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Article Excerpt
I. INTRODUCTION
II. RECENT PATENT LEGISLATION IN INDIA AND THE UNITED STATES A. International Agreements Leading to India's Revised Act B. India's Compulsory Licensing Provision in the Revised Act C. Patent Rights and Consumer Protection in the United States: Past Attitudes D. Current Compulsory Licensing Proposals in the United States III. THE INDIAN PHARMACEUTICAL MARKET A. Access and Administrative Struggles B. Poised Manufacturers and Potential Consumers C. International Respect D. Compulsory Licensing Effects on the Indian Pharmaceutical Market IV. THE U.S. PHARMACEUTICAL MARKET A. Imperfect Competition B. Informational Problems C. Access D. Compulsory Licensing Effects on the U.S. Pharmaceutical Market V. PROPOSED PRESCRIPTION FOR THE UNITED STATES
I. INTRODUCTION
Americans struggle on an ongoing basis with the high prices of prescription drugs. (1) Prescription drug prices are generally higher in the United States than in any other country. (2) There are few signs of prices going down. (3) Americans frequently hear stories about senior citizens who are forced to choose between food and their medications. Americans also frequently hear about the large profits drug manufacturers make from drugs under patent. (4)
Congress and the individual state legislative bodies are beginning to fight back against high prices. Proposals from state legislators include adjusting existing state subsidy plans; modifying drug discount plans; expanding the federal 340B drug pricing program; (5) regulating pharmacy benefit managers (PBMs), restricting marketing and advertising by pharmaceutical companies, interagency purchasing in bulk, and requiring transparency from the pharmaceutical companies by posting their clinical trials data. (6) However, the pharmaceutical lobby (PhRMA) in the U.S. Congress remains strong. While states propose and pass various laws, no federal laws to dramatically impact drug pricing have gone into effect. (7) The more high-profile solution to re-import drugs from other countries at lower prices via bussing and internet pharmacy remains illegal. (8)
Some state legislators have been trying a different tack, one that does not simply regulate, but that would fundamentally change the patent system. The tension between prices charged to consumers and property rights of patent holders is ever present. A few bills have been proposed that allow compulsory licensing of drugs by individual states. (9) "Compulsory licensing is generally defined as the granting of a license by a government to a third party to use a patent without the authorization of the patent holder." (10) Compulsory licensing has been used as a cost-cutting and access-assuring mechanism in many countries off and on for years. (11) This Comment will examine how it is used in India and in what form it has been proposed in the United States.
India provides a useful example because it has many of the same issues of price and access to drugs as the United States, but, unlike the United States, its patent system contains a compulsory licensing provision. Although India's patent regime took effect in 1856, (12) India, just in the last year, increased its patent protection to be in line with that of the United States. (13) As a compromise between the drug companies and the health organizations, India's legislation retains the compulsory licensing provision. (14)
The recent patent regime changes in India spotlight the constant tension on an international level between economic development and the idea of a right to health. (15) This clash was arguably not only over patent rights but also between developed and developing nations. (16) The Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement tries to unify, perhaps artificially, countries around the world to establish basic ground rules for intellectual property rights in the modern global world. (17) This tension was at the forefront of World Trade Organization (WTO) negotiations between countries leading up to India's adoption of the Amendments to the Patent Law Act of 1970 in 2005 (revised Act). (18) Due to the current high prices of prescription drugs in the United States, tension is also building between PhRMA and consumers. (19) The U.S. consumer wants a less controlled market while manufacturers want exclusive control over their product in the market. (20)
There is an inherent conflict between protecting patent rights and protecting a right to health (if such a right exists). In order to connect the two concepts, we need to find a concept that bridges the gap itself. Compulsory licensing is one way to alleviate the tension because it creates competition and "directly challeng[es] the exclusive rights granted to the patent owner." (21) Compulsory licensing has been effectively used in India and it is the contention of this Comment that it should be implemented in the United States in some form.
The second part of the Comment outlines the elements of India's compulsory licensing provision and provides a history of the revised Act. It discusses the United States' approach to compulsory licensing in the past. It then examines the recent proposals for compulsory licensing in the District of Columbia and Vermont. The third part analyzes India's pharmaceutical market and how it and the world market will be affected by the revised Act passed in 2005. The fourth part of the Comment evaluates the problems of the U.S. pharmaceutical market and determines what could be gained from a compulsory licensing provision. The Comment concludes with a recommendation to the United States using India's policy as a model.
II. RECENT PATENT LEGISLATION IN INDIA AND THE UNITED STATES
India and the United States have very different histories with respect to prescription drugs and patent laws. The United States has recognized patents in one form or another since the 1790s. (22) The pharmaceutical industry has been strong since the early 1900s. (23) In response to the exorbitant prices of prescription drugs, some legislators in the United States are now proposing compulsory licensing. (24) India's current industry and laws, however, are based largely on its law passed in 1970. (25) Unlike the United States, India has had a compulsory licensing provision in its system for almost as long as its system has been in place. (26) A closer look at the political history and provisions of India's revised Act and the political history and proposals in the United States can provide a helpful background with which to attack today's problems.
