RESEARCH PAPER

COMPULSORY LICENSING AND INDIAN PHARMACEUTICAL INDUSTRY

SUBJECT: INTELLECTUAL PROPERTY RIGHTS

SUBMITTED TO: PROF. SOURABH BHARTI

SUBMITTED BY: HARSH RAJ

IV YEAR VII SEMESTER

2020-5LLB-21

NALSAR UNIVERSITY OF LAW, HYDERABAD

1
 TABLE OF CONTENTS

ABSTRACT .................................................................................................................................. 3

INTRODUCTION ........................................................................................................................... 4

TRIPS AND PUBLIC HEALTH ...................................................................................................... 7

Understanding TRIPS and Doha Declaration ........................................................................ 7

India’s approach ................................................................................................................... 10

NEXAVAR CASE & PROVISIONS UNDER PATENT ACT, 1970...................................................... 12

Nexavar Case........................................................................................................................ 13

COMPULSORY LICENSING: BARRIER TO INNOVATION? ............................................................. 15

CONCLUSION............................................................................................................................. 17

2
 ABSTRACT

Compulsory licensing represents a pivotal policy tool outlined in the World Trade Organization
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). Its fundamental
purpose is to navigate the complex intersection of interests between patent-holding brand-name
pharmaceutical companies and low- and middle-income countries that are in dire need of access
to patented pharmaceutical drugs. The patent system is built on the premise that patents provide
an incentive for innovation by offering a limited monopoly to patentees. The inverse
assumption that removing patent protection will hurt innovation has largely prevented the
widespread use of compulsory licensing—the practice of allowing third parties to use patented
inventions without patentee permission. In India, compulsory licensing has increased access to
medicine while also incentivising innovation within the country through the implementation of
the Patent Act amendment in 2005 and the Nexavar case. The paper looks at the issue of TRIPS,
public health and the alleged claim of compulsory license being an innovation killer.

Keywords: Compulsory License, Pharmaceuticals, TRIPS, Health, Medicine, Nexavar.

3
 INTRODUCTION

A patent is an exclusive right granted by the government to an inventor for a limited period of
time, 20 years.1 The patent holder has the right to prevent others from making, using, selling,
or importing their invention without their permission. This gives the patent holder a kind of
monopoly on their invention, which incentivises them to invest in research and development.
Research and development in pharmaceutical patents provide patent holders with a kind of
monopoly rights. The patent holder is compensated in the form of royalty for innovations on
the patent by the government for the use of innovation in case of compulsory licence without
permission from the holder of patent.2

Compulsory license is an authorisation that is granted by the government to a third party

to produce a patented product without the permission or consent of the patent owner who
has been taking undue advantage of the exclusive rights granted by the patent.3 The main
purpose behind the concept of compulsory licensing is to eliminate misuse of patent rights
granted to the patent holder in view of either anti-competitive practices or public health, which
could result in restriction of trade or create hindrance in technology transfer. Compulsory
Licensing is one of the flexibilities in the field of patent protection included in the WTO’s
agreement on intellectual property, Trade Related aspects of Intellectual Property Rights
(hereinafter, TRIPS).4

Patented medicine is one of the key issues in India, where there is high burden of disease, low
coverage and low per capita income compared to the developed countries who have fervently
opposed the implementation of compulsory licensing.5 The importance of having affordable
medical standards is found to be enshrined in the Constitution.6 According to Art 47 of the
Constitution of India, improvement of public health is among the primary duties of the state.
After gaining independence, the Indian government recognised the necessity for a patent
system. In response, the Government of India established the Tek Chand Committee in late

1
The Patent Act, Act no. 39 of 1970, § 53
2
E. Durojaye, Compulsory licensing and access to medicines in post Doha Era: what hope for Africa, 55(1)
JOUR. IP LAW 33-71 (2008)
3
Bela Gandhi, India’s Compulsory License Model: Increased Pharmaceutical Access and Innovation Coexist,
33(5) BYU PRELAW REVIEW 33, 33-54 (2019)
4
https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm
5
Supra note 3
6
CONSTITUTION OF INDIA 1950, art. 47

