The year 2021 was a year of unprecedented developments. A report released by the Ministry of Industries found that medical and pharmaceutical imports rose by 319% from the previous year, with 85% of demand for finished pharmaceutical products (FPP) being met by imports. Expenditure on medical imports rose by 59.6%, an increase valued at $287 million, amidst the country’s growing fears of depleting foreign reserves and currency crisis.
In 2022, amidst the shortages of more than 150 drugs, persons admitted to hospitals with seemingly innocuous emergencies were mysteriously pronounced dead, and those requiring surgery wound up in worse-off states–-all of which were attributed to the quality of the drugs administered to the patients. A majority of Sri Lankans who were no longer able to afford private healthcare were confronted with the grim possibility of treatment at an overburdened government hospital that no longer had access to safe medication during a global pandemic.
While Sri Lanka was coming to grips with the medicine shortage, depleting foreign reserves and a worsening currency exchange crisis in 2022, India, Sri Lanka’s largest finished pharmaceutical products (FPP) manufacturing source, was supplanting 50% of the island nation’s demand, some of which were later purchased through the billion dollar Indian credit line, when introduced. The procurement of medicine from India has since come under wider scrutiny in Sri Lanka, as a top-level official was arrested over the procurement of less than standard intravenous immunoglobulin (IVIG), which led to the demise of 3 persons.
The officials responsible have alleged that the medicines were procured from a Mumbai-based pharmaceutical company called Livealth Biopharma Pvt. Ltd, which the company has since denied production of, leaving ascertaining the actual source of the medicine in the balance.
Nonetheless, contrary to the growing public consensus that increased dependency on Indian generic pharmaceuticals has led us here, Sri Lanka, like many other countries in the developing world, has long sourced more than half of its medicines from India, long before the crisis or the exigencies of the pandemic.
The Patent Problem
The 1970s India Government’s Patents Act opened up opportunities for domestic pharmaceutical companies to reverse engineer the manufacturing process of drugs, without the need to pay royalties to the patent holders. Additionally, the 1979 Drug Price Control Order later imposed a price ceiling over the profits of pharmaceutical companies, which led to a proliferation of pharmaceutical generic manufacturers in the Indian market, creating a boom.
Coined the “Pharmacy of the Developing World”, it has been supplying a majority of essential medicines to emergent nations in the past half-century, with 67% of national drug production exported to low and middle-income countries at affordable prices.
In August, United States President Joe Biden at a campaign trail event touted the possibility of adding price caps to an initial 10 selected drugs that treat cancer, heart disease and diabetes if the Democratic Party is to be given another term in administration this November at the Presidential election. The group of drugs that are to be targeted for negotiations are produced by 11 different drugmakers, with some having the shared exclusive rights to manufacturing certain medications. In 2024 accessibility to medicine as a humanitarian issue is not limited to developing nations.
The formation of patent legislation, such as those established in the Paris Convention of 1883 has in the past been formulated to ensure that intellectual property (IP) exporting countries, such as the US, Canada, Australia and the EU were given patent protection over the products and services that were exported to the rest of world. However, being a signatory did not ensure that each nation was to ratify the convention within its own constitutional law.
The generalized practice of patenting is a means of awarding the contribution of a person or organization who has found a new, innovative machine, product or process that benefits humanity. Patenting among pharmaceutical companies is often practised to hold exclusivity of rights to produce drugs, sometimes even before they enter the market, enabling companies the exclusive right to manufacture and sell a particular drug for 20 years (or more, with extensions), as enshrined in the Paris Convention of 1883.
The two decades of exclusive rights give drugmakers a sufficient period to earn back the cost of their investments into the drug, in addition to a significant revenue out of the monopolistic power awarded in the time span. Once the period has expired, the invention is to be transferred into the public domain, wherein the invention can be duplicated and reproduced. However, various drug makers have in the past opted for unethical practices such as re-patenting of drugs, giving rise to practices such as “evergreening”, overbroad patenting, and holding an unfair monopoly within the pharmaceuticals market for a time that far exceeds the turnaround time of an invention in today’s world.
One such case of evergreening that has set an important precedent is the case between the Swiss pharmaceutical company Novartis and the Indian government in 2013. The lawsuit ensued when the company sought to re-patent Glivec, a chronic myeloid leukaemia drug towards the end of its 20-year patent period, with the introduction of a new drug called Imatinib. Going by Section 3(d) of the Indian Patents Act, the Indian government, with the pressure of activist groups, overruled the company’s push for extending its patent, ruling that Imatinib was only a modification of the previous drug Glivec, and was not an innovation of its own.
The drug that cost INR 121,000 for a month’s medication was brought down to INR 4,000 and later distributed for free by companies to employees in need of the life-saving drug for treatment. Reflecting on his involvement in the on-grounds movement to oppose the Novartis’ challenging of Section 3(d), Eldred Tellis, Founding Director of Sankalp Rehabilitation Trust recently at the Health and Humanity Summit organized by Medecins Sans Frontiere in Colombo, discussed how pharmaceutical companies utilise evergreening of drugs to extend their monopoly on drugs, well beyond the original patent’s expiration date, blocking generic competition.
It is also worth noting the lawsuits fought by Indian grassroots groups and activists, and developmental work by international agencies, such as the Médecins Sans Frontière’s Access programme against the patenting of life-saving drugs, which typically originate from developed countries in the West, have remarkably altered the state of access to medicines and affordability of drugs for most developing countries today.
“Incremental change like the drug without change in efficacy cannot be re-patented. Many drugs are repurposed drugs. Remdesivir for COVID. Pegylated interferon was also a repurposed drug. These are drugs which no new research has been done on. But the prices, they’re getting the patents, are beyond the reach of the common man,” Tellis said.
