Compulsory Licence For Saxagliptin: Protection versus Competition

In June 2015, Lee Pharma Limited, a small Indian pharmaceutical company, filed an application with the Indian Patent Office for a grant of a compulsory licence to manufacture the diabetes drug Saxagliptin on the grounds that the patented version of the drug had not been made available to the public at an affordable price. The granting of a compulsory licence was expected to make the drug more affordable for the general public, but it would also undermine the interests of the patentee, a Western multinational company. If the developed world imposed sanctions against India in retaliation for such a protectionist measure, the flow of trade and foreign capital into the country would be adversely affected. Should the patent office strictly enforce the patent regime, which would encourage higher foreign capital inflows in research and development in the Indian pharmaceutical industry and promote inventions and innovations in the country? Or should it grant the compulsory licence, thereby attaching greater weight to the welfare of India’s general public?

This case explores issues behind compulsory licensing under a product patent regime. It is suitable for a course on macroeconomics, business environment, business law, or the economic environment of business that includes topics such as the World Trade Organization, trade agreements (e.g., the Agreement on Trade-Related Aspects of Intellectual Property Rights), trade policies, and the impact of trade policies on industry structure and the development of a country. The case exposes students to the following tasks and lessons:<br><ul><li>Analyzing the trade and legal environment of a country and assessing the effect of the environment on industry structure and social welfare</li><li>Differentiating between various types of patent regimes (e.g., process patents and product patents) and their advantages and disadvantages</li><li>Comprehending non-tariff protectionist measures and their effect on trade and capital flows, industry structure, and social welfare</li><li>Understanding the short-term and long-term trade-offs involved in policy decisions</li><li>Formulating survival strategies amid protectionist measures</li></ul>

• compulsory license, product patent, non-tariff barrier, economics