https://doi.org/10.69974/glslawjournal.v4i2.

67

Analysis of Compulsory Licensing in India and its Perceived Impact

During the Covid Era
V. Parthasarthi1
Abstract:
Compulsory licensing can be defined as a mechanism which would enable the State to
use the invention without the prior consent from the inventor or the patent right holder.
The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement provides
provisions for patenting of drugs, it also provides certain provisions for compulsory
licensing mechanism, to keep a check on the possible abuse of patent rights. There has
been an imbalance between profits and drug accessibility to people throughout the world,
including India. The Indian patent regime has changed drastically since the landmark
Judgment of Bayer v. Natco2, it was evident that the judicial approach upheld the public
interest and ensured that the pharmaceutical companies do not abuse their position.
Granting patent security to pharmaceuticals particularly fundamental medications has
dependably been a challenged one. Further, the subsequent judgements on the said
subject matter has created confusion as far as the stance of compulsory licensing
standards in India are concerned. The inborn tussle between profit driven medication
organizations and welfare arranged governments trying to guarantee less expensive
access to fundamental prescriptions has as often as possible involved the worldwide
attention. The Covid 19 pandemic has disrupted many lives all over the world, but since
the invention of numerous vaccines, there has been a ray of hope to cure the virus at a
large scale. However, the governments and the pharma companies need to have an
agreement in order to provide vaccine and healthcare to vast majority of population.
Thus, the compulsory licensing route is being explored by various governments in order
to provide healthcare, this paper aims to explore the fundamentals of compulsory
licensing in India and its possible application in the Covid 19 scenario.

Keywords: Intellectual Property, Compulsory license, Covid 19, Patent Security, Bayer –
Natco

Introduction:
Conceptually, compulsory licensing is a government mechanism which grants the license
to the third party for the use of an invention without the consent of the patent owner. The
patent rights in India are granted to the patentee to encourage inventions and
acknowledge the technical and entrepreneurial capability of the applicant. The objective
of the compulsory licensing is to prohibit the monopoly of the patent holder and to ensure
that the invention is put to use for the general public. It acts as a balancing power
between awarding the inventor for his invention and making the invention available to
the large section of the people at a reasonable price. The TRIPS was introduced in the
year in 1995 after various countries have agreed to establishing an additional multilateral
intellectual property agreement. The genesis of compulsory licensing can be found in the
TRIPS Agreement.

1
Practising Advocate, High Court of Judicature at Hyderabad.
2
Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013 (Intellectual Property Appellate Board, Chennai),
available at http://www.ipab.tn.nic.in/045-2013.htm (Last visited on November 7th, 2021)

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 21
TRIPS Agreement
In order to facilitate the trade and commerce between the members of the World Trade
Organization (WTO) and for the better use of the intellectual property rights, the TRIPS
came into force. The inventors were engaged to peruse the inventions and put their
inventions to profitable use. In Article 27, of agreement aims to provide a suitable
platform to foster invention and innovation on various products and processes.
However, in order to counterbalance the profitability of a patent and to providing welfare,
the TRIPS also provide an exception to the general rule of patentability. Article 30 of
TRIPS is mentioned below,
“Members may provide limited exceptions to the exclusive rights conferred by a patent,
provided that such exceptions do not unreasonably conflict with a normal exploitation of
the patent and do not unreasonably prejudice the legitimate interests of the patent owner,
taking account of the legitimate interests of third parties.3”
Furtherance, Article 31 of the TRIPS enables the Member States to use of the subject
matter of a patent without the authorization of the right holder, including use by the
government or third parties authorized by the government4. It allows the authorization
under exclusive circumstances broadly, prior efforts to obtain authorization from the
patentee, non-exclusive use, and non-assignable use, payment of adequate remuneration
etc.
The impact of Doha Declaration:
On November 14th, 2001 the Declaration on TRIPS Agreement and public health was
adopted in Doha5. The declaration reaffirmed that the TRIPS agreement shall be
interpreted and implemented which is supportive to the WTO members, right to protect
public health and in particular to promote access to medicines was emphasised. It
resolved the issue of compulsory licensing of exporting drugs to developing countries.
The deceleration further enabled the states to determine definitive grounds for
compulsory licensing. A conscious attempt was made in order to acknowledge the
interests of ‘least economically’ developed nations, as the regime enabled the member
states to manufacture and export the generic medicines to the aforementioned nations.
By virtue of the latest development, all WTO member countries are eligible to import
under this decision, but 23 developed countries are listed in the decision as announcing
that they will not use the system to import6.
Compulsory Licensing in India
In order to comply with the International obligations, the Indian Patent Act has been
amended in regard to the grant of compulsory licensing to be in consonance with the
TRIPS Agreement. Under the Indian Patents Act,1970 the Sections 84 to 94 deals with
compulsory licensing.
An application for the compulsory license can be may made any time after the expiration
of 3 years from the date of grant of the patent7. It shall contain a statement describing the
nature of the applicant’s interest along with the necessary particulars as may be
prescribed and the facts upon which the application is being made.

