ‘National IPR Policy’ and suggest ways and legal means to handle undue pressure exerted by other countries in IPR related areas. The notification mandated the ‘Think Tank’ to examine the current issues raised by the industry associations, including those that have appeared in the media and give suggestions to the ministry of Commerce and Industry as appropriate.

Speculations arising out of these two events were almost simultaneously fuelled by the following developments:

A. US Trade Representative Mike Froman’s reported affirmation of the following to the US lawmakers during a Congressional hearing held on January 27, 2015:

- “We have been concerned about the deterioration of the innovation environment in India, and we have engaged with the new government since they came into office in May of last year about our concerns.”

- “We held the first Trade Policy Forum in four years in November. I just returned from India yesterday as a matter of fact … and in all of these areas, we have laid out a work program with the government of India to address these and other outstanding issues.”

- “We are in the process of providing comments on that draft policy proposal on IPR, and we are committed to continuing to engage with them to underscore areas of work that needs to be done in copyright, in trade secrets as well as in the area of patents.”

- “We’ve got a good dialogue going now with the new government on this issue, and we’re committed to working to achieve concrete progress in this area.”

B. Union Minister of Commerce and Industry of India specifically seeking American Government’s inputs in the finalization process of the new National IPR policy of the country.

Keeping these in perspective, let me try to explore whether or not it would be fair for India deciding to put in place ‘Patent Linkages’ and ‘Data Exclusivity’ through administrative measures, without making any amendments in the Patents Act of the country.

In this article, I shall deliberate on my personal take on ‘Patent Linkage’ and in the next week’s article on ‘Data Exclusivity’.

Definition:

Patent linkage is broadly defined as the practice of linking market approval for generic medicines to the patent status of the originator reference product.

A brief background in India:

The ‘Patent Linkage’ saga has an interesting background in India. I would now try to capture the essence of it, as stated below.

About 7 years ago, probably prompted by intense lobbying by the Pharma MNCs, the then Drug Controller General of India (DCGI) reportedly informed the media, on April 28, 2008, the following:

“We (DCGI) are going to seek the list of the drugs from innovator companies that have received patent in India. Once we have the database of the drugs which have been granted patent, we will not give any marketing approval to their generic versions…The DCGI has issued internal guidelines to this effect and it will also co-ordinate with the health ministry to give a formal shape to the initiative. The government expects to finalize a proper system within the next 2-3 months.”

It was also reported in the same article that Patent attorney Pratibha Singh, who along with Arun Jaitley was representing Cipla in the Tarceva case against Roche said:

“The DCGI does not have the authority to reject marketing application of a generic drug on the grounds that an innovator company has received the patent for the same drug in the country.”

Immediately following the above reported announcement of the DCGI on ‘Patent Linkage’, another media report flashed that the domestic drug companies are strongly objecting to the DCGI’s plans to link marketing approval for a drug with its patent status in the country, citing requirement of additional resources for the same and concern that it could block access to affordable medicines by suppressing competitive forces.

Despite this objection of the domestic Indian pharma companies, a senior official in DCGI office reportedly reaffirmed the DCGI’s intent of establishing the linkage so that no slips happen in the future. The same media report quoted that Government official as saying:

“We will have to amend the rules in the Act. We have to put it before the Drugs Consultative Committee first and this could be around the end of this year.”

Current ‘administrative’ status in India:

Currently in India, there is no provision for ‘Patent Linkage’, either in the Statute or through any administrative measure.

After those potboiler reports, it is quite challenging to fathom, what exactly had happened for the reverse swing thereafter at the DCGI’s office. The bottom line is, the above initiative of the then DCGI for ‘Patent Linkage’ in India ultimately got killed in the corridors of power. Hence, there does not exist any direct or indirect measure for ‘Patent Linkage’ in India, as I write this article.

Current legal status:

In 2008 Bayer Corporation had filed a Writ Petition before the Delhi High Court against Union of India, the DCGI and Cipla seeking an order that the DCGI should consider the patent status of its drug, Sorefenib tosylate, and refuse marketing approval to any generic versions of this drug.

It is worth mentioning, Sorefenib tosylate is used to treat renal cancer and was being reportedly sold in India by Bayer at Rs. 2,85,000 for 120 tablets for a monthly course of treatment.

