Legislation & Covid-19 vaccine pricing

GOVERNANCE/ HEALTH

Topic:

• GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Legislation & Covid-19 vaccine pricing

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

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 (DPCO)
• 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.
• Recently, a government said that upon its request 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.

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

1. THE PATENTS ACT, 1970 

• The law 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 (national emergency or in circumstances of extreme urgency or in case of public non-commercial use)
• 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.

Challenges w.r.t COVID-19 Vaccines: 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.

2. 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 for the better prevention of the spread of dangerous epidemic disease”.
• This broad power can be used to take measures to regulate pricing. However, the law lacks the teeth to implement such an important policy framework.

Way Ahead

• 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.

Connecting the dots:

• Epidemic Diseases Act