India has been experiencing the second wave of Covid-19 virus over recent weeks. The access to health care is highly compromised as hospitals are experiencing a crippling shortage of hospital beds for people with severe cases, a shortage of oxygen supplies, and shortages of medicines being used to treat mild, moderate and severe forms of Covid-19. The issue of access has been made more disruptive by the parallel clandestine market as there are reports of hoarding and black marketing of essential medicines. These issues though became severe in the current times, the reports of hoarding of essential sanitation and other commodities have been doing rounds since the onset of the pandemic.
In my opinion the Indian Legal System is well equipped, and has been honed over many years. However, in this unprecedented Pandemic situation, it has been put to test. In this Article legal provisions relating to the two major issues of the second wave of Covid-19 i.e., shortage of the essential drugs and blackmarketing or hoarding of essential commodities are analysed.
Compulsory Licensing of Essential Drugs
The shortage of drugs can be met at the manufacturing level by providing for compulsory licenses of the essential drugs.
Compulsory Licensing basically means a license provided to a third party by the government to use the patented product without the permission of the patent holder in exchange for novelty. The concept of compulsory Licensing is based upon the rationale that public health should be given the priority over the rights of the patent holders.
Section 84-92 under chapter XVI of the Indian Patents Act, 1970 deals with the provision for compulsory licensing. Section 84(1) provides for who can apply for and the exhaustive list of circumstances when a compulsory license can be granted after expiration of 3 years from the date of the grant of the patent. An application for the compulsory license can be made before the controller by any person interest on any the followings grounds:
The reasonable requirement of the public hasn’t been fulfilled
The patented product is not available to the public at affordable price
The patented product has not been worked in the territory of India
This criteria also indicates that the provision aims at prioritizing the requirements of the public and accessibility of the innovation by the public at affordable prices. The controller of the Patents in the case of Lee Pharma Ltd. v. Astrazeneca AB, (2015)held that the reasonable requirements under section 84(1)(a) means whether the demand of the medicine can be met by the supply or not. In the case of F. Hoffmann-La Roche Ltd. v. Cipla Ltd.(2009), it was held that the question of availability of drugs at affordable prices in India was provided by compulsory Licensing.
The Section 84(6) also lays down the essential factors that the controller needs to take into consideration before granting compulsory license which are as follows:
the nature of the invention and the time that has elapsed from the time of grant of licence, utility of the invention to the patentee
the ability of the applicant to work the invention to the public advantage,
the capability of the applicant to utilise the invention, the capital and resources that the applicant has
the measures taken by the applicant to obtain voluntary license from the patentee and such efforts have to be successful within reasonable period; not ordinarily exceeding 6 months.
The reasonable requirements of the public mentioned in section 84(1) are explained in clause 7 of the said section. This clause provides a list of circumstances where the patent holder hasn’t fulfilled the reasonable requirement by refusal to grant voluntary license. Few of these circumstances are
If any existing, developing, established or of any class/person’s trade of Industry is prejudiced
If the demand of the patented product is not meant to an adequate extend
Market for export of patented article manufactured in India is not developed
The establishment or development of commercial activities is prejudiced.
The patentee has not commercially utilized or exploited the patented article.
The Honourable Bombay High Court, in the case of Bayer Corporation v, Union of India(2014), stated that section 84 provides a deeming fiction which deems that reasonable requirement of the public is not satisfied if the demand of patented product is not meant to an adequate extent. The court observed that the parliament has deliberately used the words “adequate extent” as the realms would vary from article to article. In case of medicine the adequate extent has to be 100% i.e., fullest extent. Access and availability of medicine to every patient is the penultimate requirement which cannot be sacrificed for the rights of the patent holder. The court further said that this is the mandate of the parliament by providing for compulsory license.
In brief the main principle in this section is that the patent should not be given and protected for products which are to be kept as a secret from the public and not used or exploited for the purpose they were created. The same principle is adopted in the section 85 of the Act which deals with the revocation of patent for non-working in India after 2 years of the grant of compulsory License.
Even though the courts have observed that three years limitation before granting compulsory license is to create a sustainable balance between the access to public health and interests of the patent holder. It has been observed that in developing countries, people require 2nd and 3rd Generation drugs which are not available due to this locked up period therefore these drugs are inaccessible without the consent of the patentees for a period of three years and the lack of access to proper medicines a prolonged issue of concern. In addition to this, the controller under section 84(6) is required to ensure all the factors are considered in depth which also causes delay in access of essential medicines to the public. Also applicants are required to approach the patentee for a voluntary license and wait for a reasonable period of 6 months as mentioned under section 84(6). In the case of M/s BDR Pharmaceuticals International Pvt. Ltd. v. M/s Bristols Myers Squibb Co.(2013), the court observed that the compulsory licensing application should be the last resort after all the deliberations and efforts for voluntary licensing have failed. Thereby increasing the procedural requirements and also the issue of public health. Section 84(7) in addition adds to the administrative difficulty of the Controller who has to investigate the practices and the distribution methods used by the Patentee to determine whether they are utilising the product to the fullest and if they aren’t then the reason and the justification for the same.