3
TRIPS: Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Marrakesh
Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994)
4
Supra note 1
5
World Trade Organization, Ministerial Declaration of 14 November 2001, WTO Doc. WT/MIN(01)/DEC/1,
41 ILM 746 (2002)
6
Supra note 1
7
Indian Patents Act, 1970 § 84, No 39, Acts of Parliament, 1970 (India).

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 22
Broadly, there are three important grounds for the grant of compulsory licensing in
India8,
a. The reasonable requirements of the public with regards to the patented invention
have not been satisfied.
b. The patented invention is not available to the public at a reasonable price.
c. The patented invention has not worked within the territory of India.
In the year 2012, in a landmark case between Bayer Corporation V. NATCO Pharma
Ltd, India granted its first ever Compulsory License. This move has created a huge
impact in the pharmaceutical industry.
I. Bayer Corporation V. NATCO Pharma Ltd
Bayer Corp. is a pharmaceutical company headquartered in Leverkusen, Germany. It has
invented "Sorafenib Tosylate”, a cancer drug which is primarily used in the treatment of
Kidney cancer. The said drug was marketed in the name of “Nexavar” by Bayer Corp.,
the Indian Patent Office has granted a patent to Nexavar in the year 2008. On the other
hand, NATCO Pharma Ltd ( Natco) is an Indian pharmaceutical company which deals in
the manufacture of drugs and medicines. In December 2010, when Natco has approached
Bayer Corp. for the issuance of voluntary license to manufacture ‘Nexavar’.
Unfortunately, Bayer Corp. has rejected the request. Subsequently in the year 2011,
Natco approached to the Controller for the grant of compulsory license9 under S. 84 of
the Indian Patents Act, 1970.
The question which the controller was to answer, if the said issue falls within the purview
of S.84 in which the conditions for granting for compulsory licensing are enlisted.
Natco filed an application for compulsory licensing before the controller in the year 2011.
The controller granted the compulsory license to Natco on March 9, 2012. Aggrieved by
the decision of the controller, Bayer Corp. approached the then Intellectual Property
Appellate Board (IPAB). The Controller, as well as IPAB's decision, was fundamentally
similar in nature by granting the compulsory license to Natco, the reasons are
substantiated below.
NATCO attempts to obtain voluntary license
Bayer Corp contended that Natco had not made reasonable efforts to negotiate after the
initial proposal and felt that before exploring the option of voluntary license, grant of
compulsory license cannot be granted. IPAB has made an observation stating,
“…respondent is not required to make another request when its efforts had failed. The
law does not require that…”.10" Therefore, IPAB concluded that the requirement of the
law was only to make attempts to negotiate which has been met and the contention of
Bayer Corp fails.
Reasonable requirements of the Public
S.84 1(a) of the Patents Act,1970 clearly lays down conditions for the grant of
Compulsory license. Natco had submitted facts to support its claim that Nexavar has not
met the reasonable requirements of the public. It contended that, a total of 23,120 bottles
of Nexavar were needed to the patients suffering from kidney cancer for which no bottles
of Nexavar were imported in the year 2008 followed by 200 bottles in 2009 and no