4
1948, which later became known as the Bakshi Report of 1950.7 The purpose of this committee
was to assess and improve the existing Indian patent legislation. The Act took measures to
protect pharmaceuticals from monopolistic practices that would make them inaccessible to
many citizens. Subsequently, amendments to the Indian Patent Act of 1970 were introduced,
with the first occurring in 1999, followed by amendments in 2002 and 2005.8 The third
amendment to the Indian Patent Act in 1970 introduced provisions related to compulsory
licensing. Under these provisions, individuals or entities can apply for compulsory licenses by
submitting an application to the patent controller. This application can be made after the
expiration of the patent, which occurs three years from the date the innovation was patented.
Compulsory licenses can be granted based on three primary grounds:9

1. In cases where the essential needs of the general public are not being met affordably.

2. When the patented innovation is not being utilised within the territory of India.

3. If the patented invention is not readily available to the general public at a reasonable
price.

One of the common western concerns is that when patents are not protected innovation may be
discouraged and alleged intellectual property rights might be denied, thus disincentivising
corporations from patenting pharmaceuticals in India. Despite this potential profit loss,
compulsory licenses improve low- and middle-income countries’ access to medicine. There is
no doubt that with the introduction of compulsory licensing, India has increased access to
medicine while at the same time, innovation within the pharmaceutical industry is also
incentivised, helping India become the medicine capital of the world.10

The paper is divided into three parts, the first part of the paper deals with the TRIPS agreement
that provide for compulsory licenses and the Doha Declaration on TRIPS agreement that dealt
with the public health component in trade. The second part of the paper deals with the Nexavar

7
Eduardo Urias & Shyama V. Ramani, Access to medicines after TRIPS: Is compulsory licensing an effective
mechanism to lower drug prices? A review of the existing evidence, 3(4) J. INT. BUS. POLICY, 367-384 (2020)
8
Arun S, Compulsory licensing in manufacturing may slow investments: EU, THE HINDU (5th February, 2016,
02:50 am) https://www.thehindu.com/business/Compulsory-licensing-in-manufacturing-may-slow-investments-
EU/article60514721.ece
9
The Patent Act, Act no. 39 of 1970, § 84
10
India is the pharmaceutical capital of the world today: Dr. YK Hamied, CMD, Cipla, THE ECON. TIMES (11
May 2011, 02:32pm) https://economictimes.indiatimes.com/opinion/interviews/india-is-the-pharmaceutical-
capital-of-the-world-today-dr-yk-hamied-cmd-cipla/articleshow/8243353.cms?from=mdr

5
case that granted compulsory license under Section 84 of Patent Act. The third part of the paper
will deal with the question of whether compulsory licenses inhibit innovation.

6
 TRIPS AND PUBLIC HEALTH

Compulsory licensing represents a pivotal policy tool outlined in the World Trade Organization
Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).11 Its
fundamental purpose is to navigate the complex intersection of interests between patent-
holding brand-name pharmaceutical companies and low- and middle-income countries that are
in dire need of access to patented pharmaceutical drugs.12 This mechanism offers a legal and
sustainable means of resolving this delicate balance. In essence, compulsory licensing
empowers governments and authorities in low- and middle-income countries to grant licenses
to domestic or foreign generic drug manufacturers, allowing them to produce and distribute
patented medications without the consent of the original patent holders.13 This strategy
effectively circumvents the monopoly control that patent-holding pharmaceutical companies
often wield, making essential medicines more accessible and affordable for their populations.

The Doha Declaration on TRIPS and Public Health further underscored the significance of
compulsory licensing.14 This landmark declaration recognised the critical role of compulsory
licensing in addressing the pressing global concern of ensuring equitable access to essential
medicines, particularly in the context of public health emergencies.15 It affirmed that countries
have the flexibility to employ compulsory licensing measures to safeguard public health, even
in the face of patent-related constraints.

