Wednesday, March 20, 2013

Drug Affordability and the IPAB's CL Order: A Lost Opportunity?

In the last 2 posts, I had discussed the IPAB’s Bayer-NATCO CL decision. Below is a discussion on the remaining issues discussed in the Order.

Ground 4: Nexavar was reasonably priced and had been supplied in adequate quantities in India

On the issue of pricing, the IPAB took the view that reasonableness of the price under the Act must be assessed only from the point of view of affordability for the purchasing public, and not whether the price charged by a patentee is justified by the RnD expenditure incurred by it. The IPAB seems to have relied on “reasonably affordable price” in Section 84(1)(b) to conclude thus.

In the facts of the case, before concluding that Bayer’s price of INR 2,80,000 was not reasonably affordable, it would have helped if the Board had  deliberated on metrics/indices for arriving at “reasonably affordable price” for a patented invention. Simply put, the decision lacks in discussion on the dialectics of “affordability”, and instead takes a crude approach to the issue.

Such a discussion is necessary, not to create a hallowed precedent to whet the appetites of lovers of case law, but in order for patentees to understand the legal definition of “reasonably affordable” under the Patents Act and accordingly calibrate their prices. There is no reference to any literature which addresses the issue of “drug affordability”, although there appears to be some degree of scholarship publicly available on it.

In the very month when the NATCO CL was granted last year, an article was published on the official website of the World Health Organization (WHO) titled “Practical Measurement of Affordability: An Application to Medicines”. The stated objective of this paper was “to develop two practical methods for measuring the affordability of medicines in developing countries”. Two methods were proposed in this paper for evaluating affordability of medicines in developing countries, namely the catastrophic method and the impoverishment method.  

Yet another publication by the WHO on the very same issue titled “Measuring Medicine Prices, Availability, Affordability and Price Components” was published in 2008.

There is also the 2011 publication of the National Bureau of Economics Research of the United States titled “The Importance of the Meaning and Measurement of “Affordable” in the Affordable Care Act”.

These and many such documents, in this day and age, can be accessed by most internet-savvy people without much of an effort, and yet no such document seems to have been remotely alluded to by the IPAB. The IPAB could have also sought assistance from qualified experts in this field to understand the practically applicable contours of “affordability”. I am not sure if this option was even considered.

I have no pretensions of being a student of economics, therefore I will refrain from parroting what I am obviously not qualified to discuss with conviction. That said, the point that I am trying to make is that an attempt ought to have been made, at least by the IPAB, to propose a few ways of scientifically or at least systematically demystifying a seemingly fluid and subjective term such as “reasonably affordable”.

It is indeed surprising that wordplay, casuistry and a convenient set of facts seem to have substituted rigorous and diligent analysis. What was in fact an opportunity to lay down practical guidelines for affordability appears to have been lost.

Moving on to other grounds, on the issue of adequacy of supplies of the patented drug by the patentee, the facts spoke for themselves. Consequently, nothing much needed to be said on this by the IPAB.

What is "Working" under the Act?

The other issue of consequence is the IPAB’s take on the meaning of “working” under the Act. The IPAB appears to have chosen the safe path here by saying that “working” needs to be interpreted on a case to case basis, and that the requirement of “local manufacture” need not be applied to all cases. Following is the take of the IPAB on “working”:

In any event, we are not furnished with any evidence regarding this aspect viz., whether the appellant in its facility in India, which admittedly the appellant does not deny, could not have manufactured this drug.  So, with regard to Section 84(1)(c), we find that the word ‘worked’  must be decided on a case to case basis and it may be proved in a given case, that ‘working’ can be done only by way of import, but that cannot apply to all other cases. The patentee must show why it could not be locally manufactured. A mere statement to that effect is not sufficient there must be evidence.    Therefore, while we are of the opinion that the word ‘worked’ has a flexible meaning, and to that extent we differ from The Controller. The appellant has not proved working and so his conclusion is right. Working cannot mean that the requirement of working would be satisfied by having import monopoly for all patented inventions.  We also look at Section 84(7)(iii) which says that the reasonable requirements of public shall be deemed not to have been satisfied if a market for export of the patented article manufactured in India is not being supplied or developed.  Therefore, ‘working’ could mean local manufacture entirely and ‘working’ in some cases could mean only importation. It would depend on the facts and evidence of each case.

I am truly not sure what this means and how can such an approach be adopted with respect to a statutory requirement. The Legislature surely could not have intended to apply local manufacture in a few cases, and exempt such a requirement in few others. Either the Act requires local manufacture or it does not. The question is if it does not, what would amount to working under the Act? This has not been addressed satisfactorily by the Board, again because the facts of the case made it clear that the patentee did not satisfy any reasonable standard or definition of working.