Furthermore, overbroad patenting, wherein companies apply for patenting beyond the specific inventive new process, feature or product for a range of other non-inventive features has also raised concerns in the debate of its ethicality. However, trade lawyer and Professor from the Department of Commercial Law at the University of Colombo, Naazima Kamardeen speaking to Echelon maintains that there is nothing intrinsically wrong with the original patent process described in the Paris Convention and subsequently in the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of the World Trade Organization (WTO).
She asserts that governments across the world are given provisions within the agreements that can be utilized to navigate such crises related to medicine and pharmaceutical supply and access. The problem however lies in the feasibility of taking proactive action towards realizing better medicine access beyond the structural inequities and incapacities that Sri Lanka currently grapples with.
Unaffordable Patented Drugs
Given Sri Lanka’s status as a developing nation, the average Sri Lankan is unable to afford patented drugs directly from developed nations, making a majority dependent on the generics markets across the world for their healthcare needs. “Parallel importing of medicines and pharmaceuticals is incorporated into the TRIPS agreement, which ensures that countries can import lower-cost pharmaceuticals from countries other than those producing originals of the pharmaceuticals, to distribute them locally in direct competition with the patent holder or authorized distributor,” states Kamardeen.
Sri Lanka has so far been engaging in parallel imports of generics, which supplant almost 85% of Sri Lanka’s pharmaceutical demand, from India, Pakistan, France and Bangladesh. One such example of the cruciality of parallel imports can be found during the early 2000s AIDS epidemic in South Africa, which saw many dying from the HIV stage of the virus during the development process of the antiretroviral drug in the US. Cipla Inc., a giant within the Indian generics market, brokered an agreement with the South African government to sell the drug at a fraction of the cost offered by the United States.
Looking ahead, if Sri Lanka is to explore the option of producing its own medicine in the extreme circumstance of another severe medicine shortage—it can avail of Article 31 of the TRIPS agreement, as a signatory. Compulsory licensing, which is the act of a government being allowed to issue licensing of its own to local drug makers, in the event of an extreme emergency, is a practice that Sri Lanka as a nation is yet to avail of.
The government is required to first reach out to the drug maker to notify and request authorized licensing—failing which, the nation can grant compulsory licensing to local manufacturers to produce generics of the drug, provided the scope and duration of the licensing remains for the purpose it was originally authorized for, according to Kamardeen.
She also states however that the dependence on India for the majority of finished pharmaceutical products does not put Sri Lanka in a precarious position in the future, given how fully-fledged and vast India’s market of generics is. Sudath Perera Associates Founder and Managing Partner Sudath Perera, speaking to Echelon also states that the existence of large-scale legitimate facilities with the capacity for clinical trials in countries like India and Bangladesh, makes Sri Lanka rather dependent on those markets, given the lack of infrastructure capacity locally.
“However, under a compulsory licence we must encourage the facilitation of a zone, where international pharmaceutical companies can be invited to manufacture and maintain standards,” he suggested.
Referring to the National Medical Drug Policy of Sri Lanka, Perera states that Sri Lanka already has all it needs in terms of necessary regulations to mitigate the importation and entrance of less-than-standard drugs, particularly from neighbouring India with its vast generics market.
Drawing on his work in counterfeits in Sri Lanka, stringency in Customs checks and certifications from various regulatory bodies, according to Perera, are tantamount to reducing the number of less-than-standard or counterfeit drugs entering the local market. Ensuring that importers practise better paperwork filling in addition to pre-arranging licences, will enable the Customs to better oversee what exactly enters the borders, he adds.
However, he does admit that stringent regulation has the possibility of affecting the supply of generics that feed the market, as generics imported as parallel imports have large price discrepancies in comparison to legitimate pharmaceutical imports. “For instance, if a licensed importer brings in drugs and the price, after taxes, is set at a certain level, a parallel importer might bring in the same drugs at a lower price, raising suspicions.”
There is a need for authorities to be equipped with the ability to differentiate between generics and counterfeit pharmaceuticals, through methods of visual inspection, spectral and chemical analysis and anti-counterfeiting technologies. Given that they are already empowered to notice and flag irregularities in pricing within the drugs, Customs officers and valuation departments are likely to benefit from training and infrastructure facilitation that would ensure their ability to distinguish the category the drug belongs to.
Another extraneous challenge to regulating the market is preventing the smuggling of medicines into the market by hand-carrying or mixed cargo containers, according to Perera. “A small bag of high-value drugs can easily be hidden in large shipments of other goods,” Perera states. He is hopeful about the authorities considering new legislation requiring more detailed declarations for imported goods.
“Currently, importers often fail to specify medicines in their cargo, which allows them to bypass strict Customs checks. Introducing stricter documentation requirements, especially for medicines, will make it easier to catch these violations. By tightening these controls, Sri Lanka can aim to discourage illegal practices and ensure that only high-quality drugs enter the market.”
As Sri Lanka has had real-time experience with dealing with the fallout from the COVID-19 pandemic, a worsening economic crisis, and a reliance on imported pharmaceuticals, the need to strengthen regulatory oversight has never been more urgent. The alarming rise in substandard drugs, compounded by loopholes in the parallel import system, presents a public health risk that requires better checks and balances within the system.
While Sri Lanka has the regulatory framework in place, it now requires decisive action—stricter Customs checks, transparent procurement processes, and more robust documentation requirements—to safeguard the health of its people. If left unaddressed, the country risks further undermining its already fragile healthcare system, leaving the most vulnerable exposed to the dangers of ineffective or harmful medication. The time for complacency has long passed; Sri Lanka must prioritize the integrity of its pharmaceutical imports to ensure the well-being of its citizens.