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The department on Industrial Policy & Promotion (DIPP) is in favour of making a provision for allowing Indian pharmaceutical companies to manufacture patented medicines in case prices of these drugs spiral out of control due to collusion among multinational companies (MNCs).

DIPP on Tuesday released a discussion paper on the issue, which expresses the concern that the recent acquisitions of Indian pharma companies by MNCs could lead to a few large firms dominating the market.

These handful of companies could then collude to raise prices and create problems for consumers as Indian firms producing cheap generic drugs may end up being acquired by the big MNCs.

DIPP has floated the idea of introducing compulsory licensing in the pharmaceutical sector under the Indian Patent Act.

Compulsory licensing is a system where by the government allows third parties (other than patent holder) to produce and market a patented product without the consent of patent owner.

The paper proposes a royalty and solatium for the patent owner, which should be fixed at 10 per cent of the price of the generic drugs.

The paper rises the issue of bringing drugs used for treating diseases such as cancer or diabetes with the ambit of compulsory licensing, which at present can happen only in a national emergency.

The paper raises the question as to whether CLs should be issued on the basis of anti competition law-if it is determined that companies have abused their dominant position in the market or engaged in unfair competition.

The department has also suggested putting restriction on foreign direct investment (FDI) in the pharma sector.

At present, 100 per cent FDI is allowed in the sector through automatic route. This (FDI) could be shifted to government route so that proposals for mergers and acquisitions in this important sector could be scrutinised by the Foreign Investment Promotion Board (FIPB), the discussion paper states.

In 2008, India’s largest drug maker Ranbaxy Laboratories was acquired by Daiichi Sankyo (Japan) for $ 4.6 billion and recently, US-based Abbot Laboratories acquired Piramal Healthcare’s domestic business for $ 3.7 billion.

Though imports of pharma products have been growing, the emphasis on exports has resulted in a significant lower growth of domestic consumption.

During 2008-09, domestic consumption in value terms fell from Rs 45,953 crore to Rs 44,579 crore.

As per a World Health Organisation (WHO) report, as much as 65 per cent of Indians still lack access to essential medicines.

The paper points out that while several developed and developing countries like the US, Cananda, the UK and South Africa have introduced compulsory licensing, India is yet to explore this WTO compliant option.

In India, the Competition Act 2002 does not explicitly provide for issue of Compulsory Licences as a remedy for anti competitive practices. However, Section 27 (g) empowers the Competition Commission to pass ‘such other order or issue such other directions as it may deem fit’. Further Section 90(ix) of the Patents Act recognises that CLs can be granted to remedy a practice determined, after judicial or administrative process to be anti competitive.

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This post was submitted by Chinmaya Nayak.

Thanks to indiatoday.intoday.in