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Doha conference spells gains for Indian drug firms

BS Corporate Bureau

After the World Trade Organisation meeting at Doha, governments will now be able circumvent patent laws and ask generic manufacturers to manufacture drugs that are covered by patents on grounds of public health.

In other words, governments will be able to invoke the so-called "compulsory licensing" rules that allow them to ask other drug manufacturers to produce patented drugs.

Sushil Suri, chairman & managing director, Morepen Laboratories, said: "This agreement says that the Indian government can ask the multinational patent holder of a health saving medicine to lower its price, failing which it can ask Indian pharmaceutical companies to produce the drug."

Drug industry sources also point out that the draft of the Doha conference now even allows countries to shop around for drugs from markets where their prices are the lowest, under the parallel import clause. This particular clause was ambiguous in the previous draft but now is spelled out clearly.

The beneficiary of compulsory licensing could be the Indian pharmaceutical industry. That's because it makes generics (unbranded formulations) that are vastly less expensive than patented drugs produced in developed markets.

Indian pharmaceutical companies traditionally "reverse engineered" molecules by adapting a new process to make drugs, acquired process patents and then went on to sell the generic forms in developing and underdeveloped markets at low prices.

"What Doha means is that health considerations override trade-related intellectual property rights. The ministerial declaration accepts the rights of WTO members to frame health policies that ensure access to affordable medicines," Dilip G Shah, secretary general of the Indian Pharmaceutical Alliance said.

"It also gives governments the right to grant compulsory licences -- and the grounds for granting these have been left to the member countries to define.

"This also means that the outbreak of an epidemic is not the only deciding criteria for granting compulsory licences. A compulsory licence could also be granted on the ground that affordable medicines have to be provided to the public at large," Shah added.

Shah, a former director of Pfizer, explained that no country had granted a compulsory licence since TRIPs came into being because TRIPs was ambiguous as to whether countries could grant a compulsory licence and governments did not want to be hauled to the WTO.

He said that Brazil had given foreign drug companies three years to establish their imported drugs in the market, but had said that it reserved the right to grant compulsory licences if the prices of the imported drugs were exorbitant.

The US took Brazil to the WTO, though it later withdrew the case.

Now, however, the ambiguity as to whether governments could grant compulsory licences had been removed.

Indian drug manufacturers stand to gain if more governments grant compulsory licences because only India, Brazil and China have the ability to produce cheap generics.

"More countries will grant compulsory licences to companies in India because Indian producers are the most reliable," Shah continued.

Habil F Khorakiwala, head of Wockhardt, said that the Doha conference had arrived at a consensus that the consumer comes first. An individual government will have the power to over ride TRIPS in the cause of public health.

"This would mean that the Patent Act can have a provision for compulsory licensing to another manufacturer either to make the product freely available or at a price which is affordable. This would also mean that if any country has used this provision, it can import the drug from India, he added.

Some pharmaceuticals industry analysts said that drug manufacturers here will gain only if epidemics break out.

"It still will represent a temporary increase in the income of the company. Such incomes would never be included in the projections of a company's balance sheet, " said one analyst in Mumbai.

But Shah said that the right to grant compulsory licences went beyond the outbreak of epidemics. Governments had also been granted great flexibility to import drugs from the cheapest available source. So multinational pharmaceutical companies could not indulge in price gouging.

"We are very happy with the government for its tough stand at the Doha conference and believe the results should be very positive for the industry," Shah said.

Others in the pharmaceuticals industry echoed Shah's views. "We are extremely happy with the way the Indian delegates have taken a tough stand at the conference. This new development should help the Indian government formulate its own patent law with some more space for flexibility," said Indian Drug Manufacturers' Association president Nihchal Israni.

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