Understanding TRIPS and Doha Declaration

In 1995, TRIPS established a minimum standard of protection and enforcement that each
government adhere to for intellectual property held by corporations of WTO members. Article
28 of TRIPS enshrines exclusive rights of the patent holder to use, offer for sale, sell, or import
the patented good. The patent holder also has an exclusive right to assign, allot, transfer, or
license the patent.16 Therefore, because of TRIPS, all non-exclusive pharmaceutical products

11
Supra note 3
12
TRIPS and Health, Compulsory licensing of pharmaceuticals and TRIPS, WORLD TRADE ORGANIZATION,
https://www.wto.org/english/tratop_e/trips_e/public_health_faq_e.htm
13
Margo A. Bagley, The Morality of Compulsory Licensing as an Access to Medicines Tool, MINNESOTA L.
REVIEW (2018)
14
William Alan Reinsch et al, Compulsory Licensing: A Cure for Distributing the Cure? CENTER FOR
STRATEGIC & INTERNATIONAL STUDIES (8th May 2020) https://www.csis.org/analysis/compulsory-licensing-
cure-distributing-cure
15
Id
16
TRIPS: Agreements on Trade-Related Aspects of Intellectual Property Rights, 1869 U.N.T.S. 299, 33 I.L.M.
1197 (1994), Art 28 (hereinafter TRIPS)

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and improve beneath the shield of their residential law. This situation, in turn, had the
consequence of depriving populations in developing and least developed countries worldwide
from gaining access to costly patented goods.

While the TRIPS Agreement ensures the protection of intellectual property rights, including
those related to pharmaceutical products, it also allows for certain flexibilities through Articles
30 and 31.17 On one hand, Article 30 permits WTO member states to establish limited
exceptions to patent rights under specific conditions. These exceptions can be invoked when
certain criteria are met.18

On the other hand, Article 31 outlines a more detailed framework for the granting of
compulsory licenses.19 It mandates that a third party must initially attempt to negotiate a
voluntary agreement with the patent holder before requesting a compulsory license. However,
this requirement for voluntary negotiation can be waived in cases of national emergencies,
other situations of exceptional urgency, or instances of non-commercial public use. This
particular form of compulsory licensing is referred to as “emergency compulsory licensing.”20
It is a very restricted measure and necessitates a compelling reason for its implementation,
typically involving a predominantly domestic focus.

Article 31(f) stipulates that compulsory licenses should primarily serve domestic purposes.21
However, several developing nations lack the capacity to domestically produce pharmaceutical
products, which poses a limitation on the effective use of compulsory licensing. To address
this challenge, the WTO introduced Article 31bis, which provides an exemption to Article
31(f).22 This exemption allows countries without pharmaceutical manufacturing capabilities to
import specific pharmaceutical products. It is worth noting that the Article 31bis procedure has
faced criticism for being time-consuming and costly, resulting in infrequent usage.23 For
instance, during a General Council meeting in 2019, India pointed out that the process was
overly burdensome and had been utilised only once – for the export of HIV/AIDS medications

17
Supra note 3
18
TRIPS, Art. 30
19
TRIPS, Art. 31
20
Sara M. Ford, Compulsory Licensing Provisions Under the TRIPs Agreement: Balancing Pills and Patents,
15(4) AMERICAN UNIVERSITY INT. L.R., 941-974 (2000)
21
Supra note 19
22
EM Ibokwe & Andrea Tosato, Access to Medicines and Pharmaceutical Patents: Fulfilling the Promise of
TRIPS Article 31bis, FACULTY SCHOLARSHIP AT PENN CAREY LAW (2022)
23
Id

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produced by the Canadian pharmaceutical company Apotex to Rwanda in September 2008.24
Furthermore, many countries have not enacted domestic legislation to integrate Article 31bis
into their legal frameworks, rendering it ineffective and non-operational in numerous instances.

Initially, compulsory licensing as an exception was to be used predominantly for the purposes
of supplying the domestic market of the country in which the license was issued. This system
posed a problem for countries that did not have sufficient manufacturing capacity to produce
their own generic pharmaceuticals and, therefore, had to rely on imports of medicines.25 The
Declaration on the TRIPS Agreement and Public Health, also known as Doha Declaration,
recognised that member states with insufficient or no technological capacity in pharmaceuticals
could face difficulties in making effective use of compulsory licensing under the TRIPS
Agreement.