8
Id.
9
Dewan M, Compulsory license revisited-India, RK Dewan & Co, 10 September 2014,
http://www.lexology.com/library/ detail.aspx?g=fc41db30-6793-4f92-90ae-a0bb82e6fdaa, (accessed on 27
October 2020).
10
Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013, Para.16, available at
http://www.ipabindia.in/pdfs/order-45-2013.pdf, last visited on June 5th, 2019.

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 23
bottles imported in the year 201011. IPAB declared that since the benefits of the rights are
conferred directly to the Patentee (Bayer) it is essential for the patentee to ensure that the
drug is reachable to the public at large.

Reasonably affordable Price

Natco substantiated its claim by relevant statistics , it contended that the price of Nexavar
was priced at an extortionate price and more than majority of the population was not in a
position to buy the drug. The then price of Nexavar is approximately at INR 2,80,248 /-
as compared to a generic version of the drug manufactured by Natco's at INR 8,800/-. In
deciding this claim, IPAB had taken a public welfare stance and said one of the primary
requisites of a Patent holder is to ensure that his drug is reasonably affordable12.The other
interesting contention from Natco was that, Bayer Corp was eligible for Drug Tax Credit
which would have lowered the net cost of research and development. Bayer chooses not
to avail Drug Tax Credit, if the benefit was availed by Bayer, that would have reduced
the manufacturing burden consequently the price of the drug would have been priced low.
As a result of which the IPAB stated that, the said invented drug was not available to the
public at a reasonable cost and declared it against Bayer.
Not worked within the territory of India
The literal interpretation of the clause is to be deduced from the other two conditions laid
down in S.84, the said drug is not available to the public at large and not available at
reasonable price, consequently the said drug has not worked within the territory of India.
Natco argued the word 'worked' meant to be ‘manufactured within India'. Bayer had also
failed to establish the reason ‘why it failed within the territory of India’, as a result by
which it was ruled against Bayer Corp.
The decision by IPAB may be lauded as one of the landmark judgments which
emphasized the public health motive over patentee rights but the IPAB had left many
questions unanswered. It rightfully applied facts of the case to the existing mechanism of
law in the country and decided the case based on merits but it adopted a policy and set a
precedent which might be harmful to India's patent regime in coming years. During the
entire proceedings, Bayer Corp had made an important argument; it argued that CIPLA,
another pharmaceutical company in India had been manufacturing the same drug which is
similar to the invention of ‘Soranfenib Tosylate’, Bayer Corp had already filed a patent
infringement suit against CIPLA for alleged infringement. IPAB had not taken
cognizance of the claim stated by Bayer Corp. CIPLA had been selling the drug at much
lower price as compared to Bayer, consequently reducing the market share of Bayer13.
There is an irreparable damage caused to the Patentee as when an infringer infringes the
Patent and sells at a much lesser price, the patentee is coerced to either reduce the price of
the drug considerably or the patentee's drug loses substantial market share and ultimately
fails the test of compulsory licensing and results in granting of compulsory license to the
applicant. IPAB has set a wrong precedent in the case as it will adversely affect the
pharmaceutical investors in India.

11
Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013, Para 35, available at
http://www.ipabindia.in/pdfs/order-45-2013.pdf, last visited on June 5th, 2017.
12
Bayer Corporation v. Natco Pharma Ltd, Order No. 45/2013, Para 40, available at
http://www.ipab.tn.nic.in/045-2013.htm Last visited on June 5th, 2017.
13
Bayer Corporation v. Natco Pharma Ltd., Order No. 45/2013, Para 25-26 available at
http://www.ipab.tn.nic.in/045-2013.htm (Last visited on May 12, 2013)

