TRIPS Compliance: Dealing with the Consequences of Drug Patents in India

I. INTRODUCTION II. RESPONDING TO THE THREAT OF INCREASED DRUG PRICES A. Will Drug Prices Actually Rise? B. Drug Price Controls C. Governmental Purchasing Power D. Compulsory Licenses E. Lax Enforcement of Patent Rights F. Public-Sector Drug Development G. Summary III. RESPONDING TO THE THREAT TO INDIAN INDUSTRY A. India Possesses Local Capacity B. Presence of a Skilled Scientific Workforce C. Anticipatory Behavior of Indian Pharmaceutical Firms D. Alignment of Regulatory Regimes E. Development of a Venture Capital Industry F. Summary IV. CONCLUSION I. INTRODUCTION idea of a better-ordered world is one in which medical discoveries will be free of patents and there will be no profiteering from life and death. (1) The sentiment expressed by Indira Gandhi some twenty years ago has come to fore of public consciousness in recent months. Skyrocketing healthcare costs in United have been attributed to rising prices of prescription drugs. (2) Stories of senior citizens who must make daily choices between food and life-saving medicines are commonly reported in media, (3) and debate about legality of drug reimportation from Canada continues to rage. (4) The high costs of HIV/AIDS drugs in countries of sub-Saharan Africa--some of which have HIV infection rates that approach or exceed twenty--five percent among their adult populations--mean that people are suffering and dying despite fact that medicines have been developed against this modern scourge. (5) The villains in all of these stories are firms that produce drugs--pharmaceutical and biotechnology companies--and system of intellectual property rights (in particular, patent rights) that enables companies to charge what some consider to be exorbitant prices for their products for an extended period of time. A patent, as embodied in American law, is a government-issued grant that confers upon patent owner the right to exclude others from making, using, offering for sale, or selling invention throughout United or importing invention into United States for a period of twenty years beginning from filing date of patent application. (6) A patent effectively grants patent owner a limited monopoly on patented invention. (7) While inventor can collect monopoly rents on sales of her product until time of patent expiration, this inefficiency is justified on utilitarian or consequentialist grounds--that is, without patent protection, inventors would not invent, or would invent only to a level that would be considered sub-optimal. This concern is particularly salient in world of medicines, where a substantial capital investment is required to bring products to market. (8) Significant funds are needed for drug research for two reasons: first, new drugs are exposed to extensive regulatory scrutiny and must be tested in expensive clinical trials in order to prove their safety and efficacy; and second, medical research is inherently uncertain and risky in nature, with a number of failures typically preceding any valuable breakthroughs. (9) Without prospect of a limited monopoly, it appears unlikely that many investors would be willing to place tens or even hundreds of millions of dollars at risk on early-stage biomedical research. The trade-off with drug patents, then, involves weighing creation of incentives for research and development against temporary high costs for consumers and associated economic inefficiency that result. The granting of patents, to be sure, comes at a price. The central question is: When does that price become too high? The Indian government decided some thirty years ago that price is always too high. The 1970 Patent Act simply prohibited granting of patents on pharmaceutical products (in other words, on drug compounds themselves). …

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