A. International Agreements Leading to India's Revised Act
The new Amendments to the Patent Act of 1970 have been the subject of much debate, from bloggers to legal scholars. (27) The resulting revised Act is the product of several international agreements. (28) Members of the WTO were under obligation to implement TRIPS provisions by 2000, 2005, or 2016, depending on the level of development of the member country. (29) India was given an extended period of time to bring its patent regime up to the standard--India's was implemented January 1, 2005. (30) The WTO had been working on implementing the TRIPS agreement since it was negotiated in the Uruguay Round of General Agreement on Tariffs and Trade (GATT) negotiations in 1988. (31)
In 2001, the Doha Declaration on the TRIPS Agreement and Public Health (Doha Declaration) clarified schedules and requirements of TRIPS for member countries. The Doha Declaration was a result of the Doha Ministerial Conference of the WTO meeting in Doha, Qatar, on November 14, 2001. (33) In paragraph six, the Doha Declaration expressly recognizes the difficulties countries with little or no manufacturing capabilities have in obtaining medicines. (34) This provision serves as an exemption clause for TRIPS to allow developing countries to obtain generic drugs in a health crisis. (35) Specifically, the Doha Declaration stipulates that, in Article 31(b) of TRIPS, compulsory licenses are available for commercial activity on reasonable terms and conditions. (36) The Doha Declaration fails in its goal to clarify the use of compulsory licensing because it still allows the Member States the right to determine what constitutes a "national emergency," a term with vague meaning at best. (37) In September 2003, a Ministerial Conference meeting in Cancun, Mexico was necessary to further clarify the requirements for importation and exportation. (38)
One problem that arises is that countries exporting the drug must supply most of the drug to their domestic market. (39) TRIPS Article 31(f) states that compulsory licenses "shall be authorized predominantly for the supply of the domestic market of the Member authorizing such use." (40) This provision fails to recognize that the countries most in need of the drug are those without capacity to produce it. (41) Fortunately, TRIPS Article 30 allows WTO members to export to a country that grants a compulsory license, allowing the importing country to not be completely dependent upon licenses from exporting countries. (42) This is a blanket exception that allows deviation from the general rules. (43) Furthermore, the Doha Declaration states--albeit in vague language--that compulsory licenses should be implemented to support public health and to promote access to medicine. (44) Therefore, although TRIPS Article 31 could be interpreted to restrict which licenses are granted, TRIPS Article 30 and the Doha Declaration support a broader approach. (45)
TRIPS Article 31 lays out the reasons for government compulsory licensing or government authorized third party licensing. (46) Specifically, four of the uses allowed are "(a) situations of national emergency or extreme urgency, (b) cases of public non-commercial use, (c) cases where there is a need to 'correct anti-competitive practices,' and (d) cases of dependent patents, where the exercise of one patent is dependent on the infringement of another." (47) Prior attempted negotiations are implied requirements to obtain some of the licenses. (48)
Like the requirement for previous negotiation attempts, TRIPS Article 31(h) also balances the need for the license with the rights of the patent holder. Article 31(h) is a remuneration provision (49) akin to "just compensation" in the takings context.
There is an inherent conflict between economic and social policy as expressed in international trade, treaties, and contracts. (50) TRIPS attempts to balance the interests of consumers and producers, for example, by allowing compulsory licensing. (51) India attempts to balance interests in the same manner. However, TRIPS leaves ambiguity whether the country must declare a national health emergency to invoke it. (52) In the shadow of these requirements and tensions, India passed its revised Act, effective January 1, 2005. (53)
B. India's Compulsory Licensing Provision in the Revised Act
India's patent laws date back to 1856. (54) A compulsory licensing provision was added in the Patent Act of 1970--the first comprehensive patent rights regime--as a result of the need to procure medicines at a lower cost for the poor. (55) Some contend that countries like India use compulsory licensing benefits for the exporting country's commercial interests rather than simply in the name of public health. (56) Although India's market does profit from export, the government is ostensibly committed to the people's health interests. (57) India's National Pharmaceutical Pricing Authority (NPPA) was created in 1986 to control prices of a list of drugs, again to allow access to drugs to the poor. (58)
The purpose of India's compulsory licensing provision is to provide anyone wishing to exploit a patent by obtaining a compulsory license if "a patent is not worked in India [for] three years after its grant...." (59) In addition, two other circumstances must be present before the government will issue a compulsory license: "'reasonable requirements of the public' are not satisfied" and "[the patented invention] is not available to the public at a 'reasonably affordable price'...." (60)
India's revised Act has many new provisions that will shape the country's pharmaceutical industry and those who deal with it. For this discussion, the revised Act's key provisions to strengthen the regime are: (1) the recognition of product patents, not just process patents; (2) a twenty-year term from the filing date of applications; and (3) the availability of patents for industrial application. (61) To placate those concerned with access and price, the revised Act retains its compulsory licensing provision. (62)
India's compulsory licensing provision is now more important than ever since India passed the revised Act. Part of the reason the Indian generic drug industry has grown is due to the lack of patent protection in India for products patented in other countries. (63) Indian drug manufacturers were able to capitalize on their ability to manufacture cheaper drugs. (64) India needs to encourage the continued success of the generic drug industry by allowing compulsory licensing.
C. Patent Rights and Consumer Protection in the United States: Past Attitudes
This is not the first time Americans have complained about the high cost of prescription drugs in the United States. (65) The difference between now and forty years ago is simply that there are more consumers in the prescription drug market today. (66) Due to public outcry in the 1950s, Estes Kefauver led the Administrated Prices Hearings for the pharmaceutical industry from 1959-1962. (67) Kefauver's motive for setting up the Administered Prices Hearings was that only a few large companies in the industry were...
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