COMPETITION LAW AND PATENTING INTERFACE IN THE

PHARMACEUTICAL INDUSTRY

NAME OF THE AUTHOR- Anchal 3rd year 5th sem. B.B.A;LL.B CNLU Patna, Bihar

ABSTRACT

In the pharmaceutical industry, the interaction between competition law and patenting creates
a unique set of issues and factors to consider. The research has highlighted recommendations
for the benefit of numerous stakeholders in the legal and industrial arenas based on the earlier
discussion of generic pharmaceutical products and compulsory licencing in the
pharmaceutical industry, which sheds light on important issues at the interface with
competition law. The research discusses the interplay between competition law and patents in
the pharmaceutical business, which demands a careful balance to stimulate innovation,
preserve intellectual property rights, and enable access to medications at affordable prices. It
further discusses that developing novel pharmaceutical products significantly contributes to
protecting public health by ensuring an ample supply of clinically proven medications for
treating the most serious and widespread diseases. The development of biosimilars in the
Indian pharmaceutical industry is a major contributor to improving public health while
simultaneously supporting pharmaceutical innovation if they address anti-competitive
practices and put in place measures to promote competition and access to medicines.
The research discusses unresolved concerns about how patents affect access to inexpensive
and fair healthcare. The Indian Patent Office regulates pharmaceutical patents related to
therapeutic ingredients, formulations, and technologies. Sustained growth in the sector
depends critically on striking a careful balance between promoting healthy competition and
protecting intellectual property.
The research highlights the challenges that lie in striking a balance between encouraging
pharmaceutical innovation and preserving market freedom. It also highlights that enforcing
competition and patent laws effectively is crucial to creating an environment that supports
business growth and universal access to healthcare for all members of society

INTRODUCTION
In industries where research and development are critical to the creation of ground-breaking
innovative products, such as drugs, which are successful and require the highest level of
protection, there needs to be abalance between intellectual property and competition law.
People's health has improved significantly as a result of scientific and technological
advances, but there are still unanswered questions about the role of patents in pharmaceutical
development and the extent to which they impede equitable and affordable health care. Order
patent is currently heavily reliant on the pharmaceutical industry due to its significant role. A
patent on an innovative and successful medication will slow market competition in the short
term. This barrier is the responsibility of the government in order to create incentives for
innovation. If their inventions are successful, the patent system grants the drug's inventor a
limited monopoly over its production and sale, allowing them to make exclusive profits.
Profitability encourages the development of new treatments for ailments that are not
adequately addressed by existing ones, such as diagnosis or treatment. As a result, regulations
must be put in place to support the healthcare sector and reduce instances of malpractice. 1

The pharmaceutical and drug industry fits the description of globalization and the need for a
strong intellectual property system better than any other scientific field. Recognizing the high
costs and risks associated with bringing a new drug to market during the R&D stage. As a
result, no company would put its intellectual property at risk by making it available to
everyone as if it were public property, especially if the financial benefits would be
insufficient. The acquisition, creation, protection, and management of intellectual property
has essentially evolved into a commercial activity, similar to how capital and resources are
raised. We are currently witnessing an increase in knowledge that will establish a distinct
framework for intellectual property and general decision-making behaviour.

The pharmaceutical and drug industry is one of India's most important economic and
industrial development drivers. Because of their sensitivity and complexity, pharmaceutical
industry standards have a significant impact not only on the market but also on the general
consumer population. The pharmaceutical industry's top priority is to protect its highly
regarded research and development efforts. The issue focuses on novel pharmaceutical
products. These products are also concerning because they are largely protected by the
intellectual property system, which ensures the free flow of novel pharmaceuticals.2

1
Blair RD and Sokol DD, The Oxford Handbook of International Antitrust Economics (Oxford University Press
2014).
2
COMANOR W and AKIRA G, Competition Policy in the Global Economy Modalities for Co-Operation”
(Leonard Waverman ed, Rootledge Publication)
The above innovation spur led to the Cabinet Secretariat notifying the formation of a different
Department, namely “the Department of Pharmaceuticals, under the Ministry of Chemicals
& Fertilizers which came into being with effect from 1st July 2008 with the objective to give
greater focus and thrust on the development of pharmaceutical sector in the country and to
regulate various complex issues related to pricing and availability of medicines at affordable
prices, research & development, protection of intellectual property rights and international
commitments related to pharmaceutical sector”.3

LITERATURE REVIEW

 Chandra (2013)4 explained what "anti-competitive activity" means and looked at some
Commission decisions about deals that hurt competition as well as why competition
laws are in place to protect consumers. She also tries to figure out what the
Commission thinks about the position and the broad reading of Section 3(1) by using
information from the Commission's website as a source and thinking about theories of
legal language, interpretation goals, and specific theoretical techniques. Based on
what the author has found, there was never a free request made under Section 3(1).
Both joint and end-user agreements can be checked, and Section 3 also talks about
agreements between businesses that aren't linked in the same production chain (1).
The strict rules in Section 19(3), which should be followed when figuring out if an
action will have a big negative effect on competition, may help calm people's worries
about the inquiry's broad beginning and orders.
 Sharma (2013)5 looked at the CCI and asked how it is different from Singapore's
Competition Commission. There were complaints, or "flow of information" as the Act
calls them, in the first few weeks that it was in effect, but The CCI was given more
power, and in September 2009, the first police reports from the Director General
began to come in. But it took a while for the CCI to start doing what it said it would
do to punish or stop market players who were doing wrong. It was simple to
understand what went wrong. It was important for the CCI to give everyone a chance
to be heard.

3
Carlos M. Correa, “Intellectual Property and Competition Law – Exploring Some Issues of Relevance to
Developing Countries” <http://www.iprsonline.org/resources/docs/corea_Oct07.pdf.> accessed March 13, 2024.
4
M. Chandra , “An Analysis of Orders of CCI With Respect to Anti-Competitive Agreements” (Internship
Project Report, CCI )
5
K. Sharma, “India: Prohibition of Anti-Competitive Agreements and Abuse of Dominant Position”” (Vol 2,
Competition Policy Reports) 167
  Patil et al.'s (2013)6 study found that there are both legal and economic factors that
go into looking at competition law. As told by the Commission, it has been asked to
make decisions about a range of trade problems that came up at the Businesses or
actions that work with a wide range of people of different types. Parts 3 and 4 have
never been given a final order by either the COMPAT or the Supreme Court. Given
how new Indian competition law is, it is hard to find and study jurisprudential trends
at this point. The study did find a few major trends in the decisions of the Competition
Commission of India, though.
 In order to gather important information for the present program, Pranjal (2010) 7
looked at the leniency programs in a few other countries as well as India. Any
country's competition laws would be substantially enhanced by a program of leniency
and the insights gleaned from some of The developed areas provide as examples. It
has been quite clear that an open and transparent approach is essential to leniency. If a
company cannot predict, with any degree of certainty, how it will be seen after its
corporate confession, especially in the absence of an ongoing investigation, it will be
significantly less inclined to acknowledge its crime.
 Mittal (2013)8 investigated how the Competition Enforcement Regime was being
followed by Public Sector Undertakings. PSUs in India engage in two distinct
categories of operations. Both sovereign and non-sovereign state tasks are performed.
Its application is restricted to PSUs' non-sovereign tasks under the Competition Act of
2002. a class of rulings Public service obligations and other commitments that a
public corporation has to fulfill outside of its regular commercial operations are
examples of activities. The analysis concludes that government ownership of public
players cannot provide them a competitive advantage and that equal playing fields for
both public and private participants in the market are necessary to sustain competitive
neutrality.
 According to Sinha (2013),9 the purpose of competition law is to promote a healthy
competitive environment within the country's economy via the intricate convergence
of economics, law, and policy-making. Considering that it is thought to be
6
Shalaka Patil, Payel Chatterjee and Et. al, “Competition Law In India A Report On Jurisprudential Trends And
Way Forward Introduction” Nishith Desai Associates New Delhi.
7
Pranjal Prateek, “Let the Whistle Blow Loud and Clear: Need for Greater Transparency and Certainty in the
Leniency Programme” (Internship Report, Competition Commission of India, New Delhi)..
8
Hitakshi Mittal “Applicability of Competition Law principles on Public Sector Undertakings: An Analysis of
CCI Orders and other jurisdictions” (Internship Report CCI, New Delhi)
9
Divya Sinha “The Likely Impact of Proposed Amendments (2012) to the Competition Act of 2002 on the
Regulatory Framework” (Internship Report, CCI)
 choleric,The nation's competitiveness is maintained by general economic
development and competition principles. The primary thesis is that competition
protects against the misuse of economic power by improving a country's internal
market.