Although the right conclusion may have been arrived at in the facts of the case, the approach to issues and the quality of reasoning leave much to be desired.

Comments and corrections are welcome.


  1. The research and due diligence for the actual demand for this drug is anyway lacking. The CL which is purpotedly for public interest requires NATCO to make the drug available to at least 600 deserving and needy patients and as per their own admission, have not even been able to get to the pro-rate mark of 450 people so far. Of course, March 31st is yet to come. So, it makes one wonder, if there are enough needy people for this drug at all. It is obvious that not all patients who are at stage IV cancer would require this drug. So, when there are not enough takers for even free doses of this drug, whether the 16000 figure was a justified and a researched one, needs to reflected upon. But this is something Bayer needs to look at in order to file an application for revocation of the CL, if NATCO does not meet this criteria as required under the terms and conditions.

    All said and done, the price of 1,28,000/- vis-a-vis 8800/- does not need any scholar to tell which cost is reasonably affordable. But that is now that we have a new price to compare this figure with. So, considering what the order says, wont it be a good idea for the innovator to have the drug priced at whatever price they like and when someone sets a "reasonable" price, bring it down to that or lower. We may smirk at this thought but you see, this is what Justice Sridevan has indirectly hinted when she talks about getting the application for CL cancelled by taking appropriate measures, pending proceedings also, taking cue from Section 94. Perhaps the Dasatinibs and others which are already in the cue for a CL may benefit from this.

    Well wishing Anon!!

    1. Dear Anon,
      I agree with the first para of your comment. The nature of the drug and the stage of its treatment are indeed relevant factors to decide the standard that must be applied to the patentee's fulfillment of his statutory obligations.

      As regards pricing, please note that the Act refers to "reasonably affordable", not "cheap". If one were to restrict the analysis and equate "reasonably affordable" to relative dearness or expensiveness, even INR1,00,000 would qualify as "reasonably affordable" when compared to INR2.80,000. But such an approach is clearly not what the Act envisages. Affordability must take into account the nature of the disease addressed by the drug and the quality of relief it provides and compare it with the price charged by the patentee, besides the ability of the public to purchase it. Surely it cannot be argued that the price of crocin and an anti-cancer palliative must be comparable.

      Without a doubt certain drugs, even with minimal profit margin, are bound to be expensive and hence out of the reach of certain sections of the public. Does this necessarily render the pricing of the drug unreasonable? I don't think so. The Court cannot rely on crude anecdotal evidence to etch such parameters which by their very nature call for meticulous analysis.

      In light of the order, I think innovator companies may have no choice but to reduce their prices, but the arbitrary nature of the order's reasoning gives them no clue as to what would be reasonably affordable for a given drug despite bringing down their prices.

      Best Regards,

  2. I think "working" has been properly brought in the judgement. Working can mean manufacture; importation and manufacture; or exclusively manufacture in certain cases for which evidence is shown that for some good reason patented invention cannot be manufactured in India like, say, economy of scale. This discretion is good.

    1. Dear Raj,
      There needs to be room in the Act for the IPAB to conclude that such a discretion is available. This calls for interpreting the relevant provisions to conclude that either local manufacture is mandatory, or it isn't. Instead, the IPAB goes on to conclude that there are no de minimis requirements as far as working is concerned and that whether an invention has been worked or not is to be decided on a case-to-case basis. The question is not whether or not "discretion is good", because this is not a policy debate before a standing committee. This is a statutory debate and the question is what does the Act require. This question needs to be comprehensively addressed based on the provisions and other materials like the Ayyangar Committee report. Instead, the decision is wishy washy on this issue because it appears the IPAB itself is unclear as to how best to harmoniously construe the relevant provisions and reconcile it with TRIPS. True, public interest is critical, but equally important is to ensure that such interest is protected with due reasons.

      Best Regards,

  3. Thank you for the enormous details about this case added with your inputs and research on "working" under the Patent Act.
    I came across a similar compulsory licensing provision in Turkey under Articles 96 and 97 of the Turkish Patents Act. According to my limited knowledge and understanding of the Turkish Patent law, working can be shown by filing of any one of: (1)details of manufacture or import, (2)details and objective reasons for non-working (legal, economic or technical) or (3) offer for licensing. I found the third condition i.e. the offer for licensing very interesting. Do you think innovator companies could follow this practice in India to avoid compulsory licensing in India e.g. by publishing an offer to license a drug just when three years of the term of the patent are about to elapse?