Industry ministry moots compulsory licensing for 3rd party drug making

New Delhi: The industry ministry today suggested that local pharmaceutical makers should be allowed to produce patented drugs to check medicine prices in wake of acquisition of Indian companies by multinational firms.

The ministry also suggested putting restriction on foreign direct investment in the sector.

"... The Department of Industrial Policy and Promotion (DIPP) has prepared a discussion paper examining the option of introducing compulsory licensing under the Indian Patent Act (in the pharmaceutical sector)," commerce and industry minister Anand Sharma said in a communication to health and family welfare minister Ghulam Nabi Azad.

He said the acquisitions of Indian pharmaceutical companies by foreign multi-national companies (MNCs) in the recent past has lead to articulation of public concern on its impact on the availability of low-cost medicines.

The discussion paper has also suggested a review of the foreign direct investment (FDI) policy in the sector. At present, 100% FDI is allowed in the sector through the automatic route.

"This (FDI) could be shifted to government route so that proposals for mergers and acquisitions in this important sector could be scrutinised by the Foreign Investment Promotion Board (FIPB)," the discussion paper said.

In 2008, the country's largest drug maker Ranbaxy was acquired by Daiichi Sankyo (Japan) for $4.6 billion and recently the US-based Abbot Laboratories acquired Piramal Healthcare's domestic business for $3.7 billion.

Compulsory licensing is a system where by the government allows third parties (other than patent holder) to produce and market patented product without the consent of patent owner.

Though imports of pharma products have been growing, the emphasis on exports has resulted in a significant lower growth of domestic consumption. During 2008-09, domestic consumption in value terms fell from Rs45,953 crore to Rs44,579 crore.

As per a World Health Organisation (WHO) report, 65% of Indians still lack access to essential medicines.

While several developed and developing countries like the US, Canada, the UK and South Africa have introduced compulsory licensing, India is yet to explore this WTO compliant option.


IRDA to counter-check insurer claims by accessing their systems

This is the first time that a regulator is planning to keep an eye on players in an industry by accessing their systems

The Insurance Regulatory and Development Authority (IRDA) chairman J Hari Narayan has said that the regulator is designing a method that would allow it to access various insurers' systems to do random checks on claims. This is the first time that any regulator has come out with such an idea to keep a check on players in an industry by accessing their systems directly.

Earlier, the regulator had emphasised that it would be necessary for insurers to have automated systems that would enable online registration and tracking of the status of grievances. These systems will be integrated seamlessly with IRDA's own system. 

According to Mr Narayan, the insurance companies have "robust" grievance management systems and both life and non-life insurers receive around 2 lakh complaints each. The regulator is seeking classification of complaints as many of them are policy administration complaints like documents not being received and addresses not being corrected in official records.

While admitting that "about 18% to 19% of complaints are for mis-selling," the IRDA chairman said, "We are designing systems to be able to access insurer systems to do random checks, see cases when rejected or accepted (and the reasons for the same)."

"In the later part of the year we will have a far better way to address complaints. We need to know if the complaints are contractual issues or administrative problems," Mr Narayan added.

Earlier in March, minister of state for finance Namo Narain Meena told Parliament that the claim pendency ratio of private firms was higher than the Life Insurance Corporation of India (LIC) but it had come down due to intervention from IRDA. The pendency ratio of private firms was 13.32% in 2006 which came down to 10.88% in 2007 and to 7.75% in 2008-09, the minister said, hoping that this would be reduced further in coming years.

Separately, IRDA had told insurers to abstain from doing business with 884 corporate agents who had not registered their permanent account numbers (PANs) with the agency licensing web portal.

Earlier in July, the regulator had asked all insurers to update the PAN numbers of their corporate agents on the agent licensing web portal before 31st July.

"In this respect, the insurers are advised to issue a show cause notice to the corporate agents to furnish reasons for failure to produce the PAN number and why the insurer should not recommend to the authority for the cancellation of their corporate agent license," the regulator had said in a statement.



PMNarayana Bhat

7 years ago

This is not directly related to Claims.
The Chairman, IRDA should be congratulated for his firm stand vis-a-vis SEBI recently when SEBI chairman was trying to expand his empire.

In regard to Insurance Agents, not all are dishonest or do not indulge in mis-selling ULIP products. Inspite of higher first year expenses, Insurance Cos. are still giving better returns than traditional policies, whose returns perhaps have not exceeded 7% for half a century by LIC. Because LIC's penetration was inadequate, private insurers were brought into existence. It is natural they had to match commission standards of LIC, to stay in existence, particularly having put in much higher initial costs than LIC. Why LIC is still having a capital of only Rs.5 crores and why GOI should guarantee LIC's business? Has LIC thought how their higher strata of Officers/Dev. officers' perquisites be reduced which are otherwise available for payment to policy holders?
Why traditional policy brokerages are not capped? Where is transparency in traditional policy expenses? In ULIPs, expenses to policy holders are tabled and sent along with policies and policy holders have the option to back out during free look period. But what about traditional policies, which is the legacy of LIC? Why discrimination in capital and other structures between LIC and private insurers?

Healthy Boost

 GlaxoSmithKline Consumer Healthcare (up 3%) posted 14% growth in sales as well as operating...

Premium Content
Monthly Digital Access


Already A Subscriber?
Yearly Digital+Print Access


Moneylife Magazine Subscriber or MSSN member?

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.

To continue

Sign Up or Sign In


To continue

Sign Up or Sign In



The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)