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 24
The patent holder is discouraged to start his pharmaceutical regime as his right to
exclusive use is under threat. The research and development costs are not met by the
manufacturer for his drug in practice in India , which will deter his investment in India.
This decision is set to increase competition in Indian markets as the manufacturers are in
a constant tussle to provide the requisite drug at an accessible price. It is also a boon for
patients suffering from life-threatening diseases. As in India, the poverty rate is prevalent
in many states and the majority of the population do not have adequate access to quality
healthcare. IPAB's decision with public health perspective in mind is a welcome move to
poor as the life-saving drugs is available at many affordable prices.
II. Lee Pharma v. Astrazeneca14
In this case, Lee Pharmaceuticals which is a Indian manufacturer sought Compulsory
License for the drug ‘sexagliptin' a drug which is primarily used in the treatment of
Diabetics, marketed as ‘Onglyza’. It is one of the very few drugs available in India which
treats Type-II Diabetics disease, which works in controlling glycemic control without
weight gain15. The said drug was granted to Bristol-Myers Squibb16, it was later assigned
to AstraZenica which is an Anglo-Swedish Company.
Analysis
For an application to succeed for compulsory license, as discussed earlier the essentials of
S.8417 of the Patent Act, 1970 needs to be satisfied. One of the primary requisites to grant
license, the attempts made by the petitioner to obtain a voluntary license from the
manufacturer. Like in the case of NATCO v. Bayer Corp , Lee Pharmaceuticals too had
made attempts to obtain a voluntary license from the patent holder. Bristol-Myers Squibb
has received a request from Lee Pharmaceuticals, however it refused to negotiate on the
terms offered. It contended that the patented invention has not met the reasonable
requirements of the public at large. Even after 8 years of securing the right to
manufacture, it has not manufactured the drug in India18. As per Form-27 for the calendar
year 2013 which was published in the year 2014, Saxagliptin has not been manufactured
in India, it has been imported from USA or Ireland. The total number of tablets from the
drug (Onglyza and Kmbiglyze, forms of Saxagliptin), for the year 2013, 8,23,855 units
were manufactured which amounts to Rs. 6,54,629, by breaking down costs, the cost of
importing is only 0.80 Rupee but it is sold at INR 49/-, which clearly shows the abuse of
monopoly by Bristol-Myers. However, unlike Bayer's case, there are large substitutes
available for Saxagliptin, the four other available inhibitors on the market, with
Sitagliptin, Vildagliptin, and Linagliptin19. The existence of further alternatives makes
Lee Pharmaceuticals’ argument flawed, the mere presence of like for like substitutes for
the drug is likely to meet the demands of public health at large. It has to be noted that, the
IPAB has discarded this notion in the previously discussed the Bayer’s case and stated

14
C.L.A. No. 1 of 2015
15
Onglyza – A Saxagliptin drug, available at http://www.diabetes.co.uk/diabetes-medication/diabetes-and-
onglyza.html, last visited on June 8th, 2017.
16
US Patent No - US 7,943,656 B2, dated May 17th, 2011, available at
https://patents.google.com/patent/US7943656B2/en, (last visited on June 23, 2021).
17
S 84(1)- (a) that the reasonable requirements of the public with respect to the patented invention have not
been satisfied, or(b) that the patented invention is not available to the public at a reasonably affordable price,
or(c) that the patented invention is not worked in the territory of India.
18
Compulsory License Application by Lee Pharmaceuticals, Pg 10, available at https://spicyip.com/wp-
content/uploads/2015/07/Saxagliptin-CL.pdf, (last visited on June 8, 2021)
19
Compulsory Licensing application filed over AstraZeneca's Saxagliptin- available at
https://spicyip.com/2015/07/compulsory-licence-application-filed-over-astrazenecas-saxagliptin.html, last
visited on June 8, 2021