PHARMACEUTICAL SECTOR AND COMPETITION LAW INTERACTION

The implementation of competition law and policy is critical for global health care market
management. Despite being protected by several laws designed to protect intellectual
property, the pharmaceutical industry's growth raises concerns about competition law. “Weak
competitive forces harm consumers in the pharmaceutical industry more than in other
industries”, writes Lysle T. Boller and Fiona Scott Morton. 10 Tens of millions of people
worldwide and in India rely on the pharmaceutical industry for basic medical care. Because
the health sector is so important to any economy, competition laws must be changed. The
development of novel pharmaceutical products contributes significantly to public health
protection by ensuring adequate supplies of medications that have been clinically proven to
be effective for the treatment of the most serious and widespread diseases. Economic
incentives such as direct and indirect government support through funding and subsidies,
effective intellectual property laws, and other policies that promote innovation are just a few
examples of how governments can significantly accelerate drug development. “The
pharmaceutical industry is impacted by a variety of practices relating primarily to price
regulations, insurance and reimbursements, drug procurement by government agencies,
patent laws, innovation policies, biotechnology and safety policies, drug regulation, data
protection, trademarks and use of international non-proprietary names, drug promotion
regulation, and drug advertising regulation," according to Steven. 11 The pharmaceutical
industry is affected by a wide range of practices. Because they are in the business of
increasing the money returned to their shareholders, they will seek out new opportunities to
do so whenever it is legal. Because this industry is constantly changing, competition laws and
policies must be updated on a regular basis to keep up with market changes. As a result, it is
critical to investigate how India's regulatory structure has impacted the growth of the
pharmaceutical industry.12

10
W.L. Fugate , Foreign Commerce and The Antitrust Laws, vol 2 (1996) 10-11.
11
“COMPETITION LAWS AND POLICIES” [2004] The Institute of Chartered Accountants of India 134.
12
WR Cornish , Intellectual Property (3rd edn, Sweet and Maxwell 1996).
TYPES OF PHARMACEUTICAL PATENTING IN INDIA

One of India's most "knowledge-driven" economic sectors is the pharmaceutical industry.

Pharmaceutical research is both extremely expensive and highly volatile. In the
pharmaceutical industry, the method of choice for study, research, and development is
typically the use of a novel, inventive, and utility-based process or product. Pharmaceutical
companies can protect their inventions from unapproved commercial use on the market by
acquiring patent rights over the developed product or procedure. This is due to the intense
competition that exists in the market right now. The Indian Patent Office is permitted to hold
the following types of pharmaceutical patents in India:

1) Drug compound-based patents

A patent of this kind protects a drug compound on the basis of its chemical structure. This
patent grants the most extensive form of protection possible. A claim that includes various
"functionally equivalent" chemical entities are allowed in one or more of the drug
compound’s components when it comes to patents on drug compounds. 13

2) Formulation Patent

The patents in question claim ownership of a particular method for the preparation of a
formulation or the quantity of its essential components. For instance, an ayurvedic anti-
retroviral composition for the treatment of AIDS was claimed to be protected by Indian
patent number 2039.

3) Technology Patents

These patents are asserted on the methods that were utilized to address particular issues that
were related to technology. For instance, stabilization; flavor concealment; an increase in the
substance's solubility; etc.

PHARMACEUTICAL MARKET

The pharmaceutical industry prioritizes intellectual property protection and related litigation.
As a result, striking a careful balance between the need to encourage innovation and the need
to promote and foster competition is even more critical. This is a requirement that must be

13
R Gadbow, “Intellectual Property Rights: Global Consensus”, ” [1988] Global Conflict Boulder .
met. To accomplish this goal, the first step is to precisely define markets in order to conduct a
competition analysis. Understanding how the pharmaceutical market competes is critical.
Policymakers' decisions on pharmaceutical industry mergers and acquisitions will almost
certainly have a significant impact on the cost and accessibility of medicine in India. Private
payers cover the vast majority of medical costs in India, and pharmaceuticals account for a
sizable portion of this total. India's social and economic structures are very different from
those of other countries. Because pharmaceuticals are a critical component of healthcare
systems, decisions of this nature have an immediate and direct impact on the country's public
health. In order for the pharmaceutical industry to grow, both sets of laws, namely the
competition laws and the patent laws, must function effectively and harmoniously.14

ROLE OF PHARMACEUTICAL INDUSTRY ASSOCIATION

There is a substantial middleman who acts as a point of contact between drug manufacturers
and the patients who use their products in the Indian drug market. Organizations such as the
All-India Organization of Chemists and Druggists (AIOCD), which is a consolidated union of
pharmaceutical supply chain middlemen with significant bargaining power over producers
and consumers, are good examples of this unusual phenomenon. Because the retail sector is
so concentrated, manufacturers are essentially forced to sell their products to a monopoly in
order to compete in the market. This is because the AIOCD and its sister organizations
operate in a way that maximizes their own interests on two levels. An antitrust commission
has ordered AIOCD and its affiliated organizations to stop violating competition laws. The
Assam Drug Dealers Association (ADDA), the All-Kerala Chemists & Druggists Association
(AKCDA). The Indian Competition Commission has ordered the AIOCD, a well-known
organization of Indian druggists and chemists, to stop engaging in unfair business practices
that limit the pharmaceutical market. The CCI, on the other hand, will remain concerned
about the AIOCD's ability to control prices and coordinate trade boycotts.

Companies in the Indian pharmaceutical market finds it difficult to avoid horizontal price
agreements and price controls by coordinating price increases. It is critical to remember this.
This is because any manufacturer who violates industry regulations will almost certainly face
retaliation from industry associations in the form of a sales boycott and be denied market

14
Leslie, R. Christopher., “Antitrust Law and Intellectual Property Right Cases and Materials” (Oxford
University Press, 2004)
access. Because of these factors, preventing horizontal agreements, which is one of the
challenges in preventing cartelization on the Indian drug market, is especially difficult. 15

NATURE OF CONSUMER IN PHARMA SECTOR

Prescription doctors, not consumers, decide which pharmaceutical products to purchase. This
is due to information asymmetry in our industry and supplier-induced demand, both of which
influence prescribing physicians' consumption decisions. Patients ultimately purchase
pharmaceutical products, but pharmacies, hospitals, and doctors also influence how much
demand there is for specific medications. Because the pharmaceutical market, unlike the
majority of other markets, is not governed by the concept of consumer sovereignty, selecting
an appropriate market definition for pharmaceutical-related products can be difficult. The
end-user, also known as the patient, is the person who buys and uses the medication. In India,
the prescriber—typically a doctor and a pharmacist—makes the decision. Due to the
significant discrepancies in the information, it is usually not possible for the patient or the
pharmacist to use a different formulation of the medication prescribed by the doctor for the
patient's health condition without first consulting the doctor who prescribed it. This is
because there is a scarcity of expert knowledge or data. As a result, the prescription
medication market does not support the notion of price competition driven by consumer
preference. This presents a unique challenge in terms of applying general principles of law of
competition to the pharmaceutical industry. It is critical to remember that the expansion of
the pharma business in India since 1970 has been directly attributed to the supportive
policies that have been in place. The two most important policy decisions made in 1970
concerned drug policy and the restriction of patents to "processes only" rather than
“products”.16

