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Compulsory Licensing of Patented Drugs: Is it a Viable Option?

By – Ramesh Vaidyanathan & Nidhi Tandon

The Supreme Court recently asked the Central Government to consider ‘compulsory licensing’ under the Indian Patents Act to help augment the production of Covid-19 vaccines and related drugs.

When faced with “national emergency”, “public heath crises” or “extreme urgency”, compulsory licensing is a tool available with the government to supply its citizens with generic versions of patented drugs. Under compulsory licensing, the government grants a license to a third party to manufacture, use, sell and/or distribute generic version of patented drugs without having to obtain the consent of, or a licence from, the patent owner. Under the law, the Central Government has the power to issue compulsory licences in respect of any patents during a national emergency or to facilitate public non-commercial use. The Controller General of Patents, Designs and Trade Marks may grant licenses for the manufacture of these patented drugs, subject to various conditions including quantity and duration of such manufacture.

Pharma companies invest significant resources on researching, inventing and acquiring patents for new drugs to treat known and emerging diseases. By compulsory licensing, the patent owners will only receive a fixed license fee for its patent rights but will have to allow the production and sale of generic version of patented drugs at cheaper and affordable prices.

Since the early 90s, several such licenses have been granted across the globe. India granted the first compulsory licence in 2011 to a company called Natco Pharma for the drug Nexavar, which is used in the treatment of liver cancer. Natco was able to show that the reasonable requirements of the public were not satisfied; second, the drug was not available at an affordable price; third, the patent was not being worked in India; and forth, the drug was not being manufactured in India to the required extent.

As the pandemic set in last year, countries such as Canada, Israel, Germany and Chile introduced measures to accelerate the process of issuing compulsory licenses. Israel issued a compulsory license to import generic versions of Ritonavir and Canada amended its patent law to allow quick issue of compulsory licenses.

The Indian government has chosen not to invoke these emergency provisions. Instead, in October 2020, India, along with South Africa, initiated a proposal at WTO seeking a waiver of certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to facilitate fair, affordable and universal access of COVID vaccines and medicines for developing countries. The TRIPS Agreement requires all its signatory countries to enact domestic law that guarantees minimum standards of IP protection. Such legal consistency enables innovators to monetise their intellectual property in multiple countries.

A patent protects only the conceptual knowledge of key ingredients used for the vaccine and the process of triggering a biological reaction. Different types of IP rights apply to the different stages of manufacturing a vaccine. The expertise to manufacture may be protected as a trade secret, and the data from clinical trials to test vaccine safety and efficacy may be protected by copyright. While the patent specification will contain all the technical details required to manufacture the patented invention, there is always an element of know-how required to develop mastery over a technology.

This is perhaps the reason that Indian government has sought a waiver of multiple IP rights on Covid-related innovations, instead of issuing compulsory licenses for patents on these vaccines. However, the process of negotiating a TRIPS waiver is tedious, especially when high-income countries are opposed to it. The proposal was first circulated eight months ago and is still the topic of a fierce debate.

The prevailing uncertainty on the availability of vaccines and other critical key drugs and the resultant loss of lives will no doubt qualify as a “national emergency”. Instead of trying to obtain a waiver which is a long process, the Central Government may invoke this powerful public health tool of compulsory licensing by allowing a domestic manufacturer to produce a global vaccine for domestic use. Before taking the compulsory license route, the government should also satisfy itself that the know-how to manufacture the vaccines is available in India. Issuing a compulsory license does not impose a legal requirement on the patent holders to share the know-how with anyone.

Recently, Natco Pharma approached the Controller of Patents for a compulsory licence for the drug Baricitinib for treating Covid 19.It will be interesting to see how the government deals with this request, with the limited time it has on its hands.

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