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The Government has put in place a new patent regime from January one this year keeping in line with the WTO commitments. India is among the few developing economies to have brought in amendments to the existing patent law. As Parliament was not in session the new patent regime was first brought through a Presidential ordinance, which was subsequently replaced by a legislation called the Patents (Third Amendment) bill 2005 with substantial improvements
The new bill, which was passed by the Lok Sabha on March 22 and by the Rajya Sabha on March 23, allows patenting of products in areas of food, drugs and chemicals which were not covered earlier. The India Patents Act of 1970 provided patenting of all processes and products in all areas excepting food, drugs and chemicals. Introduction of product patents in these three crucial areas indicates the sign of confidence and maturity of Indian industry particularly the emerging pharmaceutical industry. In fact, the new patent regime will help Indian pharma industry which has made large investments in drug research. It gives a chance to drug development by frontline companies with adequate safeguards to protect the interests of society.
The in-built safeguard in the new regime is that it has the provision of compulsory licensing to ensure that drugs are available at affordable prices. As it is the impact on drug prices would be minimal as 97 per cent of the drugs are off patent. Only three per cent of drugs are covered under the patent regime and almost all of them have alternatives. In fact, price rise and patents have no correlation. There are only 350 essential drugs and none of them is a patented drug. Also, the new regime is prospective and the drug price control order would continue.
Very often questions are asked what the Patent Law is. In 1995 when the World Trade Organization came into being, it was decided that all member countries including India would allow protection of intellectual property rights under an agreement called TRIPS (Trade-Related Intellectual Property Rights). This agreement gave ten years’ time until January one, 2005 to the developing countries to bring in necessary changes to the patent regime to allow product patents so that intellectual property rights particularly in food, pharmaceuticals and chemicals could be protected. India has an enviable record of fully adhering to its international obligation. It has done so in the midst of even a balance of payment crisis. It never sought rescheduling or waiver and promptly repaid the loans. Adhering to the January one deadline was part of this consistency.
Accordingly, after taking full advantage of the ten-year period, India has allowed product patents particularly with Indian pharmaceutical industry coming of age. China allowed product patents in these four areas in 1992.
As the issues involved were no doubt complex and of critical importance to both domestic pharmaceutical industry as well as consumers, the changes have been brought after considerable debate for many years. Responsive to concerns expressed in various quarters, the Government had extensive consultations with all stakeholders before formulating the bill. The Commerce Minister Shri Kamal Nath, is right in saying that all the concerns have been fully taken on board in the final amendment to the Patent Act.
Apart from meeting the WTO obligations, India has brought in the new regime as there is an economic rationale. It enables pioneering firms lead time to recoup sunk cost on research and development. Of the 12,000 applications in the mailbox for product patents, nearly 9000 are from the pharmaceutical industry. Of the 9000 nearly 2000 are from the Indian pharmaceutical industry. This shows most of the product patent applications are from the drug industry.
There are two areas of major concern expressed in various quarters — apprehensions about rise in prices of medicine, and the possible impact of the new patent regime on the domestic pharmaceutical industry.
On the issue of prices, Shri Kamal Nath has assured all stakeholders that there are enough safeguards built into the bill to protect the interests of consumers by ensuring availability of medicines at affordable prices and hence fears about drug prices rising after the introduction of product patent regime was “unfounded”. “The prices of medicines will not shoot up due to patents, because of these strong safeguards, checks and balances,” he asserts.
The clear provisions in the amended Patents Act to protect the interests of domestic pharmaceuticals and chemical industry state that domestic companies can continue to manufacture patented products even after a patent is granted in respect of mailbox applications on payment of a reasonable royalty to the patent holder, provision for both pre-grant and post-grant opposition avenues as well as reduction in timeframe for grant of patents in a cost-effective manner are also provided, the pre grant opposition to patents has too been strengthened.
Further the Act also provides to prevent “ever-greening” of patents for pharmaceutical substances, provisions listing out exceptions to patentability have been suitably amended to remove ambiguity, the conditions for obtaining compulsory licence have been clarified to facilitate export of patented pharmaceutical products by Indian companies, a reasonable period for negotiations between the patent holder and companies seeking compulsory licence has been fixed at six months and research and development has been exempted from the ambit of patents.
There are also certain fears that the patent regime does not have adequate safeguards to check spurious drugs from flooding the market. But this is not correct in the sense that it is not the patent law which checks spurious drugs but the quality control which is a separate issue.
The apprehension that traditional knowledge would be hit by the new patent regime is also not true. In fact, traditional knowledge, seeds and over a dozen other items do not fall under the purview of patents and the Indian farmers need have no fears on that score.
Yet another offshoot of the new patent regime would be that more and more multinational pharmaceutical companies might shift their research and development activities to India since they know that their intellectual property rights would be protected. As it is several multinational drug companies have started some of their R&D activities in India because of the availability of cheap qualified manpower.
Overall, the New Patent regime will do more good to India than harm. It is a fairly balanced law. It is also a reflection of the confidence of Indian drug companies which are going global and in the process of developing new products through their in-house R&D. Indian pharmaceutical industry is among the most globally competitive industries that we have today with over one-third of its output being exported. The turnover of Indian pharmaceutical industry is about Rs.50,000 crore, of which Rs.16,000 crore is exported. It is one of the fastest growing industries in the country. It is in our interest to have a modern patent regime in line with what most countries have already adopted including China and Brazil.
*Associate Editor (Economics), Press Trust of India, New Delhi
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