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.