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Explained: Indian government leverage in Covid-19 vaccine pricing

SC has noted that ‘different manufacturers are quoting different prices’ for Covid-19 vaccines, and told govt it has ‘powers under the Drugs Control Act and Patents Act’ that it can employ. What are these provisions?

Written by Apurva Vishwanath | New Delhi |
Updated: May 5, 2021 10:57:22 am
A large crowd waits to get vaccinated in Mumbai earlier this week. (Reuters Photo)

During the hearing on issues related to the pandemic on Tuesday, the Supreme Court flagged differential pricing for vaccines, and directed the central government to clarify in its affidavit the basis and rationale for pricing.

One of the three judges on the Bench, Justice Ravindra Bhat, called on Solicitor General Tushar Mehta to explore legislative measures to address the issue.

“There are powers under the Drugs Control Act and Patents Act. This is a pandemic and a national crisis. If this is not the time to invoke such powers, what is the time?” Justice Bhat said. The court noted that “different manufacturers are quoting different prices”.

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How does the government regulate the pricing of drugs?

To ensure accessibility, the pricing of essential drugs is regulated centrally through The Essential Commodities Act, 1955. Under Section 3 of the Act, the government has enacted the Drugs (Prices Control) Order. The DPCO lists over 800 drugs as “essential” in its schedule, and has capped their prices.

The capping of prices is done based on a formula that is worked out in each case by the National Pharmaceutical Pricing Authority (NPPA), which was set up in 1997.

Can the government regulate the price of Covid-19 vaccines through DPCO?

Regulation through DPCO is not applicable for patented drugs or fixed-dose combination (FDC) drugs.

This is why the price of the antiviral drug remdesivir, which is currently in great demand for the treatment of serious cases of Covid-19, is not regulated by the government. Last week, a notification by the Ministry of Chemicals & Fertilizers said that on the intervention of the government, major manufacturers/marketers of the remdesivir injection had reported voluntary reduction in the Maximum Retail Price (MRP).

Globally, the American biotechnology firm Gilead Sciences owns the patent for the drug. Several pharma companies have obtained a licence from Gilead to manufacture remdesivir.

To bring vaccines or drugs used in the treatment of Covid-19 such as remdesivir under the DPCO policy, an amendment can be brought.

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What legal avenues are available for the government to address differential pricing for vaccines?

THE PATENTS ACT, 1970: This law, which was mentioned by the Supreme Court, has two key provisions that could be potentially invoked to regulate the pricing of the vaccine.

* Section 100 of the Patents Act gives the central government the power to authorise anyone (a pharma company) to use the invention for the “purposes of the government”. This provision enables the government to license the patents of the vaccine to specific companies to speed up manufacturing and ensure equitable pricing.

* Under Section 92 of the Act, which deals with compulsory licensing, the government can, without the permission of the patent holder, license the patent under specific circumstances prescribed in the Act.

“If the Central Government is satisfied, in respect of any patent in force in circumstances of national emergency or in circumstances of extreme urgency or in case of public non-commercial use, that it is necessary that compulsory licenses should be granted at any time after the sealing thereof to work the invention, it may make a declaration to that effect, by notification in the Official Gazette, and thereupon the following provisions shall have effect…,” the provision says.

After the government issues a notification under Section 92, pharma companies can approach the government for a licence to start manufacturing by reverse engineering the product.

However, in the case of biological vaccines like Covid-19, even though ingredients and processes are well known, it is difficult to duplicate the process from scratch. The process will also entail new clinical trials to establish safety and efficacy, which makes compulsory licensing less attractive.

The World Health Organisation (WHO) is working to expand the capacity of low- and middle-income countries (LMICs) to produce Covid-19 vaccines and scale up manufacturing to increase global access to them. On April 16, it invited expressions of interest to enable “transfer of technology” and “appropriate know-how” to existing or new manufacturers in LMICs to enable them to develop and produce Covid-19 mRNA vaccines.

THE EPIDEMIC DISEASES ACT, 1897: Another legal route suggested by experts to regulate the pricing of vaccines is the Epidemic Diseases Act. This has been the main legal weapon for the government in dealing with the pandemic.

Section 2 of this law gives the government “power to take special measures and prescribe regulations as to dangerous epidemic disease”.

The provision reads: “When at any time the State Government is satisfied that the State or any part thereof is visited by, or threatened with, an outbreak of any dangerous epidemic disease, the State Government, if it thinks that the ordinary provisions of the law for the time being in force are insufficient for the purpose, may take, or require or empower any person to take, such measures and, by public notice, prescribe such temporary regulations to be observed by the public or by any person or class of persons as it shall deem necessary to prevent the outbreak of such disease or the spread thereof, and may determine in what manner and by whom any expenses incurred (including compensation if any) shall be defrayed.”

These broad, undefined powers can be used to take measures to regulate pricing. However, the law lacks the teeth to implement such an important policy framework.

Violation of the Act is penalised under Section 188 of the Indian Penal Code, which deals with “disobedience to order duly promulgated by (a) public servant”. The punishment prescribed under this law is imprisonment of up to six months or a fine that could extend up to Rs 1,000.

Apart from these legislative options, experts suggest that the central government procuring directly from the manufacturers could be the most beneficial route to ensure equitable pricing. As the sole purchaser, it will have greater bargaining power.

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