ROLE OF INNOVATION-BIOSIMILAR AND GENERIC DRUGS

This century is known as the century of technological progress. According to the European
Commission, "innovation is critical in the pharmaceutical industry." Because of advances in
human medicine, patients now have access to treatments that were previously unthinkable. In
exchange, you will be granted exclusive rights to use the innovation. As a result, everyone in
the field is concerned about protecting their rights in the field of creative thought. As a result,

15
Lianos, I. and Korah, V. with Siciliani, P., “Competition Law: Analysis, Cases and Materials” (4 th edn, Hart
Pub., 2017)
16
Noonan Chris, “The Emerging Principles of International Competition Law” (Oxford University Press, 2008)
protecting innovations is critical, especially since the pharmaceutical industry relies on an
inventive, secure, and robust intellectual property environment. Numerous sociocultural and
economic benefits can be supported by a strong intellectual property framework. It could
strengthen India's biopharmaceutical sector, create hundreds of high-potential jobs, and
facilitate increased foreign direct investment, among other benefits. It will be necessary to
include both biosimilar and generic medications when discussing the pharmaceutical sector.
A biosimilar drug has received the same stringent regulatory approval as all biologic drugs.
This is also known as a follow-on biologic or a subsequent entry biologic. Somatropin was
the first biosimilar drug to receive global approval, with the European Union approving it in
2006. Patient access increased by 44% between 2006 and 2013 when the biosimilar
"filgrastim" was introduced in the United Kingdom.17 In India, the term "biosimilar" refers to
the process of clinically testing a drug on both humans and animals to demonstrate that it is
highly similar to the reference product—the innovator's biological product—and that
regarding safety and effectiveness, there are no clinically meaningful variations between the
medication and the standard product.

When there is insufficient competition in the product market, patents account for a sizable
portion of the market. It's important to remember that the patent system is at the heart of the
price disparity between branded and generic medications. One of the primary reasons for the
sudden price decrease is the introduction of generic competition following the patent's
expiration. The Patent Act of 1970 was enacted with no provisions for product patents.

Instead, only processes are protected by patents under the Patent Law. Product patents
allowed multinational pharmaceutical corporations to maintain aggressive monopolies prior
to 1970. This was taken into consideration. The prices were noted to be among the at its peak.
As a result, two separate work by authorities and experts concluded that the pharmaceutical
product patent system should be eliminated. Later, the creation of the World Trade
Organization, which included several agreements to create universally binding standards,
altered the international environment. These changes had an impact on the Indian patent
system as well. All technological endeavours required the availability of product and process
patents.18

17
K. Maskus, “Competition Policy And Intellectual Property Rights In Developing Countries: Interests In
Unilateral Initiatives And A WTO Agreement”, <http://siteresources.worldbank.org/DEC/Resources/84797-
1251813753820/6415739- 1251814020192/maskus.pdf> , accessed on 13 March 2024
18
Prankrishna Pal (Ed), “Intellectual Property Rights in India: General Issues and Implications” (Regal
Publications ,New Delhi, 2008)
As a result, 2005 revision to the Patent Act restored the legal status of pharmaceutical
product patents. By taking a "pro-public health" and "pro-access" stance, the Indian
government has based its patent law on the dual principles of promoting intellectual property
rights (IPR) protection and preserving the public interest. Section 3(d) of the 1970 Patent Act
was added as a significant safeguard in 2005. On a global scale, the significance of this
precaution in preserving public health is widely acknowledged. For the first time, the
Novartis case, which the Supreme Court began hearing in 2007, addressed whether or not
Section 3(d) of the Patent Act of 1970 applies.

APPLICATION OF COMPETITION LAW IN INDIAN PHARMACEUTICAL

SECTOR
It is critical to ensure that the pharmaceutical industry in India, like all other technologically
driven industries on the market, is competitive. Maintaining a competitive advantage
necessitates striking a balance between market participants' freedom and the incentive for the
development of new pharmaceutical products. While market participants are still conducting
business, this equilibrium must be reached. As a result, the anti-competitive agreement must
be modified, both of which address how to avoid contractual restrictive clauses. It is
unacceptable to include clauses in a patent lease or license agreement that are either opposed
to or in favor of the public interest, regardless of whether these clauses were included on
purpose or by mistake. The main flaw of the Patents Act of 1970 is that it makes no mention
of compulsory licenses or other antitrust remedies. The Patent Act's sole remedy is the ability
to use such license conditions as a defense in court against infringement claims. This is the
only other option. The Patents Act's compulsory license provisions must therefore be linked
to these provisions. The Bolar exception, also known as the "experimental use exception,"
and parallel import provisions are recognized under Sections 107A (a) and 107A (b),
respectively, of the Patent Act of 1970. These exceptions are found in sections 107A (a) and
(b). The "Bolar exemption" is based on the idea that specific requirements should be put in
place so that generic medication manufacturers can begin selling their wares immediately
after a drug's patent expires. This provision was added to ensure that less expensive
alternatives to patented medicines are available. Parallel importation is synonymous with
“importation of patented products by any person”.19

PHARMACEUTICAL PATENT AS ENTRY BARRIER

19
Pertiz, Rudolph J.R., “Competition Policy in America: History, Rhetoric, Law” (Oxford University Press,
2001)
• Roche Pharmaceutical Company case:

Pharmaceutical behemoths F. Hoffmann-La Roche AG, Genentech, Inc., and Roche Products
Private Ltd. were accused of patent infringement by Karnataka-based Biocon Limited and
Maharashtra-based Mylan Pharmaceuticals Private Limited. It is worth noting that Roche
Products Limited sued Biocon and Mylan in the Delhi High Court to prevent them from
marketing a biosimilar version of Roche's Trastuzumab, a breast cancer treatment. The
lawsuit was filed in order to prevent Biocon and Mylan from publicizing the biosimilar
version. Justice Manmohan Singh issued a temporary restraining order to prevent Roche's
Biocon and Mylane from marketing their novel medications. In a related development,
Justices Badar Durrez Ahmed and Sanjeev Sachdeva overturned Biocon and Mylan's appeal
against a temporary injunction. This restored the law to its pre-order status while still
allowing Biocon and Mylan to market their pharmaceutical products. The Competition
Commission was informed by Biocon and Mylan that Roche had been accused of abusing its
dominant position. The CCI requested an investigation into the situation under section 26
after concluding that Roche had, at the very least, abused its dominant market position. CCI
has authorized an investigation into the pharmaceutical behemoth Roche in relation to the
cancer drug Trastuzumab following a favorable prima facie finding of a violation of Section
4(2)(c) of the Act.

According to the CCI, “the Informants have claimed that Roche Group is a dominant player
in the Trastuzumab market and has indulged in a series of abusive practices to evade entry of
the Informants’ products and/or to hamper their growth. Such conduct of Roche Group has
been alleged to be in contravention of the provisions of Section 4 of the Act”.20

Issue: whether the opposing party violated Section 4(2)(c) of the Competition Act by
preventing competitors from entering the market. Furthermore, Biocon contends that the
defendants violated Sections 4(2)(a)(ii), 4(2)(a)(i), 4(2)(e), and 4(2)(b)(i) by fixing unfair
prices, imposing unfair conditions, and employing leverage.

I. Maintainability of complaint – preliminary issue

The opposing party, Roche Group, contended that Since the issues stated in the current
material are directly addressed by the existing civil suit, informants should not be allowed to
bring up identical matters before the commission. t in the Delhi High Court. In response to
20
Biocon Limited and Mylan Pharmaceuticals Private Limited (Informants) And F. Hoffmann-La Roche AG &
Others (Opposite Parties), (8th edn, CUTS International) https://cuts-ccier.org/pdf/Edition-8-
Analysis_of_Competition_Cases_in_India.pdf., accessed on 13 March 2024
this criticism, the Informants stated that the reliefs provided by these two forums are not the
same. The Commission's main concern, however, is whether Roche Group's market behavior
is abusive.

