Imports weaken Indian pharma Premium

Reliance on imports could have a chilling effect on the pharmaceutical industry, weakening its ability to remain relevant

Ensuring the affordability of pharmaceuticals is essential for controlling healthcare costs, especially in India, where out-of-pocket health expenditures accounted for nearly 47.1% of the total health expenditure in 2021. While the Drugs Price Control Order, 2013, aims to regulate the prices of existing medicines, a better option is to establish a competitive environment for critical medicines by promoting local production. However, the government has taken two initiatives to meet domestic requirements through imports, which could have a chilling effect on the domestic industry.

The first was a Department of Expenditure (DoE) order permitting the Ministry of Health to procure 120 medicines through global tenders to supply Union government schemes. This list includes several top-selling anti-diabetes medicines and anti-cancer drugs. Currently, the companies selling these medicines enjoy a market monopoly in India, largely due to patent protection, regulatory barriers, or both. Moreover, for over 40 of these 120 medicines, the DoE order specifies a specific brand to be procured, implying that monopoly control of foreign companies would be enhanced.

Secondly, the 2024-25 Union Budget proposed removing the 10-12% customs duty on three cancer medicines marketed by AstraZeneca, ostensibly to reduce their prices. Given that some of these medicines are priced extremely high, the proposed import duty reduction would contribute little towards making them affordable.

These measures could seriously disincentivise domestic producers, making the country dependent on imports. More importantly, they could reinforce two entry barriers faced by the domestic industry, namely, the product patent regime and the regulatory guidelines for marketing approval of bio-therapeutics.

New medicines are generally under patent protection, preventing Indian companies from producing affordable generics/biosimilars. Meanwhile, regulatory guidelines, which impose costly and time-consuming requirements for obtaining marketing approval of biosimilars, can adversely affect domestic producers. However, both these entry barriers can be overcome through proactive government action. The Patents Act has several public interest provisions which can be invoked to promote local production. Similarly, regulatory guidelines for marketing approval of bio-therapeutics can be suitably amended to reduce the burden on domestic companies.

Section 83 of the Patents Act states that “patents are granted to encourage inventions and to secure that the inventions are worked in India on a commercial scale and to the fullest extent that is reasonably practicable without undue delay” and that “they are not granted merely to enable patentees to enjoy a monopoly for the importation of the patented article”. It also states, “Patents are granted to make the benefit of the patented invention available at reasonably affordable prices to the public”. Substantive provisions enforce these key assertions, ensuring that while patent holders are guaranteed their rights under the Act, they cannot act in a manner that is prejudicial to the public interest.

If a patented medicine is “not available to the public at a reasonably affordable price,” compulsory licences (CL) can be granted to any company willing to make the product in India. Issuing CL is the most effective remedy to ensure affordability of medicines but it was issued only once. This was when the originator company was charging nearly three lakh for a medicine. Using CL, an Indian company produced for ₹8,000. However, despite the high prices of medicines, the Patent Office has not issued CL for any other medicine. The government opposed granting CL even during the pandemic. This is in stark contrast to the stance of the U.S. government, which granted licences on multiple patents during the pandemic.