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India ponders compulsory licensing revisions to cut prices

By Nick Taylor , 25-Aug-2010
Last updated on 25-Aug-2010 at 14:18 GMT

India is considering strengthening compulsory licensing provisions, which allow third parties to produce patented products, in response to concerns about overseas takeovers and drug prices.

Multi-national takeovers of Indian pharma firms have raised concerns that the sector will be dominated by a handful of firms. Some fear this could lead to an increase in drug prices, especially if India’s big generic producers are bought by foreign companies.

A document published by the Indian Department of Industrial Policy and Promotion (DIPP) discusses these issues and the role compulsory licensing can play to ensure drug availability. The goal is to develop a predictable environment for use of compulsory licensing measures.

DIPP described compulsory licensing as “a focused and sharp response which can be invoked when a single critical drug is either unavailable per se or unavailable at reasonably affordable prices”.

Unavailability due to price is an issue in India, particularly is some therapeutic areas, such as cancer. DIPP wrote “the near non-accessibility” of cancer treatments for “a vast majority of the affected population” occurs primarily because of price.

To address these issues DIPP is seeking input on a number of issues. Compulsory license topics covered by the review include: their use beyond emergencies; whether they should be issued based an anti-competition law; and the basis for compensatory royalty payments.

Alternative measures

Although the discussion document is focused on compulsory licensing it briefly mentions three short-term measures which could be taken to address possible detrimental side-effects to foreign investment.

Firstly, India could review its policy on foreign investment in pharma companies. This could result in the Indian Foreign Investment Promotion Board (FIBP) being given the power to scrutinise proposed pharma deals.

Also, the Competition Act 2002 could be used to investigate if high drug pricing and subsequent restricted availability is a consequence of: an anti-competitive agreement; a combination which has an adverse effect on competition; or the abuse of a dominant position by a company.

The final measure proposed by DIPP is expansion of the role and powers of the Indian National Pharmaceutical Pricing Authority (NPPA).

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