As a result, the Commission rejects the jurisdictional argument advanced. The Commission
stated that a dominant company may use legal means that would otherwise be protected by
law but may not be, to deplete the assets of smaller competitors and either delay or thwart
their entry into the market. When a company in a dominant market position files an
anticompetitive lawsuit of this type, the Competition Act considers it an unfair business
practice. The defendant will be released if they can show both of the following:

1) According to an objective and preliminary examination, the plaintiff's legal action appears
to be without merit and is being used as a form of harassment against the defendant.21

2) It is abundantly clear that the plaintiff is engaging in anti-competitive behavior because the
plaintiff clearly intends to eliminate the defendant's competitor.

The Commission considered the United States Supreme Court's decision in the sham
litigation case22, which addressed the two critical elements discussed in greater detail below.
The first argument contends that the plaintiff cannot reasonably expect to win the legal
process, while the second contends that the litigant is attempting to directly meddle with the
operations of the rival company by using legal tactics. In the Columbia case 23, it was decided
that before the court will consider proof of the suit’s financial feasibility, a plaintiff must
refute the legal viability of the contested lawsuit. The decision in the case before this one was
identical.

While in European Commission in the case of AstraZeneca looked into Vexatious litigation
in the pharmaceutical industry. “Vexatious litigation means a malicious legal action without
probable cause, in which a litigant is not acting in good faith, but for the purpose of
harassing an opponent or competitor. This is used as an anticompetitive weapon in patent
enforcement proceedings and is becoming a matter of increasing antitrust concern on both
sides of the Atlantic”. 24
21
Philips, Jeremy, Firth Alison, “Introduction to Intellectual Property Law” (4th Edition, Butterworths, Lexis
Nexis, 2010) 5
22
In both the U.S. and the EU, the antitrust classification of "sham litigation" (in the U.S.) or "vexatious
litigation" (in the EU) allows a plaintiff, or a defendant in the event that this action forms part of a counterclaim,
to argue that the commencement of litigation may, under certain circumstances, constitute an infringement of
competition law.
23
Professional Real Estate Investors, Inc. v. Columbia Pictures Industries Inc., (1993) 508 U.S. 49.
24
Case C- 321/05 AstraZeneca v. Commission, [2005] ECR
The Indian Competition Commission determined that "the use of public procedures and
regulations, including administrative and judicial processes, may also constitute an abuse in
certain circumstances" because "the concept of abuse is not limited to market behavior alone"
and "misuse of public procedures can have severe anticompetitive effects on the market." 25
Based on the prior understanding, the Informants' allegations of frivolous litigation against
Biocon and Mylane were initially found to be unfounded.

II. Relevant Market

Identifying a meaningful market is the first step towards proving a dominance abuse under
fourth section of the Competition legislation of 2002 26. The Act defines "relevant market" as
"a market consisting of a relevant product market, a relevant geographic market, or both." 27
The Act defines "relevant product market" as "a market consisting of all products or services
that consumers view as interchangeable or substitutable based on the characteristics of the
products, their prices, and their intended use." 28 The description in the Competition Act is an
important guide for defining the relevant market, but it is impossible to do so without
considering the specifics of the industry in question. The pharmaceutical industry is unique in
that the patient, also known as the final customer, does not participate in the decision-making
process. Because a doctor determines how to treat a patient's illness, demand for prescription-
only drugs, medicines, and treatments has increased. As a result, price changes have little
impact on this industry. Because a patient's health is so important, the intended use of a drug
is more important. A drug's "quality," "safety," and "effectiveness" determine whether it can
be substituted for another.29

The commission30 defined “the relevant market in combination matter in Sun – Ranbaxy deal
and Stide shasun –Sun pharma deal the Commission has defined the relevant product market
at the molecular level in the case of chemical drugs, i.e., medicines/formulations based on
the same active pharmaceutical ingredient (API). At the molecular level, branded as well as

25
Biocon Limited & others Vs. F. Hoffmann-La Roche AG & Others [2016], COMPETITION COMMISSION
OF INDIA, case no 68
26
The Competition Act, 2002, s 4
27
The Competition Act, 2002, s 2®
28
The Competition Act, 2002, s 2(t)
29
Raju, K.D, “The Intellectual Property Rights and Competition Law”, A Comparative Analysis (1st Edition
Eastern Law House)
30
Competition Commission of India
generics based on the same API, were considered part of the same relevant product
market”.31

For the purposes of section 2, the Competition Commission determined that biological drugs
and their biosimilar counterparts are two distinct markets within the identical market for
relevant products. Therefore, the market for biological medications based on trastuzumab,
including biosimilars, would constitute the relevant product market.. The commission also
concluded that the geographical market for pharmaceutical products covers the entire country
because the competition rules for pharmaceutical products are the same throughout India. As
a result, in order to identify relevant markets, the "market for biological drugs based on
trastuzumab" would include its biosimilars in India.32

III. Holding a Dominant Position in the Relevant Market

The dominant position of an organization is the first step in determining whether or not it
engages in abusive business practices. Before 2014, The Roche Group controlled the entire
market. Despite a drop in market share in 2014, the company kept a sizable market share in
both 2014 (In terms of value and sales volume, the figures are 83.9% and 77%, respectively,
for the years 2015 and 2015, respectively, 70.9% and 61%, respectively). 33 Despite the fact
that CANMAb and HERTRAZ are said to be equally effective and less expensive and the
decline in Roche Group's market share is not significant.34 Other factors must be considered
in addition to market share when determining dominance, according to Section 19(4) of the
Competition Act. Roche developed trastuzumab and held the patent until 2013. Because
prescription drugs must be purchased with a doctor's prescription, it is extremely unlikely that
consumers will switch to an alternative.

The Commission also observed that “there is high entry barriers in the market identified
above, which firms up the position of Roche Group of company even stronger. There is
substantial cost, time and expertise involved in the development of biosimilar Trastuzumab
drug. Additionally, there are major regulatory approvals which are required to be obtained
for the development, manufacturing and marketing of a drug. Thus, it appears prima facie
that this market is characterised by high entry barriers”.

31
Mathews P. George, “CCI Order on Pharma Major Roche (vol 1, SPICY IP) <
https://spicyip.com/2017/04/cci-order-on-pharma-major-roche-i.html > accessed on 13 March 2024
32
Ibid.
33
Biocon Limited & others Vs. F. Hoffmann-La Roche AG & Others [2016], COMPETITION COMMISSION
OF INDIA, case no 68
34
Ibid.
It is a prima facie case of dominance in the meaningful market and functioning without
dependence of the market force when considering the market share, size, entry barrier,
absence of countervailing buying power, and high dependence of the patients on the
medicine. This can be deduced from the information presented in the previous sentence. 35

IV. Non-Pricing Strategies

The Commission discovered that powerful pharmaceutical companies use non-price

strategies to illegally raise the prices of their competitors or completely eliminate them from
the market. The following are some examples of dominant entity behaviors that have been
deemed abusive by other competition authorities.

1) Filing frivolous lawsuits solely for the purpose of intimidating competitors;

2) attempting to influence laws or regulations; and

3) criticizing rival products in an attempt to prevent the introduction of biosimilars or generic

medications.

The Commission observes that “it is well-acclaimed and acknowledged that introduction of
generics intervenes with the monopoly position of an innovator/originator drug and infuses
competition in the market. The competition not only brings affordability because of reduced
prices but also ensures accessibility. However, since competition intervenes with the
monopoly position of the innovator drug, such innovator often resorts to strategies to delay
or oust the entry of generics/bio-similar. While efforts aimed at meeting competition on
merits, e.g. reducing prices, improving quality by introducing improved drugs that leave the
generic/bio-similar entrants behind, are certainly legitimate under the Act, resorting to anti-
competitive strategies to distort genuine competition go against the very aim that competition
law seeks to achieve”.

