Curb prices of costly imported medicines before issuing compulsory licences.

India's Controller of Patents has given the first-ever compulsory licence (CL) to make generic versions of a cancer drug patented by Germany's Bayer to Hyderabad-based Natco Pharma. This will bring the price of Nexavar, an anti-cancer drug, down to 3% of its current price.

Almost certainly, it will also bring a bucketful of lawsuits challenging the licensing decision. India's patent laws are, by and large, in tune with international ones. Indian rules say that overseas companies can export patented drugs into India for three years, during which they should set up production of the drug locally.

If they don't, and the drug is an important one, the government will arrange for local companies to break down the walls of intellectual property and copy it for local sales.

The interpretation that imports do not constitute working of the patent is not helpful for Indian manufacturers, who often benefit when countries, for example in Africa, issue compulsory licences to foreign drugmakers. While sufficient availability and affordability are robust grounds for considering CL, local manufacture is not: it also militates against economies of scale.

Natco will pay Bayer a fee of 6% of net quarterly sales. Bayer will sue: the German company invested lots of money to develop the drug, unlike the Indian company. Parallel imports and the working of compulsory licensing via imports have hugely benefitted Indian pharma companies, many of which are now waiting to ask the government to slap CL on several other drugs that are nearing the end of the three-year indigenisation deadline.

The government should not jump the gun. It should first impose price controls on imported drugs. Only if the original drugmaker stops supplies at the lower price, should it impose CL. People could argue that this is a procedural wrinkle before the inevitable imposition of CLs, but it is an important one.

It gives overseas drugmakers a chance to sell their medicines at more reasonable prices to avoid a crackdown. It would also safeguard India's ability to export drugs made under compulsory licences issued by a third country. Room for negotiation is always better than a blow from a regulatory sledgehammer.

Source : economictimes.indiatimes.com