The appeal in the Delhi High Court was filed against a judgment delivered by Justice Ravindra Bhat on 18 August 2009, rejecting Bayer’s attempt to introduce the patent linkage system in India through a court direction. But, in a landmark judgment on February 9 2010, a division bench of the Delhi High Court dismissed the appeal of Bayer Corporation in this regard. Thereafter, Bayer Corporation moved Supreme Court against this Delhi High Court order.

However, in December 01, 2010, a Division Bench of the Supreme Court rejected the appeal filed by Bayer Corporation against the February 2010 decision of the Delhi High Court. The Apex Court of India ordered, since the Drugs Act does not confer power upon the DCGI to make rules regarding the ‘Patent Linkage’, any such attempt would constitute substantive ultra vires of the delegated power.

RTI helps to get the marketing approval status of drugs:

Currently relevant information on marketing approval application status of generic drugs are not available at the CDSCO website. Hence, some innovator companies have resorted to using Right To Information (RTI) Act to ferret out such details from the DCGI office and initiate appropriate legal measures for patent infringement, well before the generic version of the original drug comes to the market.

A middle ground:

In view of the above order of the Supreme Court, the government of India may try to seek a middle ground without amending any provision of the Patents Act, in any way.

Even avoiding the word ‘Patent Linkage’, the Ministry of Health can possibly help the pharma MNCs achieving similar goal, through administrative measures. It can instruct the DCGI to upload the ‘Marketing Approval’ applications status for various generic products in the Central Drugs Standard Control Organization (CDSCO) website. If for any patented drugs, applications for marketing approval of generic equivalents are made, the available information would enable the patent holder taking appropriate legal recourse for patent infringement, much before the drug is marketed at a heavily discounted price.

It is quite possible that the interested constituents had put requests for such administrative measures even before the earlier Government. As no tangible action has been taken even thereafter, the erstwhile Government probably felt, if introduced, such a system would adversely impact quick and early availability of the generic drugs in the market place.

Conclusion: 

I wrote an article on similar issue in my blog post of August 24, 2009 titled, “Recent Bayer Case Judgment: Patent Linkage: Encouraging Innovation in India.”

Taking all these into consideration, in my view, it is quite possible for the present Indian Government to resolve the core issue related to ‘Patent Linkage’ through administrative measure, without amending any Acts or breaching any case laws of the land.

In the present IPR imbroglio, the above administrative measure could well be a win-win solution for all.

It would help facilitating early judicial intervention by the patent holder in case of prima facie patent infringements, enabling the Government to send a clear reiteration that the patents granted to pharmaceutical products will be appropriately enforced and protected in the country.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.

Patented Drugs’ Pricing: Apprehensive Voices Could Turn into a Self-Defeating Prophecy

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On February 21, 2013, the Department of Pharmaceuticals in a communication to the stakeholders announced that the committee to examine the issues of ‘Price Negotiations for Patented Drugs’ has since submitted its report to the Department. Simultaneously the stakeholders were requested to provide comments on the same urgently, latest by March 31, 2013.

This committee was constituted way back in 2007 to suggest a system that could be used for price negotiation of patented medicines and medical devices ‘before their marketing approval in India’.

In that process, the Committee reportedly had 20 meetings in two rounds, where the viewpoints of the Pharmaceutical Industry including FICCI, NGOs and other stakeholders were taken into consideration.

Simultaneously, the Committee had commissioned a study at the Rajiv Gandhi School of Intellectual Property Law and Indian Institute of Technology (IIT), Kharagpur to ascertain various mechanisms of price control of Patented Drugs in many countries, across the world. The Committee reportedly has considered this ‘Expert Report’ while finalizing its final submission to the Government.

Scope of recommendations:

The Committee in its final report recommends price negotiations for Patented Drugs only for:

  • The Government procurement/reimbursement
  • Health Insurance Coverage by Insurance Companies

Issues to remain unresolved despite price negotiation:

In the report, the Committee expressed the following view:

  • Even after calibrating the prices based on Gross National Income with Purchasing Power Parity of the countries where there are robust public health policies, with the governments having strong bargaining power in price negotiation, the prices of patented medicines will still remain unaffordable to a very large section of the population of India. Such countries were identified in the report as UK, Canada, France, Australia and New Zealand
  • The government should, therefore, extend Health Insurance Scheme covering all prescription medicines to all citizens of the country, who are not covered under any other insurance /reimbursement scheme.