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 25
that, the patentee shall meet the criteria individually, which is contradictory to present
case however the nature of the drug is such that there are close substitutes it may or may
not be possible to meet the criteria individually. Hence, in an economic sense, the
existence of substitutes in the market is likely to impact the product.
With respect to the patentable invention not available to the public at a reasonable price,
Lee Pharmaceuticals stated that it could produce each tablet at a mere cost of 30/- INR
which is 15/- cheaper than Bristol-Myers. It also stated that is it capable enough to
produce 10,00,00 units each day20. As said above, Lee Pharmaaceuticals has
demonstrated that in spite of 8 years since the patent was granted and from the data from
Form 27, clearly indicate that patent holder has not produced the medication in India and
merely importing the units from different nations.
Lee Pharmaceuticals had contended before Intellectual Property Office(IPO) there are
more than 60 million diabetic patients in India with a premise that majority of the patients
might be potential consumers of the drug , but it was rejected the plea on grounds that,
not all patients are potential customers and more so, there is a possibility that they might
prescribe to a lifestyle change which shall mitigate the effect of diabetics 21. The IPAB
has also rejected the claim of Lee Pharmaceuticals on the grounds that ‘Sexaglipton’, just
10% of Indian diabetics were prescribed Saxagliptin,
In quashing the under supply argument made by the applicant, the Controller stated that
“ such assumptions cannot be used to argue that the reasonable requirement of the
public has not been met – ‘authentic data/statistics’ are required to make such a claim”.
While all the empirical data supplied by the applicant has been around diabetics in
general, the Controller holds that this would not suffice, as mere under supply of the drug
is not a valid stance in establishing that the said drug has not worked in the territory of
India. More so, the existence of substitutes in the market is adequate in meeting the
public health demands. Further, the high cost/unit argument made by the applicant fell
flat on stomach, as all the other alternatives of Saxaglipton are priced at a similar range ,
between INR 42- INR 52. In hindsight, for this argument to succeed, the applicant ought
to have established that the other alternatives of Sexaglipton too, are priced at a higher
range and by the issuance of compulsory license, it is likely to produce at a lesser price
and subsequently offering a reasonable healthcare to the patients. The failure to do so,
Lee Pharmaceuticals has failed in its onus to prove the necessary requisites of S. 84 of
the Patent’s Act.
In addition to the above legality, a compulsory license may be issued by a notification
from the Government. Section 92 of the Patent’s Act, 1970 enables the government to
grant compulsory licensing by a notification. The objective behind this section is to
provide healthcare facilities to the general public in solely case of a health calamity. This
license can be granted without any prior notification to the manufacturer or patent
owners. i The said provision is in consonance with the TRIPS agreement under Article
31.
COVID 19- COMPULSORY LICENSING THE WAY OUT ?
The novel Corona Virus has caused widescale destruction to millions of lives all across
the globe. Late in the year 2020, there arose a hope to provide vaccination to large scale
population. But the real challenge was to have technical expertise on production and
acute strategies for its distribution. The policy makers look upon the compulsory

20
Compulsory License Application by Lee Pharmaceuticals, available at https://spicyip.com/wp-
content/uploads/2015/07/Saxagliptin-CL.pdf, last visited on June 8, 2021
21
Order by Controller in rejecting compulsory licensing, available at
https://www.jetro.go.jp/ext_images/world/asia/in/ip/pdf/Lee-prima-facie-notice_en20160119.pdf, last visited on
June 11 2021.

