Submission From: The Centre for WTO Studies, Indian Institute of Foreign Trade
Prepared by: Chandni Raina
Country: India


Access to medicines has become a critical issue with most developing countries being pressurized to move far beyond TRIPS- whether it is as part of their compliance with the WTO Agreement or as part of the bilateral FTAs / RTAs being entered into with developed countries. Important policy space provided by TRIPS such as the ability to define patentability criteria, interpretation of Article 39.3 on undisclosed information submitted to the regulator, circumstance that would call for issue of compulsory license are sought to be progressively reduced or controlled. In this scenario, it is important to import the concept of ‘standard essential patents’ used in the telecom sector and also in environment technologies (in some countries) to allow for mandatory licensing as long as the treatment protocol includes that patented drug.


Submission by Centre for WTO Studies, Indian Institute of Foreign Trade to the UN Secretary General’s High Level Panel on Access to Medicine

A. Rationale of the Submission

Most patented medicines are priced out of reach of the patients in developing countries and LDCs . Sofosbuvir for treatment of Hepatitis C priced at US$84000 in the US market for a three month treatment and the case of Nexavor, a renal cancer drug, priced at Rs. 280,000 for a month’s treatment in India are a case in point. Predatory pricing of patented drugs and the resultant impact on access is also well documented in the decision of the Indian Controller General of Patents, Designs and Trademarks in the Natco Pharma Ltd Vs Bayer Corporation (Nexavar) . The fact that at that price Bayer could only meet 2% of the total demand for that medicine in the country indicates complete policy incoherence between protection of IP, promoting access to public health and trade. It also buttresses the view that developing countries and the LDC are not the relevant market for the patented medicines. While safeguards in the TRIPS Agreement such as the issue of compulsory license exist, it has become increasingly difficult to take recourse to it. The extent of concern among the developed countries on the issue of a single compulsory license by India or the cases of compulsory license granted in Thailand makes it quite clear that the probability of use of the measure is likely to be very low. This makes it an unviable option if access to medicine has to be addressed in a substantive and comprehensive manner. The measure also creates inherent uncertainties and is liable to be challenged making it difficult for generic producers to use this option. We should therefore institutionalize the concept of standard essential patents in the same manner as it is done in the telecom sector to address a more important public need.

B. Model to Address this Policy Incoherence

The model developed is based on the concept of “standard essential patents” used in the telecom sector with a few modifications to address the distinctiveness of pharma over telecom. In fact a 'standard essential patent' type of model has also been applied in making environment technologies accessible in the US. The Environment Protection Agency (EPA) in the US can apply to the Attorney General for a mandatory license for a patent covering a technology necessary to enable compliance with the hazardous air pollutants standards, or motor vehicle emission standards of the Clean Air Act. Under section 308 of the Clean Air Act, the United States may require the owner of the patented technology to grant the non-complying party a patent license in exchange for a reasonable royalty if the patented technology is necessary to meet the requirements in certain sections of the Clean Air Act. Treatment of most diseases has a clear protocol- whether it concerns prevention through vaccines or treatment after onset of the disease. This is true for lifestyle diseases such as diabetes, hypertension, mental illnesses and cancer and also in respect of HIV or communicable diseases such as Tuberculosis, Malaria, or other vector borne diseases. The proposal is that once a protocol of treatment is decided upon, all patents that are set down as critical for the treatment of the disease should be called “standard essential patents”. Such patents that are critical to implement the protocol should then be available to be manufactured by a pharmaceutical company that is prequalified by WHO to do so (after due application) on payment of reasonable and non discriminatory (RAND) royalty. The royalty to be paid could be decided by the concerned companies i.e. the originator and the applicant on mutual consent or could be fixed in case of a dispute by a judicial authority. Country jurisdictions would have the freedom to decide whether interim injunctions could be applied in such cases. It may be highlighted that interim injunction seriously compromises the possibility of negotiating on RAND terms and is therefore best avoided. Besides, given the impact medicines have on public health it is advisable that other means such as directing the alleged infringer to maintain all the transactions related to the medicine in a separate bank account could be considered.

C. Mechanism of Implementation

The mechanism of implementation could be as follows: Step 1: WHO sets up an expert group involving medical specialists, innovator and generic companies, concerned experts and representative group of member States to set down the protocol for treatment of major diseases whether lifestyle related or vector borne. WHO has considerable experience in this area. Given the vast public safety and health angle of the impact it is important that the exercise be conducted under the aegis of this body unlike SEPs in the context of telecom where it is primarily the research based companies that have come together. Moreover involvement of generic companies is essential because these organizations have considerable expertise in developing improved versions of the drug such as pediatric dosage, fixed dose combinations etc which in turn may further refine and improve the treatment protocol. This group could deliberate upon the new proprietary technologies and the appropriate stages when these could be applied in the treatment of a disease. The committee could also discuss problems, if any, in the treatment and deliberate upon future treatment course or options. Step 2: The patents that get included in the treatment protocol would be called the standard essential patents. These technologies could be used by any company other than the originator on payment of royalty on RAND terms in markets where the product is already patented. It is understood that in territories where the drug is not patented, the generic manufacturers would be free to manufacture the product without requiring to pay any royalty. Further improvements such as fixed dose combinations, paediatric dosage forms, and sustained release molecules of the same product when developed by a company could be used by another on payment of royalty, if there is a patent on that form in the country in which it is proposed to be marketed. Step 3: While royalties could be determined by the two parties to the deal, guidelines could also be drawn up by the WHO which would guide the process of fixation. Disputes if any will be resolved as per judicial decisions in the country where the generic company is incorporated or where the product is to be licensed. Interim injunctions could be avoided given the impact they are likely to have on public health matters. Who may also be required to come out with a statement on the undesirability of interim injunctions in case of medicines.

