India: Patents and precedents; Pharmaceutical companies fear that the battle raging in India over patents will inspire other countries to change their laws

May 15, 2013 8:12 pm

India: Patents and precedents

By Amy Kazmin

Pharmaceutical companies fear that the battle raging in India over patents will inspire other countries to change their laws

Meena, a 45-year-old New Delhi widow with a 10-year-old son, was diagnosed with potentially fatal blood cancer in 2010. To control it, her doctors prescribed an Indian*- made generic version of Novartis’ leukaemia drug. But her body stopped responding to it and Meena was advised to switch to a more expensive drug, Sprycel, a second-line cancer drug made by Bristol-Myers Squibb. Sprycel costs Rs160,000 ($2,900) per month, far out of reach for a woman living on her late husband’s Rs17,000 monthly pension. A solution appeared to be at hand last May when Natco, an Indian generic drugs company, started selling its own version of Sprycel for Rs9,000 a month. A charity helped Meena to buy it. But Meena’s ability to obtain potentially lifesaving medicine became tied up in a dispute pitting the interests of the world’s largest drugmakers – who spend $70bn annually developing drugs – and generic manufacturers in the developing world.BMS, the US drugs group with revenues of $17.6bn in 2012, accused Natco of patent infringement, prompting the India’s Supreme Court to order the Indian drugmaker to stop making the medicine until a final verdict was reached. While some patients stocked up before the generic disappeared, Meena could only afford a few bottles.

The BMS “access programme” for the poor offered to sell her Sprycel for Rs15,000 per month – a big discount on the market price but still more than she can afford. Friends have chipped in to buy her a month’s supply but she is distraught about the future. “I don’t see a ray of hope,” she says. “Even if I use all my resources, I can only afford it for two months. It’s not sustainable.”

It is this struggle of educated, middle-class patients to obtain cutting-edge medicine that has led to ashowdown between India and western pharmaceutical companies over the patents and prices of lifesaving drugs.

Western drugmakers fear India will inspire other emerging markets to challenge their patents. They have accused India of trampling on their intellectual property rights after a series of decisions overriding, revoking or refusing patents on cancer and hepatitis C drugs from BayerPfizerRoche and Novartis. The companies are also irate that New Delhi is considering compulsory licenses for another three patented cancer drugs, including Sprycel, and Roche’s breast cancer drug Hercepterin.

At a recent US Congressional hearing, Roy Waldron, Pfizer’s chief intellectual property officer, complained that New Delhi had “routinely flouted trade rules to bolster the Indian generics industry”.

Indian generics executives and patients activists say the reality is more nuanced. They argue that India’s courts are trying to balance drug companies’ intellectual property rights against the need for affordable medicine for 1.2bn Indians. India’s public healthcare system has virtually collapsed, with Indians paying 60 per cent of their healthcare costs from their own pockets.

This stand-off is taking place within the framework of a new patent law crafted to preserve India’s manoeuvring room to keep medicines affordable at home – and protect its exports of drugs abroad.

“The portrayal is that India doesn’t respect intellectual property rights but the reality is that it is balanced,” says Leena Menghaney, a lawyer with Médecins Sans Frontières, the humanitarian organisation. “The decisions that go in favour of the MNCs [multinational corporations] never get reported and decisions against them always hit the headlines.”

D.G. Shah, secretary-general of the Indian Pharmaceutical Alliance, which represents India’s biggest generics firms, rejects suggestions of protectionism for domestic companies.

“People are claiming there is no level playing field for foreign multinationals vis a vis domestic players but we don’t have any data to suggest that,” says Mr Shah. “The courts have been unpredictable but are working independently. In IPR jurisprudence, there are judgments both in favour and against Indian companies. We don’t see any particular pattern.”

The stakes of this battle go far beyond the future of India’s domestic market. Indians bought just $13bn worth of medicine last year, which is tiny compared with America’s $400bn. But drug purchases are growing at more than 10 per cent a year as education and incomes rise. Indian generics companies play a big role globally, exporting $13bn worth of pharmaceuticals last year, 40 per cent of which went to the US and Europe.

But western companies’ greatest con­cern is that India will serve as a catalyst for emerging markets to change their laws to make it more difficult to register or extend patents. That is worrying prospect for an industry facing slowing growth in developed countries and looking to emerging markets to finance research.

“You’ve got these powerful companies that have had a great say in shaping the international regime and want to make IP laws look the same the world over,” says Shamnad Basheer, an intellectual property law specialist at the West Bengal National University of Judicial Sciences. “India is the first country standing up and saying ‘hey, we want to go our own way’.”

South African health officials have already expressed a desire to follow India’s lead. “Western companies fear this will spread like a plague,” says an Indian generics executive gleefully.

Ranjit Shahani, Novartis’ India country director, frets that other countries could indeed take their cue from New Delhi. “India punches above its weight so there is a danger of contagion,” he says

. . .

A decade ago, western drug companies yielded to pressure to allow low-cost generic Aids drugs in sub-Saharan Africa to treat a devastating HIV epidemic. But India, with its fast-growing economy and high-flying tycoons, will not receive the same concessions. Instead, New Delhi is expected to come under intense pressure to fall in line with western patent standards as global companies’ frustrations rise.

“The bottom line is India is treating people differently to the rest of the world, and as a great emerging superpower it’s not going to get the kind of international sympathy or tolerance that was there for sub-Saharan Africa,” says Jason Rutt, head of patents at Rouse, a specialist IP law firm. “It’s very hard for an innovative company in the US and Europe to say: ‘I see spectacular wealth in India and yet my intellectual property is being ripped off.’”