Three categories of Patented Drugs identified:

The committee has identified three categories of patented drugs, as follows:

1. A totally new class of drug with no therapeutic equivalence

2. A drug that has therapeutic equivalence but also has a therapeutic edge over the  existing ones

3. A drug that has similar therapeutic effectiveness compared to the existing one

The Committee recommended that these three categories of Patented Drugs would require to be treated differently while fixing the price.

A bullish expectation of the Government on Patented Drugs market:

The report highlights that the Indian Pharmaceutical Industry has currently registered a turnover exceeding US$ 21 billion with the domestic turnover of over US$ 12 billion.

The report also estimates that the total value turnover of patented medicines in India, which is currently at around US$ 5 million, is expected to grow at a brisk pace due to the following reasons:

  • Rapid up-gradation of patent infrastructure over the past few years to support new patent laws with the addition of patent examiners.
  • Decentralization of patent-filing process and digitization of records.
  • Increase of population in the highest income group from present 10 million to 25 million in next 5 years.

All these, presumably have prompted the Government to come out with a ‘Patented Drugs Pricing’ mechanism in India.

Pricing Mechanism in China: 

Just to get a flavor of what is happening in the fast growing neighboring market in this regard, let us have a quick look at China.

In 2007, China introduced, the ‘New Medical Insurance Policy’ covering 86 percent of the total rural population. However, the benefits have so far been assessed as modest. This is mainly because the patients continue to incur a large amount out of pocket expenditure towards healthcare.

There does exist a reimbursement mechanism for listed medicines in China and drug prices are regulated there with the ‘Cost Plus Formula’.

China has the following systems for drug price control:

  • Direct price control and competitive tendering

In this process the Government directly sets the price of every drug included in the formulary. Pharmaceutical companies will require making a price application to the government for individual drug price approval.The retail prices of the drugs are made based on the wholesale price plus a constant rate.

Interestingly, unlike Europe, the markup between the retail and wholesale price is much higher in China.

Apex body for ‘Patented Drugs Price Negotiation’: 

The Report recommends a committee named as ‘Pricing Committee for Patented Drugs (PCPD)’ headed by the Chairman of National Pharmaceutical Pricing Authority (NPPA) to negotiate all prices of patented medicines.

As CGHS, Railways, Defense Services and other Public/Private institutions cover around 23 percent of total healthcare expenditure, the members of the committee could be invited from the Railways, DGHS, DCGI, Ministry of Finance and Representatives of top 5 health insurance companies in terms of number of beneficiaries.

Recommended pricing methodology:

For ‘Price Negotiation of Patented Drugs’, the report recommends following methodologies for each of the three categories, as mentioned earlier:

  1. For Medicines having no therapeutic equivalence in India:
  • The innovator company will submit to the PCPD the details of Government procurement prices in the UK, Canada, France, Australia and New Zealand for the respective Patented Drugs.
  • In the event of the concerned company not launching the said Patented Drug in any of those reference countries, the company will require to furnish the same details only for those countries where the product has been launched.
  • The PCPD will then take into consideration the ratio of the per capita income of a particular country to the per capita income of India.
  • The prices of the Patented Drug would be worked out for India by dividing the price of the medicine in a particular country by this ratio and the lowest of these prices would be taken for negotiation for further price reduction.
  • The same methodology would be applicable for medical devices also and all the patented medicines introduced in India after 2005.

2. For medicines having a therapeutic equivalent in India:

  • If a therapeutically equivalent medicine exists for the Patented Drug, with better or similar efficacy, PCPD may consider the treatment cost for the disease using the new drug and fix the Patented Drug price accordingly
  • PCPD may adopt the methodology of reference pricing as stated above to ensure that the cost of treatment of the Patented Drug does not increase as compared to the cost of treatment with existing equivalent medicine

3. For medicines introduced first time in India itself:

  • PCPD will fix the price of such drugs, which are new in the class and no therapeutic equivalence is available, by taking various factors into consideration like cost involved, risk factors and any other factors of relevance.
  • PCPD may discuss various input costs with the manufacturer asking for documented evidence.
  • This process may be complex. However, the report indicates, since the number of medicines discovered and developed in India will not be many, the number of such cases would also be limited.

Negotiated prices will be subjected to revision:

The report clearly indicates that ‘the prices of Patented drugs so fixed will be subjected to revision either periodically or if felt necessary by the manufacturer or the regulator as the case may be.’