Subsequent to the Doha Declaration in 2003, the TRIPS Council initiated its initial formal
effort, known as the ‘August 30 Decision,’ aimed at permitting the export of drugs under
compulsory licenses to nations lacking the technological capability to manufacture the required
medicines.26 Two years later, on December 6, 2005, the ‘August 30 Decision’ was permanently
incorporated into the TRIPS Agreement through the insertion of Article 31bis following Article
31 and an Annex following Article 73.

This decision effectively institutionalised the ‘Paragraph 6 system,’ which authorised the use
of compulsory licensing for the exclusive purpose of exporting medicines to countries that
lacked the capacity to produce these drugs themselves due to technological limitations.27 The
formal inclusion of this system into the TRIPS Agreement occurred following the acceptance
of the Protocol amending the TRIPS Agreement by a two-thirds majority of WTO member
states in 2017.28 Notably, this marked the first instance of amending the WTO accords since
the organisation’s inception in 1995. The Doha Declaration underlined the fact that the World
Trade Organization parties have a legal obligation to ensure public health and increase access
to diverse medications and that this obligation makes it possible for these parties to fully exploit
TRIPS adaptabilities.29 As a result of Doha Declaration WTO state parties are obliged to

24
Matthew Rimmer, Race Against Time: The Export of Essential Medicines to Rwanda, 1(2) PUBLIC HEALTH
ETHICS, 89-103 (2008)
25
Supra note 3
26
Supra note 7
27
Laura Chung, Use of Paragraph 6 Systems for Access to Medicine, 36(1) N.C.J. INT. L. 137 (2010)
28
Id
29
Nandini Rajesh & Arya Kuttan, Compulsory Licensing: An Antidote for the Dissemination of Potential
COVID-19 Cure?, KATH. S. L. R. 99-118 (2021)

9
actualise the TRIPS in a way that is steady in the healthcare of the public and measures to make
strides for access to medications.30

India’s approach

India’s approach to pharmaceutical patents has evolved over time, balancing the need to reward
innovation with the imperative of ensuring equitable access to essential medicines. The Indian
Patent Act of 1970 prohibited pharmaceutical product patents but allowed for the process patent
used in drug manufacturing and the associated equipment.31 This unique approach enabled
India to develop a thriving generics industry, making essential medicines available at a fraction
of the cost of patented products.

However, when India32 joined the World Trade Organization (WTO) in 1995, it was obligated
to adhere to the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement,
which required India to extend patent protection to pharmaceutical products. In response, India
enacted the Patent Act of 2005, which incorporated TRIPS requirements while also including
provisions to safeguard public health.33 For example, the Act allows for compulsory licensing,
which enables the government to grant permission to other companies to manufacture and
distribute a patented drug without the patent holder’s consent. This provision is intended to
ensure that essential medicines remain affordable, even if they are protected by patents. To
obtain a compulsory license, the applicant must demonstrate that there is a public health need
for the drug and that the patent holder has refused to grant a voluntary license. The government
must also ensure that the patent holder is adequately compensated. Before India accessed the
TRIPS agreement, the Indian patent laws did not allow the grant of product protection, but after
accessing TRIPS agreement, the amended patent laws allowed product patent.34

Recognising the unique challenges faced by lower- and middle-income countries in accessing
essential medicines, TRIPS allows LMICs to import patented drugs from other countries that

