Use of Medicines and Drugs by Government

1Under s 47 of the Patents Act, the government may allow use of patented medicines and drugs by dispensaries, hospitals or other medical institutions. In the case of a patent in respect of any medicine or drug, the patent is granted subject to the condition that the government may import such medicine or drug for its own use or for distribution in any dispensary, hospital or other medical institution maintained by or on behalf of the government or any other dispensary, hospital or other medical institution which the Central Government, having regard to the public service rendered by such institution, may specify in the Official Gazette. The use of patented medicines and drugs by any dispensary, hospital or other medical institution will be regarded as use for government purposes. (See Pfizer Corpn v Ministry of Health (1965) RPC 261, p 294, [1965] AC 512 (HL).) The Pfizer case brought out important issues of law which are discussed below.

2Pfizer was the proprietor of a process patent for making a widely used antibiotic, tetracycline. Until September 1961, supplies of tetracycline for use in the treatment of patients in National Health Service hospitals were procured from the appellants’ licensees manufacturing the drug in the United Kingdom. In May 1961, the Ministry of Health decided to use the powers conferred by s 46 of the Patents Act 1949, for the purpose of obtaining certain patented drugs from sources other than the patentees or their licensees with the object of reducing expenditure. (Section 46 of the UK Patents Act 1949 is similar to s 100 of the Patents Act 1970.) The Ministry of Health offered tenderers the protection of an authorisation under s 40 of the Patents Act 1949. The tender of Fraser Chemicals Ltd was accepted by the Ministry. The company was not a licensee of Pfizer and met the requirements of the Ministry by the mere importation of tetracycline made by Carlo Erba in Italy, where tetracycline enjoyed no patent protection.

3Pursuant to the contract, tetracycline was imported from Italy by Fraser Chemicals Ltd and sold to the Ministry and National Health Service hospital management committees. The imported drug was subsequently used in the treatment of in-patients and out-patients in the National Health Service hospitals. The drug was also provided and used in the administration of the general medical services by general practitioners and chemists who were not servants or agents of the Crown. Pfizer sought for a declaration on three points. First, Pfizer sought for a declaration that s 46 could not be used to authorise the providing of patented medicines for employment in the treatment of patients in National Health Service hospitals. The second point of declaration was that no authority could be given which would cover the supply of the drug to out-patients on payment of a charge. Thirdly, Pfizer argued that mere importation could not be authorised under the UK Patents Act 1949. The Court of Appeal decided all the three points in favour of the respondents; Pfizer appealed to the House of Lords.

4With regard to the first point, the House of Lords held that the supply of the drug to the National Health Service hospitals for administration to out-patients and in-patients was a use ‘for the services of the Crown’ and was accordingly within the authority conferred by s 46 (1) of the UK Patents Act 1949. On the second point, it was held that out-patients were not entitled to demand the supply of the drug, save on payment of a prescribed nominal charge made under the National Health Service regulations. This constituted a statutory relationship and not a sale. On the third point, the House of Lords held that the importation of the drug by the importers, with a view to selling it to the Ministry, was a user of the invention within the meaning of s 46 (1) of the UK Patents Act 1949 and the authority to use the invention for the services of the Crown must carry with it authority to sell to the appropriate department.

5In In re Exorbitant Pricing of Life Saving Patented Medicines (2026) (paras 30 and 36) the Kerala High Court held that the purposes of Government “has to include the use of the patent, manufacturing of the medicines, and supplying the same on a non-commercial basis under Section 100(6) of the Act to the needy patients. On the Lok Sabha debates the Court recorded that “it has been clarified that under the provisions of Section 100 of the Act, the Government can use the patent at any time ‘in the interest of the public health system’. It is further clarified that the Government can ‘procure it and sell it to the hospitals or they can give it to third parties’.” It is pertinent to note that this decision does not consider section 47(4) or supply through government hospitals, which was the route involved in Pfizer. It reaches the patient through sale under section 100(6).