V. Denial of Market Access

The Roche group had made overt and significant attempts to prevent the company from
entering the market. The concept of denying market access is not expected to be explicit or
comprehensive. A competitor may be in violation of the law if even a partial denial of market
access impairs their ability to compete successfully and fairly in the relevant market. This
clause was added in 1998. While debating the issue of denied access, the commission
concluded that the unique product and the market for it are critical concerns. This part of the
35
Ramappa T., “Competition Law in India – Policy, Issues and Developments” (Oxford University Press, 2006)
realm is particularly vulnerable. As a result, even the smallest amount of scepticism spread,
whether directly or indirectly through derogatory advertising directed at physicians, will have
a much greater impact on the healthcare industry than on any other industry.36

VI. Responsibility of the Dominant player

In Accordance with the CCI, under paragraph 79 of the order CCI order in Roche case, it held
that “a dominant enterprise is endowed with a special responsibility not to allow its conduct
to impair undistorted competition in the relevant market. The Competition Act cast special
duty on such enterprise to ensure not to carry its business in a way which is prohibited under
Section 4(2) of the Act. Prima facie, it appears to the Commission that Roche Group has
shirked such responsibility and indulged in abusive conduct”37

Concluding CCI Order

Because it appears that the Roche pharmaceutical company violated Section 4(2)(c) of the
Act, the Director General is required to conduct a thorough investigation in accordance with
Section 26(1) of the Act. In order to prevail in the end, Roche must reconsider its legal
strategy in light of the most recent information in order to defeat the CCI's initial reading of
the case. It could fortify its position, for example, by including more credible scientific
evidence to back up its claims. Hoffman La Roche & Co. Ag, Basel v. Commission of the
European Communities38, a significant decision rendered by the European Communities'
Court of Justice in this regard, and its delivery is encouraging.

The Court held as follows “An undertaking which has a very large market share and holds it
for some time, using the volume of production and the scale of the supply which it stands for,
without those having much smaller market shares being able to meet rapidly the demand
from those who would like to break away from the undertaking which has the largest market
share is by that share in a position of strength which makes it an unavoidable trading partner
and which, already because of this secures for it, at the very least during relatively long
periods, that freedom of action which is the special feature of a dominant position”.39

36
Arun Roy & Jayant Kumar, “Competition Law in India” (Eastern Law House, 2008)
37
Biocon Limited & others Vs. F. Hoffmann-La Roche AG & Others [2016], COMPETITION COMMISSION
OF INDIA, case no 68
38
Case C- 85/76 Hoffman La Roche & Co. Ag, Basel v. Commission of the European Communities [1979] ECR
461
39
LAW TEACHER, ‘Abuse of a Dominant Position in Business’< https://www.lawteacher.net/free-law-
essays/business-law/abuse-of-dominant-position-law.php > accessed on 13 March 2024
The commission in Hoffman's case defined the concept of abuse as “an objective concept
relating to the behaviour of an undertaking in a dominant position which is such as to
influence the structure of a market where, as a result of the very presence of the undertaking
in question, the degree of competition is weakened and which, through recourse to methods
different from those which condition normal competition in products or services based on the
transactions of commercial operators, has the effect of hindering the maintenance of the
degree of competition still existing in the market or the growth of that competition”.40

The Commission identified the following criteria as critical for determining whether a
dominant position existed:

a) the relationship between the alleged dominant player's and its rival's market shares;

b) an organization's technological advantage over competitors;

c) the existence and operation of a highly developed sales network; and

d) the absence of any indications of impending competition.

In the case presented, it is abundantly clear how a dominant player can use its patent
protection to be the first on the market and attempt to retain it, even if doing so would be
anticompetitive.

Mergers and Combination

Mergers and acquisitions benefit the pharmaceutical industry significantly. Discussions about
mergers and acquisitions can take the public interest into account from a competitive
standpoint. The mechanics, finances, and tax implications of business transactions are usually
the main topics in traditional mergers and acquisitions cases. However, market concentration
is not considered illegal under antitrust law when it results from healthy internal growth and
the regular operation of a free market. Leslie 41, on the other hand, claims that "the merger
may be challenged before the authorities" when the merger of two firms or the acquisition of
one firm's assets by another results in market overconcentration 42. CCI has examined and
approved a wide range of business mergers and acquisitions since its merger control

40
Case C- 85/76 Hoffman La Roche & Co. Ag, Basel v. Commission of the European Communities [1979] ECR
461
41
Christopher Leslie, Professor, University of California, Irvine School of Law.
42
. Christopher Leslie, “Antitrust Law and Intellectual Property Right Cases and Materials” (Oxford University
Press, 2004)
operations began on June 1, 2011.43 The CCI approved the majority of these pre-merger
notifications involving pharmaceutical companies in less than 30 days during its initial phase.
This was done to protect Native American interests. The risk that foreign pharmaceutical
producers joining the Indian market would raise the prices of crucial medications may have
impacted the government's choices , making basic medical care inaccessible to a sizable
portion of the Indian population. On March 4, 2016, however, the Central Government issued
a notification raising the minimum financial requirement that organizations must meet in
order to submit an application to the CCI for approval of proposed mergers and acquisitions.
This modification took effect immediately.44

Even though the European Union may only provide an illustrative guide under block
exemptions on technology transfer, the researcher believes that the CCI has full authority to
set reasonable thresholds for the purposes of Sections 5 and 6 of the Act. This is true despite
the fact that the European Union can only serve as an example of a block exemption for
technology transfer. In addition, the Central Government has raised the thresholds for small
target exemptions, also known as "de minimis exemptions."45

Generic drug and compulsory license

The global patent accumulation has been consolidated over the last 20 years. These
agreements established a strong and effective regime of intellectual property rights (IPRs)
with the implementation of product patents in developing countries, particularly in the
pharmaceutical sector, extending patent protection to twenty years. The geographical scope
of these TRIPs agreements included all WTO members, particularly those with developing
economies. As a result, viewing intellectual property rights—particularly patents—as market
tools has been used to justify their granting. Patents can also be used as "exchange currency"
to gain access to the technology of others. To encourage private investment, the patent owner
is granted exclusive access to the relevant technology for a period of 20 years. Businesses
will be able to recoup their investments in the development of cutting-edge pharmaceuticals
if a global minimum standard legislative framework for the protection of intellectual property

43
Khaitan & Co, Merger control in India, (LEXOLOGY) https://www.lexology.com/library/detail.aspx?
g=e5b2ab48-a274-4462-b3ed-8e18c9248631. Accessed on 13 March 2024
44
Taylor Martyn, “International Competition Law, A New Dimension for the WTO?” (Cambridge University
Press, UK, 2006)
45
Mayer Brown, Brief Guide to M&A in Southeast Asia,
https://www.mayerbrown.com//media/files/perspectives-events/publications/2018/05/brief-guide-to-ma-in
southeastasia/files/brief_guide_to_ma_in_se_asia/fileattachment/brief_guide_to_ma_in_se_asia.pdf?
rev=e6dc3257e23446f1a16637836c21c051. Accessed on 13 March 2024
rights is established. As a result, a strong intellectual property rights system encourages
innovation and the improvement in social welfare brought about by new drugs. On the other
hand, technology transfers will be encouraged, giving developing countries like India access
to new medical and technological advancements. Finally, TRIPs provides strong intellectual
property rights as a useful institutional framework for both developed and developing
countries46. Pharmaceutical companies usually pay for their own R&D because they value the
protection that patents provide for the products (medicines) they create. When a patent
expires and is no longer valid, generic product manufacturers are free to enter the market
without the consent of the patent owner.47

Rationalisation and Growth of Pharmaceutical Industry

“The very fact that public health and access to medicines have been singled out as major
issues needing special attention in TRIPS implementation indicates that health care and
health care products need to be treated differently from other products. By giving countries
broad discretion in deciding how to counter the negative effects of TRIPS, the Doha
Declaration may stand for the proposition that public health concerns outweigh full
protection of intellectual property”.48