30
Prashant R. Dahat & Puneet Satbir Yadav, Patents Law and Trips: Compulsory Licensing of Patents, and
Pharmaceuticals, NLIU L.R. (2010)
31
Radhi Shah, Compulsory License: India, KLUWER PATENT BLOG (16th August 2021)
https://patentblog.kluweriplaw.com/2021/08/16/compulsory-license-india/
32
Mohan Kumar, An Indian perspective on reviving the World Trade Organization, ORF (28 April, 2021)
https://www.orfonline.org/expert-speak/indian-perspective-reviving-world-trade-organization/
33
Supra note 30
34
Hana Onderkova, Compulsory Licensing in India and changes brought to it by the TRIPS Agreement,
EUROPEAN COMMISSION IP HELPDESK (12th October 2021) https://intellectual-property-
helpdesk.ec.europa.eu/news-events/news/compulsory-licensing-india-and-changes-brought-it-trips-agreement-
2021-10-12_en#_ftn1

10
have granted compulsory licenses.35 India has also gone beyond TRIPS requirements to
establish its own criteria for issuing compulsory licenses, including situations where a patented
drug is unaffordable or inaccessible to a significant portion of the population. India’s approach
to pharmaceutical patents strikes a delicate balance between rewarding innovation and ensuring
equitable access to essential medicines.36 By allowing for compulsory licensing and other
safeguards, India has been able to maintain a thriving generics industry and provide its citizens
with affordable access to essential medicines.

35
Supra note 27
36
Supra note 3

11
 NEXAVAR CASE & PROVISIONS UNDER PATENT ACT, 1970

Under Section 84 of the Patent Act, a compulsory license may be granted when the patented
drug is unavailable, unaffordable, or not supplied properly to the public.37 The reasoning
behind this step is to not obstruct country’s overall health. The first compulsory license under
section 84 was done by the Patent Controller of India on a drug that was deemed to be of
unreasonable price for patients and local manufacturers.38

Compulsory licenses find further justification in Section 92 of the 2005 Patent Act, which
empowers India’s central government to grant them when deemed absolutely necessary. Unlike
Section 84, which allows compulsory licenses for generic manufacturing, Section 92 covers
situations such as national emergencies, extreme urgency, or public non-commercial use.39 In
other words, it goes beyond manufacturing for generic versions. Section 92(A), introduced in
the 2005 amendment of the Patent Act, specifically addresses granting compulsory licenses for
exporting pharmaceutical products in exceptional circumstances. It emphasises India’s right to
manufacture and export patented pharmaceuticals to countries lacking the capacity to meet
their public health needs. These countries must notify the WTO Council of their intent to import
pharmaceutical products. If they are WTO members, they must grant a compulsory license for
drug importation.

Importantly, India’s Section 92(A) enables India-based companies to manufacture and export
patented products to the licensee country, but these products cannot be sold within India itself.
This provision has been crucial for countries like Thailand, Zimbabwe, and South Africa,
which rely on compulsory licenses to import generic pharmaceuticals from India.40 It
safeguards these countries from potential medicine shortages, especially when patents or
manufacturing capabilities are at issue. Without Section 92(A), India-based companies’ ability
to manufacture and export drugs that other nations urgently need, even if they are not produced
generically in India, would be compromised. Moreover, this approach has set a precedent for

37
The Patent Act, Act no. 39 of 1970, § 84
38
Supra note 2
39
The Patent Act, Act no. 39 of 1970, § 92
40
Supra note 3

12
other countries like Jordan, which have followed India’s lead and allow drug exportation when
compulsory licenses are granted.41

Nexavar Case42

The compulsory license in question pertained to the kidney cancer drug Nexavar, originally
developed and sold by the pharmaceutical company Bayer. In 2008, Bayer obtained a patent
for Nexavar in India. Four years later, Natco Pharma, an Indian pharmaceutical company,
sought a compulsory license after its request for a voluntary license from Bayer was promptly
rejected. In August 2011, Natco Pharma submitted a compulsory license application to the
Patent Controller, ultimately leading to a landmark decision in March 2012 when the Controller
General of Patents granted Natco Pharma the compulsory license for Nexavar.

The key reason behind granting this compulsory license was the substantial disparity in the
drug’s price and accessibility. Bayer priced Nexavar at $5,000 per month, while Natco Pharma
proposed a significantly reduced cost of $170 per month, marking a substantial 97% decrease
in total expense. This stark pricing difference rendered Nexavar unaffordable for a significant
portion of the Indian population, contravening Section 84(b) 's requirement that the drug must
be reasonably priced and accessible to the country’s populace.