Strong voices of support and apprehension:

A.  Support from the domestic Indian Pharmaceutical Industry

Interestingly there have emerged strong voices of support on this Government initiative from the domestic Indian Pharmaceutical Industry, as follows:

  • Indian Pharmaceutical Alliance (IPA) has commented, “This policy is in the right direction as we know that Compulsory License (CL) cannot address the need of price control for all patented drugs, so this policy takes care of that issue of a uniform regulation of price control for all patented drugs”. IPA had also suggested that the reference pricing should be from the developed countries like UK, Australia and New Zealand where the 80 percent of the expenditure being incurred on public health is borne and negotiated by the government.
  • Pharmexcil - another pharma association has commented, “This report is balanced and keeps India’s position in the global market in mind while recommending a pricing formula.”
  • Federation of Pharma Entrepreneurs (FOPE) & Confederation of Indian Pharmaceutical Industry (CIPI) had submitted their written views to the Committee stating that FOPE supports price negotiation mechanism for Patented Drugs and strongly recommends that Compulsory License (CL) provisions should not get diluted while going for price negotiation.
  • Indian Drug Manufacturer Association (IDMA) supported price negotiation for all Patented Drugs and recommended that the issue of CL and price negotiation should be dealt separately.

However, the Organization of Pharmaceutical Producers of India (OPPI) feels, as the report indicates, ‘Price Negotiations for Patented Products’ should be made only for Government purchases and not be linked with ‘Regulatory Approval’. They have already expressed their serious concern on the methodology of ‘Patented Products Pricing’, as detailed in the above report.

B. Apprehension within the Government

Even more interestingly, such apprehensive voices also pan around the Government Ministries.

Though the DoP has proposed in the report that once the Patented Drug Policy is implemented the issuance of CL may be done away with, the Department of Industrial Policy and Promotion (DIPP) has reportedly commented with grave caution, as under:

“If it is decided that Price Negotiations on Patented Drugs should be carried out then, the following issues must be ensured:

(i) Negotiations should be carried out with caution, as the case for Compulsory License on the ground of unaffordable pricing of drugs [Section 84(b) of the Patent Act] will get diluted.

(ii) Re-Negotiations of the prices at periodic intervals should be an integral part of the negotiation process.”

C. Apprehension of other stakeholders 

The NGOs like, “Lawyer’s Collective HIV/Aids Unit” and “Medicines Sans Frontiers (MSF)” reportedly have urged that the price negotiation should not be allowed to weaken the position of CL for the Patented Drugs.

They had mentioned to the Committee as follows:

“As regards the plea of the patent holder that they had spent a large sum on R&D, one should note that most of the funds for R&D come from the Governments of their respective countries”. They further stated, “when the cost of production of the patented drugs is not known, it would be impossible to negotiate the price in a proper manner.”

The DoP report states that the other members of the NGOs also seconded these views.

Conclusion:

Not so long ago, on January 12, 2013, one of the leading dailies of India first reported that in a move that is intended to benefit thousands of cancer patients, Indian Government has started the process of issuing Compulsory Licenses (CL) for three commonly used anti-cancer drugs:

-       Trastuzumab (or Herceptin, used for breast cancer),

-       Ixabepilone (used for chemotherapy)

-       Dasatinib (used to treat leukemia)

For a month’s treatment drugs like, Trastuzumab, Ixabepilone and Dasatinib reportedly cost on an average of US$ 3,000 – 4,500 or Rs 1.64 – 2.45 lakh for each patient in India.

I reckon, a robust mechanism of ‘Price Negotiation for Patented Drugs’ could well benefit the global pharmaceutical companies to put forth even a stronger argument against any Government initiative to grant CL on the pricing ground for expensive innovative drugs in India. At the same time, the patients will have much greater access to patented drugs than what it is today, due to Government procurement of these drugs at a negotiated price.

On the other hand, apprehensive voices as are now being expressed on this issue, just hoping for drastic measures of grant of frequent CL by the Government for improved patients’ access to innovative drugs, could well turn into a self-defeating prophecy – making patients the ultimate sufferers, yet again, as happens most of the time.

By: Tapan J. Ray

Disclaimer: The views/opinions expressed in this article are entirely my own, written in my individual and personal capacity. I do not represent any other person or organization for this opinion.