Mr Shahani says about 81m Indians have incomes on a par with the affluent in developed countries and can afford to pay international prices for patented drugs, while New Delhi should help the rest rather than undermining patents to push down prices. However, he says the Congress-led government turned down an offer from western pharmaceutical companies to sell it patented drugs in bulk at deeply discounted prices. “Are the poor the wards of the state or the wards of the pharmaceutical industry?” he asked.

New Delhi overhauled its patent law to comply with World Trade Organisation requirements. For decades, India did not recognise drug patents, laying the foundation for a feisty generics industry. Today it churns out low-cost medicine for local use, is a global provider of generic Aids drugs and is an increasingly important supplier of off-patent medicine for western consumers. It has more US Federal Drug Administration-approved production facilities than any other country outside America.

In 2005, India’s parliament adopted a patent law to protect innovative molecules discovered after 1995, when New Delhi signed up to the WTO’s rules for protecting intellectual property. But the Indian law has unusual flexibilities intended to safeguard local access to affordable medicines.

In most countries, only governments can issue compulsory licenses allowing production of cheaper generic versions of patented drugs. In India, though, generics companies can seek such licenses themselves from the independent patent controller

India’s patent law also has a contentious provision intended to stop the “ever-greening” of patents – when companies are able to extend or renew patents by making minor changes to a molecule or a drug formulation. This provision states that a modified version of a previously known molecule can be patented only if it clearly demonstrates improved efficacy.

. . .

Many western companies say they will not invest in research and development in India owing to the difficult innovation environment. Novartis has threatened to withhold new drugs from India but activists say that would simply leave the field clear for local generics companies.

While western governments could haul New Delhi to the WTO dispute panel to challenge its patent law as non-compliant with global trade rules, generics executives’ and health activists’ bigger worry is that the EU, and eventually the US, will secure provisions in new free-trade deals. These provisions would give western drugmakers more tools to stop Indian generic rivals.

Mr Shah, a former Pfizer executive, says most western companies have failed to understand “the emotive issue that affordable healthcare has become for Indians”. He says that western drugmakers are making strategic mistakes by selling lifesaving medicines at prices only the richest Indians can afford. “It’s like saying: ‘You are too poor but maybe in 10 or 15 years when you become rich, you can take these products.’”

Western pharmaceutical companies counter that India’s real health crisis is not the price of a handful of patented drugs but of a government that has abdicated its responsibility to ensure decent healthcare for its citizens. India’s government spends less than 1.2 per cent of gross domestic product on healthcare.

“You can parachute free medicine across the country but that will not improve access because you don’t the health infrastructure,” says Mr Shahani. “You don’t have doctors, you don’t have nurses, you don’t have nursing homes and you don’t have diagnostics.”

Some western companies, led by GlaxoSmithKline, are trying tiered pricing strategies in India to reflect the extremes of its wealth and poverty. Merck Sharp and Dohme sells its patented diabetes drug Januvia in India for about $24 per month, 80 per cent lower than its global price.

Still, the cut-rate price for Januvia has not deterred Glenmark, an Indian generics firm, from making its own version, which it sells for 30 per cent less than the discounted price. Last month MSD tried unsuccessfully to get a court order stopping Glenmark from selling its medicine, and protracted litigation lies ahead.

Kiran Mazumdar-Shaw, managing director of Bangalore-based biotech company Biocon, says the Januvia battle will further undermine India’s claim to play according to global rules. “The Indian government needs to demonstrate that they are responsible,” she says. “You can’t say if you don’t allow affordable drugs in the market, we won’t protect your patent.”


A healthcare sector in need of treatment

Medical staff at south Delhi’s Safdarjung Hospital, a government-run specialist care facility, went on a one-day strike this month to protest against poor conditions. They complained of a lack of drinking water and said it took months for broken equipment to be repaired. Shortages of nurses and orderlies meant young doctors had to do menial tasks such as carrying laboratory samples or wheeling patients into the operating theatre.

The junior doctors say the public hospital is so overstretched – and poorly managed – that they have to make snap decisions on how to handle patients, as if processing the wounded from a battlefield.

“This government doesn’t want patients to die, so our major concern is to prevent death, but what about proper management after that?” asks Sameer Prabhakar, a doctor at Safdarjung. “A doctor seeing 100 patients a day won’t have time.”

Safdarjung’s problems resonate across India’s public health system, which is starved of funds. Clinics struggle to cope with the flow of patients who can spend days queueing to see a doctor, only to be told they will have to wait months for treatment – even for potentially fatal diseases such as cancer.

India has just six doctors and nine hospital beds for every 10,000 people, compared with 15 doctors and 38 beds in China, and 24 doctors and 30 beds in the US, according to UN data. “The biggest question is: why is the government not building more hospitals and opening more medical colleges?” says Dr Prabhakar.

The emergence of swish upmarket private hospitals catering to India’s rich and middle classes is exacerbating the strain on public hospitals, as doctors, nurses and other specialists are drawn to the higher salaries and better working conditions.

With India spending just 1.2 per cent of gross domestic product on health – compared with nearly 3 per cent in China – the problems will not be resolved easily. Many poor Indians go to unqualified quacks. Lower middle-class patients are driven to private hospitals they cannot afford, clocking up debt to pay for essential treatment.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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