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 26
licensing process as a solution to overcome the crisis. As the policy makers are hopeful
that the involvement of larger players in the production market will ensure enough doses
to be produced to the mass population in India.
The problem of vaccine production and their distribution is a far more complicated set of
events and compulsory licensing of a particular vaccine formula cannot be treated as a
wholesome solution. It is pertinent to understand the nature of the challenge the policy
makers are facing in order to respond to the ever evolving virus. Fredreich Hayek, the
great Austrian Economist has made a study on simple and complex phenomenon22.
Hayek in 1967 stated that , in order to respond to a policy there are two ways , the simple
phenomena and the other is the complex phenomena. The key distinction Hayek tries to
make is that, in a simple system, it is possible to devise a policy by control and planning
by directive intelligence the policy makers or the governments derive from. The later,
however such control and directive intelligence cannot be made as there is an
overwhelming knowledge problem. India like many other countries currently face with
the problem of centralised approach to vaccine distribution and production. As stated, in
a simple system it is possible to define a policy by massive control and a set of planned
events. However, the pandemic is a complex amalgamation of issues for which having
knowledge of the same is the most important aspect. The word ‘Knowledge’ in this
specific context means, information about market conditions, demand and supply and
customer behaviour in the market. As, ultimately the production and distribution of
vaccine is an economic exercise. The Government with its centralised approach, may not
posses all these attributes. The players in the market, are in a far better position in order
to understand the knowledge problem. An ideal market economy, coordinates all of the
decentralized knowledge held by individuals or players throughout the economy.
Each district, state and territory offers a unique set of challenges in vaccine distribution in
India. With a centralised approach, it may not suffice the motto- vaccine for all. The
United Kingdom’s (UK) , approach vis-à-vis European Union’s (EU) approach offers a
blue print as far as vaccine procurement and distribution is concerned. As on data
published by UK’s National Health Service (NHS) on 16th May, 2021 a total of
3,04,35,887 have completed their first dose of vaccination23, it is around 84.49/100
population which is one of the best among the countries in the world. According to data24
published by the European Centre for Disease Prevention and Control merely 39.6% have
availed single dose of vaccination. The primary reason which accelerated UK’s
vaccination drive was ,early approval of vaccines by regulatory authorities and a
decentralised approach catering to the requirements of its own population. The European
Union has however, have taken a more complex approach in vaccinating it’s member
countries. The European Medicines Agency, the EMA the recommendatory body to EU,
has delayed the approval of vaccine distribution among member states. The rigid
bureaucratic route of the EU has hampered the vaccine distribution, countries like
Hungary has superseded the rigorous EU route for vaccine distribution and approved the
Russian Make- Sputnik-iv for its distribution in Hungary. The UK, on the other hand, had
a more meticulous and measured approach in vaccine distribution but also vaccine
research. UK was one of the first countries to place 40 million doses of Pfizer/BionTech

22
Hayek, F.A. (1967) The theory of complex phenomena, in Hayek, F.A. (1967) Studies in philosophy, politics
and economics, London: Routledge
23
england.nhs.uk, available at https://www.england.nhs.uk/statistics/statistical-work-areas/covid-19-
vaccinations/, last visited on 21 May,2021.
24
European Centre for Disease Prevention and Control- qap.ecdc.europa.eu, available at
https://qap.ecdc.europa.eu/public/extensions/COVID-19/vaccine-tracker.html#uptake-tab, last visited on 21
May, 2021.