During the legal proceedings, Bayer defended its pricing by citing the substantial research and
development (R&D) expenses incurred during drug development. They contended that generic
companies, like Natco Pharma, did not bear such R&D costs, allowing them to offer
significantly lower prices. However, Natco Pharma countered that the pricing of Nexavar in
India should not be based on the assumption that the entire R&D costs should be recouped
from the Indian market alone, given that Bayer sold Nexavar in multiple countries. This
argument highlighted the flawed logic in Bayer’s approach, where they sought to recover R&D
expenses multiple times over from various countries. Ultimately, the Patent Controller
concurred with Natco Pharma’s perspective that a “reasonably affordable price,” as described
in Section 84, should be evaluated from the public’s viewpoint, rather than the pharmaceutical

41
PB Jayakumar, How long can India resist US pressure on pharma IP protection, BUSINESS TODAY (15TH
March 2015) https://www.businesstoday.in/magazine/features/story/us-mounts-pressure-on-india-on-pharma-ip-
protection-impact-142887-2015-03-05
42
Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013 (Intellectual Property Appellate Board, Chennai)

13
companies.43 This decision could set a precedent for future cases in India, as the judiciary
appears to be increasingly inclined to rule in favour of patient access to essential medications.

Following the compulsory license grant, Bayer attempted to appeal to the Indian Patent
Appellate Board (IPAB). However, their appeal was unsuccessful, as the IPAB upheld the
Controller’s decision. The denial of Bayer’s appeal was grounded in the fact that Nexavar was
not available to the public at an affordable price, reinforcing the standard of “reasonable
affordability” as defined from the perspective of the general public, which had been established
by the Controller and confirmed by the IPAB. The judgement was justified by TRIPS.44 Despite
the court’s leaning, granting compulsory license is still an exception in India. The Patent Act
does not immediately favour generic companies over patent holders.45

43
Mansi Sood, Natco Pharma Ltd. V. Bayer Corporation and the Compulsory Licensing Regime in India, 6
NJUS L.R. (2013)
44
Supra note 3.
45
Petra Moser & Alessandra Voena, Does Compulsory Licesing Hurt Innovation?, STANFORD INS. ECO. POL.
RESEARCH Policy Brief(2010)

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 COMPULSORY LICENSING: BARRIER TO INNOVATION?

Compulsory License is permitted under the WTO’s TRIPS Agreement provided conditions
such as ‘national emergencies, other circumstances of extreme urgency and anti-competitive
practices’ are fulfilled.46 Permitting compulsory license does not mean confiscating the
patented technology but effecting technology transfer by paying the patent holders reasonable
royalties.47 Opponents of compulsory licensing argue that it weakens incentives to invent and
discourages technology transfer into developing countries.

Compulsory licensing within the Indian pharmaceutical industry is often viewed through the
lens of its potential impact on innovation, particularly in the context of generic medicine
development.48 Contrary to being a barrier to innovation, compulsory licensing can be seen as
a mechanism that fosters increased research and development (R&D) within the generic drug
sector, with several key arguments supporting this perspective.

Primarily, compulsory licensing encourages innovation within the generic pharmaceutical

sector by promoting competition. When a compulsory license is granted, it enables multiple
manufacturers to produce generic versions of a patented drug.49 This competition not only
leads to price reductions but also incentivises innovation in various aspects of drug
development and production. Generic manufacturers are motivated to explore innovative
production processes, novel formulations, and improved drug delivery methods to gain a
competitive edge in the market.