D. Manner in which the Suggestion impacts Innovation, Public health, Human Rights and Trade

i) Impact on Innovation a. The discussions in the ‘expert body’ comprising of originator companies, generic producers and medical experts could bring in greater synergy in developing improved drugs for treatment of specific diseases. The telecom standards body such as the International Telecom Union and European Telecom Standard Institute have helped in development of new standards in the telecom arena and one may not be amiss in reckoning a similar impact on treatment protocol for diseases. b. Involvement of Generic producers could help in pushing them into R&D through collaborations and cooperation. In any case licensing on non exclusive basis will unleash competition which in turn will promote innovation in product delivery, improvements in the drug such as fixed dose combinations and extension to new patient groups through paediatric dosage and better compliance with sustained release forms of the molecules. c. Payment of royalty, expansion of the markets for medicines due to competition and reduced prices will generate revenue for the innovator companies. This will not only extend their reach but also allow them to utilize the distribution network of the generic companies to their advantage. d. Transfer and dissemination of technology will impact social and economic welfare and facilitate the realization of Article 7 (Objective) and Article 8 (Principles) of the TRIPS Agreement. e. Despite the average success rate of three in 10 drugs , the extent of expenditure incurred by innovator pharma companies in R&D is not without reservation. Many question the extent of expenses incurred by these companies in marketing as against Research and Development. Moreover, research also shows that that public sector research institutes have had an extensive role in the discovery of drugs and vaccines especially in medicines that are expected to have disproportionately higher clinical effect. This is also corroborated with findings that public sector has both direct and indirect impact on overall research. Innovation by Pharma companies may therefore not be adversely affected. In fact the synergies achieved and the expansion in the market due to non exclusive license may have an overall beneficent impact. ii) Impact on Access to Medicine and Public Health a. One of the crucial reasons for the inability of people and countries to get medicines is its price. Technology transfer in a non exclusive basis will bring in competition and help to reduce the prices of medicines. Better distribution networks of the generic companies coupled with lower prices will also extend the reach to new markets. The role generic companies have played in enabling access to HIV Medicines in the world is evidence that this model can indeed work. b. With lower prices, the mechanism will also reinforce the work of various aid giving humanitarian organizations which procure life saving drugs by enabling them to extend their services to more people and countries. c. More significantly the model being proposed will have a profound impact on prices and access because under this, license would be given for manufacture of the medicine with no territorial restriction on its application-as long as a country is a middle income or a low income country. The economies of scale and the competition unleashed will be precursors to reduced prices, improved products and improved access. iii) Impact on Human Rights The model seeks to enhance competition, create economies of scale and incentivize innovation by generic companies while compensating innovative efforts of the originator companies through payment of royalty. The measure will improve availability and affordability of life saving drugs in low income and middle income countries. It would therefore impact the Sustainable Development Goal No. 3 on promoting health for all positively. The proposal will directly impact two targets set to be achieved by 2030 - ie- a.To end the epidemics of AIDS, tuberculosis, malaria and neglected tropical diseases and combat hepatitis, water-borne diseases and other communicable diseases b.To reduce by one third premature mortality from non-communicable diseases through prevention and treatment and promote mental health and well-being while also impacting the others indirectly. iv) Impact on Trade According to the WHO, “although trade in medicines is increasing rapidly, most of it takes place between wealthy countries, with developing countries accounting for just 17% of imports and 6% of exports. It is estimated that one-third of the developing world's people are unable to receive or purchase essential medicines on a regular basis.” The measure being suggested will address this and promote trade in medicine among the Developing and the Least Developed Countries by removing the barriers to technology transfer and dissemination.

Bibliography and References

1. Ellen F. M. ’t Hoen “TRIPS, Pharmaceutical Patents and Access to Essential Medicines: Seattle, Doha and Beyond”
2. Natco Pharma Limited v. Bayer Corporation, Compulsory License Application No. 1 of 2011
3. Telecommunication Standardization Bureau: “Understanding patents, competition and standardization in an interconnected world”
4. Shrybman Steven, Canadian Centre for Policy Alternative “The WTO: A Citizen’s Guide”
5. Pharmaceutical Industry gets high on Fat Profits
6. Stevens. Ashley, Jensen JJ et al “The role of Public Sector Research in the Discovery of drugs and Vaccines” The New England Journal of Medicine (2011);364:535-41
7. Lichtenberg. F, and Sampat B, Assistant Professor in the Department of Health Policy and Management at the Mailman School of Public Health of Columbia University (2011)