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 27
vaccine, UK has also established large scale vaccine facilities for the vaccine to be filled
and sealed in multiple vials for distribution, which is vital in distribution process 25. The
distinguishable approaches by both EU and UK, largely dictated vaccine numbers. Vital
policies such as vaccine approvals and vaccine distribution measures were better planned
and approached by UK. The vital decisions were as a result of decentralised approach
taken by UK. It was better placed to assess its resources, budgets and technology for
vaccine distribution. However, factors such as diplomacy, economic strength of a nation,
diplomacy etc play an important role in vaccine production and distribution.
Nevertheless, the purpose of this comparative analysis was to indicate that the
decentralised approach is more plausible as opposed to a centralised approach. In India’s
context, the governments of states are better equipped in gauging strategies for overall
benefit of people. Even with compulsory licensing , the success may not be guaranteed
with a central set up. The policy makers are hopeful that with the help of compulsory
licensing, it can meet the demands of production and distribution by polling in resources,
but the more pertinent and critical decision lies in the approach to do so as accumulation
of power to make decisions may not result in desirable results. As stated previously about
the process of acquiring compulsory license and application, it’s success is however is
not assured.
To study the beneficial advantages of compulsory licensing historically, the research
conducted by Joerg Baten, Nicola Bianchi, and Petra Moser26 has suggested interesting
insights. As a sample size, the study studies the impact of Trading with the Enemy Act of
1917, which was introduced by USA in order to gain access and grant compulsory license
to all such patents from Germany after the commencement of the World War-I. Around
1246 patents were licensed to USA’s players from a period between 1918- 1922. The
study rightly reaffirms the relationship between competition and innovation, it indicates
that German inventors have in fact applied for more patentable inventions post 1918
repercussions after World War-I. However, a closer analysis indicate that patentability
has increased in the fields wherein the pre-existing economic conditions of competition
were strong in specific fields. This is supported by periodic increase of 2.97 patents per
year from 1918 in the fields of chemical invention, more specific to dye-stuff and
explosives. Even though, compulsory licences were issued for all categories of invention
but the increase in innovation and patentability was only confined to more competitive
markets. Though the market conditions , economic/political scenarios are vastly different
from the periods of post-World War-I to current world, the evidentiary value cannot be
ignored. The increase in innovations was more specific to economically viable fields and
specific markets. Increase in innovations plays a major role on the usefulness of a patent,
especially in the pharmaceutical industry. More so, one of the primary expectations of
proponents of compulsory licensing is to share the technical know-how and increase in
the serviceability of patented drugs. The study relied upon by the authors, suggests such
serviceability of drugs is only foreseeable in the markets of higher economic significance.
It has to be noted that, there is already prevalence of large scale research and innovation
in the development of vaccines in battle against covid-19, the sharing of patented formula
to the other manufacturers may not result in upscale in supply and more importantly, the
development of the vaccine.

25
United Kingdom’s Department of Health and Social Care- UK Covid -19 vaccines delivery plan, published on
January 11, 2021, www.gov.uk, available at https://www.gov.uk/government/publications/uk-covid-19-
vaccines-delivery-plan, last visited on 21st May, 2021.
26
“Does Compulsory Licensing Discourage Invention? Evidence from German Patents After WWI,” National
Bureau of Economic Research Working Paper no. 21442, July 2015.

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 28
In another study27, the impact or pricing from compulsory licensing was studied. The
prices of Antiretroviral Drugs purchased through compulsory licensing and other
international procurement mechanisms were compared. It was determined that,
compulsory licenses for antiretroviral drugs proceeded in prices that were higher than the
prices achieved by peer countries that has sourced the drugs from international
procurement markets which are either monitored by the World Health Organization or the
Global Fund between the years 2002-2011/12. The percentage reduction of costs as a
result of compulsory licensing was 71% in comparison to reduction of 79% of costs
through other means28. Interestingly, the pricing disadvantage was more so evident in
developing countries29. This study however has its own limitations, as it does not explore
the possibility of special circumstances ( in this case, a pandemic) which may have
resulted in reduction of prices. The authors conceive this study only as a source of
information that adoption of compulsory licensing may not result in direct reduction of
prices , which is an perceived outcome of this process.
The importance and impact of voluntary licenses was briefly discussed in the case of
Bayer, however a discussion on Thailand’s case of compulsory licensing of vital drugs
such as kaltera manufactured by Abbot Inc. is an important viewpoint in this scenario.
The importance of voluntary co-operation and licensing can never be ignored. After the
Thai government’s announcement of potential compulsory licensing of its manufactured
drug, Abbot Inc promptly negotiated its terms by reducing the per person cost in
Thailand. Reminiscent of the bidding process, when the generic manufacturers suggested
the cost reduction to 1300 USD $, Abbot Inc has dropped its per person cost to 1000$,
Finally the pooled procurement of the drug from various NGOs and other agencies has
drastically reduced the per person cost to 676$. It is a classic case of a free market
functionaries working to the benefit of the consumer.
Voluntary licensing has been a successful tool to efficiently manufacture distribute drugs
globally as per a study30. The case in point was, when Gilead Scienes Inc has licensed
its drugs for the treatment of hepatitis-c to large scale Indian pharma manufacturers. The
licensees are also allowed to determine the prices for export to other countries. Such
voluntary arrangements will significantly benefit the IP owners in development of
vaccines. Depending upon the licensing arrangement, these licensees may also sub-
license these life saving drugs to increase supply. It may be contended that, these are the
exact same functions which will be performed as a result of compulsory licensing but, a
forceful intervention of state is largely different from individual mutual cooperation
among players in the market. As stated before in this article, in a decentralised approach
the players possess important ‘knowledge’ for sustainable and profitable distribution of
vaccines.
The mutual cooperation among the pharma companies play a major role in the pandemic.
Such as the collaboration of Moderna, Pfizer and BioNtech has gained momentum in
production and distribution of vaccines. The Compulsory Licensing is an extreme
phenomenon to try and ensure the production and distribution of vaccines not only in
India but also across the world.

