Enter compulsory licensing

But it's an extreme weapon, to be used judiciously

The appellate authority for intellectual property has approved the Indian patent office's decision to grant the country's first compulsory licence to a Hyderabad-based firm to manufacture and sell in India a drug used to treat renal and liver cancer, whose global patent is held by the German pharmaceutical company Bayer. Reportedly, what mattered to the authority was affordability: while the Indian firm, Natco Pharma, will be able to price its product at a monthly cost of Rs 8,800 to the patient, the comparative cost for a similar drug from Bayer is a colossal Rs 2.8 lakh. At that cost, only a handful of Indians would be able to afford the medicine. This may not even be the revenue-maximising price for Bayer, but that does not seem to be Bayer's main concern. In its first reaction, the firm has said that the legal decision will weaken the international patent system and endanger pharmaceutical research. On the other hand, Indian civil society groups have reacted positively to the legal decision. They hope that the decision will pave the way for other compulsory licences to be issued to make many available cures affordable for large numbers of Indians.

Not only are provisions in Indian law allowing compulsory licensing (manufacture and sale of a drug by a local company for national non-commercial reasons and in extreme emergencies against the wishes of the patent holder) compatible with World Trade Organisation rules, there is a well-ordered legal process overseeing such action. Bayer has already said it will go in appeal against the quasi-judicial authority's ruling before the Bombay High Court. On the other hand, compulsory licensing is an extreme weapon, to be used sparingly. Its efficacy lies mostly in its deterrent effect in price negotiations with patent holders. Only a few countries such as Brazil and Thailand have used the weapon till now. India should no longer be seen as timid in comparison, but things should rest at that for now. Some activists apparently prefer the compulsory licensing route to price negotiation; but it is low, negotiated prices for state purchase that should form a cornerstone of affordable drug delivery for both state governments and the Centre. So far, the official machinery has been either too incompetent or too dishonest to negotiate effectively. That must change.

One serious point made by drug majors across the world is that compulsory licensing will weaken the patent regime and endanger pharmaceutical research. This is true, but only if it is not used judiciously. The government should ensure that compulsory licensing remains on the table, while it negotiates carefully and in good faith with drug firms to make vital drugs affordable.