The right to good health is widely regarded as a fundamental human right. According to the
Indian Constitution, one of the most important responsibilities of the state is the identification
and prioritization of initiatives aimed at improving the general health of the population. A
framework for less-than-five-year plans to build infrastructure for health services, including
pharmaceutical products, has been provided to the central government and individual states.
Since the implementation of the National Health Policy in 1983, the overall effort to improve
national public health has advanced significantly. Regardless of how important they are,
medications can never completely meet a patient's needs. However, when used correctly, they
can significantly help in the maintenance, restoration, and prevention of harm to the
population's health. As a result, India's pharmaceutical sector actively contributes to meeting
the population's basic health needs.49
46
Stephen Ezell & Nigel Cory, The Way Forward for Intellectual Property Internationally, (INFORMATAION
TECHNOLOGY AND INNOVATION FOUNDATION)< https://itif.org/publications/2019/04/25/way-forward-
intellectual-property-internationally/ > accessed on 13 March 2024
47
Chon Margaret, “Intellectual Property and the Development Divide” (Cardozo Law Review, 2006) 2817
48
Shreyas Kemparaj, Impact of TRIPS on access to medicine and right to health,
https://www.academia.edu/4008923/Impact_of_TRIPS_on_access_to_medicine_and_right_to_health accessed
on 13 March 2024
49
Vinod Dixit, “Competition Law”, Annual Survey of Indian Law, (Vol .XLVII, 2011) 149.
The Hathi Committee

In 1975, the biggest event in India's pharmaceutical industry occurred. The Hathi Committee
was formed under Mr. Hathi's direction with the goals of improving affordable access to
necessary medications and achieving medical self-sufficiency. Mr. Hathi presided over the
committee. In 1975, the Hathi Committee proposed the establishment of a national
pharmaceutical agency. The agency would have established a single pharmaceutical
registration authority and uniform standards. As a result, compliance with national standards
would have been ensured. Since 1975, the Indian pharmaceutical sector has grown to become
the world's most vertically integrated and diverse. Fostering competition, increasing
economic scales of production, and removing unfavourable growth barriers will be the most
helpful in achieving the goal of ensuring widespread availability of medicines at affordable
prices.

The National Health Policies of 1983 and 2002

The National Health Policies of 1983 and 2002 had a significant positive impact on India's
Five-Year Plans' health sector strategy.50 These regulations were last updated in 2002. The
environment has changed in four major ways since the previous iteration of the National
Health Policy in 2017. Despite significant reductions in maternal and infant mortality rates,
noncommunicable and some infectious diseases continue to cause stress 51. This is still true,
despite the fact that the health situation and priorities have changed significantly. The
thriving health-care industry is expected to grow by double digits. This expansion is expected
to last for a long time. Third, the increasing frequency of extravagant spending due to the
rising cost of healthcare, which is now regarded as one of the major causes of poverty. A
government's fiscal capacity can be increased as the economy grows faster. As a result, a new
health policy that could address the problems in the situation was urgently needed. 52

Indian Pharmaceutical Pricing Policy

The national interest in fostering continued development of manufacturing capacity

comparable to that of world-class pharmaceutical manufacturers must be balanced against the
50
The National Health Policy, 2017.
51
Ibid.
52
Gopalakrishnan S., “Competition Law An Analytical Perspective”, Chartered Secretary, (A-325) (September,
2008) 1231-1238.
Indian pharmaceutical industry's primary responsibility to protect the health and well-being
of the majority of Indians. Price control's immediate goal is to increase patient access to
medications, which will ultimately improve consumer welfare. Parallel to this, price
regulation seeks to provide drug manufacturers with sufficient incentive to continue
marketing their products at prices below the established ceiling.53

In India, the pharmaceutical sector is regulated at two levels: the first regulates pricing, and
the second regulates licensing. The pricing structure can be classified into the following
broad categories: It establishes a price ceiling that serves as a floor for the costs of all
necessary medications:

National Pharmaceutical Pricing Authority (NPPA)

The NPPA has a long history as a politically independent activist organization that is not
affiliated with any political party. For example, in 2014, the National Pharmaceutical Pricing
Authority used the DPCO's emergency provisions to address issues of public health
emergencies and other extraordinary situations to impose price controls for 108 formulations
that were not on the national list of essential medicines. 54 These clauses have now been
incorporated into the DPCO to account for additional exceptional circumstances. The order
was revoked a few weeks later, adding to the uncertainty.

National Pharmaceutical Pricing Policy Order (NPPP), 2012

For the past 20 years, the NPPA has been in charge of determining drug prices on its own.
The goal of creating a regulatory framework for drug pricing in order to ensure that "essential
medicines" are available at reasonable prices and that there are enough opportunities for
innovation and competition to support industry growth, create jobs, and a shared economic
well-being for all. In order to create a legal framework for drug pricing.

Drug Price Control Order, 2013

53
Hovenkamp Herbert, “Sensible Antitrust Rules for Pharmaceutical Competition” (Vol.39, University of San
Francisco Law Review,2004) 3
54
SPICY IP, Pharma Price Control and Policy Schizophrenia – I: Background and Context,
https://spicyip.com/2017/05/pharma-price-control-and-policy-schizophrenia-i-background-and-context.html
accessed on 13 March 2024
The National Pharmaceutical Pricing Authority (NPPA) is in charge of enforcing market-
determined pharmaceutical price caps under the Drug Price Control Order of 2013. Section 3
of the Essential Commodities Act of 1955, which was passed in 1955, governs the DPCO. 55
In general, the DPCO has authority only over the medications listed on its Schedule. The
National List of Essential Medicines is contained in this Schedule, which is frequently
updated. This list is heavily based on the World Health Organization's Model List of
Essential Medicines. Despite the fact that patented medications are not on the National List of
Essential Medicines and thus are not on the DPCO, the NPPA has historically operated as a
political activist organization independent of its political masters

In order to effectively address a public health emergency, the NPPA used the DPCO's
emergency provisions in 2014 to issue orders for price control against 108 formulations not
included in the NLEM's scope. No one employed any of these formulations by the NLEM.
This included heart medications, some of which had long-term patent protection, such as
sitagliptin. The manufacturers of the medicine promptly filed writ petitions in the Delhi and
Bombay High Courts, but they were denied a temporary stay of the price control orders.
Within weeks, the National Pollutant Discharge Elimination System (NPDES) mysteriously
and abruptly revoked its price control orders, effectively ending the storm of widespread
confusion. The reversal of the orders resulted in new litigation, which has yet to be resolved.
The All India Drug Action Network has asked the Delhi High Court to issue a writ of
mandamus ordering the reinstatement of price controls on non-essential medications.56

Policy for Pricing of Patented Drugs

This country has been debating whether or not to control the costs of patented medicines for a
long time, but there are currently no indications that a decision will be made soon. The expert
committee was formed in 2013 by the Department of Pharmaceuticals and the Ministry of
Corporate Affairs to investigate the cost of patented medicines in the United States. The
committee now includes one representative from each of these groups. A representative from
the Department of Pharmaceuticals was also on the committee. The recommendations of the
committee have yet to be agreed upon. The House of Representatives received a report from
55
TEAM LEASE, Essential Commodities Act, 1955 and Drugs (Price Control) Order, 2013,
https://www.teamleaseregtech.com/resources/acts/article/115/essential-commodities-act-1955-and-drugs-price-
control-order-2013/ accessed on 13 March 2024
56
Katju, Markandey ,“Intellectual Property Rights and The Challenges Faced By The Pharmaceutical Industry”
(vol.4 , Supreme Court Cases, 2004)
the second Parliamentary Standing Committee on Chemicals and Fertilizers in 2015, which
advocated for price controls on all medicines sold in India, regardless of whether they were
patent-protected or deemed necessary. In addition, in order to negotiate a price cap, the
NPPA requested information about patented drugs from pharmaceutical companies.