Further section 86 provides for an additional time period of 12 months (in addition to the 3 years) to be granted to the patentee before granting compulsory License, if the Controller is of the opinion that reasonable time to exploit the product as mentioned under section 84(7)(d) has not lapsed and the Patentee can still maximise his utilisation and commercially exploit the invention. Section 87 of the Act provides for procedural compliance by informing the patent holder of the application for compulsory license and ensuring a chance of hearing to both the parties. It is undisputed that Audi Alteram Partem forms an essential feature of the principles of Natural Justice however, it must be noted that the application for compulsory licensing is applied for only after the volutory license has been rejected thus, these procedural compliances only add to the hiderence to the access and availability of essential drugs. In Imperial Chemical Industries Ltd v Controller of General Patents, Designs and Trademarks (1978), the delay of the hearing was so extreme that the original patent period of 20 years expired before the final decision on the case was delivered and the issue was resolved. Delays like this may cause great harm to patients who are suffering from serious illness and in dire need of the medicines.
Section 88 of the Act provides for the terms and conditions given by the controller at the stage of granting the license along with the time period for which it can be used. To ensure that the medicines are available to the public at affordable prices the license must be granted for a longer duration of time and the terms and conditions must be changed with the changing circumstances. However, under this provision the applicant is allowed to request for such changes only twice. This adds to the procedural drawbacks under the Patents Act.
Section 90 also provides for the terms and conditions to be adhered by the licensee. Some of these terms are royalty that can be charged, time period of licensing, the affordable prices at which the products can be sold, exporting or importing rights of the licensee etc. In order to maintain a balance between the rights of the patent holder and the needs of the public the controller as a neutral person is required to decide the royalty paid to the patent holder. Along with this licensee is not allowed to authorize import of the patented article, any kind of importation would amount to infringement of the rights of the patent holder.
Another important provision under the Act is section 92, wherein the government notifies patents on which compulsory licenses can be granted and this is limited to circumstances of national emergency, urgency or for public non-commercial use and in these cases, the applicant can approach the Controller and the license is granted. However, it is essential to comply with the procedural requirements under provisions of section 83, 87,88,89,90.
In certain exceptional cases such as national emergency, urgency or for public non-commercial use including Public Health Crisis relating to HIV, AIDS, Tuberculosis, Malaria and other epidemics as mentioned under section 92(3), the procedural compliances under section 87 are not required to be adhered to. It is however, imperative to inform the patentee of such non adherence as soon as practicable. This section provides for easy access of medicines in situations relating to public health crises; however, the Indian Government hasn’t utilized this power under section 92 of the Act in light of the Covid-19 second wave crisis. They have claimed that Remdesivir was the only drug useful for treating those infected with Covid. While Tociluzumab had more effective substitutes available in India, Favipiravir’s use on Covid patients was not sufficiently peer reviewed. Regarding Remdesivir, in addition to the existing licensing agreements between the patentee Gilead and 7 Indian companies, the government is looking at the possibility of importing the same. The honourable Supreme Court has also recommended the issue of compulsory licenses and imposing ceiling prices for the sale of drugs as per Drugs Price Control Order.
Blackmarketing and Hoarding
It is imperative to understand that the question of blackmarketing and hoarding arises only when the prices are fixed by the Government or when the commodity is more than what is permitted by Law. Necessarily, black-marketing and hoarding cannot take place in respect of a commodity when its supply position is comfortable, and when no restrictions are imposed.
The Essential Commodities Act, 1955 under section 3 empowers the Government to regulate and control the production, supply and distribution of essential commodities. The Act does not deal with the term "black marketing" but section 7 prescribes for penalty on violation of government notification issued under section 3. The schedule to the Act includes “drugs” as essential commodities.
The Prevention of Black-marketing and Maintenance of Supplies of Essential Commodities Act, 1980, doesn’t explicitly provide for the definition of black marketing however, section 3(1) states that authorities have power to detain a person "with a view to preventing him from acting in any manner prejudicial to the maintenance of supplies of commodities essential to the community it is necessary so to do, make an order directing that such person be detained”.