Pulling rabbits out of the hat

Quietly but intriguingly, India is trying to pull out new rabbits out of its policy hat with regard to its intellectual property rights (IPR) and drug-pricing policy.

In January 2019, India first unveiled proposals exempting innovative medicines developed by foreign companies from price control for five years, giving Indian patients access to drugs that are currently only available abroad.

The proposals also included orphan drugs used for treating rare medical conditions and come from amendments to its Drug Price Control Order.

This was, however, followed up by an early March National Pharmaceutical Pricing Authority (NPPA) order that cut maximum retail prices of 390 non-scheduled cancer medicines by up to 87 per cent, days after capping the trade margin of 42 non-scheduled cancer drugs at 30 per cent.  

Whether the NPPA can tweak trade margins is of course another issue of legal consideration here, beyond the flip flop in incentivising innovative medicines in January and then moving back with price controls in March.

Apart from prices, India also recently entered into an agreement with the Japanese Patent Office (JPO) to start a Patent Prosecution Highway (PPH) as a pilot, wherein an applicant can ask for fast-tracking a patent application citing the granting of a patent in Japan.

The PPH, reports suggest, will only allow for expediting patent examination, without guaranteeing the grant of a patent in India. It also comes at a time when Regional Comprehensive Economic Partnership discussions are emerging in Asia about new norms for patents (especially as they pertain to the pharmaceutical sector) in the region.

The stronger patent and relaxing of price control measures may have been in anticipation of a threat from a US Trade Representative (USTR) last year reviewing India’s eligibility in the generalised system of preferences (GSP) given pressure by the US medical devices (where price controls in stents and other devices have been a policy hot button) and the dairy industry.

But overall, one hopes that this is thinking afresh from the Government of India (GOI) to incentivise innovation and its diffusion within the country, while not letting go of access and affordability of medicines.

Iain Cockburn and co-authors show in their 2016 paper, in a sample of 642 new drugs in 76 countries during 1983-2002, that patent and price regulation regimes strongly affect how quickly new drugs become commercially available in different countries. Price regulation delayed a launch, while longer and more extensive patent rights accelerated it.

Health policy institutions made markets more profitable speeding up diffusion, Cockburn demonstrated. Is India covering up its weak health infrastructure and institutions by its repeated invoking of a lower hanging price control policy? That is a question that still remains unanswered.

That said, India’s price control moratorium for innovative medicines and faster patent approval harmonised with JPO, might enhance access to innovative drugs, pharmaceutical and medical devices in the country though apologists for incentives for innovation may also argue that this is not enough.

India’s actions are important to place in context with what is happening to drug prices globally. First, China in 2018 imposed price controls on oncology drugs, taking a leaf out of India, and in the US, pharmaceutical innovators are facing pressures on drug pricing, an issue also emerging in Canada and the European Union (in countries like the Netherlands and the UK) for drugs like Vertex used in cystic fibrosis.

So the timing of these policies come curiously from India. While richer economies are moving in one direction in pricing and protecting patents on medicines, one wonders if India is moving in the other direction.

Furthermore, what might these policies mean for signals the Indian government is giving to pharmaceutical and medical device innovators for differential pricing of products, is worth considering.

Research by my co-authors and myself published in the Journal of Health Economics in 2015 show that differential pricing could raise welfare in the market for medicines in India.

So, by strengthening the policy environment for innovation incentives, might the government unintendedly soften innovator willingness to differentially price their innovative products in India?

Also, what would these policy changes do to incentives for discovery work in India, let’s say in vaccines remains an open question.

Could one expect some discovery work to be undertaken going forward? By whom? And through what R&D mechanisms, internal or external?

The country’s scorecard on generating new chemical or biological entities in the global drugs and pharmaceutical world is underwhelming and one hopes that the price moratorium and the faster patent granting policy creates a buzz in India’s science and innovation community, both private and public.

They also come at a time when healthcare financing is going through a shift in India given the Ayushman Bharat Scheme. Several specifics on it are still not settled, including insurance coverage for drugs and medical devices, but if it gets cleared tomorrow to some steady state consensus, faster patents and moratorium on price controls for innovative medicines in India could augur well (in an insured world) even for those worried about affordability and access to medicines in India.

Public health activists, globally and domestically, can be expected to push back India, however, on these two revised policies. Particularly so because this might impact the survivability of the Indian generic firms, labelled as the pharmacists of the world. They have been shifting their attention to the least developed countries (those being provided a TRIPs extension till 2021) both on the demand and supply side and to developed countries for selling biosimilars.

Amy Kapczynski from the Yale Law School has earlier written about India trying to engineer a patent law 2.0 globally, but these 2019 new IPR laws and price control moratoriums on innovative medicines might mean that India is ultimately rebooting its patent and price control laws. 

The author is with IIM-A and Hoover Institution