Moreover, compulsory licensing can fill critical healthcare gaps, particularly in situations
where patented drugs are either unaffordable or unavailable to a significant portion of the
population.50 By allowing for the production of generic versions of these essential medicines,
compulsory licensing ensures that such drugs reach those in need. This, in turn, can stimulate
pharmaceutical companies to invest in R&D for generic versions of vital drugs that were
previously inaccessible to many, thus contributing to innovation within the industry.
compulsory licensing can foster collaboration and partnerships between generic
manufacturers, research institutions, and government bodies. This collaborative environment

46
Supra note 7 (Arun S)
47
Ekta Pandey Sourabh B Paul, Affordability versus innovation: Is compulsory licensing the solution, 30(4) INT.
J. RISK SAF, MED, 233-247 (2019)
48
Id
49
Supra note 44
50
Supra note 34

15
can promote knowledge sharing, joint R&D initiatives, and technology transfers, ultimately
leading to innovation within the pharmaceutical sector.

Compulsory licensing also plays a pivotal role in promoting R&D for neglected diseases or
conditions that may not have been financially attractive to pharmaceutical companies under
the traditional patent-based model.51 The issuance of compulsory licenses creates
opportunities for innovation in areas where the profit potential may be limited.
Pharmaceutical companies, including generic manufacturers, may find investing in R&D for
drugs that address pressing public health concerns worthwhile, even if the market incentives
are not as substantial.

The competitive landscape fostered by compulsory licensing can lead to more cost-effective
drug development processes.52 Generic manufacturers, operating within thinner profit
margins than patent-holding companies, are compelled to seek efficiencies and improvements
in their production methods.53 This focus on efficiency often drives the development of
innovative techniques, technologies, and formulations, benefiting not only the generic
industry but also the broader pharmaceutical landscape.

A notable consequence of compulsory licensing is the encouragement of innovation in the

realm of biosimilars.54 Biosimilars are complex, biologically derived medicines that represent
a growing sector within the pharmaceutical industry. India’s experience with compulsory
licensing for biosimilars has led to advancements in the development and production of these
critical medicines.55 The expertise gained in this field can translate into innovative
approaches for producing high-quality biosimilars, contributing to both innovation and
access. It is important to note that compulsory licensing operates alongside other mechanisms
within the Indian pharmaceutical landscape.56 It coexists with patent protection, voluntary
licensing agreements, and various regulatory frameworks, all of which collectively contribute
to a balanced approach that ensures access to essential medicines while providing incentives
for pharmaceutical companies to invest in R&D.

51
Supra note 44
52
Mario A. Bagley, The Morality of Compulsory Licensing s an Access to Medicines Tool, 133 MINNESOTA
L.R., 2463-2497 (2018)
53
Id
54
Colleen Chein, Cheap Drugs at What Price to Innovation: Does the Compulsory Licensing of
Pharmaceuticals Hurt Innovation, 18(3) BERKELEY TECHNOLOGY L.J., 853-907 (2003)
55
Id
56
Supra note 3

16
 CONCLUSION

Compulsory licensing, a significant policy tool under the TRIPS Agreement, aims to navigate
the intricate balance between patent-holding pharmaceutical companies and low- and middle-
income countries needing patented medicine. The Doha Declaration on TRIPS and Public
Health emphasised the role of compulsory licensing in ensuring equitable access to essential
medicines, especially during public health crises.

With a unique approach to pharmaceutical patents, India prohibited pharmaceutical product

patents in 1970 but allowed process patents. After joining the WTO, India amended its patent
laws in 2005 to comply with TRIPS while safeguarding public health. The Patent Act of 2005
allowed compulsory licensing, enabling the government to grant licenses for essential
medicines, provided there is a public health need and the patent holder refuses a voluntary
license. India’s approach balances innovation and access, striking a delicate equilibrium.

Rather than acting as a barrier to innovation, compulsory licensing in the Indian pharmaceutical
industry has the potential to stimulate and direct innovation toward addressing critical
healthcare challenges. By encouraging competition, fostering R&D in generics, and promoting
cost-effective drug development, compulsory licensing contributes positively to both the
accessibility of medicines and the growth of the pharmaceutical sector. It demonstrates that
innovation and access to essential medicines are not mutually exclusive goals but can be
mutually reinforcing within a well-considered policy framework. Compulsory licensing, when
implemented judiciously, serves as a vital tool to ensure access to essential medicines,
particularly in low- and middle-income countries.

17