Draft Drug Policy of 2017

In an effort to strike a balance between the need for more stringent price controls on
prescription drugs and the growth of the domestic pharmaceutical industry, the Department of
Pharmaceuticals has developed a new pharmaceutical policy. The Union Government's
initiative to ease business operations, as well as the "Make in India" initiative, both had a
significant impact on the formulation of the Drug Policy. The pricing authority, according to
the policy, must operate independently as a team of knowledgeable professionals who are
largely unaffected by central government decisions. The National Pharmaceutical Pricing
Authority (NPPA) was given the authority to regulate drug prices in 2013. The NPPA was
established in 1997.

The following objective is deemed crucial and strategic by the Draft Policy:

a. essential medications at reasonable prices that are available to the general public;

b. developing a pharmaceutical industry policy that is both long-lasting and stable;

c. self-reliance in indigenous pharmaceutical manufacturing from beginning to end;

d. drugs of world-class quality for domestic use and export; and

e. creating a setting that encourages research and development, which would lead to the
development of novel pharmaceutical products.

Licensing

When discussing the commercialization of pharmaceuticals, the term "licensing" is

commonly used. The acquisition of a license is the most common method of transferring
ownership of knowledge covered by a patent. According to the Patents Act of 1970, there are
three types of patent licenses: Exclusive License, Non Exclusive License, Sub License,
Cross-Licensing, Voluntary Licensing, Compulsory Licensing, Carrot Licensing, Stick
Licensing. Licensing agreements are critical in the context of the Patent Act of 1970, which is
based on the WTO's TRIPS framework. According to Dhar and Gopakummar, “ regulation
of licensing agreements is critical to promote access to medicines and the transfer of
technology, which is explicitly mentioned as one of the principles of the Agreement on
TRIPS. The Agreement does not prevent members from regulating licensing practices or
conditions that may particularly constitute an abuse of intellectual property rights and have
an adverse effect on competition in the relevant market”.57

According to Section 84 of the Patent Act of 1970, India permits the issuance of compulsory
licenses in cases where the avoidance of unjustified terms, including those pertaining to
grant-back, packaging, preventing challenges during the voluntary licencing process, and
utilising the market exclusively for imports,and so on, has an effect on competition.
Compulsory licenses are not subject to the same rule of reason analysis requirements as other
situations involving anti-competitive behavior under patent law. It is critical to remember that
an examination of the relevant market is not required for the Patents Act to be successfully
applied. Proof that such clauses are present in the parties' agreements, however, is required.
This can be accomplished by supplying evidence that these terms exist. State Drug
Regulatory Commissions must also approve pharmaceutical product manufacturers before
they can be licensed. The Drugs and Cosmetics Act of 1940 governs pharmaceutical
manufacturing, distribution, and sale in India. The licensing activity in the acquiring market
has shifted from secondary to primary sources. The Drug Controller General of India is also
in charge of drug approval and registration, as well as drug production and marketing
licenses. The aforementioned Act established this authority. The organization in question is in
charge of clinical trial management in India.

Generic Pharmaceutical Industry

Over the course of more than three decades, From being almost nonexistent, India's
pharmaceutical sector has developed into a global leader in the manufacture of superior
generic medications.This expansion has occurred despite India's rapidly growing population.
The manufacture of generic medications in India is well-known throughout the world for its
high quality and low cost.

Even as a growing number of pharmaceutical patents expire, the generic pharmaceuticals

market is expected to grow. Domestic corporations are aggressively pursuing opportunities in
developed-country generic pharmaceutical markets. These companies are major players in the
57
Raj S. Davé, Jon Wood, Susan K. Finston, Zhongyi Tao, Zheng Zha ,“Compulsory Licensing in the United
States, China, Japan, Germany & India”,http://www.ipo.org/AM/CM/ContentDisplay.cfm?
ContentFileID=6484&FusePrev iew=Yes accessed on 13 March 2024
global generic pharmaceuticals market due to their technological advancements, ability to
produce and supply generic drugs, and innovative and technological capabilities. Contract
manufacturing, co-marketing alliances, and R&D outsourcing have been identified as
opportunities for Indian businesses by industry federations. The World Trade Organization's
decision to recognize foreign product patents on January 1, 2005, made this opportunity
possible.

India was able to establish scientific and technical competence for the production and
distribution of generic drugs after 2005. This was made possible by the 2005 implementation
of the third amendment to the Patent Act of 1970.

Compulsory Licensing

Compulsory licensing occurs when a state allows a third party who is not the patent holder to
use a patented good or process without the patent holder's permission. Compusory licenses
are independent state permissions or approvals that allow a third party to benefit from patent
rights, such as the ability to create, use, or market a "patented product," without the patent
holder's involvement. As a result, the state imposes and upholds the agreement reached
between a buyer who is interested in the property and a seller who is not. Seeking to achieve
a balance between encouraging the development of new pharmaceuticals and access to those
that are already on the market, the World Trade Organization (WTO) allowed compulsory
licensing, which is defined as “other use without authorization of the right holder” under
TRIPS. This was made possible by the Trade Related Intellectual Property Rights
Agreement.58

Article 31 of the WTO agreement has as part of the TRIPS agreement's broader endeavour to
find a balance between promoting access to pharmaceuticals that are already accessible and
funding research and development of new drugs, compulsory licencing is allowed. This
provision is part of the TRIPS agreement's overall effort to protect intellectual property
rights. Although the term "compulsory licensing" is not used in the TRIPS Agreement, the
phrase "other use without the consent of the right holder" in the title of Article 31 indicates
what constitutes a compulsory license. Compulsory licensing is just one example of "other
use," which includes government actions taken to further their own goals.

58
Lemley Mark A, “Ex ante versus ex post justifications for IP”, (University of Chicago Law Review, 2004) 71
Public Health under TRIPS: The Doha Declaration

The main approach for determining how TRIPS policy has changed in relation to the
pharmaceutical industry is to examine the situation through the lens of TRIPS Agreement
Article VII. Article VII seeks to strike a balance between competing goals in order to ensure
patients' access to new pharmaceuticals while also encouraging the advancement of existing
ones. Member countries with unstable economies and health crises, for example, need to
provide medication to a larger population, whereas innovative pharmaceutical firms want to
protect their temporary exclusivity rights in order to recoup their investment and increase
profits. The TRIPS agreement was utilitarian at the time.

WTO members made the Doha Ministerial Declaration public on November 14, 2001. The
states in it emphasized the importance of interpreting and implementing the TRIPS
Agreement for the benefit of public health. As a result, they agreed to accept a separate
statement on TRIPS and public health. The TRIPS Agreement should never limit members'
ability to act to protect the public's health. They drew attention to the flexibility provisions of
the TRIPS Agreement, which include compulsory licensing and parallel importation.
Furthermore, they agreed to exempt least developed countries from pharmaceutical patent
protection until 2016.

Generic Pharmaceutical Industry and Competition Policy

It is a common misconception that the primary goal of competition law is to improve

consumer conditions by fostering healthy levels of competition within and between markets.
Poor medical care is a serious problem almost everywhere in the world. The introduction of
generic medications into the pharmaceutical market raises a number of critical issues as well
as formidable competition policy barriers. The introduction of generic versions of existing
medications is expected to result in price decreases, which will benefit patients as consumers.
However, the ultimate goal of price reductions as a result of generic competition must be
carefully considered in order to maintain a sustainable balance between the pharmaceutical
industry's incentives for new drug development, ongoing investment in the improvement of
mature drugs, and public benefit. This is required to maintain a stable equilibrium. The
pharmaceutical industry is largely directed and regulated by research and development. To
maintain its level of protection, it heavily relies on the patent system. Unfair business
practices in the pharmaceutical industry, on the other hand, have recently been the subject of
heated debate. The pharmaceutical industry is dominated by two rivalries in particular:

● “Competition amid various branded drugs designed to cure the similar ailment

and

● Competition from generic drugs manufacturers that are equivalent to brand-

named drugs”.

These generic manufacturers treat the same diseases with the same result, while the
manufacturers of branded drugs have already achieved success in the market.

Compulsory Licensing and Competition Law Interaction

A general review of international intellectual property law demonstrates that when a

dependent patent is being hindered, the patent is not being worked on, or the invention is
being used, the three most prevalent obligatory licencing requirements apply in question is
related to food or medicine.

