Thursday, May 3, 2012

Should compulsory licensing be allowed?

Use of the invention by a third party without the consent of the patent owner can be authorised by Governments under a Compulsory License (CL). CLs are permitted by TRIPs provided certain conditions, specified in Article 31 TRIPs, are complied with.   Whether or not compulsory licenses should be granted may be difficult to justify either way, but there is a balance that needs to be maintained.

One thing that we need to reflect is, Why would Innovators ever be willing to launch their drugs in India going forward. 
If compulsory licenses are granted for every other life saving drug, why would innovators launch them in India any more.   It takes about $1.3 billion in R&D investment to bring a new drug to the market now, and not compensating the innovators for the money they spent is against the spirit of law.   Innovators price these drugs at a level so that they have enough incentive to pursue R&D and they expect that the government of the country should take the burden to subsidize such life saving drugs for the masses, which indeed should be the case. Compulsory license do provide to the larger population access to the life saving drugs, but at the cost of innovators money, it spent on discovery and development

For any market, and it is even true for the western market, if customer are to spend out of pocket for drugs,  there is no way that innovators can recover the money they have spent to discover/develop them.  Pricing drugs at a level that would make it affordable for the masses, does not yield returns proportional to the investment and that is why we see the price of drugs as they are in the developed world. With western economies getting under growth pressures, it is now the turn of the emerging markets to share a part of the burden, if we want to see innovation continuing to happen the way it has over the years.