The Compulsions and Repercussions of Compulsory Licensing

Zee Business
September 02, 2012

The recent erosion of investor confidence in India that is doing the rounds in corporate circles is due to a variety of self-defeating strategies that have been adopted by the government. Here is a look at one of government’s such decisions that has got the international community sit up and take notice.

In March 2012, the office of the Controller General of Patents, Designs and Trademarks issued the country’s first compulsory license to Natco Pharma that gave it the right to sell the generic version of Bayer’s patent protected cancer drug, Nexavar. It’s been almost half a year now and there has not been much headway on this front. Bayer’s case against the grant of this compulsory license has been pending since then and is due for hearing on 3 September, 2012 . The government of India has been sleep walking on this issue just like it has been on other contentious issues like General Anti-Avoidance Rule; retrospective amendment to the Income Tax Act; Goods and Services Tax; FDI in sectors like retail, insurance, pharma and aviation; to name a few.

According to a recent study, about six lakh people died of cancer in India in 2010. It is not that there was no cure available back then. Like all other things, the cure was available but was way too expensive at Rs. 2.8 lakhs for a month’s treatment, and out of reach of the majority. Two years later in 2012, the government stepped in and granted a compulsory license to a generic drug maker that brought down the price of the drug by almost 97 percent, thereby making it affordable for many, if not all. Should not the government have been praised for this humanitarian act? Is it the cynicism of Indian people that has made them cry foul? Is it greed that has made the corporates forget the good of the common man? The answer lies elsewhere, as always.

It is no rocket science to know that the amount of effort, cost and time required for the research and development of any pharmaceutical drug is humungous. Any for-profit organisation that invests money into some activity does so with the objective of earning returns from it. Bayer, like many other pharma companies, did the same. It went through the legal route to get its product patented. If the government of India found that the drug was unaffordable, then instead of issuing a diktat on a private organisation, it should have stepped in and looked at a public-private partnership model.

It is the duty of the government to ensure that its people can afford life-saving drugs. However, it cannot do so at the cost of that very organisation that invested so much of its bandwidth in inventing the drug. The right way for the government would have been to purchase the drug from Bayer at a mutually agreeable discounted price to be sold to the end users for free or at subsidized rates. In fact, even at the current price of Rs 8,800 for a month’s treatment that the government is advocating, the drug would not be affordable for over three-fourths of the population; thereby nullifying the very basis of its argument.

It is the responsibility of the government to create an environment conducive to the development of life-saving drugs in India. Since it has failed in this area, it becomes all the more important for it to support multinationals that have developed such capabilities, thanks to the efforts of their respective governments. Though multinationals are doing no charity by selling their drugs in India, it is still a great benefit for the Indian people. Thus, the Indian government should go out of the way to encourage such innovations as it ultimately would help its people as well. If it expects the multinationals to share their fruits with its people, then it should either contribute to the R&D cost or let the multinationals decide the price for themselves. The government cannot have the cake and eat it too in the name of social good. It is grossly unjustified to determine the output price of something for which the input price was borne by someone else.

What befuddles many is how the government can be so myopic in its view? Does the government not understand the fallouts of its decisions? Does it not understand that by taking such steps, it runs the risk of making patent protection redundant? In 2010, Natco had applied for a voluntary license for the very same drug for which it has got the compulsory license in 2012. Does this not undermine the importance of voluntary licenses? If a multinational offers its drugs at lower rates in India, would not other countries demand the same? How would it recover its R&D costs in such a case? Would it not stifle innovation? How will the government prevent the misuse of compulsory licensing in a country where government officials are infamous for favouritism? How can the government put this issue on the back burner?

There is no dearth of proactive measures and strategies that the government can come up with like providing adequate health insurance cover for life threatening diseases that require expensive cures. However, in a country where basic health cover for around 98 percent of the population is lacking, this may be too much for the government to target. Another strategy could be to have differential pricing according to the income levels of the end-users; again a challenging task given the current system in India that is prone to misuse and black marketing.

One can be convinced beyond a reasonable doubt that the best of all strategies would be to become self-reliant. If a country cannot, then it needs to adjust. But, where is the will of the government to act, leave alone pro-act? Perhaps, it is busy preparing the ground for the 2014 elections. For it, life threatening diseases can always wait...


Your article titled ‘The Compulsions and Repercussions of Compulsory Licensing (CL)' is thought provoking and in many ways depicts how science and innovation has fallen prey to political patronage. Companies are by nature profit making organizations and need not compensate for wrong socio economic policies due to which poor people cannot buy medicines. Being a healthcare consultant, I agree with your arguments against CL.

B. Dey, India

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