In such cases, the right holder's or patentee's exclusive right to the optimum exploitation of
rights as determined by the IPR regime is superseded by the greater public interest in broader
access to the patented invention. This is because it is widely assumed that the general welfare
comes first. The authorized third-party licensee is typically required by law to pay the patent
owner. Regardless of whether compulsory licenses are in place, patent owners have the legal
right to sue non-licensed parties. Because of the interaction of intellectual property rights and
competition law, compulsory licensing may be granted in the following circumstances: (i) a
refusal to issue a license; and (ii) patent holders abusing IPRs to restrict competition.

Many national laws allow for the issuance of a compulsory license based on a business
owner's refusal to conduct business. This clause, for example, appears in the patent laws of
China, Argentina, and Israel.

Global Perspective

The government may grant licenses to parties other than the patent holder under the
compulsory licensing system, allowing those parties to produce and market patented goods
without the patent holder's consent. Despite being appropriate for the World Trade
Organization, mandatory licenses are currently uncommon in the majority of countries.
Involuntary licensing has been successfully implemented in both developed and developing
countries, including the United States, Canada, Italy, Thailand, Ecuador, Brazil, Kenya,
Malaysia, and South Africa. The World Trade Organization's Doha Declaration made this
possible.

Following the December 2005 WTO ministerial meeting, the mandatory license provisions
were eventually approved for use on a global scale.

Scope of Compulsory Licensing under Section 4 of the Competition Act, 2002

When read in conjunction with Sections 27 and 28, Section 4 of the Competition Act has a
broad range of application and latitude, so it covers a wide range of antitrust activity and
available remedies. According to Section 4, any owner of intellectual property rights who
engages in unfair or discriminatory business practices, such as setting unreasonable prices, is
subject to legal action. If a company provides an unfair degree of exclusivity to a product that
is not protected by intellectual property rights legislation and fails to exploit a right for the
benefit of consumers, it may face legal action under Section 4 of the Competition Act of
2002. Despite the fact that the Act makes no mention of exhaustion, compulsory licensing, or
parallel importation, these remedies—which are typically included in the IPR regime—can
still be used to stop anti-competitive practices.

The Competition Act of 2002 may have successfully monitored the 2012 Bayer v. Natco
case59, which involved the medication Nexavar. This case involved the issuance of a
compulsory license to Hyderabad-based NACTO Pharmaceutical. Bayer Pharma claimed in a
petition that it had limited production of its cancer drug to only 2% of potential customers.
Bayer Pharma made the claim that this was the case. Bayer's outrageous monthly fee of Rs.
2,000,000 clearly violated Section 4 (2) a (ii) of the 2002 Competition Act. Concerns about
pricing prompted the issuance of the compulsory license. Although the earlier discussed
experimental and exploratory licensing may have been effective in this case, the development
of a workable framework for determining what constitutes "excessive" or "unaffordable"
pricing will undoubtedly be required in the future.

59
Nacto Pharna Ltd. Vs Bayer Healthcare Llc [2019] 262 DLT 284
This framework must be based on a thorough understanding of the healthcare market, patient
purchasing power, insurance program participation, and other similar factors. Given the
positive market impact of compulsory licensing, which ensures that there are more producers
or manufacturers present to meet societal needs while also fostering consumer welfare and
business competition, it is recommended that the government continue to enact such
regulations. Those who oppose it on the grounds that it reduces the incentive to innovate fail
to recognize that a right is accompanied by a duty, and failure to meet that duty may result in
legal consequences. The provisions of the 2002 Competition Act are sufficient to prevent
infringements of intellectual property rights, and compulsory licensing is the best method of
doing so—but only in exceptional cases.

To maintain a sustainable equilibrium, competition and patent policy must overcome the
increasingly difficult hurdles of the knowledge-based economy. Businesses frequently exploit
the fact that intellectual property laws allow them to easily go beyond the rights that are
guaranteed to them and engage in actions that are either an abuse of these rights or an
improper exploitation of these rights while claiming exclusive protection.

Despite the fact that intellectual property laws protect the monopoly system, it is still
extremely vulnerable to abuse. Businesses frequently engage in anticompetitive and
exclusionary behavior, attempting to expand their monopoly into sectors not expressly
protected by intellectual property legislation. Pharmaceutical companies are particularly
interested in human life and health issues. Healthcare costs and other related issues have
sparked heated ethical debates in the twenty-first century. Should a patient's prescription be
rejected due to its high cost? This is the most important question that requires an answer.
Compulsory licensing has been identified by the intellectual property regime as a means of
balancing pharmaceutical intellectual property rights and affordability. This equilibrium can
be achieved by striking a balance between intellectual property rights and
compulsorylicensing.

As a result, compulsory collective management is also referred to as a compulsory license. It

ensures that the patentee is compensated for his efforts and that the public interest is
protected by paying the owner of a patented drug a fixed or arbitrated sum. The researcher
summarizes the thesis and makes recommendations for the benefit of numerous stakeholders
in the legal and industrial arenas based on the earlier discussion of generic pharmaceutical
products and compulsory licensing in the pharmaceutical industry, which sheds light on
important issues at the interface with competition law.

CONCLUSION
In conclusion, the intersection of patenting and competition law in the pharmaceutical
business creates a unique set of issues and factors to take into consideration. The convergence
of these two areas of law is essential to establishing a balance between encouraging
innovation through patent protection and providing access to affordable medicines through
competition. This balance can be achieved by finding the right amount of both.

Patents are extremely important to the pharmaceutical sector because they provide exclusive
rights to innovators, which enables those inventors to recuperate the money they spent on
research and development. This promotes the development of novel pharmaceuticals and
medical treatments, which in turn drives innovation and improves the overall outcomes for
public health.

However, the pharmaceutical industry is also subject to scrutiny under competition law due to
the potential for anti-competitive practises that may restrict market entry and interfere with
access to inexpensive medications. This is because competition law was designed to protect
consumers from unfair business practises. Concerns can be raised concerning the equilibrium
between patent rights and competition when certain practises are put into effect, such as
patent evergreening, abusive dominance, and settlements that are anti-competitive.

Authorities in charge of regulating competition keep a careful eye on the pharmaceutical

sector to make certain that the use of patent rights does not unreasonably restrict market
competition or lead to unethical business practises. They analyse the potential for anti-
competitive agreements or practises, evaluate the market dominance of pharmaceutical
companies, and consider the impact on consumer welfare and access to medications.

In the pharmaceutical sector, there have been efforts made to find a middle ground between
the preservation of patents and the promotion of healthy competition. Regulatory
frameworks, such as rules for compulsory licencing, make it possible for governments to give
licences for patented drugs in specific situations. This is especially true when there are
concerns over the state of public health or when the patent holder engages in anti-competitive
practises that limit access to important medicines.

In addition, efforts such as patent pools and voluntary licencing agreements have been
formed in order to ease the process of gaining access to patented medications in nations that
are still economically developing or in the event of a public health emergency. These
mechanisms want to encourage innovation while also guaranteeing that affordable medicines
are readily available to patients. Their goal is to find a balance.

In the pharmaceutical sector, the interface between competition law and patenting is
something that needs to be continually evaluated and adapted to. Policymakers and regulatory
agencies have a difficult task ahead of them in navigating the complicated issues of pricing,
market exclusivity, and access to medications. It is absolutely necessary for patent offices,
competition authorities, and public health agencies to work together in order to facilitate
competition, foster innovation, and guarantee that life-saving therapies are available at prices
that are reasonable.

In conclusion, the interplay between competition legislation and patenting in the

pharmaceutical business demands a careful balance in order to stimulate innovation, preserve
intellectual property rights, and enable access to medications at affordable prices.
Policymakers have the ability to contribute to the improvement of public health while
simultaneously supporting pharmaceutical innovation if they address practises that are anti-
competitive and put in place measures to promote competition and access to medicines.