27
Beall, Reed & Kuhn, Randall & Attaran, Amir. (2015). Compulsory Licensing Often Did Not Produce Lower
Prices For Antiretrovirals Compared To International Procurement. Health Affairs. 34. 493-501.
10.1377/hlthaff.2014.0658.
28
Supra 6
29
Public Citizen. Compulsory licenses and right to health litigation: Kaletra campaign [Internet]. Washington
(DC): Public Citizen; c2014 [cited 2015 Jan 13]. Available from: http:// citizen.org/Kaletra-campaign
30
Friedman MA, den Besten H, Attaran A. Out-licensing: a practical approach for improvement of access to
medicines in poor countries. Lancet. 2003;361(9354):341–4.

GLS Law Journal, Vol. 04, Issue 02; July - December 2022 | 29
The complex infrastructure necessary to adequately increase the drug production is
extremely arduous and complex. As mentioned, the coordination/collaboration and
technical expertise which is required for efficient supply and distribution of vaccines is
necessary. The move by a welfare government may be able to produce a feasible solution
for a temporary time frame but in the longer run, the technical expertise, innovation and
government policies play a far more crucial role. Incentivisation of a patent plays a vital
role in the development of an invention , especially in pharmaceutical sector because as
the vital intellectual information in this field is constantly under supplied.
The companies are incentivised to produce large amounts of vaccine, even at a lower
price when they retain the power of knowhow as, they are much better placed to
understand the cost vs benefit analysis. The best price of the product may also be
achieved through tiered pricing, pooled procurement, compulsory licensing etc. As the
best price is often the equilibrium price or the Austrian economists call it, the market
clearing price when the forces of demands and supply accurately arrive at a specific
point. Therefore, in order to arrive at an ideal price which is feasible for large scale
distribution of vaccines may be attained by other processes.
Conclusion
It is trusted that this period will get more difficulties terms of conceding/dismissal of
Compulsory Licensing for more protected medications. More ion is yet to be seen
between Indian pharma goliaths and bigger MNCs. The working of Indian Patent office
in managing CL case will likewise realize greater lucidity the eventual fate of CL in India
and the standards won such laws in India. Albeit patent empowers syndication and
overpricing, it is an essential wickedness in light of the fact that without patent security
firms have no motivation to grow new items. Accordingly, patent security is important to
guarantee development; the patent is in this way a flawed yet successful instrument to
advance the advancement of new items.
As discussed in this article, compulsory licensing is a prominent tool for policymakers to
look up to increase the production and distribution of drugs and medicines amidst the
crisis. It has been discussed , the specific circumstances in which the compulsory
licensing is invoked. Though, it is an efficient mechanism previously adopted by various
governments and even the Indian government, it has to be borne in mind about the
limited advantage is offers. The invention of vaccine has surely created a new hope in
combating the menace of virus but, its usage and distribution to large masses still remains
a challenge. The adoption of radical government policy such as compulsory licensing
may not be an ideal move given the limitations. Hence, the policy makers are required to
devise a balancing policy which incentives the inventors and provide necessary health
care to masses at large, by creating a suitable environment for intellectual property to
thrive.

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